-----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, TuDhUUpIwDjCK0PSrY9AlC1R9gStn1zzMoFWUu0/R/sdlzieH4qPpdNjLUTSlIFY 8HqVj/Sn42Q5Gxh2klY/7Q== 0000950130-98-001397.txt : 19980324 0000950130-98-001397.hdr.sgml : 19980324 ACCESSION NUMBER: 0000950130-98-001397 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 25 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980323 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL SIGNAL CORP CENTRAL INDEX KEY: 0000040834 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRICAL INDUSTRIAL APPARATUS [3620] IRS NUMBER: 160445660 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-00996 FILM NUMBER: 98571333 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-K 1 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------- 1997 FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 COMMISSION FILE NO. 1-996 GENERAL SIGNAL CORPORATION BOX 10010 HIGH RIDGE PARK, STAMFORD, CONNECTICUT 06904-2010 TELEPHONE NUMBER (203) 329-4100 IRS EMPLOYER IDENTIFICATION NO. 16-0445660 STATE OF INCORPORATION: NEW YORK SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH TITLE OF EACH CLASS EXCHANGE ON WHICH REGISTERED - ------------------------------------------------------------------------------- Common Stock par value $1.00 New York Stock Exchange (Par value reduced from $6.67 effective April 21, Pacific Stock Exchange 1969) - -------------------------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [_] The aggregate market value of voting stock held by non-affiliates as of February 13, 1998 was approximately $1.8 billion. As of February 13, 1998, there were 47.0 million shares of General Signal Corporation common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE--PART III Portions of the Proxy Statement for 1998 Annual Meeting of Shareholders - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TABLE OF CONTENTS
ITEM PAGE ---- ---- 1 Business........................................................... 3 2 Properties......................................................... 8 3 Legal Proceedings.................................................. 8 4 Submission of Matters to a Vote of Security Holders................ 8 5 Market for the Registrant's Common Stock and Related Shareholder Matters........................................................... 9 6 Selected Financial Data............................................ 9 7 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................. 10 7A Quantitative and Qualitative Disclosures about Market Risk......... 15 8 Financial Statements and Supplementary Data........................ 15 9 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............................................. 15 10 Directors and Executive Officers................................... 16 11 Executive Compensation............................................. 16 12 Security Ownership of Certain Beneficial Owners and Management..... 16 13 Certain Relationships and Related Transactions..................... 16 14 Exhibits, Financial Statements, Schedules and Reports on Form 8-K.. 17 Signatures......................................................... 19 Index to Financial Statements, Schedule and Exhibits............... F-1
2 PART I ITEM 1. BUSINESS GENERAL DEVELOPMENTS: General Signal Corporation (the company), incorporated in New York in 1904, is a manufacturer of equipment for the Process Controls, Electrical Controls and Industrial Technology industries. The company's key Process industry products include mixers, valves for municipal water supply and wastewater treatment, pulp, paper, food, pharmaceutical and chemical manufacturing, ultra low-temperature freezers for life science research and furnaces. In the Electrical industry, key products include uninterruptible power supply equipment, power transformers and fire detection systems. Products serving the Industrial Technology industry include auto and bicycle components, data networking equipment and fare collection and vending equipment. During the last five years, the company invested approximately $394.4 million in cash and 4.4 million shares of common stock to acquire 12 businesses and/or product lines. The notes to the financial statements on page F-21 of this 10-K provide additional information concerning significant acquisitions during the last three years. Additionally, during the last five years, the company disposed of four units, two of which were accounted for as discontinued operations. Information regarding these dispositions is on pages F-21 through F-22 of this 10-K. In September 1997, the company contributed the net assets of the General Signal Electrical Group (GSEG) to the EGS Electrical Group LLC (EGS), a joint venture with Emerson Electric's Appleton Electric operations. See page F-10 of this 10-K for additional information. FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS: Selected business segment information for the last five fiscal years is summarized on page F-23 of this 10-K. Net sales from the uninterruptible power systems (UPS) class of product accounted for 12.1%, 11.2% and 8.2% of consolidated net sales in 1997, 1996 and 1995, respectively. A summary of information by geographic area for the last five fiscal years is included on page F-24 of this 10-K. NARRATIVE DESCRIPTION OF BUSINESS MAJOR MARKETS AND PRODUCTS AND METHOD OF DISTRIBUTION: A description of the registrant's business follows:
PRINCIPAL BUSINESS MAJOR PRODUCTS TOP MARKETS TOP COMPETITORS BY MARKET - ------------------ -------------- ----------- ------------------------- PROCESS CONTROLS DEZURIK Industrial valves for Water supply and McWane; Tyco; Sartell, Minnesota gases, liquids, slurries wastewater treatment AMRI and dry solids Pulp and paper Neles; Velan; manufacturing Fisher Chemical processing Fisher; Velan; Duriron; Masonelian - --------------------------------------------------------------------------------------------------------- KAYEX Crystal growing furnaces Semiconductor wafer Ferrofluidics; Mitsubishi Rochester, New York manufacturers Machine - --------------------------------------------------------------------------------------------------------- LIGHTNIN Industrial fluid mixers and Chemical process Robbins & Meyers Rochester, New York agitators industries (Chemineer brand); Ekato; Philadelphia Mixers Water supply and Philadelphia Mixers; wastewater treatment Robbins & Meyers (Chemineer brand) Minerals processing Philadelphia Mixers; Robbins & Meyers (Prochem brand); Ekato - ---------------------------------------------------------------------------------------------------------
3
PRINCIPAL BUSINESS MAJOR PRODUCTS TOP MARKETS TOP COMPETITORS BY MARKET - ------------------ -------------- ----------- ------------------------- GENERAL SIGNAL Ultra-low temperature Life science research Forma Scientific; LABORATORY laboratory freezers laboratories Sanyo Scientific EQUIPMENT, INC. (formerly Revco) Specialty refrigerators Clinical laboratories Forma Scientific; Asheville, Sanyo Scientific North Carolina CO2 incubators Industrial research Forma Scientific; laboratories Nu Aire Laboratory ovens Academic laboratories Precision Scientific; Lab-Line Laboratory furnaces Institutional laboratories Barnstead/Thermolyne - ----------------------------------------------------------------------------------------------------------- LINDBERG Industrial furnaces, ovens Transportation and Surface Combustion; Watertown, Wisconsin and environmental chambers electronics equipment Despatch manufacturing and Spare parts, technical service component manufacturers and process support - ----------------------------------------------------------------------------------------------------------- STOCK EQUIPMENT Coal feed systems Electrical utilities Merrick; Ramsey COMPANY Chagrin Falls, Ohio Paper manufacturers and Ramsey industrial steam generators Feed systems and flow Waste supply and Wallace and Tiernan measurement devices for wastewater treatment water and wastewater treatment - ----------------------------------------------------------------------------------------------------------- ELECTRICAL CONTROLS BEST POWER Uninterruptible power Midrange and mainframe Exide; Liebert; Necedah, Wisconsin systems computers Merlin Gerlin Industrial and electrical Exide; Liebert; installations Merlin Gerlin Personal American Power computers/workstations and Conversion Corp.; internetworking equipment Exide; Tripp Lite Telecommunications American Power Conversion Corp.; Exide - ----------------------------------------------------------------------------------------------------------- DIELECTRIC Radio frequency Television and FM Andrew Corp.; COMMUNICATIONS transmission equipment and broadcasters Harris Corp. Raymond, Maine broadcast antenna systems Cable pressurization Telecommunications Puregas equipment providers - ----------------------------------------------------------------------------------------------------------- EDWARDS SYSTEMS Fire detection products, Commercial, industrial and Simplex; Cerberus; TECHNOLOGY systems and services institutional facilities Pittway Corp. Cheshire, Connecticut - ----------------------------------------------------------------------------------------------------------- GS ELECTRIC Universal, blower and Floorcare appliance AMETEK/Lamb Electric Carlisle, Pennsylvania permanent magnet manufacturers fractional horsepower electric motors Yard and garden MAMCO appliance manufacturers Fitness equipment United Technologies manufacturers, tubs, pools, spas - -----------------------------------------------------------------------------------------------------------
4
PRINCIPAL BUSINESS MAJOR PRODUCTS TOP MARKETS TOP COMPETITORS BY MARKET - ------------------ -------------- ----------- ------------------------- WAUKESHA ELECTRIC Medium-power Investor-owned and public ABB Waukesha, Wisconsin transformers and substations power utilities Industrial and commercial ABB; GE/Prolec sector Transformer Investor-owned and Solomon; S.D. Meyers remanufacturing and public power utilities decommissioning services - -------------------------------------------------------------------------------------------------------------- INDUSTRIAL TECHNOLOGY GENERAL SIGNAL Wide-area network matrix Financial services, Dynatech; Cornet NETWORKS switching systems common carriers, Mount Laurel, business services New Jersey Host networking products Common carriers, IBM; CNT; Network and fiber management financial services, Systems systems transportation Telecommunications Regional Bell operating Hekimian; ADA distributed performance companies, long-distance measurement systems carriers, international telephone companies - -------------------------------------------------------------------------------------------------------------- GFI GENFARE Automatic fare collection Bus and rail mass Cubic Corporation Elk Grove Village, including electronic transit Illinois fareboxes, faregates, magnetic ticket processing U.S. Postal Service National Vendors; systems and high-security Northrup/Grumman vending equipment Passenger processing, information systems and audio products for transit market Stamp vending machines - -------------------------------------------------------------------------------------------------------------- METAL FORGE Cold-forged solid and Automotive OEM Thompson Products Dublin, Ohio tubular metal components and assemblies for Bicycle OEM automobiles and bicycles Automotive OEM service Arvin; Walker - -------------------------------------------------------------------------------------------------------------- EQUITY INVESTMENT EGS ELECTRICAL GROUP, Electrical hazardous and non- Commercial and industrial Crouse-Hinds; Thomas & LLC (joint venture with hazardous location conduit construction, industrial Betts; Square D; Federal Emerson Electric) fittings, accessories, lighting, automation and MRO Signal Corp.; Lithonia Chicago, Illinois enclosures and controls, power conditioning supplies, transformers, signaling/signage, heat trace and fire stop equipment - --------------------------------------------------------------------------------------------------------------
The company's products, except for EGS's products, are sold by its own sales organization and through distributors and manufacturers' representatives. 5 MATERIALS AND SUPPLIES: The company manufactures many of the components used in its products. It also purchases a variety of basic materials and component parts. The company believes that it will generally be able to obtain adequate supplies of major items or reasonable substitutes. PATENTS: The company holds many patents and has continued to secure other patents that cover many of its products. While patents are important in the aggregate to the company's competitive position, the loss of any single patent, patent application or patent license agreement, or group thereof, would not materially affect the conduct of its business as a whole. The company is both a licensor and licensee of patents. WORKING CAPITAL: A discussion of working capital is included on pages 13 through 14 of this 10-K. BACKLOG: The amount of unfilled orders was approximately $363.1 million as of December 31, 1997 and $444.6 million as of December 31, 1996. In the third quarter of 1997, the company sold the General Signal Pump Group (GSPG) and contributed the net assets of GSEG to EGS, resulting in a decrease in backlog of approximately $64 million. Substantially all unfilled orders are expected to be filled within the next year. COMPETITION: Although the businesses of the company are highly competitive, the competitive position cannot be determined accurately in the aggregate or by segment since none of its competitors offer all of the same product lines or serve all of the same markets, nor are reliable comparative figures available for its competitors. In most product groups, competition comes from numerous concerns, both large and small. The principal methods of competition are price, service, product performance and technical innovation. These methods vary with the type of product sold. The company believes that it can compete effectively on the basis of each of these factors as they apply to the various products offered. RESEARCH AND DEVELOPMENT: Research and development information for the last three years is included on page F-24 of this 10-K. ENVIRONMENTAL MATTERS: The company is involved in various stages of investigation and remediation relative to environmental protection matters, arising from its own initiative, from indemnification of purchasers of divested operations, or from legal or administrative proceedings, some of which involve waste disposal sites. The company has a comprehensive environmental compliance program which includes environmental audits conducted by internal and outside independent environmental professionals and regular communications with the company's operating units, regarding environmental compliance requirements and anticipated regulations. The company has been notified that it has been named as a potentially responsible party or has received other notices of potential liability pursuant to various federal and state environmental laws (including, without limitation, the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 and similar state legislation) at 69 multi-party sites which are not present or former facilities of the company and for which the company may be jointly and severally liable. It is alleged that the company generated hazardous substances, pollutants or contaminants which are present at those sites. The company has resolved its liability by entering into de minimis settlements or other buyout agreements with governmental authorities or other parties at 32 of these sites and believes that it has no liability with respect to 17 of these sites. The company is of the opinion, based on information currently available, that its aggregate probable remaining liability at the other 20 sites is approximately $3 million. The company is engaged in site investigation and/or remediation at the following sites presently or formerly owned by the company and has accrued for its expected future costs, as detailed below. It is the company's policy not to offset expected insurance recoveries against expected obligations when determining the amount of environmental accruals. New York Air Brake Landfill/Kelsey Creek Site: In February 1990, the company entered into a consent order with the New York State Department of Environmental Conservation (NYSDEC) to conduct an investigation and remediation at the company's discontinued New York Air Brake facility in Watertown, New York. On March 30, 1994, NYSDEC issued a Record of Decision with respect to site remediation. The remedial action consists of consolidation of contamination in the existing industrial landfill, capping the landfill, collecting contaminated groundwater downgradient of the landfill, and the removal of certain sediments in Kelsey Creek. The future cost estimated by the company for site remediation is approximately $11 million. The company has filed litigation against the City of Watertown to challenge an increase in sewer discharge fees for leachate at the landfill and believes that it will ultimately prevail in such litigation. 6 Hevi-Duty Facility: The company is participating in a voluntary clean-up program sponsored by the state of North Carolina and has entered into an Administrative Order on Consent with the North Carolina Department of Environmental Health and Natural Resources. The company currently believes that the probable aggregate remaining liability for clean-up of this site will be approximately $4.5 million. Fairbanks Morse Facility: On December 2, 1994, the company acquired Fairbanks Morse Pump Corporation (Fairbanks). Based on the company's pre- acquisition environmental assessment and site testing performed at the Fairbanks facility located in Kansas City, Kansas, the company determined that there is soil and groundwater contamination at the site. The company has entered into a Consent Order with the Kansas Department of Environment and Health with respect to additional site investigation. The company believes that up to $4.8 million could be required to investigate and remediate contaminated soil and groundwater at the site. The accrual to cover the expected costs was established at the time of acquisition. The company is conducting investigations and remedial activities due to contamination at six additional present or former facilities of the company. Site contamination has been alleged with respect to two other former facilities. Based on information currently available, the company believes that the probable aggregate remaining liability for investigation and remediation at these eight sites will not exceed $1.5 million. The potential costs related to the matters described above and the possible impact on future operations are uncertain due in part to the complexity of government laws and regulations and their interpretations, the varying costs and effectiveness of clean-up technologies, the uncertain level of insurance or other types of recovery and the questionable level of the company's responsibility. In management's opinion, after considering reserves established for such purposes, remedial actions for compliance with the present laws and regulations governing the protection of the environment are not expected to have a material adverse impact on the company's results of operations or financial position. EMPLOYEES: At December 31, 1997, the company had approximately 9,900 employees. Approximately 1,400 employees are represented by 16 different collective bargaining units. Approximately 42 percent of the labor force that is covered by collective bargaining agreements have agreements that expire within one year. The company has generally experienced satisfactory labor relations at its various locations. EXECUTIVE OFFICERS OF THE REGISTRANT
NAME, POSITION, AGE AT DECEMBER 31, 1997 AND OTHER INFORMATION AGE - -------------------------------------------------------------- --- Michael D. Lockhart........................................................ 48 Chairman and Chief Executive Officer since October 19, 1995. Previously, President and Chief Operating Officer since October 3, 1994. Prior to joining the company, Vice President and General Manager of General Electric's Commercial Engines and Services division, following several other key executive positions at GE since 1981. Prior to joining GE, served as Vice President and Director, The Boston Consulting Group. Terence D. Martin.......................................................... 54 Executive Vice President and Chief Financial Officer since February 2, 1995 and Treasurer since January 1, 1998. Previously, Chief Financial Officer of American Cyanamid Company since 1991 and Treasurer since 1988. Ernest R. Verebelyi........................................................ 50 Executive Vice President--Operations since December 12, 1997. Previously, Senior Vice President--Operations since November 1, 1996. Prior to joining the Company, Executive Vice President of Special Products Division of Emerson Electric since 1994, and Vice President of Operations since 1991. Prior to joining Emerson, served in various executive and management positions with Hussmann and General Electric. Joanne L. Bober............................................................ 45 Senior Vice President, General Counsel, and Secretary since January 2, 1997. Previously, Partner at Jones, Day, Reavis & Pogue since 1989 and associate from 1983 to 1988. Elizabeth D. Conklyn....................................................... 50 Senior Vice President--Human Resources since December 14, 1995. Previously, Senior Vice President, Human Resources and Organization for Mobile Telecommunications Technologies since 1994. Served in various human resource management positions with IBM from 1977 to 1994.
7
NAME, POSITION, AGE AT DECEMBER 31, 1997 AND OTHER INFORMATION AGE - -------------------------------------------------------------- --- Raymond L. Arthur........................................................... 38 Vice President and Controller since March 20, 1997. Formerly, Assistant Vice President, Director of Compliance, following several other positions, for American Home Products Corporation since 1994 and American Cyanamid Company since 1986.
Nino J. Fernandez........................................................... 56 Vice President--Investor Relations since May 1, 1987. Previously, Director of Communications since April 1, 1974.
Jeffrey M. Johnson......................................................... 40 Vice President--Sourcing since August 21, 1997. Previously, Director-- Supply Chain, following several other positions for Black & Decker since 1996 and Sterling Drug since 1984.
Donald J. Noonan........................................................... 57 Vice President--Asia Pacific Development since September 11, 1996. Formerly, Vice President and General Manager of Southern Pacific Aircraft Engine Operations of General Electric Aircraft Engines since 1981.
Lawrence J. Smith.......................................................... 54 Vice President--Engineering since December 12, 1997. Previously, Direc- tor--Engineering since July 14, 1997. Prior to joining the company, Vice President--Engineering, following several other positions, for Liebert North America, a division of Liebert Corporation, owned by Emerson Elec- tric from 1982 to 1997.
The executive officers are elected annually by the Board of Directors. There are no family relationships between any of the directors or executive officers of the company. ITEM 2. PROPERTIES The following is a list of the company's principal properties, classified by sector:
APPROXIMATE NO. OF SQUARE LOCATION FACILITIES FOOTAGE PERCENT -------- ---------- ------------- ------------ OWNED LEASED ----- ------ (IN MILLIONS) Process Controls Sector................. 9 states and 8 foreign countries 21 2.0 87% 13% Electrical Controls Sector................. 10 states and 6 foreign countries 23 2.1 84% 16% Industrial Technology Sector................. 8 states 11 0.8 87% 13%
In addition to manufacturing plants, the company as lessee occupies executive offices in Stamford, Connecticut, and various sales and service locations throughout the world. All of these properties, as well as the related machinery and equipment, are considered to be well maintained and suitable and adequate for their intended purposes. Assets subject to lien are not significant. ITEM 3. LEGAL PROCEEDINGS The company and certain of its subsidiaries are defendants in legal proceedings incidental to their businesses. Although the ultimate disposition of these proceedings is not presently determinable, management does not expect the outcome to have a material adverse impact on the company's financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 8 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS The company's common stock is listed on the New York and Pacific stock exchanges under the symbol "GSX." Information as to quarterly prices for the last two years, and dividends paid, is included on page F-25 of this 10-K. There were approximately 10,052 holders of record of the company's common stock on February 13, 1998. ITEM 6. SELECTED FINANCIAL DATA SIX-YEAR FINANCIAL SUMMARY GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
YEAR ENDED DECEMBER 31, --------------------------------------------------------------- 1997 1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- -------- (DOLLARS AND SHARES IN MILLIONS, EXCEPT PER-SHARE DATA) SUMMARY OF OPERATIONS Net sales............... $1,954.6 $2,065.0 $1,863.2 $1,527.7 $1,354.2 $1,477.8 -------- -------- -------- -------- -------- -------- Cost of sales........... 1,378.5 1,435.7 1,308.0 1,109.5 959.0 1,070.2 Selling, general and administrative expenses............... 394.6 406.2 354.4 292.3 259.3 287.7 Other charges and (credits).............. (72.7) (20.8) 20.1 (46.2) (19.8) 85.6 -------- -------- -------- -------- -------- -------- Total operating costs and expenses........... 1,700.4 1,821.1 1,682.5 1,355.6 1,198.5 1,443.5 -------- -------- -------- -------- -------- -------- Operating earnings...... 254.2 243.9 180.7 172.1 155.7 34.3 Equity in earnings of EGS.................... 11.8 -- -- -- -- -- Interest expense, net... 13.2 21.5 24.3 11.8 16.6 24.8 -------- -------- -------- -------- -------- -------- Earnings from continuing operations before income taxes........... 252.8 222.4 156.4 160.3 139.1 9.5 Income taxes............ 121.8 89.0 56.3 56.2 41.0 3.2 -------- -------- -------- -------- -------- -------- Earnings from continuing operations............. 131.0 133.4 100.1 104.1 98.1 6.3 Earnings (loss) from discontinued opera- tions, net of income taxes.................. -- -- -- 2.4 (31.5) 6.1 Earnings (loss) on dis- posal of discontinued operations, net of income taxes........ 2.3 -- (64.0) (25.8) -- -- -------- -------- -------- -------- -------- -------- Earnings before extraor- dinary charges and cu- mulative effect of ac- counting changes....... 133.3 133.4 36.1 80.7 66.6 12.4 Extraordinary charges... -- -- -- -- (6.6) (0.3) Cumulative effect of ac- counting changes....... (3.7) -- -- -- (25.3) (92.4) -------- -------- -------- -------- -------- -------- Net earnings (loss)..... $ 129.6 $ 133.4 $ 36.1 $ 80.7 $ 34.7 $ (80.3) -------- -------- -------- -------- -------- -------- PER-SHARE DATA(/1/) Basic earnings (loss) per share of common stock: Continuing operations.. $ 2.61 $ 2.68 $ 2.04 $ 2.20 $ 2.17 $ 0.15 Discontinued opera- tions................. 0.05 -- (1.30) (0.49) (0.70) 0.15 Extraordinary charges.. -- -- -- -- (0.14) (0.01) Cumulative effect of accounting changes.... (0.08) -- -- -- (0.56) (2.21) -------- -------- -------- -------- -------- -------- Basic net earnings (loss)................. $ 2.58 $ 2.68 $ 0.74 $ 1.71 $ 0.77 $ (1.92) -------- -------- -------- -------- -------- -------- Diluted earnings (loss) per share of common stock: Continuing operations.. $ 2.60 $ 2.62 $ 2.01 $ 2.16 $ 2.13 $ 0.15 Discontinued opera- tions................. 0.05 -- (1.24) (0.47) (0.65) 0.14 Extraordinary charges.. -- -- -- -- (0.14) (0.01) Cumulative effect of accounting changes.... (0.07) -- -- -- (0.53) (2.19) -------- -------- -------- -------- -------- -------- Diluted net earnings (loss)................. $ 2.58 $ 2.62 $ 0.77 $ 1.69 $ 0.81 $ (1.91) -------- -------- -------- -------- -------- -------- Cash dividends per share.................. 1.035 0.975 0.96 0.915 0.90 0.90 Book value per share.... 13.37 14.47 11.71 11.64 11.09 8.90 -------- -------- -------- -------- -------- -------- SUMMARY OF FINANCIAL POSITION Working capital........ $ 191.6 $ 252.7 $ 289.3 $ 349.2 $ 268.8 $ 347.8 Property, plant and equipment............. 240.7 310.0 312.7 280.5 263.4 246.9 Total assets........... 1,388.0 1,551.0 1,613.2 1,357.9 1,224.9 1,258.4 Total long-term liabil- ities................. 381.8 368.0 603.0 442.0 373.9 537.7 Shareholders' equity... 629.7 743.8 578.1 547.9 525.2 374.8 -------- -------- -------- -------- -------- --------
9
YEAR ENDED DECEMBER 31, ----------------------------------------------------------------------------------- 1997 1996 1995 1994 1993 1992 --------- --------- --------- --------- --------- --------- (DOLLARS AND SHARES IN MILLIONS, EXCEPT PER-SHARE DATA) FINANCIAL RATIOS Working capital to sales.................... 9.8% 12.2% 15.5% 22.9% 19.8% 23.5% Selling, general and ad- ministrative expenses to sales.................... 20.2% 19.7% 19.0% 19.1% 19.1% 19.5% Operating margin.......... 13.0% 11.8% 9.7% 11.3% 11.5% 2.3% After-tax return on net sales.................... 6.7% 6.5% 5.4% 6.8% 7.2% 0.4% Return on average share- holders' equity.......... 18.9% 20.2% 6.3% 15.0% 7.7% (18.9%) Current ratio............. 1.5 1.6 1.7 1.9 1.8 2.0 Total debt to capitaliza- tion..................... 25.6% 21.8% 43.1% 33.1% 27.6% 49.7% --------- --------- --------- --------- --------- --------- SUPPLEMENTAL INFORMATION Capital expenditures...... 56.5 59.3 49.0 74.8 55.1 49.9 Depreciation of property, plant and equipment 50.7 52.6 50.3 41.7 35.4 40.6 Research and develop- ment..................... 45.7 47.5 46.9 49.7 53.1 56.2 Common stock price range: High.................... 53 44 1/2 42 1/2 38 37 7/8 32 5/8 Low..................... 36 1/8 32 28 30 1/8 30 25 7/8 Price-earnings ratio range--continuing opera- tions(/3/)............... 20.4-13.9 17.0-12.2 21.1-13.9 17.6-14.0 17.8-14.1 21.3-16.9(/2/) Average common shares outstanding.............. 50.2 49.7 49.2 47.3 45.2 41.8 Employees (in thou- sands)................... 9.9 13.0 12.9 12.2 11.2 12.1 --------- --------- --------- --------- --------- ---------
- ------- (1) The earnings per share amounts prior to 1997 have been restated as required to comply with Statement of Financial Accounting Standards No. 128, Earnings Per Share. See pages F-8 and F-20 for further information. (2) Excludes the impact of after-tax charges related to dispositions of businesses. (3) Price-earnings ratio range is based on diluted earnings per share. See pages F-21 through F-22 of the notes to the consolidated financial statements of this 10-K for information regarding the company's acquisition and divestiture activities. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (DOLLARS IN MILLIONS, EXCEPT PER-SHARE DATA) The following discussion should be read in conjunction with the company's consolidated financial statements and notes thereto. RESULTS OF OPERATIONS Overview BUSINESS COMBINATIONS AND DIVESTITURES: During the last three years, the company completed three significant business combinations and two divestitures. In June 1995, the company acquired Best Power Technology, Inc. (Best Power) for $206. In connection with this acquisition, the company recorded pre-tax charges of $7 for severance and other consolidation costs. In July 1995, the company acquired MagneTek Electric Inc. (Waukesha Electric) for $74. In November 1995, the company merged with Data Switch Corporation (Data Switch) and recorded a pre-tax charge of $13 for transaction costs, severance and balance sheet valuation adjustments. See page F-21 for additional information. In August 1997, the company sold GSPG for approximately $200 and recognized a pre-tax gain of $64. Income tax expense on the gain was $46 or 72 percent of the pre-tax gain. The rate differs from the U.S. statutory tax rate due to a difference in the book and tax basis of GSPG. In January 1996, the company sold Kinney Vacuum Company (Kinney) for $29 and recorded a pre-tax gain of $21. See pages F-21 through F-22 for additional information. In September 1997, the company contributed the net assets of GSEG to EGS, a joint venture with Emerson Electric's Appleton Electric operations. The company accounts for its investment in EGS under the equity method of accounting. See page F-10 for additional information. 10 NONRECURRING GAINS AND EXPENSES: In the fourth quarter of 1997, the company settled patent litigation and sold related patents for a gain of $10 (Patent Income) and sold its equity interest in a company in Mexico for a gain of $9 (Mexico Gain). Income tax expense on the gains totaled $11. The effective tax rate on the Mexico Gain differs from the U.S. statutory tax rate due to a difference in the book and tax basis of the equity investment sold. The company also recorded charges of $14 (Fourth Quarter 1997 Charges) for asset valuations, lease termination costs and other individually insignificant matters. In September 1997, the company recorded charges for potentially excess and obsolete inventory and potentially uncollectible accounts receivable, as well as recorded professional fees in connection with the formation of EGS. The company also wrote off assets related to a discontinued product line and recorded a charge for cancellation of a facility lease due to a restructuring plan for Best Power. Additionally, the company reversed a restructuring reserve that was no longer needed due to the information of EGS. The net of these charges totaled $14 (Third Quarter 1997 Charges). In July 1996, the company negotiated a royalty settlement related to one of its previously divested semiconductor businesses and received $4 in connection with this agreement (the Royalty Income Amount). In May 1996, a fire at a supplier facility destroyed certain assets of a business and in September 1996, the company received $2 in insurance proceeds (Insurance Proceeds), net of related expenses, and recognized a gain on the involuntary conversion of these assets. In the first quarter of 1996, the company recorded charges totaling $20 (First Quarter 1996 Charges) for asset write-downs, lease termination costs, severance, warranty repairs and environmental matters. 1997 COMPARED WITH 1996 REVENUES: Sales decreased 5.3 percent from 1996 levels primarily due to the disposition of GSPG and the contribution of GSEG's net assets to EGS. Adjusted for these transactions, net sales increased approximately 2 percent due primarily to increased sales in the Electrical Controls sector as well as higher volume of industrial oven and laboratory products. International sales represented approximately 25 percent of total net sales in 1997 versus 23 percent in 1996. The overall decline in sales is the result of the following factors (percentages are expressed in relation to 1996 sales): dispositions, including EGS (6%); volume 2%; price (1%). Process Controls sector sales decreased 10.7 percent to $672 primarily due to the sale of GSPG, which recorded sales of $73 in the four months ended December 31, 1996. Lower sales volume of crystal growing furnaces, as a result of a cyclical downturn in the semiconductor equipment market, and lower mixer volume, reflecting the impact of several significant projects in 1996, also contributed to the decrease. Offsetting these decreases were increased sales of industrial oven and laboratory products due in part to increased laboratory construction and renovations. Sales in the Electrical Controls sector decreased 3.6 percent to $911 due primarily to the contribution of the GSEG business to EGS. Adjusted for the contribution of GSEG, net sales increased approximately 6.2 percent. Out of the five continuing business units, four experienced increased revenue over the prior year. The largest sales improvements were noted in the medium-power transformer, fire detection products and uninterruptible power systems products. Industrial Technology sales increased 1.2 percent to $372. Included in 1996 sales was the Royalty Income Amount referred to above. Excluding the Royalty Income Amount from 1996 revenue, sales would have increased 2.4 percent. Increased demand from North American automotive producers as well as strong sales of General Signal Network's CD 9000(TM) Director contributed to the growth. COSTS AND EXPENSES: Cost of sales included $11 of Third Quarter 1997 Charges in 1997 and $13 of First Quarter 1996 Charges in 1996. Adjusted for the items referred to above and the Royalty Income Amount, 1997 gross profit as a percentage of sales decreased from 31.0 percent to 30.0 percent. The decrease was due to a shift in sales to lower margin products in certain businesses, as well as the contribution of GSEG's net business assets to EGS, which carried a high gross margin. Research and development spending was two percent of sales in both years. 11 Selling, general and administrative expenses in 1997 included $10 of Patent Income, $14 of Fourth Quarter 1997 Charges and $3 of Third Quarter 1997 Charges. 1996 expenses included $7 of First Quarter 1996 Charges and $2 of Insurance Proceeds. Excluding these items in both 1997 and 1996 as well as the Royalty Income Amount, selling, general and administrative expenses as a percentage of sales increased from 19.5 percent to 19.8 percent, as cost reduction efforts did not match lower sales volume. 1996 operating expenses were positively impacted by environmental insurance recoveries and the collection of a previously written off receivable totaling $4. Also included in selling, general and administrative expenses were pension credits of $15 in 1997 and $9 in 1996. These credits resulted from the company's overfunded pension plans and favorable long-term investment results. Net interest expense decreased 38.6 percent due to lower average debt levels. Cash generated from operations and divestitures was used to partially pay down debt. The 1997 effective tax rate was 48.2 percent, which included $46 of income taxes from the sale of GSPG and $7 on the Mexico Gain. The company anticipates that its effective tax rate for 1998 will be 38.5 percent. DISCONTINUED OPERATIONS: During 1995, the company recorded losses on the divestitures of the Leeds & Northrup Company (L&N) and Dynapower/Stratopower (Dynapower) and set up reserves to cover potential remaining obligations. In September 1997, it was determined that $2 of this amount, net of tax, was no longer required and accordingly, was reversed through discontinued operations. 1996 COMPARED WITH 1995 REVENUES: Sales increased 10.8 percent over 1995 levels, approximately half of which was due to the acquisitions of Best Power and Waukesha Electric in June and July of 1995, respectively. Adjusted for acquisitions and dispositions, sales improved approximately five percent. International sales in 1996 totaled approximately 23 percent of the company's net sales versus 22 percent in 1995. Price changes, volume changes, acquisitions, net of dispositions, and new product introductions accounted for 2 percent, 50 percent, 47 percent and 1 percent of the revenue increase, respectively. Process Controls sector sales improved 4.5 percent to $752 on strong second half volume activity in pumps, mixers and crystal growing furnaces. These increases were partially offset by the disposition of Kinney, sold in January 1996, which generated revenues of $25 in 1995. Sales in the Electrical Controls sector increased 21.7 percent to $945. The addition of Best Power and Waukesha Electric accounted for approximately 75 percent of the increase. A strong UPS market and North American market share gains in GSEG's electrical fittings also contributed to the improvement. Industrial Technology sector sales increased 0.2 percent to $367. Included in 1996 sales was the Royalty Income Amount. Excluding the Royalty Income Amount from 1996 revenue, sales would have decreased 0.5 percent. Sales from new products introduced in the fourth quarter of 1996 as well as higher product sales of matrix switch systems to the telecommunication and datacommunication industries were offset by the completion of several large farebox contracts in 1995. COSTS AND EXPENSES: In 1996, cost of sales included $13 of First Quarter 1996 Charges. Adjusted for these items and the Royalty Income Amount, gross profit as a percentage of sales increased from 29.8 percent to 31.0 percent. Improved cost structures at several operating units were the primary reasons for the increase. Margin improvements were strongest for mixer, coal feeder, broadcast antenna, electrical fitting, power transformer and automotive products. Gross profit in 1996 included $1.7 related to liquidations of LIFO inventory quantities. Research and development spending ranged from two to three percent in both years. Selling, general and administrative expenses in 1996 included $7 of First Quarter 1996 Charges offset by $2 of Insurance Proceeds. Excluding these items from 1996 expenses and the Royalty Income Amount, selling, general and administrative expenses increased from 19.0 percent to 19.5 percent. The inclusion of a full year's operating expenses related to Best Power, which has a higher rate of operating expenses than the rest of the company, as well as lower credits in connection with the settlement of insured matters, were the primary reasons for the increase. 1996 operating expenses were positively impacted by environmental insurance recoveries and the collection of a previously written off receivable totaling $4. 1995 operating expenses were positively impacted by environmental insurance recoveries and gains on the sale of assets of totaling $11. Also included in selling, general and administrative expenses were pension credits of $9 in both 1996 and 1995. These credits resulted from the company's overfunded pension plans and favorable long-term investment results. 12 Net interest expense decreased 11.5 percent due to lower average debt levels. Cash generated from operations and divestitures was used to pay down the debt incurred in connection with 1995 acquisitions. The 1996 effective tax rate rose to 40 percent from 36 percent in 1995, due largely to reductions in the deferred tax valuation allowance recorded in the prior year. DISCONTINUED OPERATIONS: The company adopted a plan to sell L&N and Dynapower in November 1994. In 1995, the company recorded after-tax net losses totaling $64 ($1.30 per share) in connection with the divestitures of these businesses. LIQUIDITY AND CAPITAL RESOURCES The following information was derived from the Consolidated Financial Statements:
YEAR ENDED DECEMBER 31, -------------- 1997 1996 ------ ------ Cash flow from operating activities............................ $109.0 $191.7 ------ ------ Divestitures................................................... 216.9 94.4 Capital expenditures........................................... (56.5) (59.3) Other investing activities..................................... (5.5) (2.8) ------ ------ Cash flow from investing activities............................ 154.9 32.3 ------ ------ Debt repayments, net of borrowings............................. 52.4 (173.2) Dividends paid................................................. (51.7) (47.6) Purchase of common stock....................................... (240.4) (1.2) Other financing activities..................................... 11.4 14.7 ------ ------ Cash flow from financing activities............................ (228.3) (207.3) ------ ------ Effect of exchange rate changes on cash and cash equivalents... (3.3) -- ------ ------ Net changes in cash and cash equivalents....................... $ 32.3 $ 16.7 ====== ====== Total debt to capitalization................................... 25.6% 21.8% ====== ======
1997 operating cash flow decreased due to lower earnings, after adjusting for non-operating activities, lower accounts receivable collections and lower accrued expenses due to the decrease in disposition and restructuring accruals as well as payment of other non-operating accruals. Included in operating cash flows for 1997 and 1996 were expenditures of $9 and $25, respectively, related to previously divested operations and $8 and $6, respectively, for severance pay. 1997 capital expenditures were primarily comprised of upgrades to manufacturing facilities. The company anticipates capital expenditures in 1998 to be approximately one-and-a-half times depreciation. 1997 divestitures included $191 for the sale of GSPG, $19 for the sale of the company's equity interest in a company in Mexico and $7 for other. 1996 dispositions included $65 related to discontinued operations and $29 on the sale of Kinney. On June 19, 1997, the Board of Directors approved a stock buy-back program of up to $150 subject to the consummation of the GSPG divestiture. On September 18, 1997, the Board of Directors approved an increase of this program to $300. The program is expected to be completed by the end of 1998. As of January 23, 1998, 3.4 million shares were repurchased under this program for $145. On December 12, 1996, the company called for the redemption of its $100 5.75 percent convertible subordinated notes. As of December 31, 1996, notes with a face value of $57 had been converted into 1.5 million shares of the company's common stock, with an additional $40 converted into 1.0 million shares on January 2, 1997. The balance of the notes of $3 was redeemed for cash. On December 12, 1996 the Board of Directors approved a stock buy-back program of up to $100 to offset any shares issued as a result of the call for the redemption of the 5.75 percent convertible subordinated notes. On April 17, 1997, the program was completed with the total of 2.5 million shares repurchased for $100. 13 Total debt to capitalization increased over the prior year due to lower equity at year-end as a result of the stock buy-back programs. At the end of 1997, the company had credit agreements of $605, consisting primarily of committed revolving credit agreements of $180 and $360 that expire in May 1998 and May 2002, respectively. The company also has a $300 financing program under a universal shelf registration with the Securities and Exchange Commission, providing the flexibility to issue a broad variety of securities from time to time. At December 31, 1997, $50 had been issued under the shelf registration. The company expects to use available borrowing facilities to finance, in whole or in part, its buy-back of common stock. Other than the buy-back program, the company expects that cash provided from operations will be sufficient to provide for the company's 1998 financing needs. At December 31, 1997, the company's balance sheet reflected deferred tax assets of $155 that were reduced by deferred tax liabilities of $136 and a valuation allowance of $17. The carrying amount of the net deferred tax asset was based on management's assessment of the realizability of the net operating loss and credit carry-forwards and deductible items through future taxable earnings or alternative tax planning strategies. In September 1997, the company announced its intention to explore the spin off of its GS Networks unit and the possible disposition of three other units. These four units accounted for approximately 19 percent of the company's 1997 net sales. READINESS FOR YEAR 2000 The Year 2000 issue is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the company's computer programs that have time-sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices or engage in similar normal business activities. Based on a recent assessment, the company determined that it will be required to undertake projects to modify or replace significant portions of its software so that its computer systems will properly utilize dates beyond December 31, 1999. These projects will provide the company with numerous benefits only one of which is becoming Year 2000 compliant. The implementation or remediation plans are in various stages of completion. While total expenditures related to these programs have not been finalized, the company estimates, on a preliminary basis, that $8 will be charged to expense in 1998 related to these programs and a similar amount will be expensed in 1999. The company presently believes that with these modifications, the Year 2000 issue will not pose significant operational problems for its computer systems. The company has started to communicate with its significant suppliers to determine the extent to which the company's interface systems are vulnerable to those third parties' failure to remediate their own Year 2000 issues. The projects referred to in the previous paragraph address the impact of third party Year 2000 issues based on presently available information. However, there can be no guarantee that the systems of other companies on which the company's systems rely will be timely converted and would not have an adverse effect on the company's systems. The company is also exploring whether it has any exposure to contingencies related to the Year 2000 issue for the products it has sold. The above information is based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources, third party modification plans and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in this area, the ability to locate and correct all relevant computer codes and similar uncertainties. ENVIRONMENTAL MATTERS The company is involved in various stages of investigation and remediation relative to environmental protection matters. A more detailed discussion of environmental matters appears on pages 6 through 7 of this 10-K. 14 SAFE HARBOR; FORWARD-LOOKING STATEMENTS This 10-K contains various forward-looking statements and includes assumptions concerning the company's operations, future results and prospects. The company's forward-looking statements are based on the company's current expectations, which are subject to a number of risks and uncertainties that could materially affect or reduce such operations and earnings. In connection with the "safe harbor" provisions of the Private Securities Reform Act of 1995, the company provides the following cautionary statement identifying important economic, political and technological factors, among others the absence of which could cause the actual results to differ materially from those set forth in or implied by the forward-looking statements and related assumptions. Such factors include the failure of: (1) a continuation of the increased order rate experienced during 1997, (2) productivity improvements meeting or exceeding budget, (3) new products under development being produced and accepted as anticipated, (4) stable governments and business conditions in emerging economies and (5) stable exchange rates between currencies in which the company is buying or selling materials and products. Further, since the company is a producer of capital goods and equipment, its results can vary with the relative strength of the economy. Demand for products in the Process Controls sector follows the demand for capital goods orders. The Electrical Controls sector depends upon several markets, principally the nonresidential construction and computer equipment industries. The Industrial Technology sector depends on several markets, primarily automotive, mass transportation, and telecommunications equipment. Mass transportation depends upon continued federal and local government spending, and telecommunications is dependent upon continued research and development and the continued success of new product introductions. While no one marketplace or industry has a major impact on the company's operations or results, the inherent pace of technological changes presents certain risks that the company monitors carefully. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The company is exposed to market risk related to changes in interest rates and foreign currency exchange rates, and selectively uses financial instruments to manage these risks. The company does not enter into financial instruments for speculation or trading purposes. The company has an interest rate exchange agreement with a financial institution to limit exposure to interest rate volatility. Additionally, the company enters into foreign currency forward or option contracts to mitigate the risks of doing business in foreign currencies. The company hedges currency exposures of firm commitments and specific assets and liabilities denominated in non-functional currencies to protect against the possibility of diminished cash flow and adverse impact on earnings. The company's currency exposures vary, but are primarily concentrated in the Canadian dollar, British pound, Australian dollar, German mark, French franc and Singapore dollar. Translation exposures generally are not hedged. The value of market risk sensitive financial instruments is subject to change as a result of movement in market rates and prices. Sensitivity analysis is one technique used to evaluate the impact of such possible movements on the valuation of these instruments. Based on a hypothetical one- percentage point increase in interest rates or ten-percent weakening in the U.S. dollar across all currencies, the potential losses in future earnings, fair value and cash flows are immaterial. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The response to this item is submitted in a separate section of this report. See page F-1. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 15 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS This information is incorporated herein by reference to the Board of Directors Section of the Proxy Statement for the 1998 annual meeting of shareholders. Also see pages 7 through 8 of this 10-K as to information related to executive officers. ITEM 11. EXECUTIVE COMPENSATION This information is incorporated herein by reference to the Executive Compensation section of the Proxy Statement for the 1998 annual meeting of shareholders, except for the Report of the Personnel and Compensation Committee on Executive Compensation and the Performance Graph on Comparison of Five-Year Cumulative Total Return, which are specifically not incorporated herein. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT This information is incorporated herein by reference to the Security Ownership of Certain Beneficial Holders and Security Ownership of Management sections of the Proxy Statement for the 1998 annual meeting of shareholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. 16 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K (a) (1) and (2) The response to these portions of Item 14 are submitted as a separate section of this report. See page F-1. All other schedules are omitted as the required information is not applicable or the information is presented in the financial statements or related notes. (3) Listing of Exhibits.
3.1 Restated Certificate of Incorporation of General Signal Corporation, as amended through April 21, 1994 incorporated herein by reference to Exhibit 3.1 of the registrant's 1994 Form 10-K filed March 21, 1995. 3.2 By-laws of General Signal Corporation, as amended through March 19, 1998. 4.1 Copies of the instruments with respect to the company's long-term debt are available upon request to the Securities and Exchange Commission. 10.1 Annual Incentive Compensation Plan for Corporate and Business Unit Management of General Signal Corporation effective January 1, 1997. 10.2 General Signal Corporation Senior Executive Incentive Compensation Plan, as approved by shareholders on April 20, 1995 incorporated herein by reference to Exhibit 10.2 of the registrant's 1996 Form 10-K filed March 21, 1997. 10.3 General Signal Corporation 1997 Non-Employee Directors' Stock Option Plan incorporated herein by reference to Exhibit 10.7 of the registrant's 1988 Form 10-K filed March 17, 1989. 10.4 General Signal Corporation Deferred Compensation Plan for Directors, as amended and restated through December 12, 1996 incorporated herein by reference to Exhibit 10.4 of the registrant's 1996 Form 10-K filed March 21, 1997. 10.5 General Signal Corporation Change in Control Severance Pay Plan, as amended and restated through June 20, 1996 incorporated herein by reference to Exhibit 10.5 of the registrant's 1996 Form 10-K filed March 21, 1997. 10.6 General Signal Corporation Deferred Compensation Plan, as amended and restated January 1, 1997. 10.7 First Amendment to General Signal Corporation Deferred Compensation Plan, effective November 19, 1997. 10.8 General Signal Corporation Benefit Equalization Plan, as amended and restated October 17, 1996. 10.9 General Signal Corporation 1996 Stock Incentive Plan as approved by shareholders on April 18, 1996 incorporated herein by reference to Exhibit 10.8 of the registrant's 1996 Form 10- K filed March 21, 1997. 10.10 First Amendment to General Signal Corporation 1996 Stock Incentive Plan, effective November 19, 1997. 10.11 General Signal Corporation 1992 Stock Incentive Plan, as amended and restated July 7, 1993 incorporated herein by reference to Exhibit 10.6 of the registrant's 1993 Form 10-K filed March 21, 1994. 10.12 First Amendment to General Signal Corporation 1992 Stock Incentive Plan, effective November 19, 1997. 10.13 General Signal Corporation 1989 Stock Option and Incentive Plan, as amended July 7, 1993 incorporated herein by reference to Exhibit 10.7 of the registrant's 1993 Form 10-K filed March 21, 1994.
17 10.14 First Amendment to General Signal Corporation 1989 Stock Option and Incentive Plan, effective November 19, 1997. 10.15 General Signal Corporation 1985 Stock Option Plan as amended and restated July 7, 1993 incorporated herein by reference to Exhibit 10.8 of the registrant's 1993 Form 10-K filed March 21, 1994. 10.16 First Amendment to General Signal Corporation 1985 Stock Option Plan, effective November 19, 1997. 10.17 Employment agreement between Michael D. Lockhart and the registrant dated October 3, 1994 incorporated herein by reference to Exhibit 10.12 of the registrant's 1994 Form 10-K filed March 21, 1995. 10.18 Employment agreement between Terence D. Martin and the registrant dated February 2, 1995 incorporated herein by reference to Exhibit 10.13 of the registrant's 1994 Form 10-K filed March 21, 1995. 10.19 Employment agreement between Joanne L. Bober and the registrant dated October 29, 1996 incorporated herein by reference to Exhibit 10.14 of the registrant's 1996 Form 10-K filed March 21, 1997. 10.20 Employment agreement between Elizabeth D. Conklyn and the registrant dated November 2, 1995 incorporated herein by reference to Exhibit 10.15 of the registrant's 1996 Form 10-K filed March 21, 1997. 10.21 Employment agreement between Ernest R. Verebelyi and the registrant dated September 12, 1996 incorporated herein by reference to Exhibit 10.16 of the registrant's 1996 Form 10-K filed March 21, 1997. 10.22 Employment agreement between Donald J. Noonan and the registrant dated June 5, 1996 incorporated herein by reference to Exhibit 10.17 of the registrant's 1996 Form 10-K filed March 21, 1997. 10.23 Employment agreement between Raymond L. Arthur and the registrant dated January 28, 1997 incorporated herein by reference to Exhibit 10.18 of the registrant's 1996 Form 10-K filed March 21, 1997. 10.24 Employment agreement between Jeffrey M. Johnson and the registrant dated August 1, 1997. 10.25 Change-of-Control Employment Agreement between General Signal Corporation and Michael D. Lockhart, dated as of February 2, 1998. 10.26 Form of Change-of-Control Employment Agreement between General Signal Corporation and each of Terence D. Martin, Ernest R. Verebelyi, Joanne L. Bober, Elizabeth D. Conklyn and each of the other executive officers of the registrant (5 persons), dated as of February 2, 1998. 10.27 Shareholder Rights Plan dated February 1, 1996 incorporated herein by reference to Exhibit 10.15 of the registrant's 1995 Form 10-K filed March 22, 1996. 10.28 Copies of the Credit Agreements among General Signal Corporation and Various Commercial Banking Institutions, dated through May 29, 1997, as described in the Notes to Financial Statements. 10.29 Amendment, effective December 12, 1996, to Retirement Plan for Directors of General Signal Corporation. 12 Calculation of Ratio of Earnings to Fixed Charges. See page F-27 of this report. 21 Subsidiaries. See pages F-28 through F-30 of this report. 23 Consent of Ernst & Young LLP. See page F-31 of this report. 24 Power of attorney. 27 Financial Data Schedule.
(b) Reports on Form 8-K filed in the fourth quarter of 1997 No reports were filed on Form 8-K. (c) Exhibits The response to this portion of Item 14 is submitted as a separate section of this report. (d) Financial Statement Schedules The response to this portion of Item 14 is submitted as a separate section of this report. 18 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED. General Signal Corporation By: /s/ Michael D. Lockhart ________________________________________ (MICHAEL D. LOCKHART, CHAIRMAN) MARCH 20, 1998 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW ON MARCH 20, 1998 BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE --------- ----- /s/ Michael D. Lockhart Chairman and Director ____________________________________ (Principal Executive Officer) (MICHAEL D. LOCKHART) /s/ Terence D. Martin Executive Vice President, ____________________________________ Chief Financial Officer and (TERENCE D. MARTIN) Treasurer /s/ Raymond L. Arthur Vice President and Controller ____________________________________ (Chief Accounting Officer) (RAYMOND L. ARTHUR) * Director ____________________________________ (H. KENT BOWEN) * Director ____________________________________ (VAN C. CAMPBELL) * Director ____________________________________ (MICHAEL A. CARPENTER) * Director ____________________________________ (URSULA F. FAIRBAIRN) * Director ____________________________________ (JOHN R. SELBY) *By /s/ Terence D. Martin ____________________________________ (TERENCE D. MARTIN) ATTORNEY-IN-FACT
19 FORM 10-K--ITEMS 14(A)(1) AND (2) GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS, SCHEDULE AND EXHIBITS Management's Responsibility for Financial Statements...................... F-2 Report of Independent Auditors............................................ F-3 Statement of Earnings for the Years Ended December 31, 1997, 1996 and 1995..................................................................... F-4 Balance Sheet as of December 31, 1997 and 1996............................ F-5 Statement of Shareholders' Equity for the Years Ended December 31, 1997, 1996 and 1995............................................................ F-6 Statement of Cash Flow for the Years Ended December 31, 1997, 1996 and 1995..................................................................... F-7 Notes to the Financial Statements............................ F-8 through F-25 Schedule: II--Valuation and Qualifying Accounts.................................. F-26 All other schedules required by Regulation S-X have been omitted because they are not applicable or because the required information is included in the financial statements or notes thereto. Exhibits: 12--Calculations of Ratio of Earnings to Fixed Charges................. F-27 21--Subsidiaries of Registrant............................ F-28 through F-30 23--Consent of Ernst & Young LLP....................................... F-31 F-1 MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS Management is responsible for the preparation of the company's consolidated financial statements and related information appearing in this 10-K. Management considers that the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements reasonably present the company's financial position and results of operations in conformity with generally accepted accounting principles. Management also has included in the company's financial statements amounts that are based on estimates and judgments which it views as reasonable under the circumstances. The independent auditors perform an audit of the company's consolidated financial statements in accordance with generally accepted auditing standards and provide an objective, independent review of the fairness of reported operating results and financial position. The Board of Directors of the company has an Audit Committee composed of four non-management Directors. The Committee meets at least three times annually with financial management, the internal auditors and the independent auditors to review accounting, control, auditing and financial reporting matters. /s/ Michael D. Lockhart Michael D. Lockhart Chairman and Chief Executive Officer /s/ Terence D. Martin Terence D. Martin Executive Vice President, Chief Financial Officer and Treasurer /s/ Raymond L. Arthur Raymond L. Arthur Vice President and Controller F-2 REPORT OF INDEPENDENT AUDITORS The Board of Directors and Shareholders General Signal Corporation We have audited the accompanying balance sheet of General Signal Corporation and consolidated subsidiaries as of December 31, 1997 and 1996, and the related statements of earnings, shareholders' equity, and cash flow for each of the three years in the period ended December 31, 1997. Our audits also included the financial statement schedule listed in Item 14(a). These financial statements and schedule are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of General Signal Corporation and consolidated subsidiaries at December 31, 1997 and 1996, and the results of their operations and their cash flow for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects, the information set forth therein. As discussed in the notes to the financial statements, in 1997 the company changed its method of accounting for business process reengineering costs. /s/ Ernst & Young LLP Stamford, Connecticut January 23, 1998 F-3 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, ---------------------------- 1997 1996 1995 -------- -------- -------- (IN MILLIONS, EXCEPT PER- SHARE DATA) Net sales....................................... $1,954.6 $2,065.0 $1,863.2 -------- -------- -------- Cost of sales................................... 1,378.5 1,435.7 1,308.0 Selling, general and administrative expenses.... 394.6 406.2 354.4 Gains on dispositions........................... (72.7) (20.8) -- Transaction and consolidation charges........... -- -- 20.1 -------- -------- -------- Total operating costs and expenses.............. 1,700.4 1,821.1 1,682.5 -------- -------- -------- Operating earnings.............................. 254.2 243.9 180.7 Equity in earnings of EGS....................... 11.8 -- -- Interest expense, net........................... (13.2) (21.5) (24.3) -------- -------- -------- Earnings from continuing operations before in- come taxes..................................... 252.8 222.4 156.4 Income taxes.................................... 121.8 89.0 56.3 -------- -------- -------- Earnings from continuing operations............. 131.0 133.4 100.1 Earnings (loss) from disposal of discontinued operations, net of income taxes................ 2.3 -- (64.0) -------- -------- -------- Earnings before cumulative effect of accounting change......................................... 133.3 133.4 36.1 Cumulative effect of accounting change.......... (3.7) -- -- -------- -------- -------- Net earnings.................................... $ 129.6 $ 133.4 $ 36.1 ======== ======== ======== Basic earnings (loss) per share of common stock: Continuing operations......................... $ 2.61 $ 2.68 $ 2.04 Disposal of discontinued operations........... 0.05 -- (1.30) Cumulative effect of accounting change........ (0.08) -- -- -------- -------- -------- Basic earnings per share........................ $ 2.58 $ 2.68 $ 0.74 ======== ======== ======== Diluted earnings (loss) per share of common stock: Continuing operations......................... $ 2.60 $ 2.62 $ 2.01 Disposal of discontinued operations........... 0.05 -- (1.24) Cumulative effect of accounting change........ (0.07) -- -- -------- -------- -------- Diluted earnings per share...................... $ 2.58 $ 2.62 $ 0.77 ======== ======== ========
See accompanying notes to the financial statements. F-4 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES BALANCE SHEET
DECEMBER 31, ------------------ 1997 1996 -------- -------- (IN MILLIONS) ASSETS Current assets: Cash and cash equivalents............................... $ 50.0 $ 17.7 Accounts receivable..................................... 285.4 353.0 Inventories............................................. 156.8 240.6 Prepaid expenses and other current assets............... 23.2 24.7 Deferred income taxes................................... 52.7 55.9 -------- -------- Total current assets.................................. 568.1 691.9 Property, plant and equipment, net of accumulated depreci- ation and amortization................................... 240.7 310.0 Intangibles, net of accumulated amortization.............. 264.3 381.3 Investment in EGS......................................... 133.1 -- Pension asset............................................. 127.5 104.9 Other assets.............................................. 54.3 62.9 -------- -------- Total assets.......................................... $1,388.0 $1,551.0 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Short-term borrowings and current maturities of long- term debt.............................................. $ 9.0 $ 5.6 Accounts payable........................................ 142.7 187.3 Accrued expenses........................................ 184.4 214.6 Income taxes............................................ 40.4 31.7 -------- -------- Total current liabilities............................. 376.5 439.2 Long-term debt, less current maturities................... 207.4 201.3 Accrued post-retirement and post-employment obligations... 112.4 133.2 Deferred income taxes..................................... 50.3 17.3 Other liabilities......................................... 11.7 16.2 -------- -------- Total long-term liabilities........................... 381.8 368.0 Shareholders' equity: Common stock............................................ 78.5 78.2 Additional paid-in capital.............................. 367.2 337.1 Retained earnings....................................... 746.7 667.4 Cumulative translation adjustments and other............ (11.8) (1.4) -------- -------- 1,180.6 1,081.3 Common stock in treasury................................ (550.9) (337.5) -------- -------- Total shareholders' equity............................ 629.7 743.8 -------- -------- Total liabilities and shareholders' equity............ $1,388.0 $1,551.0 ======== ========
See accompanying notes to the financial statements. F-5 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF SHAREHOLDERS' EQUITY
CUMULATIVE ADDITIONAL TRANSLATION COMMON COMMON PAID-IN RETAINED ADJUSTMENTS STOCK IN STOCK CAPITAL EARNINGS AND OTHER TREASURY ------ ---------- -------- ----------- -------- (IN MILLIONS, EXCEPT PER-SHARE DATA) Balance at December 31, 1994... $77.4 $281.1 $620.5 $(12.1) $(419.0) Restatement for Data Switch merger...................... -- 4.8 (27.7) (0.1) 45.7 Net earnings................. -- -- 36.1 -- -- Dividends declared ($0.96 per share)...................... -- -- (46.0) -- -- Purchase of common stock..... -- -- -- -- (18.0) Exercise of stock options and savings and stock ownership plan funding................ 0.5 18.3 -- -- 8.3 Discontinued operations...... -- -- -- 7.4 -- Translation adjustments...... -- -- -- 0.9 -- ----- ------ ------ ------ ------- Balance at December 31, 1995... 77.9 304.2 582.9 (3.9) (383.0) Net earnings................. -- -- 133.4 -- -- Dividends declared ($0.975 per share).................. -- -- (48.9) -- -- Purchase of common stock..... -- -- -- -- (1.2) Exercise of stock options and savings and stock ownership plan funding................ 0.3 12.4 -- -- 9.4 Conversion of 5.75 percent convertible subordinate notes........... -- 20.5 -- -- 37.3 Translation adjustments...... -- -- -- 2.5 -- ----- ------ ------ ------ ------- Balance at December 31,1996.... 78.2 337.1 667.4 (1.4) (337.5) Net earnings................. -- -- 129.6 -- -- Dividends declared ($1.035 per share).................. -- -- (50.3) -- -- Purchase of common stock..... -- -- -- -- (240.4) Exercise of stock options and savings and stock ownership plan funding................ 0.3 16.1 -- -- 1.5 Conversion of 5.75 percent convertible subordinate notes....................... -- 14.0 -- -- 25.5 Minimum pension liability ad- justment.................... -- -- -- (1.7) -- Translation adjustments...... -- -- -- (8.7) -- ----- ------ ------ ------ ------- Balance at December 31, 1997... $78.5 $367.2 $746.7 $(11.8) $(550.9) ===== ====== ====== ====== =======
See accompanying notes to the financial statements. F-6 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF CASH FLOW
INCREASE (DECREASE) YEAR ENDED DECEMBER 31, ---------------------------- 1997 1996 1995 ------ ------------- ------ (IN MILLIONS) CASH FLOW FROM OPERATING ACTIVITIES: Net earnings..................................... $129.6 $133.4 $ 36.1 Adjustments to reconcile net earnings to net cash from operating activities: Cumulative effect of accounting change......... 3.7 -- -- (Earnings) loss on disposal of discontinued operations.................................... (2.3) -- 64.0 Equity in earnings of EGS...................... (11.8) -- -- Gains on dispositions.......................... (72.7) (20.8) -- Asset write downs, transaction, consolidation and other charges............................. 22.9 19.7 20.1 Deferred income taxes.......................... 22.2 43.7 32.0 Depreciation................................... 50.7 52.6 50.3 Amortization................................... 14.6 16.6 12.5 Pension credits................................ (14.7) (8.8) (9.3) Other, net..................................... (2.7) 5.5 4.4 Changes in assets and liabilities, net of effects from acquisitions and divestitures: Accounts receivable.......................... (17.5) (30.8) (15.4) Inventories.................................. 8.4 (10.4) 21.4 Prepaid expenses and other current assets.... 5.8 11.0 18.1 Accounts payable............................. (8.8) 28.8 (14.2) Accrued expenses and other................... (27.7) (49.0) (71.6) Income taxes................................. 9.3 0.2 12.3 ------ ------ ------ Net cash from operating activities............... 109.0 191.7 160.7 ------ ------ ------ CASH FLOW FROM INVESTING ACTIVITIES: Divestitures..................................... 216.9 94.4 53.4 Capital expenditures............................. (56.5) (59.3) (49.0) Acquisitions, net of cash acquired............... (11.0) -- (272.4) Other, net....................................... 5.5 (2.8) 15.3 ------ ------ ------ Net cash from investing activities............... 154.9 32.3 (252.7) ------ ------ ------ CASH FLOW FROM FINANCING ACTIVITIES: Issuance of long-term debt....................... 170.5 115.3 273.2 Redemption of long-term debt..................... (118.1) (288.5) (134.0) Purchase of common stock......................... (240.4) (1.2) (18.0) Issuance of common stock......................... 11.4 14.7 17.1 Dividends paid................................... (51.7) (47.6) (45.6) ------ ------ ------ Net cash from financing activities............... (228.3) (207.3) 92.7 ------ ------ ------ Effect of exchange rate changes on cash and cash equivalents..................................... (3.3) -- -- ------ ------ ------ Net changes in cash and cash equivalents......... 32.3 16.7 0.7 ------ ------ ------ Cash and cash equivalents at beginning of year... 17.7 1.0 0.3 ------ ------ ------ Cash and cash equivalents at end of year......... $ 50.0 $ 17.7 $ 1.0 ====== ====== ====== Interest paid.................................... $ 11.6 $ 25.7 $ 27.3 Income taxes paid................................ 87.0 44.0 15.7 Noncash investing and financing activities: Conversion of convertible debt into common stock......................................... $ 39.3 $ 57.4 $ -- Contribution of GSEG's net assets to EGS joint venture....................................... 119.4 -- --
See accompanying notes to the financial statements. F-7 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS (Dollars in millions, except per-share data) 1. ACCOUNTING POLICIES CONSOLIDATION: The financial statements include the accounts of General Signal Corporation and consolidated subsidiaries after elimination of intercompany accounts and transactions. Investments in unconsolidated companies where management exercises significant influence are accounted for using the equity method. CASH EQUIVALENTS: The company considers its highly liquid money market investments with original maturities of three months or less to be cash equivalents. INVENTORIES: Inventories are stated at the lower of cost or market. Cost is primarily determined using the first-in, first-out (FIFO) method. All other inventories are valued using the last-in, first-out (LIFO) method. PROPERTY: Property, plant and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of assets, which do not exceed 40 years for buildings and range from 3 to 10 years for machinery and equipment. Leasehold improvements are amortized over the life of the related asset or the life of the lease, whichever is shorter. INTANGIBLES: Intangible assets (primarily the excess of purchase price over the fair value of net assets acquired) are amortized on a straight-line basis over periods not exceeding 40 years. Intangibles assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Impairment losses are recognized if expected cash flows of the related assets are less than their carrying values. REVENUE RECOGNITION: Revenues are primarily recognized as products are shipped and services are rendered. The percentage-of-completion method of accounting is followed for long-term contracts. Under this method, earnings accrue as contracts progress toward completion, generally based on the percentage of costs incurred or the units of product delivered. FINANCIAL INSTRUMENTS: The company does not enter into financial instruments for speculation or trading purposes. The net amount to be paid or received under interest rate swap agreements is accrued over the life of the agreement as a separate component of interest expense. Gains and losses related to forward foreign exchange and option contracts that qualify for hedge accounting treatment are deferred and offset against losses and gains when the underlying transaction occurs. Gains or losses at the time of maturity, termination, sale or repayment of a financial instrument contract designated as a hedge are included in earnings. The fair values of interest rate swap agreements and forward foreign exchange and option contracts are not recognized in the financial statements. ENVIRONMENTAL: The company's environmental accruals cover all anticipated costs, including investigation, remediation, and operation and maintenance of clean-up sites. Environmental obligations generally are not discounted and are not reduced by anticipated insurance recoveries. STOCK COMPENSATION: The company accounts for the options granted under its stock incentive program by recognizing as compensation any excess of quoted market price over exercise price at the date of grant. ACCOUNTING CHANGES: In February 1997, the Financial Accounting Standards Board (the FASB) issued Statement of Financial Accounting Standards (SFAS) No. 128, "Earnings Per Share" (SFAS No. 128), which revises the methodology of calculating earnings per share. The company adopted SFAS No. 128 in the fourth quarter of 1997. Earnings per share amounts for all periods have been presented, and where appropriate, restated to conform to the SFAS No. 128 requirements. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" (SFAS No. 130) and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS No. 131). SFAS No. 130 and SFAS No. 131 are effective for financial statements for fiscal years beginning after December 15, 1997. The company is studying the application of the new statement. The adoption of these statements will have no impact on the company's consolidated results of operations, financial position or cash flow. F-8 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) In November 1997, the Emerging Issues Task Force (EITF) of the FASB issued consensus 97-13, "Accounting for Costs Incurred in Connection with a Consulting Engagement or an Internal Project that Combines Business Process Reengineering and Information Technology Transformation" (EITF 97-13). EITF 97-13 requires all previously capitalized business process reengineering costs to be expensed as a cumulative effect of a change in accounting principle. The company recorded a charge of $3.7, net of tax, in connection with EITF 97-13 in the fourth quarter of 1997. In December 1997, the FASB issued SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits" (SFAS No. 132), which revises disclosure requirements for employers' pensions and other retiree benefits. The statement is effective for financial statements for fiscal years beginning after December 15, 1997. The company is studying the application of the new statement. The adoption of this statement will have no impact on the company's consolidated results of operations, financial position or cash flow. USE OF ESTIMATES: The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS: Certain reclassifications were made to conform prior years' data to the current presentation. 2.ACCOUNTS RECEIVABLE Accounts receivable were net of allowances for doubtful accounts of $12.3 and $10.0 at December 31, 1997 and 1996, respectively. 3.INVENTORIES
DECEMBER 31, -------------- 1997 1996 ------ ------ Finished goods............................................. $ 43.9 $ 80.8 Work in process............................................ 38.3 63.2 Raw material and purchased parts........................... 87.3 117.1 ------ ------ Total FIFO cost............................................ 169.5 261.1 Excess of FIFO cost over LIFO inventory value.............. (12.7) (20.5) ------ ------ $156.8 $240.6 ====== ======
Inventories valued using LIFO were approximately $48.6 and $61.9 at December 31, 1997 and 1996, respectively. In 1996, the company recorded a LIFO liquidation, which increased net income by $1.0. In 1997, included in the gain on sale of General Signal Pump Group (GSPG) was a LIFO liquidation of $2.0. Additionally, $5.3 of the excess of FIFO cost over LIFO inventory value was transferred from General Signal Electrical Group (GSEG) to the investment in EGS Electrical Group LLC (EGS). In 1996, included in the gain on sale of the Kinney Vacuum Company (Kinney) was a LIFO liquidation of approximately $1.1. Progress payments, netted against work in process at year end, were $10.1 in 1997 and $11.0 in 1996. 4.CONTRACTS IN PROGRESS Prepaid expenses and other current assets include contracts in progress of $3.4 and $7.8 at December 31, 1997 and 1996, respectively. Contracts in progress represent revenue recognized on a percentage-of-completion basis over related progress billings of $60.5 and $36.0 at December 31, 1997 and 1996, respectively. Substantially all contracts in progress at year end are billed during the subsequent year. F-9 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 5.PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31, ---------------- 1997 1996 ------- ------- Land..................................................... $ 9.5 $ 12.2 Buildings and leasehold improvements..................... 150.7 173.7 Machinery and equipment.................................. 416.1 561.4 ------- ------- 576.3 747.3 Accumulated depreciation and amortization................ (335.6) (437.3) ------- ------- $ 240.7 $ 310.0 ======= ======= 6.INTANGIBLES DECEMBER 31, ---------------- 1997 1996 ------- ------- Excess of cost over net assets acquired.................. $ 298.0 $ 465.3 Other intangibles........................................ 34.3 40.4 ------- ------- 332.3 505.7 Accumulated amortization................................. (68.0) (124.4) ------- ------- $ 264.3 $ 381.3 ======= =======
In the third quarter of 1997, the company sold GSPG and contributed the net assets of GSEG to EGS. As a result of these transactions, intangible assets decreased by approximately $102. 7.EGS JOINT VENTURE In the fourth quarter of 1997, the company and Emerson Electric Company formed EGS, a joint venture combining Emerson Electric's Appleton Electric operations and the company's GSEG. The company contributed substantially all of the operating assets of GSEG in exchange for 47.5 percent of EGS. The company accounts for its investment in EGS under the equity method of accounting. EGS operates primarily in the United States, Canada and Mexico. EGS's operations for the period from September 15, 1997 to December 31, 1997 were the following:
EGS: ---- Net sales........................................................... $162.0 Gross profit........................................................ 62.5 Net income.......................................................... 24.5
The company's equity in earnings of EGS at December 31, 1997 was $11.8. The company's investment in EGS is approximately $17 less than its equity in the joint venture's net assets at December 31, 1997. This difference is being amortized on a straight-line basis over an estimated economic life of 40 years. Condensed balance sheet information of EGS as of December 31, 1997 is as follows: Current assets..................................................... $149.0 Noncurrent assets.................................................. 241.7 Current liabilities................................................ 59.4 Noncurrent liabilities............................................. 16.0
F-10 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 8.ACCRUED EXPENSES
DECEMBER 31, ------------- 1997 1996 ------ ------ Payroll and compensation.................................... $ 53.5 $ 62.5 Environmental and legal..................................... 25.3 26.9 Dispositions and special items.............................. 9.2 23.0 Other....................................................... 96.4 102.2 ------ ------ $184.4 $214.6 ====== ======
9.INCOME TAXES For financial reporting purposes, earnings from continuing operations before income taxes includes the following components:
YEAR ENDED DECEMBER 31, ------------------------- 1997 1996 1995 ------- ------- ------- Pretax income: United States............................... $ 236.0 $ 205.6 $ 151.5 Foreign..................................... 16.8 16.8 4.9 ------- ------- ------- $252.8 $ 222.4 $ 156.4 ======= ======= ======= The reconciliation of income tax from continuing operations computed at the U.S. federal statutory tax rate to the company's effective income tax rate is as follows: YEAR ENDED DECEMBER 31, ------------------------- 1997 1996 1995 ------- ------- ------- Tax at U.S. federal statutory rate............ 35.0% 35.0% 35.0% State and local income taxes, net of U.S. fed- eral benefit................................. 5.3 4.2 5.5 Foreign sales corporation..................... (1.8) (1.3) (1.7) Goodwill amortization......................... 1.6 1.9 2.1 Income from Puerto Rican operations........... (0.2) (0.2) (0.7) Foreign rates and foreign dividends........... 0.6 0.4 (1.4) Reduction in valuation allowance.............. (0.9) -- (4.5) Disposition basis differences................. 8.6 -- -- Other......................................... -- -- 1.7 ------- ------- ------- 48.2% 40.0% 36.0% ======= ======= =======
The components of the provision for income taxes are as follows:
YEAR ENDED DECEMBER 31, ------------------------- 1997 1996 1995 -------- ------- -------- Current: Federal...................................... $ 74.3 $ 32.8 $ 14.2 Foreign...................................... 8.5 4.9 3.4 State........................................ 16.0 7.6 6.7 -------- ------- -------- Total current.............................. 98.8 45.3 24.3 -------- ------- -------- Deferred: Federal...................................... 17.5 34.2 (6.5) Foreign...................................... 0.5 1.9 (2.6) State........................................ 4.2 7.6 5.2 -------- ------- -------- Total deferred............................. 22.2 43.7 (3.9) -------- ------- -------- $121.0 $ 89.0 $ 20.4 ======== ======= ========
F-11 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) Income tax expense (income) is included in the financial statements as follows:
YEAR ENDED DECEMBER 31, -------------------- 1997 1996 1995 ------ ----- ------ Continuing operations................................ $121.8 $89.0 $ 56.3 Discontinued operations.............................. 1.5 -- (35.9) Cumulative effect of accounting change............... (2.3) -- -- ------ ----- ------ Total income tax expense............................. $121.0 $89.0 $ 20.4 ====== ===== ======
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, -------------- 1997 1996 ------ ------ Deferred tax assets: Acquired tax benefits and basis differences............. $ 21.0 $ 29.0 Other post-retirement and post-employment benefits...... 53.7 58.3 Losses on dispositions and restructuring................ 4.0 11.7 Inventories............................................. 16.2 14.8 NOL and credit carry-forwards........................... 21.2 32.9 Other................................................... 38.9 32.0 ------ ------ Total deferred tax assets............................. 155.0 178.7 Valuation allowance..................................... (16.7) (30.0) ------ ------ Net deferred tax assets............................... 138.3 148.7 Deferred tax liabilities: Accelerated depreciation................................ 27.9 35.7 Pension credits......................................... 49.1 39.0 Reliance gain........................................... 19.8 19.8 Basis difference in EGS................................. 23.2 -- Other................................................... 15.9 15.6 ------ ------ Total deferred tax liabilities........................ 135.9 110.1 ------ ------ $ 2.4 $ 38.6 ====== ======
Realization of deferred tax assets associated with the net operating loss (NOL) and credit carry-forwards is dependent upon generating sufficient taxable income prior to their expiration. Management believes that there is a risk that certain of these NOL and credit carry-forwards may expire unused and, accordingly, has established a valuation allowance against them. Although realization is not assured for the remaining deferred tax assets, management believes it is more likely than not that the net deferred tax assets will be realized through future taxable earnings or alternative tax strategies. However, the net deferred tax assets could be reduced in the near term if management's estimates of taxable income during the carry-forward period are significantly reduced or alternative tax strategies are no longer viable. The valuation allowance decreased in 1997 and 1996 by $13.3 and $3.6, respectively. At December 31, 1997, the following net federal operating loss and tax credit carry-forwards were available:
OPERATING TAX EXPIRATION DATES LOSSES CREDITS ---------------- --------- ------- 1998-1999............................................... $5.0 $8.7 2000-2001............................................... 2.1 -- 2002-2003............................................... 0.6 --
F-12 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) Undistributed earnings of the company's foreign subsidiaries amounted to approximately $62.3 at December 31, 1997. Those earnings are considered to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been made. If these earnings were distributed, the company would be subject to U.S. income taxes (subject to a reduction for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable; however, unrecognized foreign tax credit carry-overs would be available to reduce some portion of the U.S. liability. Withholding taxes of approximately $4.0 would be payable upon remittance of all previously unremitted earnings at December 31, 1997. 10.DEBT
DECEMBER 31, ------------- 1997 1996 ------ ------ 5.75% Convertible Subordinated Notes....................... $ -- $ 42.6 Commercial paper: 1997 at 6.1% and 1996 at 5.6%............ 116.4 114.5 Medium-term Notes: $25 at 7.0% due 2000, $25 at 7.114% due 2002...................................................... 50.0 -- Industrial Revenue Bonds due 2000-2008; no stipulated principal repayments prior to maturity (primarily variable rate)................................. 32.5 36.0 Other long-term borrowings................................. 14.0 12.8 ------ ------ 212.9 205.9 Less current maturities.................................... 5.5 4.6 ------ ------ $207.4 $201.3 ====== ====== Short-term notes payable to banks.......................... $ 3.5 $ 1.0 ====== ======
On December 12, 1996, the company called for the redemption of its 5.75 percent convertible subordinated notes. Through December 31, 1996, notes with a face value of $57.4 had been converted into 1.5 million shares of the company's common stock, with an additional $39.3 converted into 1.0 million shares on January 2, 1997. The balance of the notes of $3.3 was redeemed for cash. Long-term debt maturing during each of the four years after 1998 is $2.7, $35.7, $3.6 and $144.2. The company maintains credit arrangements with banks in the U.S. and abroad which aggregated approximately $605 and $604 at December 31, 1997 and 1996, respectively. At December 31, 1997, the company had a committed revolving credit agreement of $180.0 that matures on May 28, 1998, and a committed revolving credit agreement of $360.0 that matures on May 28, 2002. The agreements permit domestic and Eurodollar borrowings at interest rates offered to investment grade customers. The agreements also are convertible into one- year term loans at maturity. Commercial paper is classified as long-term debt as the company maintains long-term committed credit agreements to support these borrowings and intends to refinance them on a long-term basis, either through continued commercial paper borrowings or the issuance of medium-term notes. The company has a $300.0 financing program under a universal shelf registration that permits the issuance of junior or senior debt, convertible securities, equity warrants and preferred shares under one filing without specifying any dollar amounts for any security. On April 30, 1996, the company filed a prospectus supplement which allows the company to issue medium-term senior notes or medium-term subordinated notes under the shelf registration. As of December 31, 1997, $50.0 had been issued under the shelf registration. The company has an interest rate exchange agreement, expiring in March 2000, with a financial institution to limit exposure to interest rate volatility on the commercial paper. The transaction has a notional principal amount of $25.0 at December 31, 1997 and 1996. The company monitors the risk of default by the swap counterparty and does not anticipate non-performance. At December 31, 1997, termination of this agreement would result in a $1.5 loss. F-13 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 11.FOREIGN EXCHANGE CONTRACTS The company conducts its business in various foreign currencies. Accordingly, the company is subject to the typical currency risks and exposures that arise as a result of changes in the relative value of currencies. The risks are often referred to as transactional, commitment, translational and economic currency exposures. The company's policy stresses risk reduction and specifically prohibits speculation. The policy's three basic objectives are to reduce currency risk on a consolidated basis, to protect the functional currency value of foreign currency-denominated cash flows and to reduce the volatility that changes in foreign exchange rates may present to operating income. The company utilizes natural hedges and offsets to reduce exposures and also combines positions to reduce the cost of hedging. The company entered into forward foreign exchange contracts to hedge net consolidated currency transaction exposure for periods consistent with the terms of the underlying transactions, extending through September 17, 1998. Foreign currency forward or option contracts are not used for trading purposes, and these contracts do not subject the company to currency risk from exchange rate movements. At December 31, 1997, the company had approximately $15.1 of such contracts outstanding. 12.FAIR VALUE OF FINANCIAL INSTRUMENTS Cash and cash equivalents, short- and long-term debt, and foreign currency contracts had fair values, based upon quoted prices or discounted cash flow analyses, that approximated their carrying amounts. Financial guarantees and letters of credit were issued by the company in the ordinary course of business, and had a fair value of approximately $104.3 as of December 31, 1997. The fair values of financial guarantees and letters of credit were based on the face value of the underlying instruments, after deducting the amount related to those instruments that are recorded as liabilities, and the related amounts accrued. 13.CONTINGENCIES AND COMMITMENTS LITIGATION: The company and certain of its subsidiaries are defendants in legal proceedings incidental to its business. Although the ultimate disposition of these proceedings is not presently determinable, management does not expect the outcome to have a material adverse impact on the company's financial position or results of operations. LEASES: The future minimum rental payments under leases with remaining noncancelable terms in excess of one year are:
Year ending December 31, ------------------------ 1998.............................................................. $10.5 1999.............................................................. 8.2 2000.............................................................. 5.8 2001.............................................................. 2.6 2002.............................................................. 3.6 Subsequent to 2002................................................ 4.6 ----- Total minimum payments.......................................... $35.3 =====
Total rent expense in 1997, 1996 and 1995 was $19.2, $20.3 and $21.1, respectively. F-14 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 14.ENVIRONMENTAL MATTERS The company is involved in various stages of investigation and remediation relative to environmental protection matters, arising from its own initiative, from indemnification of purchasers of divested operations, or from legal or administrative proceedings, some of which include waste disposal sites. In certain instances, the company may be exposed to joint and several liability for remedial action or damages. The company, along with several other entities, has been named as a potentially responsible party for remedial costs at certain third-party sites listed on the National Priorities List under CERCLA and state counterpart statutes. The potential costs related to such matters and the possible impact on future operations are uncertain due in part to the complexity of government laws and regulations and their interpretations, the varying costs and effectiveness of clean-up technologies, the uncertain level of insurance or other types of recovery, and the questionable level of the company's responsibility. The company estimates that costs of investigation and remediation will be approximately $25 and has included this amount in accrued expenses in the accompanying balance sheet. It is at least reasonably possible, however, that a change in this estimate will occur. In management's opinion, after considering reserves established for such purposes, remedial actions for compliance with the present laws and regulations governing the protection of the environment are not expected to have a material adverse impact on the company's results of operations or financial position. 15.CAPITAL STOCK PREFERRED STOCK: 10 million shares of cumulative preferred stock, par value $1.00 per share, are authorized but unissued. COMMON STOCK: 150 million shares are authorized, with 65.0 million issued in 1997 and 64.6 million issued in 1996. The 1.96 million shares issued through 1969 have a par value of $6.67 per share. Shares issued since then have a par value of $1.00 per share. TREASURY STOCK:
NUMBER OF SHARES ---------------- 1997 1996 1995 ---- ---- ---- (IN MILLIONS) Balance at beginning of year............................ 13.2 15.0 16.6 Restatement for Data Switch merger...................... -- -- (1.8) Common stock reacquired................................. 5.8 -- 0.5 Common stock issued under the company's incentive com- pensation and savings and stock ownership plans........ (0.1) (0.3) (0.3) Conversion of convertible subordinated notes............ (1.0) (1.5) -- ---- ---- ---- Balance at end of year.................................. 17.9 13.2 15.0 ==== ==== ====
On June 19, 1997, the Board of Directors approved a stock buy-back program of up to $150.0 subject to the consummation of the GSPG divestiture. On September 18, 1997, the Board of Directors approved an increase of this program to $300.0. The program is expected to be completed by the end of 1998. As of January 23, 1998, 3.4 million shares were repurchased under this program for $145.1. On December 12, 1996, the Board of Directors approved a stock buy-back program of up to $100.0 to offset any shares issued as a result of the call for the redemption of the 5.75 percent convertible subordinated notes. On April 17, 1997, the program was completed with the total of 2.5 million shares repurchased for $100.0. F-15 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) In March 1994, the company's Board of Directors approved a program, which concluded in March 1996, to repurchase up to 3.4 percent or 1.6 million shares of the common stock outstanding at that time. These shares were purchased systematically in open market transactions after the Board's approval and were used to offset dilution from the increased exercise of employee stock options arising from the company's executive stock ownership program. Approximately 1.1 million shares were repurchased under this program. WARRANTS: In connection with the Data Switch merger, the company assumed 1,452 warrants that are redeemable at $34.83 per share and 14,357 warrants that are redeemable at $16.54 per share. In 1997 and 1996, 718 and 13,639, respectively, of these warrants were redeemed for shares of common stock. SHAREHOLDER RIGHTS PLAN: On February 1, 1996, the Board of Directors declared a dividend distribution of one common stock purchase right for each share of common stock. The rights trade with the common stock and are not currently exercisable. Each right entitles the shareholder to buy the company's or the acquiring company's stock valued at $300 per share for a price of $150 per share upon the occurrence of specific events. The company may redeem the rights for 10 days (subject to a further 20-day extension) for one cent per right, after a person or entity acquires 20 percent or more of the common stock. The provisions do not apply to rights that are beneficially owned by the acquirer. 16. EMPLOYEE BENEFIT PLANS PENSION PLANS: The company's pension plans cover substantially all salaried and hourly paid employees, including certain employees in foreign countries. The plans generally provide benefit payments using a formula based on an employee's compensation and length of service or, in some cases, stated amounts for each year of service. The company funds United States pension plans in amounts equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974, plus additional amounts that may be approved from time to time. Substantially all plan assets are invested in cash and short-term investments or listed stocks and bonds and real estate. Plan assets and obligations of non-U.S. subsidiaries are not material. The periodic net pension income related to continuing operations is comprised of the following:
YEAR ENDED DECEMBER 31, ---------------------- 1997 1996 1995 ------ ------ ------ Service cost - benefits earned during the period......................................... $ 11.7 $ 14.6 $ 8.9 Interest cost on projected benefit obligation... 32.8 32.7 32.6 Actual return on assets......................... (89.5) (77.4) (45.7) Net amortization and deferral................... 30.3 21.3 (5.1) ------ ------ ------ Net pension income............................ $(14.7) $ (8.8) $ (9.3) ====== ====== ====== The actuarial assumptions used were: Discount rate................................... 7.60% 7.60% 7.00% Rate of increase in compensation levels......... 5.00% 5.00% 5.00% Expected long-term rate of return on assets..... 9.50% 9.50% 9.50%
F-16 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) The following table sets forth the plans' funded status and amounts recognized in the balance sheet:
DECEMBER 31, -------------------------------- 1997 1996 --------------- --------------- OVER UNDER OVER UNDER FUNDED FUNDED FUNDED FUNDED ------- ------ ------- ------ Actuarial present value of obligations: Vested benefit obligation.............. $(445.0) $(4.6) $(343.0) $(71.2) ------- ----- ------- ------ Accumulated benefit obligation......... (464.8) (5.0) (361.2) (73.7) ------- ----- ------- ------ Fair value of plan assets.............. 633.8 -- 522.9 62.4 Projected benefit obligation........... (483.6) (4.4) (377.7) (76.1) ------- ----- ------- ------ Plan assets in excess of (less than) projected benefit obligation.......... 150.2 (4.4) 145.2 (13.7) Unrecognized net (gain) loss........... (3.2) 2.2 (10.5) 4.0 Prior service cost not yet recognized in net pension cost................... 4.9 1.1 6.0 3.1 Unrecognized net asset................. (19.4) 0.2 (24.5) (4.7) Adjustment to recognize minimum liabil- ity................................... -- (4.1) -- -- ------- ----- ------- ------ Prepaid (accrued) pension.............. $ 132.5 $(5.0) $ 116.2 $(11.3) ======= ===== ======= ======
A minimum pension liability adjustment is required when the actuarial present value of accumulated benefits exceeds plan assets and accrued pension liabilities. The minimum liability adjustment, less allowable intangible assets, net of tax benefit, is reported as a reduction of shareholders' equity. At December 31, 1997, the company recorded a minimum pension liability adjustment, net of tax, of $1.7. Under the Savings and Stock Ownership Plan and other supplemental plans, the company matches employee contributions in cash and common stock equal to a percentage of certain amounts contributed by employees. The company's contributions under these plans amounted to $13.2 in 1997, $10.6 in 1996 and $8.2 in 1995. Effective July 1, 1997, the contributions were invested in funds based on employee direction. Prior to July, the contributions were invested in shares of the company's common stock. At December 31, 1997, the plans held 2.4 million shares and 0.6 million shares were reserved for issuance. NON-PENSION RETIREMENT BENEFITS: The company and its U.S. subsidiaries have post-retirement plans that provide health and life insurance benefits for retirees. Some of these plans require employee contributions at varying rates. Not all employees are eligible to receive these benefits, with eligibility governed by the plan(s) in effect at a particular location. The accumulated post-retirement benefit obligation at December 31, 1997 was determined using the terms of the company's various plans, together with relevant actuarial assumptions and health care cost trend rates projected at estimated annual rates ranging from 6.6 percent in 1997 and 6.4 percent in 1998, to 5.0 percent through the year 2006, and a weighted average discount rate of 7.0 percent. Generally, where applicable, the discount rate and the actuarial assumptions used for pension plans also apply to the non-pension retirement plans. A one percent annual increase in these assumed cost trend rates would increase the accumulated post-retirement benefit obligation by approximately $0.9, and annual service costs by approximately $0.1. Certain of the company's non-U.S. subsidiaries have similar plans for retirees. The company's obligations for such plans are not material. The net periodic post-retirement benefit cost related to continuing operations is composed of the following:
YEAR ENDED DECEMBER 31, ----------------- 1997 1996 1995 ---- ---- ----- Service cost for benefits attributed to service during the period........................................... $0.4 $0.6 $ 0.4 Interest cost on the accumulated post-retirement benefit obligation................................... 6.2 6.0 4.5 Net amortization and deferral......................... (4.3) (4.5) (5.5) ---- ---- ----- Net periodic post-retirement benefits............... $2.3 $2.1 $(0.6) ==== ==== =====
F-17 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) The following table shows the plans' funded status and amounts recognized in the balance sheet:
DECEMBER 31, -------------------------------- 1997 1996 --------------- --------------- HEALTH LIFE HEALTH LIFE ------- ------ ------- ------ Accumulated post-retirement benefit obligation: Retirees............................ $ (58.9) $(16.2) $ (55.8) $(15.3) Fully-eligible active plan participants....................... (3.1) (1.2) (1.3) (0.2) Other active plan participants...... (3.2) (1.4) (8.2) (3.1) ------- ------ ------- ------ Total............................. (65.2) (18.8) (65.3) (18.6) Unrecognized net gain................. (13.8) (1.2) (20.4) (1.7) Unrecognized prior service cost....... (12.6) -- (19.5) -- ------- ------ ------- ------ Accrued post-retirement benefit cost.. (91.6) (20.0) (105.2) (20.3) Less amounts classified as current.... 7.3 1.3 7.3 1.3 ------- ------ ------- ------ $ (84.3) $(18.7) $ (97.9) $(19.0) ======= ====== ======= ======
During 1997, the company's accrued post-retirement benefit cost was reduced by curtailment gains and settlement gains of approximately $7.9 related to the disposition of GSPG and the formation of EGS. The curtailment gain recognized on the disposition of GSPG is included in the gain on sale amount. The curtailment and settlement gains resulting from the formation of EGS were included in the investment in EGS. The unrecognized prior service cost at December 31, 1997 and 1996 represents unamortized amounts for plan amendments, resulting from revisions to company- sponsored health plans, which reduced benefit levels. STOCK INCENTIVE PROGRAM: The company has a stock incentive program whereby executive officers and designated employees have been or may be granted restricted stock and options to purchase shares of company common stock. Restricted stock awards were granted during 1997 and 1996 for 25,000 shares and 11,568 shares of company common stock with a weighted-average price of $43.50 per share and $40.31 per share, respectively. The restricted stock awards granted in 1997 and 1996 vest at certain rates over a three-to-five- year period. Non-employee directors may elect to defer all or part of their cash compensation as directors and to receive in lieu thereof restricted stock. No restricted stock awards granted in 1997 were received by non- employee directors. In 1996, of the 11,568 shares granted, 3,068 shares of company common stock were received by three non-employee directors, subject to a five-year restriction period. Total compensation expense for restricted stock for 1997 and 1996 was $1.0 and $1.2, respectively. Options are exercisable during specified dates at prices at least equal to 100 percent of the fair market value on the date of grant. The exercise price of General Signal stock options granted in 1997 and 1996 equaled the market value on the date of grant. All options granted have 10-year terms, and vest and become fully exercisable at the end of four years of continued employment, except for options granted to non-employee directors which vest immediately. In 1997, of the 532,000 shares granted, 14,000 shares of company common stock were received by seven non-employee directors. No options were granted to non- employee directors in 1996. As of December 31, 1997 and 1996, 4.3 million and 4.6 million shares, respectively, of company common stock were reserved for issuance under the stock incentive program. The company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations in accounting for its employee stock options. Under APB 25, because the exercise price of the company's employee stock options equals the market price of the underlying stock on the date of the grant, no compensation expense has been recognized. Pro forma information regarding net income and earnings per share is required by SFAS No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123), which also requires that the information be determined as if the company had accounted for its employee stock options granted subsequent to December 31, 1994, under the fair-value method of SFAS No. 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions: F-18 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
1997 1996 1995 ------- ------- ------- Risk-free interest rate....................... 5.71% 4.77% 5.39% Dividend yield................................ 2.40% 2.54% 2.76% Expected volatility of market price of company's common stock....................... 0.233 0.235 0.20 Expected option life.......................... 5 years 5 years 5 years The risk-free interest rate is based on treasury bill rates. For the purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The company's pro forma information is as follows: 1997 1996 1995 ------- ------- ------- Pro forma net income.......................... $128.0 $132.5 $35.7 Pro forma basic earnings per share............ $ 2.55 $ 2.67 $0.73 Pro forma diluted earnings per share.......... $ 2.55 $ 2.60 $0.76
These pro forma effects may not be representative of the effects on future years because of the prospective application required by SFAS No. 123, and the fact that options vest over several years and new grants generally are made each year. OPTION ACTIVITY: The following table shows the option activity for the three years ended December 31, 1997. Options granted and exercised by Data Switch prior to the merger date are included in the 1995 activity.
WEIGHTED- AVERAGE OPTION PRICE EXERCISE SHARES PER SHARE PRICE ------------- ------------- --------- (IN MILLIONS) Options outstanding at December 31, 1994.. 2.2 $19.44-$37.25 $29.32 Restatement for Data Switch merger........ 0.2 13.94- 56.63 27.46 Options granted........................... 0.7 21.80- 38.25 35.82 Options exercised......................... (0.5) 13.94- 35.38 25.03 Options terminated........................ (0.2) 13.94- 53.98 32.71 ---- ------------- ------ Options outstanding at December 31, 1995.. 2.4 $13.94-$56.63 $31.30 Options granted........................... 0.4 36.50- 42.63 41.26 Options exercised......................... (0.3) 13.94- 39.64 26.71 Options terminated........................ (0.1) 13.94- 53.98 31.42 ---- ------------- ------ Options outstanding at December 31, 1996.. 2.4 $13.94-$56.63 $33.73 Options granted........................... 0.5 37.25- 51.00 43.09 Options exercised......................... (0.4) 13.94- 47.02 27.20 Options terminated........................ (0.1) 13.94- 56.63 36.81 ---- ------------- ------ Options outstanding at December 31, 1997.. 2.4 $13.94-$53.98 $36.70 ==== ============= ====== Options exercisable: 1997.................................... 1.3 $13.94-$53.98 $32.91 1996.................................... 1.4 13.94- 56.63 31.13 1995.................................... 1.1 13.94- 56.63 29.16
The weighted-average fair value of options granted during 1997, 1996 and 1995 was $10.85 per share, $9.08 per share and $7.36 per share, respectively. F-19 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) The following table summarizes information concerning currently outstanding and exercisable options:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE --------------------------------- --------------------- --- WEIGHTED- AVERAGE WEIGHTED- WEIGHTED- RANGE OF REMAINING AVERAGE AVERAGE EXERCISE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE -------- ----------- ----------- --------- ----------- --------- (NUMBER OF SHARES IN THOUSANDS) $10-$20....... 20 5.81 $16.23 18 $16.19 $20-$30....... 232 2.46 25.61 224 25.72 $30-$40....... 1,279 4.94 34.24 996 33.89 $40-$50....... 883 9.09 43.56 106 41.43 $50-$60....... 5 6.48 52.02 2 53.98 ----- ----- 2,419 1,346 ===== =====
17.EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share from continuing operations:
YEAR ENDED DECEMBER 31, ---------------------- 1997 1996 1995 ------ ------ ------ Numerator: Numerator for basic earnings per share-earnings from continuing operations.......................................... $131.0 $133.4 $100.1 Effect of dilutive securities: 5.75 percent convertible subordinated notes........ 0.2 3.5 3.8 ------ ------ ------ Numerator for diluted earnings per share-income available to common shareholders after assumed conversion........................................ $131.2 $136.9 $103.9 ====== ====== ====== Denominator (shares in millions): Denominator for basic earnings per share-weighted-av- erage shares........................................ 50.2 49.7 49.2 Effect of dilutive securities: Employee stock options............................. 0.2 0.2 0.1 5.75 percent convertible subordinated notes........ 0.1 2.5 2.5 Restricted stock compensation...................... (0.1) (0.1) (0.1) Contingent restricted stock awards................. -- -- 0.1 ------ ------ ------ Dilutive potential common shares..................... 0.2 2.6 2.6 ------ ------ ------ Denominator for diluted earnings per share-adjusted weighted-average shares and assumed conversions... 50.4 52.3 51.8 ====== ====== ====== Basic earnings per share from continuing operations.... $ 2.61 $ 2.68 $ 2.04 ====== ====== ====== Diluted earnings per share from continuing operations.. $ 2.60 $ 2.62 $ 2.01 ====== ====== ======
For additional disclosures regarding the 5.75 percent subordinated notes and the employee stock options, see pages F-13 and F-18 through F-20. F-20 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 18.BUSINESS COMBINATIONS During the three-year period ended December 31, 1997, the company acquired four entities for cash and common stock valued at $350.7 plus the assumption of liabilities. The acquisitions, except Data Switch Corporation (Data Switch), were accounted for as purchases, and, accordingly, the results of operations of the acquired companies are included in the statement of earnings for the periods during which they were owned by the company. Data Switch was accounted for as pooling of interests. The following paragraphs discuss significant mergers and acquisitions made during the three years ended December 31, 1997. On June 13, 1995, the company completed a cash-tender offer for Best Power Technology, Inc. (Best Power). Best Power is a manufacturer of uninterruptible power supply products, which provide backup power to protect computers, information networks and other critical systems from power line disturbances. The aggregate purchase price was $206.3, creating goodwill of $167.1. The purchase price was financed through the issuance of commercial paper. The company recorded a $7.4 before-tax charge ($4.8 after-tax) during the second quarter of 1995, primarily for severance and other consolidation costs relating to the combination of General Signal and Best Power locations. On July 27, 1995, the company acquired MagneTek Electric Inc. (Waukesha Electric) for $73.9, creating goodwill of $46.2. Waukesha Electric designs, manufactures and installs medium-power transformers and related products. The purchase price was financed through the issuance of commercial paper. Unaudited pro forma data for the year ended December 31, 1995 giving effect to the acquisitions of Best Power and Waukesha Electric as if they had been acquired at the beginning of 1995 are shown below:
1995 -------- Net sales........................................................ $1,974.3 Net earnings..................................................... $ 36.2 Basic earnings per share......................................... $ 0.74 Diluted earnings per share....................................... $ 0.77
On November 9, 1995, the company merged with Data Switch by exchanging 1.8 million shares of company common stock and 0.2 million rights to receive company common stock for all of the outstanding common stock and related options and warrants of Data Switch. Data Switch designs, develops, manufactures, markets and services products for large-scale data center networks. As a result of the merger, the company incurred transaction costs, severance and balance sheet valuation adjustments of $12.7 ($8.1 after-tax). The transaction costs included investment banker and other professional fees. The consolidation costs included severance pay primarily for Data Switch and asset valuation adjustments. 19.DISCONTINUED OPERATIONS In November 1994, the company adopted a plan to sell Leeds & Northrup Company (L&N), formerly a part of the Process Controls sector, and Dynapower/Stratopower (Dynapower), formerly a part of the Industrial Technology sector. These operations have been accounted for as discontinued operations, and the consolidated financial statements have reported separately their net assets and operating results. In the second and third quarters of 1995, the company recorded a total of $99.9 before-tax charges ($64.0 after- tax) for additional expected losses relating to the disposal of L&N and Dynapower. Through December 31, 1996, substantially all related assets were sold. In September 1997, $3.8 of this amount ($2.3 after-tax) was no longer required and accordingly, was reversed. 20.DISPOSITION OF BUSINESS AND OTHER SPECIAL ITEMS In the fourth quarter of 1997, the company settled patent litigation and sold related patents for a pre-tax gain of $10.0 and sold its equity interest in a company in Mexico for a gain of $9.0. Income tax expense on the gains totaled $10.6. The effective tax rate on the Mexico gain differs from the U.S. statutory tax rate due to a difference in the book and tax basis of the equity investment sold. Additionally in the fourth quarter of 1997, the company recorded $13.8 of pre-tax charges in selling, general and administrative expenses for asset valuations, lease termination costs and other individually insignificant matters. F-21 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) In August 1997, the company sold substantially all of the assets of GSPG, a unit of the Process Controls sector, to Pentair, Inc. for approximately $200 and recognized a pre-tax gain of $63.7 ($17.2 after-tax). The effective tax rate differs from the U.S. statutory tax rate due to a difference in the book and tax basis of GSPG. Additionally, during the third quarter of 1997, the company recorded charges for inventory and accounts receivable policy changes, asset write-offs, professional fees and cancellation of a facility lease. Additionally, the company reversed a restructuring reserve that was no longer needed due to the formation of EGS. The net of these charges of $14.1 were included in cost of sales ($11.1) and selling, general and administrative expenses ($3.0), with an associated income tax benefit of $5.4. In January 1996, the company sold Kinney, a unit of the Process Controls sector, for $29.0 and recognized a pre-tax gain of $20.8. Included in the gain were transaction costs of approximately $0.5. Also during the first quarter of 1996, the company recognized $19.7 of pre-tax charges for asset write-downs, lease termination costs, severance, warranty repairs and environmental matters. The charges were included in cost of sales ($13.0) and selling, general and administrative expenses ($6.7), with an associated income tax benefit of $7.9. F-22 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 21.BUSINESS SECTOR INFORMATION The company manufactures industrial products and components in the Process Control, Electrical Control and Industrial Technology (primarily transportation and telecommunication) industries. See pages 3 through 5 of this 10-K for a description of major products and markets served.
PRODUCT SECTORS 1997 1996 1995 1994 1993 - --------------- -------- -------- -------- -------- -------- NET SALES: Process Controls........ $ 671.9 $ 752.4 $ 719.7 $ 606.4 $ 545.8 Electrical Controls..... 910.9 945.3 777.0 618.6 547.1 Industrial Technology... 371.8 367.3(/2/) 366.5 302.7 261.3 -------- -------- -------- -------- -------- $1,954.6 $2,065.0 $1,863.2 $1,527.7 $1,354.2 ======== ======== ======== ======== ======== OPERATING EARNINGS: Process Controls........ $ 149.9(/1/)$ 128.9(/3/)$ 92.0 $ 66.8(/5/) 45.1(/6/) Electrical Controls..... 66.4(/1/) 86.4(/3/) 62.1(/4/) 30.7(/5/) 29.2(/6/) Industrial Technology... 64.3(/1/) 62.5(/3/) 51.1(/4/) 47.4(/5/) 44.8 Other charges and cred- its.................... -- -- -- 46.2 48.0(/7/) -------- -------- -------- -------- -------- 280.6 277.8 205.2 191.1 167.1 Equity income........... 11.8 1.1 0.9 1.0 0.2 Interest expense, net... (13.2) (21.5) (24.3) (11.8) (16.6) Unallocated expenses.... (26.4)(/1/) (35.0) (25.4) (20.0) (11.6) -------- -------- -------- -------- -------- Earnings from continuing operations before in- come taxes............. $ 252.8 $ 222.4 $ 156.4 $ 160.3 $ 139.1 ======== ======== ======== ======== ======== IDENTIFIABLE ASSETS: Process Controls........ $ 299.7 $ 434.9 $ 420.9 $ 391.4 $ 474.3 Electrical Controls..... 532.5 700.7 692.0 399.4 326.5 Industrial Technology... 191.0 205.9 209.0 181.3 167.2 -------- -------- -------- -------- -------- 1,023.2 1,341.5 1,321.9 972.1 968.0 General corporate as- sets................... 220.2 183.1 210.3 211.8 213.1 Assets held for sale at estimated realizable value.................. -- 4.9 60.4 153.6 25.7 Investments in and ad- vances to affiliates... 144.6 21.5 20.6 20.4 18.1 -------- -------- -------- -------- -------- Total assets............ $1,388.0 $1,551.0 $1,613.2 $1,357.9 $1,224.9 ======== ======== ======== ======== ======== DEPRECIATION OF PROPER- TY, PLANT AND EQUIP- MENT(/8/): Process Controls........ $ 17.2 $ 17.8 $ 17.9 $ 16.6 $ 12.4 Electrical Controls..... 20.3 22.1 19.0 14.5 13.0 Industrial Technology... 10.9 10.6 11.4 6.4 6.4 Corporate and other..... 2.3 2.1 2.0 4.2 3.6 CAPITAL EXPENDITURES(/8/): Process Controls........ $ 18.8 $ 21.8 $ 15.0 $ 28.7 $ 23.1 Electrical Controls..... 20.9 25.1 21.1 21.8 22.3 Industrial Technology... 11.2 10.5 11.0 11.4 7.7 Corporate and other..... 5.6 1.9 1.9 12.9 2.0
(1) Includes 1997 income in Process Controls ($63.7) and unallocated expenses ($19.0) for the gain on sale of GSPG, settlement of patent litigation and sale of patents and gain on sale of equity interest in a company in Mexico. Also recorded were charges in Process Controls ($2.8), Electrical Controls ($16.7), Industrial Technology ($1.9) and unallocated expenses ($6.5) for asset valuations, restructuring charges, lease termination costs and other matters. (2) Includes $4.2 of royalty income. (3) Includes 1996 income in Process Controls ($22.6) and Industrial Technology ($4.2) for the gain on sale of Kinney, insurance gain on the recovery of destroyed assets and royalty income. Also recorded were charges in Process Controls ($4.0), Electrical Controls ($11.1) and Industrial Technology ($4.6) for asset write-downs, lease termination costs, severance, warranty repairs and environmental matters. (4) Includes 1995 charges in Electrical Controls ($7.4) and Industrial Technology ($12.7) for the acquisition of Best Power and merger with Data Switch. (5) Includes 1994 charges in Process Controls ($11.9), Electrical Controls ($19.2) and Industrial Technology ($9.9) for the consolidation of operations, asset valuations, environmental and other. (6) Includes 1993 charges in Process Controls ($22.1) and Electrical Controls ($10.5) for asset valuations, restructuring and transaction and consolidation charges related to Revco. (7) Represents credits for the divested semiconductor operations ($53.2) and charges for the transportation businesses ($5.2). (8) Excludes discontinued operations. F-23 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 22.GEOGRAPHIC AREAS
1997 1996 1995 1994 1993 -------- -------- -------- -------- -------- NET SALES: United States............... $1,764.3 $1,901.0 $1,699.8 $1,390.0 $1,218.9 Foreign..................... 273.0 274.6 239.9 180.7 173.7 Intergeographic............. (82.7) (110.6) (76.5) (43.0) (38.4) -------- -------- -------- -------- -------- $1,954.6 $2,065.0 $1,863.2 $1,527.7 $1,354.2 ======== ======== ======== ======== ======== OPERATING EARNINGS(/1/): United States............... $ 193.5 $ 234.7 $ 212.0 $ 135.7 $ 113.4 Other charges and credits... 72.7 20.8 (20.1) 46.2 48.0 Foreign..................... 14.4 22.3 13.3 9.2 5.7 -------- -------- -------- -------- -------- $ 280.6 $ 277.8 $ 205.2 $ 191.1 $ 167.1 ======== ======== ======== ======== ======== IDENTIFIABLE ASSETS(/2/): United States............... $ 866.4 $1,201.0 $1,175.6 $ 875.8 $ 822.5 Foreign..................... 156.8 140.5 146.3 96.3 145.5 -------- -------- -------- -------- -------- $1,023.2 $1,341.5 $1,321.9 $ 972.1 $ 968.0 ======== ======== ======== ======== ======== Export sales to unaffiliated customers(/3/)............. $ 176.8 $ 215.2 $ 199.1 $ 125.4 $ 110.9
- ------- (1) Excludes equity income, net interest expense and unallocated expenses. (2) Excludes general corporate assets and investments in affiliates. (3) Included in United States sales. 23.SUPPLEMENTARY INFORMATION
YEAR ENDED DECEMBER 31, ------------------ 1997 1996 1995 ----- ----- ------ Liabilities assumed in conjunction with acquisitions: Fair value of assets acquired............................. $11.0 $ -- $332.1 Cash paid................................................. 11.0 -- (280.2) ----- ----- ------ $ -- $ -- $ 51.9 ===== ===== ====== Research and development.................................... $45.7 $47.5 $ 46.9 Advertising expense......................................... $16.1 $17.9 $ 14.1
F-24 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 24. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
FIRST SECOND THIRD FOURTH --------------- --------------- -------------------- -------------------- 1997 1996 1997 1996 1997 1996 1997 1996 ------- ------- ------- ------- ------- ------- ------- ------- Net sales............... $ 505.6 $ 481.7 $ 539.6 $ 515.0 $ 475.7 $ 521.6 $ 433.7 $ 546.7 Gross profit............ 148.3 130.3 163.7 157.7 129.2 165.4 134.9 175.9 Earnings from continuing operations............. 24.3 25.4(/3/) 34.4 31.6 36.0(/1/) 37.4 36.3(/2/) 39.0 Disposal of discontinued operations............. -- -- -- -- 2.3 -- -- -- Cumulative effect of accounting change...... -- -- -- -- -- -- (3.7) -- ------- ------- ------- ------- ------- ------- ------- ------- Net earnings............ $ 24.3 $ 25.4 $ 34.4 $ 31.6 $ 38.3 $ 37.4 $ 32.6 $ 39.0 ======= ======= ======= ======= ======= ======= ======= ======= Basic earnings (loss) per share of common stock(/4/): Continuing operations........... $ 0.47 $ 0.51 $ 0.68 $ 0.64 $ 0.71 $ 0.75 $ 0.75 $ 0.78 Disposal of discontinued operations........... -- -- -- -- 0.05 -- -- -- Cumulative effect of accounting change.... -- -- -- -- -- -- (0.08) -- ------- ------- ------- ------- ------- ------- ------- ------- Net earnings.......... $ 0.47 $ 0.51 $ 0.68 $ 0.64 $ 0.76 $ 0.75 $ 0.67 $ 0.78 ======= ======= ======= ======= ======= ======= ======= ======= Diluted earnings (loss) per share of common stock(/4/): Continuing operations........... $ 0.47 $ 0.51 $ 0.68 $ 0.62 $ 0.71 $ 0.73 $ 0.75 $ 0.76 Disposal of discontinued operations........... -- -- -- -- 0.05 -- -- -- Cumulative effect of accounting change.... -- -- -- -- -- -- (0.08) -- ------- ------- ------- ------- ------- ------- ------- ------- Net earnings.......... $ 0.47 $ 0.51 $ 0.68 $ 0.62 $ 0.76 $ 0.73 $ 0.67 $ 0.76 ======= ======= ======= ======= ======= ======= ======= ======= Common stock price range: High.................. $46 3/4 $37 3/4 $46 3/4 $40 1/8 $ 53 $44 1/4 $44 7/8 $44 1/2 Low................... 38 1/2 32 36 1/8 35 1/4 37 3/16 36 1/4 36 5/8 39 3/4 Dividends declared per share.................. $ 0.255 $ 0.24 $ 0.255 $ 0.24 $ 0.255 $ 0.24 $ 0.27 $ 0.255 Dividends paid per share.................. $ 0.255 $ 0.24 $ 0.255 $ 0.24 $ 0.255 $ 0.24 $ 0.255 $ 0.24
- ------- Earnings before cumulative effect of accounting change was $38.3 ($0.76 per share) in the third quarter of 1997. Note: The sum of the quarters' earnings per share may not equal the full year per-share amounts. (1) Included $63.7 gain on sale of GSPG. The company also recorded $14.1 of special charges for asset valuations, restructuring charges and other matters. (2) Included $10.0 gain on settlement of a patent litigation and sale of patents and $9.0 gain on sale of an investment in Mexico. The company also recorded $13.8 of special charges for asset valuations, lease termination costs and other matters. (3) Included $20.8 gain on sale of Kinney and $6.0 related to a royalty contract and an insurance gain. The company also recorded $19.7 of charges for asset write-downs, lease termination costs, severance, warranty repairs and environmental matters. (4) The 1996 and first three quarters of 1997 earnings per share amounts have been restated to comply with SFAS No. 128. F-25 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED DECEMBER 31, 1997, 1996 AND 1995 -------------------------------------------------------- ADDITIONS BALANCE AT CHARGED TO COSTS BALANCE AT BEGINNING AND END OF OF PERIOD EXPENSES DEDUCTIONS PERIOD ---------- ---------------- ---------- ---------- (IN MILLIONS) 1997 Reserves deducted from assets: Allowance for doubtful accounts............. $ 10.0 $ 8.6 $ (6.3)(/1/) $12.3 Dispositions and special items: Consolidation of oper- ations and other..... $ 10.8 1.0 (6.7) 5.1 Acquisition related... 0.8 -- (0.6) 0.2 Semiconductor......... 0.6 -- (0.4) 0.2 Restructuring and product repairs...... 6.0 -- (6.0) -- ------ ----- ------ ----- $ 18.2 $ 1.0 $(13.7) $ 5.5 ====== ===== ====== ===== 1996 Reserves deducted from assets: Allowance for doubtful accounts............. $ 10.6 $ 2.1 $ (2.7) $10.0 Assets held for sale.. $ 67.9 -- (67.9)(/2/) $ -- Dispositions and special items: Consolidation of oper- ations and other..... $ 24.7 -- (13.9)(/2/) 10.8 Acquisition related... 4.1 -- (3.3) 0.8 Semiconductor......... 3.2 -- (2.6) 0.6 Restructuring and product repairs...... 0.7 7.9 (2.6) 6.0 ------ ----- ------ ----- $ 32.7 $ 7.9 $(22.4) $18.2 ====== ===== ====== ===== 1995 Reserves deducted from assets: Allowance for doubtful accounts............. $ 10.7(/6/) $ 4.9 $ (5.0)(/3/) $10.6 Assets held for sale.. $ 8.6 59.5 (0.2)(/4/) $67.9 Dispositions and special items: Consolidation of oper- ations and other..... $ 15.9 40.4 (31.6)(/3/) 24.7 Acquisition related... 0.6 5.6 (2.1)(/5/) 4.1 Semiconductor......... 18.1 -- (14.9)(/5/) 3.2 Restructuring......... 2.5 -- (1.8)(/5/) 0.7 ------ ----- ------ ----- $ 37.1 $46.0 $(50.4) $32.7 ====== ===== ====== =====
- ------- (1) Includes $1.9 due to the sale of GSPG and the contribution of GSEG's net assets to EGS. (2) Includes reclassification of $4.8 credit balance from assets held for sale reserve to discontinued operations reserve. (3) Write-off of bad debts, net of recoveries. (4) Reflects reclassification to accruals. (5) Charges to reserve for related costs incurred during the year. (6) Includes $0.6 of reserves recorded by Data Switch which were consolidated effective January 1, 1995. F-26 EXHIBIT (12) GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES CALCULATIONS OF RATIO OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31, ---------------------------------- 1997 1996 1995 1994 1993 ------ ------ ------ ------ ------ (DOLLARS IN MILLIONS) Earnings: Earnings from continuing operations before income taxes............................. $252.8 $222.4 $156.4 $160.3 $139.1 Fixed charges............................. 23.5 30.9 34.7 20.2 22.6 ------ ------ ------ ------ ------ $276.3 $253.3 $191.1 $180.5 $161.7 Fixed charges: Interest expense (gross).................. $ 17.1 $ 24.1 $ 27.7 $ 14.4 $ 18.0 One-third of rent expense................. 6.4 6.8 7.0 5.8 4.6 ------ ------ ------ ------ ------ $ 23.5 $ 30.9 $ 34.7 $ 20.2 $ 22.6 ------ ------ ------ ------ ------ Ratio....................................... 11.76 8.20 5.51 8.94 7.15 ====== ====== ====== ====== ======
F-27 EXHIBIT (21) GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES SUBSIDIARIES OF REGISTRANT 1. CONSOLIDATED SUBSIDIARIES
PERCENT ORGANIZED UNDER OWNED THE LAWS OF ------- --------------- Aurora/Hydromatic Pumps, Inc........................... 100 Delaware Best Power Technology AG............................... 100 Switzerland Subsidiary of Best Power Technology AG: Sola Electric GmbH.................................... 100 Germany Borri Elettronica Industriale S.r.L.................... 100 Italy DeZurik of Australia Proprietary Ltd................... 100 Australia DeZurik Vertriebs GmbH................................. 100 Austria Fairbanks Morse Pump Corporation....................... 100 Kansas Subsidiary of Fairbanks Morse Pump Corporation: Fairbanks Morse Limited (India)....................... 35 India GCA International Corporation.......................... 100 New Jersey GSR Merger Sub., Inc................................... 100 Delaware G.S. Building Systems Corporation...................... 100 Connecticut General Signal (China) Co., Ltd........................ 100 China General Signal FSC, Inc................................ 100 Virgin Islands General Signal Holdings Company........................ 100 Delaware Subsidiary of General Signal Holdings Company:........ General Signal Networks, Inc.......................... 100 Delaware Subsidiaries of General Signal Networks, Inc.:....... Data Switch Intellectual Property, Inc............... 100 Delaware Data Switch Subsidiary Stock Corporation............. 100 Delaware Data Switch Collections, Inc......................... 100 Delaware Data Switch (UK) Limited............................. 50 England (balance of 50% held by Data Switch Subsidiary Stock Corporation) General Signal Networks Italia S.r.L................. 100 Italy General Signal Networks Limited...................... 100 England General Signal Technology Corporation................. 100 Delaware Subsidiary of General Signal Technology Corporation: General Farebox of Atlanta, Inc...................... 100 Delaware General Signal International Corporation............... 100 Delaware General Signal Limited................................. 100 Canada General Signal Mauritius, Inc.......................... 100 Mauritius General Signal S.E.G.--Asia, Ltd....................... 100 Hong Kong General Signal Power Systems, Inc...................... 100 Wisconsin Subsidiaries of General Signal Power Systems, Inc.: Best Power Technology SARL (France)................... 100 France Best Power Technology Mexico SA. de C.V............... 100 Mexico Best Power Technology Limited......................... 100 Taiwan Subsidiary of Best Power Technology Limited: Best Power Taiwan Trading Co. Ltd.................... 100 Taiwan Best Power Technology Pte. Limited.................... 100 Singapore
F-28
PERCENT ORGANIZED UNDER OWNED THE LAWS OF ------- --------------- General Signal UK Limited.............................. 100 England Subsidiaries of General Signal UK Limited: Best Power Technology Limited......................... 100 England Subsidiary of Best Power Technology Limited:......... Sola (UK) Ltd........................................ 100 England DeZurik International Limited......................... 100 England GCA Limited........................................... 100 England G.S. Iona Ltd......................................... 100 England General Signal Europe Limited......................... 100 England Subsidiaries of General Signal Europe Limited: General Signal Verwaltaugsgesellschaft mbH........... 100 Germany General Signal GmbH & Co. KG......................... 99 Germany Subsidiaries of General Signal GmbH & Co. KG: Best Power Technology GmbH.......................... 100 Germany General Signal Networks GmbH........................ 100 Germany Data Switch Elektronik GmbH......................... 100 Germany General Signal SEG, Ltd............................... 100 England Leeds & Northrup Limited.............................. 100 England Lightnin (Europe) Limited............................. 100 England Lightnin Mixers Limited............................... 100 England Tau-Tron (UK) Limited................................. 100 England Telenex Europe Limited................................ 100 England Kayex China Holdings, Inc.............................. 100 Delaware Subsidiary of Kayex China Holdings, Inc.: Hangzhou Kayex Zheda Electromechanical Co., Ltd....... 53.3 China Leeds & Northrup Company............................... 100 Delaware Subsidiaries of Leeds & Northrup Company: Leeds & Northrup GmbH................................. 100 Germany Leeds & Northrup Mexicanna, S.A....................... 100 Mexico Leeds & Northrup S.A.................................. 100 Spain LDN, Ltd.............................................. 100 Delaware Subsidiaries of LDN, Ltd.: Leeds & Northrup S.A.R.L............................. 100 France General Signal Ireland B.V........................... 100 Netherlands Subsidiary of General Signal Ireland B.V.:.......... High Ridge Ireland Ltd.............................. 100 Ireland Subsidiary of High Ridge Ireland Ltd.: General Signal Enterprises......................... 99 Ireland Leeds & Northrup Singapore, Pte., Ltd................ 100 Singapore L&N Products Pty Ltd................................. 100 Australia Subsidiary of L&N Products Pty Ltd.: Leeds & Northrup (New Zealand) Ltd.................. 100 New Zealand Leeds & Northrup Italy, S.p.A........................ 53 Italy (Remaining 47% owned by Leeds & Northrup Company) Lightnin Mixers Pty. Ltd............................. 60 Australia (Remaining 40% owned by General Signal Ltd.) Lightnin Private Limited............................. 100 Singapore Metal Forge Company, Inc............................. 100 Delaware Shenyang Stock Electric Power Equipment Company, Lim- ited................................................ 50 China Sola Australia, Limited.............................. 100 Australia Stock Japan, Ltd..................................... 100 Japan
F-29 2. OTHER SUBSIDIARIES EGS Electrical Group LLC, organized under the laws of Delaware, is 7.21 percent owned by G.S. Building Corporation, 40.29 percent owned by General Signal Corporation and 52.5 percent owned by Emerson Electric. The subsidiaries of EGS Electrical Group LLC are as follows:
PERCENT ORGANIZED UNDER OWNED THE LAWS OF ------- --------------- OZ Gedney LLC..................................... 100 Delaware Dual-Lite Manufacturing, Inc...................... 100 Delaware Teraski Nelson Ltd................................ 50 Japan (Balance of 50% owned by Terasaki Co. of Japan)
The following foreign subsidiaries and the investment of 50 percent or less owned companies are carried at cost plus equity in undistributed earnings since acquisition. These subsidiaries and companies are not material individually or in the aggregate in relation to the financial statements.
PERCENT ORGANIZED UNDER OWNED THE LAWS OF ------- --------------- Subsidiaries of General Signal Corporation: DeZurik Japan Co., Ltd............................. 48 Japan DeZurik Mexico, S.A. de C.V........................ 49 Mexico HMS Ventures Ltd................................... 14 California High Ridge Company, Limited........................ 100 Bermuda Koyo Lindberg Ltd.................................. 50 Japan
F-30 EXHIBIT (23) CONSENT OF ERNST & YOUNG LLP The Board of Directors and Shareholders General Signal Corporation We consent to the incorporation by reference in the Registration Statements (Form S-3 No. 33-33929) pertaining to the universal shelf registration dated May, 1994, (Form S-8 No. 33-46613) pertaining to the General Signal Corporation Savings and Stock Ownership Plan, (Form S-8 No. 33-05181) pertaining to General Signal Corporation's stock incentive plans, (Form S-8 to Form S-4 No. 33-62437-01) pertaining to stock options assumed as a result of the merger with Data Switch Corporation (Form S-3 to Form S-4 No. 33-62437-02) pertaining to the outstanding stock warrants as a result of the merger with Data Switch Corporation and related prospectuses of our report dated January 23, 1998, with respect to the financial statements and schedules of General Signal Corporation included in this Annual Report (Form 10-K) for the year ended December 31, 1997. /s/ Ernst & Young LLP Stamford, Connecticut March 20, 1998 F-31 EX-3.2 2 BY-LAWS OF GENERAL SIGNAL CORPORATION EXHIBIT 3.2 GENERAL SIGNAL CORPORATION __________ BY-LAWS __________ As Amended Through March 19, 1998 ARTICLE I SHAREHOLDERS' MEETING SECTION 1. Annual Meeting: The Annual Meeting of the shareholders of this --------------- Corporation for the election of directors and the transaction of such other business as may properly come before such meeting shall be held each year on such date and at such time and place, whether within or without the State of New York, as shall be determined by the Board of Directors. SECTION 2. Special Meeting: A Special Meeting of the shareholders may be ---------------- held at any time upon the call of the Board of Directors or the Chairman of the Board and shall be called by the Secretary at the written request of shareholders owning at least two-thirds of the outstanding shares of stock entitled to vote, which request shall specify the matters to be presented to such meeting. SECTION 3. Notice of Annual or Special Meeting: Written notice of the ----------------------------------- holding of each Annual or Special Meeting of the shareholders shall be given by the Secretary. Such notice shall state the place, date and hour of the meeting, and the purpose or purposes for which the meeting is called, and shall be signed by the Secretary, and shall indicate that it is being issued by or at the direction of the person or persons calling the meeting. A copy of such notice shall be mailed, postage prepaid, not less than ten nor more than fifty days before the date of the meeting, to each shareholder of record as of such record date, not less than ten nor more than fifty days before the date of the meeting, as may be fixed by the Board of Directors for determining the shareholders entitled to notice of, or to vote at, the meeting. Such notice shall be directed to the shareholder at his address as it appears on the record of shareholders, or, if he shall 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 more than 15 as shall be determined from time to time by the Board of Directors. SECTION 3. Newly Created Directorships and Vacancies: Newly created ------------------------------------------ directorships resulting from an increase in the number of directors and vacancies occurring in the Board for any reason may be filled by the vote of a majority of the directors then in office, although less than a quorum may exist. A director elected to fill a newly created directorship or a vacancy shall be elected to hold office until the next Annual Meeting of the shareholders, and (if he is to have a successor) until his successor has been elected and qualified. SECTION 4. Regular Meetings: Regular Meetings of the Board of Directors ---------------- shall be held at such times and places as may be fixed by the Board of Directors provided that the Organization Meeting of the newly elected Board of Directors shall be held on the same day as the Annual Meeting of the shareholders, at which time the Executive Committee and other Committees of the Board and Officers shall be elected or appointed. Unless otherwise required by appropriate resolution of the Board of Directors, or by law, notice of any such meetings need not be given. SECTION 5. Special Meetings: Special Meetings of the Board of Directors ---------------- shall be called by the Secretary upon the order of the Chairman of the Board, the President, or the Chairman of the Committee on Directors, or upon the written request of five (5) directors. SECTION 6. Presiding Officer: At all meetings of the Board of Directors, the ----------------- Chairman of the Board of Directors shall preside, or in his absence, the Chairman of the Committee on Directors, the President or any Vice President who is a member thereof may preside. SECTION 7. Quorum: A majority of the directors then in office or half of ------ such number when the number of directors then in office is even, but not less than one-third of 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 prescribed by the Board of Directors or assigned to him by the Chairman of the Board or the Officer to whom he reports. SECTION 5. Duties of Treasurer and Controller: The Treasurer shall have the ----------------------------------- care and custody of all the funds and securities of the Corporation and, in general, shall perform all the duties incident to the office of Treasurer including the appointment of depository and disbursement banks. The Controller shall have charge of the books of account of the Corporation and, in general, perform all the duties incident to the office of Controller. The Treasurer and the Controller shall also discharge such other duties as from time to time the Board of Directors may prescribe or the Chairman of the Board, the President, or the Vice President-Finance may assign. SECTION 6. Duties of Secretary: The Secretary shall keep the minutes of the ------------------- meetings of the Board of Directors, of the Executive Committee and other Committees of the Board and of the shareholders, and shall attend to the giving and service of all notices for meetings of the Board of Directors, of the Executive Committee and other Committees of the Board and of the shareholders and otherwise whenever required, except to the extent, that such duties shall have been specifically delegated to another officer by the Board of Directors or by the Chairman of the Board. He shall have the custody of such books and papers as the Board of Directors, the Chairman of the Board, or the President may provide. He shall also discharge such other duties as from time to time the Board of Directors may prescribe or the Chairman of the Board, or the President may assign to him. 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 to be entitled to indemnification or, where indemnification is granted, to the extent the expenses so advanced or reimbursed exceed the amount to which such Indemnified Person is entitled. Nothing herein shall limit or affect any right of any Indemnified Person otherwise than hereunder to indemnification or expenses, including attorneys' fees, under any statute, rule, regulation, certificate of incorporation, by-law, insurance policy, contract or otherwise. Anything in these by-laws to the contrary notwithstanding, no elimination of this by-law, and no amendment of this by-law adversely affecting the right of any Indemnified Person to indemnification or advancement of expenses hereunder shall be effective until the 60th day following notice to such Indemnified Person of such action, and no elimination of or amendment to this by-law shall thereafter deprive any Indemnified Person of his or her rights hereunder arising out of alleged or actual occurrences, acts or failures to act prior to such 60th day. The Corporation shall not, except by elimination or amendment of this by-law in a manner consistent with the preceding paragraph, take any corporate action or enter into any agreement which prohibits, or otherwise limits the rights of any Indemnified Person to, indemnification in accordance with the provisions of this by-law. The indemnification of any Indemnified Person provided by this by- law shall be deemed to be a contract between the Corporation and each Indemnified Person and shall continue after such Indemnified Person has ceased to be a director or officer of the Corporation and shall inure to the benefit of such Indemnified Person's heirs, executors, administrators and legal representatives. If the Corporation fails timely to make any payment pursuant to the indemnification and advancement or reimbursement of expenses provisions of this Article V and an Indemnified Person commences an action or proceeding to recover such payment, the Corporation in addition shall advance or reimburse such Indemnified Person for the legal fees and other expenses of such action or proceeding. The Corporation is authorized to enter into agreements with any of its directors or officers extending rights to indemnification and advancement of expenses to such Indemnified Person to the fullest extent permitted by applicable law, but the failure to enter into any such agreement shall not affect or limit the rights of such Indemnified Person pursuant to this by-law, it being expressly recognized hereby that all directors or officers of the Corporation, by serving as such after the adoption hereof, are acting in reliance hereon and that the Corporation is estopped to contend otherwise. Persons who are not directors or officers of the Corporation shall be similarly indemnified and entitled to advancement or reimbursement of expenses to the extent authorized at any time by the Board of Directors. In case any provision in this by-law shall be determined at any time to be unenforceable in any respect, the other provisions shall not in any way be affected or impaired thereby, and the affected provision shall be given the fullest possible enforcement in the circumstances, it being the intention of the Corporation to afford 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-10.1 3 ANNUAL INCENTIVE COMPENSATION PLAN EXHIBIT 10.1 ANNUAL INCENTIVE PLAN FOR CORPORATE AND BUSINESS UNIT MANAGEMENT ----------------------------------------------------------------- OF GENERAL SIGNAL CORPORATION ----------------------------- Effective January 1, 1997 1. PURPOSE ------- The purpose of the Annual Incentive Plan (the "Plan") for Corporate and Business Unit management of General Signal Corporation ("Corporation") is to motivate and retain those key management personnel who are most responsible for achieving annual business objectives. Certain capitalized terms used in the Plan are defined in Section 11. 2. ELIGIBILITY AND PARTICIPATION ----------------------------- The Chairman of the Board of Directors of the Corporation ("Chairman") will designate key managers ("Participants") to participate in the Plan. Participants are generally expected to be officers of the Corporation, key members of the corporate staff, unit presidents, and key management reporting directly to unit presidents. 3. TARGET AWARDS ------------- The Chairman determines the size of the award opportunity, expressed as a percentage of Base Salary ("Target Award") available to each Participant based on market level compensation for the position that the Participant holds. The Target Awards for officers of the Corporation are subject to the approval of the Board of Directors (the "Board"). The Target Awards for unit presidents are subject to the approval of the P&C Committee. At the beginning of the Performance Period, each Participant will be notified that (i) he or she has been granted the opportunity to earn a bonus under the Plan (a "Cash Award"), (ii) the specific EVA Performance Target for the applicable business unit or for the Corporation applicable to the Participant for the Performance Period, and (iii) his or her Target Award, as determined by the Chairman. 4. CHANGES TO TARGET AWARD ----------------------- During the term of the Plan, the Target Award may be changed at the discretion of the Chairman for Participants other than officers and presidents, if a transfer, a promotion, or a significant increase or decrease in responsibility is determined by the Chairman to warrant such a change. Changes to the Target Award for officers of the Corporation are subject to the approval of the Board. Changes to the Target Award for unit presidents are subject to the approval of the P&C Committee. Notwithstanding the foregoing, no such change that is adverse to Participants may be made at the request of a third party that is seeking to effect a Change in Control or otherwise in connection with or in anticipation of a Change in Control. 5. EVA PERFORMANCE TARGETS ----------------------- The Cash Award paid to a Participant for a Performance Period will equal (i) the Target Award, multiplied by (ii) the Performance Percentage, multiplied by (iii) the Participant's Actual Base Salary for the Performance Period. The "Performance Percentage" means 100% if 100% of the EVA Performance Target is achieved. If the EVA Performance Target is exceeded, the "Performances Percentage" means 100% plus three percentage points for each percentage point of EVA achievement above the EVA Performance Target, but the Performance Percentage shall not be more than 200%. If the EVA Performance Target is not met, the "Performance Percentage" means 100% minus three percentage points for each percentage point of EVA achievement under the EVA Performance Target (but not less than 0%). Once established, EVA Performance Targets will generally remain fixed during the applicable Performance Period. However, the Chairman with the approval of the P&C Committee may adjust EVA Performance Targets during, or at the end of, the Performance Period. Reasons for such a change include, but are not limited to, the following: a reconfiguration of one or more business units, acquisitions or divestitures, and/or significant market changes. Notwithstanding the foregoing, no such change that is adverse to Participants may be made at the request of a third party that is seeking to effect a Change in Control or otherwise in connection with or in anticipation of a Change in Control. -2- 6. PAYMENT OF CASH AWARDS ----------------------- Payment of Cash Awards will be made no later than the March 15th of the year following the Performance Period. Cash Awards will be calculated on Actual Base Salary paid for the time the Participant actually participated in the Plan during the Performance Period. Except in the event of a Change in Control, no vested interest in any payment under the Plan will accrue during the Performance Period. Cash Awards will not be paid to any Participant who resigns or whose employment is terminated, with or without cause, prior to the end of the applicable Performance Period, except to the extent approved by the Chairman, subject to required approvals by the Board (in the case of Cash Awards to officers of the Corporation) or by the P&C Committee (in the case of Cash Awards to unit presidents). Exceptions: Notwithstanding the foregoing, if a Participant terminates ---------- due to death, Disability, Retirement, transfer into a position which is ineligible for participation, or for other circumstances approved by the Chairman, the pro rata award amount earned through such event will be paid following the Performance Period in accordance with the Actual Base Salary paid up to the date of such event. If a Participant transfers to a position in another business unit of the Corporation in which he or she remains eligible to be a Participant, the Cash Award will be calculated based on the Participant's Actual Base Salary and by prorating each business unit's EVA for the time the Participant spent in each business unit during the Performance Period. Participants may elect to defer receipt of Cash Awards, under the Corporation's Deferred Compensation Plan or any successor thereto, to the extent such a plan is in effect from time to time and the Participant is eligible to participate therein under the terms of such plan. 7. CHANGE IN CONTROL ----------------- If there is a Change in Control of the Corporation, each Participant will become immediately vested in, and entitled to, payment of the Cash Award calculated as (i) the Target Award, multiplied by (ii) the Performance Percentage, as defined in Section 5 above, based upon the Participant's Target Award as in effect immediately before the Change in -3- Control and upon the actual EVA achievement relative to the EVA Performance Target during the portion of the Performance Period ending at the end of the fiscal month immediately preceding the date of the Change in Control, multiplied by (iii) the aggregate amount of the Participant's Actual Base Salary for the portion of the Performance Period ending on the day immediately preceding the date of the Change in Control; provided, that the Performance Percentage may not exceed 200%. Payment of Cash Awards will be made no later than 30 days after the date of the Change in Control. Upon a Change in Control, a Participant's election to defer receipt of Cash Awards shall remain in full force and effect. 8. ADMINISTRATION -------------- Subject to the authority of the P&C Committee and the Board as specified in this Plan, the Chairman has full authority to interpret the Plan, to establish any rules or regulations relating to the Plan which he or she deems to be appropriate, and to make any other determination which he or she believes necessary or advisable for the proper administration of the Plan, including termination of the Plan. Notwithstanding the foregoing, the Plan may not be amended or terminated in any manner that adversely affects the rights of any Participant without that Participant's consent following a Change in Control, at the request of a third party that is seeking to effect a Change in Control or otherwise in connection with or in anticipation of a Change in Control. 9. ADDITIONAL PROVISIONS --------------------- (a) No Participant will have any right because he or she is a Participant in the Plan to continue in the employ of the Corporation or any of its subsidiaries for any period of time, or any right to continuation of his or her present or any other rate of annual base salary. The rights and powers of the Corporation which now exist or may exist in the future to discharge any Participant from his or her employment or change the assignment of any Participant are expressly reserved to the Corporation. (b) When any payment is made under the Plan, the Corporation is authorized to withhold from such payment any amount necessary to satisfy income tax and other withholding requirements. -4- (c) Cash Awards may not be sold, transferred, pledged or assigned prior to payment or forfeiture. 10. GOVERNING LAW ------------- The validity, construction and effect of this Plan, any rules and regulations relating to this Plan, and any Cash Awards payable under this Plan, will be determined in accordance with the laws of the state of New York. 11. DEFINITIONS ----------- (a) ACTUAL BASE SALARY. With respect to any specified period, the amount of Base Salary earned by a Participant for such period, whether paid to the Participant or deferred at the Participant's election pursuant to any tax-qualified or nonqualified plan or arrangement of the Corporation. (b) BASE SALARY. The annual base salary payable to a Participant, at the rates in effect from time to time. (c) CHANGE IN CONTROL. Any of the following events: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (a) the then outstanding shares of common stock of the Corporation (the "Outstanding Corporation Common Stock") or (b) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Corporation Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change in Control: (A) any acquisition directly from the Corporation, (B) any acquisition by the Corporation, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation or (d) any acquisition pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 11(c); or (ii) Individuals who, as of the date of this Plan, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date of this Plan whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least a -5- majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation or the acquisition of assets of another entity (a "Corporate Transaction"), in each case, unless, following such Corporate Transaction, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction of the Outstanding Corporation Common Stock and Outstanding Corporation Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such Corporate Transaction) beneficially own, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Corporate Transaction and (C) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Corporate Transaction; or (iv) Approval by the shareholders of the Corporation of a complete liquidation or dissolution of the Corporation. (d) DISABILITY. "Disability" will mean a disability entitling a Participant to long-term disability benefits under the applicable long- term disability plan of the Corporation and its subsidiaries. (e) EVA(R). As to a business unit or the Corporation, as applicable, the Net Operating Profit After Tax of such entity, minus a charge on the capital invested -6- in such entity, and excluding non-cash reserve activity. EVA(R) is a registered trademark of Stern Stewart & Co. (f) EVA(R) PERFORMANCE TARGET. The budgeted percentage of EVA set by the Chairman and approved by the P&C Committee for the applicable Performance Period for a business unit or the Corporation, as applicable. (g) P&C COMMITTEE. The Personnel and Compensation Committee of the Board of Directors of the Corporation. (h) PERFORMANCE PERIOD. The "Performance Period" will be generally from January 1 to December 31, unless otherwise established by the Chairman. (i) RETIREMENT. "Retirement" means a Participant's early or normal retirement under the applicable tax-qualified retirement plan of the Corporation as in effect at the time. -7- ANNUAL INCENTIVE PLAN - EXAMPLES -------------------------------- 1. THE COMPANY ACHIEVES ITS TARGET PERFORMANCE Let's say that the unit has an EVA goal of $50 million for the year. At the end of the year, the EVA is $50 million. So, the unit met the EVA goal and is said to have achieved 100% of its EVA Performance Target. Here's how to calculate your individual award when the unit achieves its EVA Performance Target: - - Determine your Actual Base Salary during the Performance Period, let's say $80,000 - - Multiply that figure by your Target Award. We'll use 20% x 20 % - - This equals your AWARD AT TARGET PERFORMANCE (100%) $16,000 - - Now multiply the Target Award by the unit's EVA x 100% - -The result is your Cash Award $16,000 -------
2. THE COMPANY EXCEEDS ITS PERFORMANCE TARGET BY 10% What would happen if the unit exceeds its goal? Let's say that the unit achieves an EVA of $55 million for the year when its goal was $50 million. This would be 110% of the EVA Performance Target. For every 1% the unit exceeds EVA Performance Target the individual's Cash Award increases by 3 percentage points. Here's how to calculate your Cash Award under these circumstances: - - Determine your Actual Base Salary during the Performance Period, again let's use $80,000 - - Multiply that figure by your Target Award x 20% - - Once again, this equals your AWARD AT TARGET PERFORMANCE (100%) $16,000
- - Because the unit EVA achievement is 10% above the EVA goal, the individual's Cash Award is increased by 30% (3 x 10% = 30%) and results in an EVA Performance Target of 130% (100% + 30% = 130%) x 130% - - The result is your Cash Award $20,800 -------
3. THE COMPANY MISSES ITS PERFORMANCE TARGET BY 10% What happens if the unit misses its goal? Let's say that the unit achieves an EVA of $45 million for a year when the goal was $50 million. This would only be 90% of the EVA Performance Target. For every 1% the unit misses its EVA Performance Target the individual's Cash Award decreases by 3 percentage points. Here's how to calculate your Cash Award under these circumstances: - - Again we'll use example #1 as your Actual Base Salary during the Performance Period $80,000 - - Multiply that figure by your Target Award x 20% - - This equals your AWARD AT TARGET PERFORMANCE (100%) $16,000 - - Because the Company missed its goal by 10% (100%-10%=90%) the individual's Cash Award is decreased by 30% (3 x 10% = 30%) and results in a multiplier of 70% (100%-30% = 70%) x 70% - -The result is your Cash Award $11,200 -------
-8- EX-10.6 4 GENERAL SIGNAL CORP. DEFERRED COMPENSATION PLAN EXHIBIT 10.6 GENERAL SIGNAL CORPORATION DEFERRED COMPENSATION PLAN As Amended and Restated January 1, 1997 032497 GENERAL SIGNAL CORPORATION DEFERRED COMPENSATION PLAN TABLE OF CONTENTS ----------------- PAGE ---- ARTICLE I Purpose...................................... 1 ARTICLE II Definition................................... 1 ARTICLE III Eligibility.................................. 4 ARTICLE IV Savings Account Allocations.................. 4 ARTICLE V Deferred Incentive Account Allocations....... 5 ARTICLE VI Phantom Stock Units and Fixed Income Balances 5 ARTICLE VII Vesting...................................... 6 ARTICLE VIII Distributions and Withdrawals................ 7 ARTICLE IX Source of Payment of Benefits................ 9 ARTICLE X Designation of Beneficiaries................. 10 ARTICLE XI Administration of the Plan................... 10 ARTICLE XII Amendment and Termination.................... 11 ARTICLE XIII General Provisions........................... 11 GENERAL SIGNAL CORPORATION DEFERRED COMPENSATION PLAN ARTICLE I --------- Purpose 1.1 General Signal Corporation established this Deferred Compensation Plan effective as of October 14, 1993 for the purposes of providing to its eligible employees (a) benefits which would have been payable from the tax-exempt trust under the tax-qualified benefit plan known as the General Signal Corporation Savings and Stock Ownership Plan but for the limitations placed by the Internal Revenue Code on contributions with respect to such employees under such plan and (b) an opportunity to defer all or a portion of their compensation and to receive in lieu thereof phantom stock units. This Plan constitutes an amendment and continuation of the Plan in effect prior to this restatement. The portions of the Plan providing (a) benefits without regard to the limitation on "compensation" under Section 401(a)(17) of the Code, the limitation applicable to the Savings Plan under Section 402(g) of the Code and the limitations on contributions under the Savings Plan by reason of the actual deferral percentage test of Section 401(k) of the Code and the average contribution percentage test of Section 401(m) of the Code and (b) an opportunity to defer all or a portion of an eligible employee's compensation, constitute an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. The portion of the Plan providing benefits above the limitations prescribed under Section 415 of the Code constitutes an "excess benefit plan" as defined in Section 3(36) of the Employee Retirement Income Security Act of 1974. ARTICLE II ---------- Definitions When used herein, the following terms shall have the following meanings: 2.1 "Account" means an Employee's Savings Account or Incentive Account under the Plan. 2.2 "Act" means the Employee Retirement Income Security Act of 1974 as amended from time to time. 1 2.3 "Beneficiary" means the beneficiary or beneficiaries designated in accordance with Article X of the Plan to receive the amount, if any, payable upon the death of an Employee who participates in the Plan. 2.4 "Benefit Limitations" means (a) the maximum aggregate amount of "annual additions" which could have been made to an Employee's accounts under the Savings Plan in accordance with Section 415 of the Code, (b) the limitation prescribed under Section 401(a)(17) of the Code on the amount of annual compensation that can be taken into account under the Savings Plan, (c) the limitation applicable to the Savings Plan under Section 402(g) of the Code, (d) the limitations applicable to highly compensated employees under the Savings Plan with regard to the contribution rates for Tax Deferred Contributions, in order to comply with the actual deferral percentage test under Section 401(k) of the Code, and (e) the limitations applicable to highly compensated employees under the Savings Plan with regard to Matching Contributions by reason of the average contribution percentage test under Section 401(m) of the Code. 2.5 "Board of Directors" means the Board of Directors of the Company. 2.6 "Code" means the Internal Revenue Code, as amended from time to time. 2.7 "Committee" means the Corporate Benefits Committee of General Signal Corporation. 2.8 "Company" means General Signal Corporation , a New York corporation, and its successors or assigns. 2.9 "Company Stock" means the Common Stock, par value of $1.00 per share, of the Company. 2.10 "Compensation" means Compensation as defined in the Savings Plan but determined without regard to the limitation prescribed under Section 401(a)(17) of the Code on the amount of annual compensation that can be taken into account under the Savings Plan and cash compensation paid under the Company's Long Term Incentive Compensation Plan. 2.11 "Deferred Account" means an Employee's Account attributable to allocations pursuant to Sections 5.1 and 5.2 as adjusted for dividend equivalents and earnings equivalent pursuant to Article VI. 2.12 "Disability" means long term disability as determined under rules and procedures that apply under the Company's Long Term Disability Plan. 2.13 "Employee" means any executive officer of the Company and any President of a unit of the Company. 2 2.14 "Employer" means the Company and each subsidiary thereof that participates in the Savings Plan. 2.15 "Employment Requirement" means the requirement under the Savings Plan that an employee complete a year of Continuous Employment in order to receive Matching Contributions. 2.16 "Fixed Income Balance" means an Employee's Fixed Income Balance in such person's Savings Account determined pursuant to Section 6.2. 2.17 "Human Resources Officer" means the chief human resources officer of the Company. 2.18 "Investment Account" means an Employee's Account attributable to allocations pursuant to Sections 5.1 and 5.2 as adjusted for dividend equivalents and earnings equivalents pursuant to Article VI. 2.19 "Matching Contribution" means a Matching Contribution as defined in the Savings Plan. 2.20 "Phantom Stock Unit" means a unit in an Account corresponding to a share of Company Stock as described in Section 6.1. 2.21 "Plan" means the General Signal Corporation Deferred Compensation Plan as set forth herein and as amended and restated from time to time. 2.22 "Savings Account" means an Employee's Account attributable to allocations pursuant to Sections 4.1 and 4.2 as adjusted for dividend equivalents and earnings equivalents pursuant to Article VI. 2.23 "Savings Plan" means the General Signal Corporation Savings and Stock Ownership Plan, as amended and restated from time to time. 2.24 "Tax Deferred Contribution" means a Tax Deferred Contribution as defined in the Savings Plan. 2.25 "Value" means, with respect to a share of Company Stock, the closing price on the New York Stock Exchange - Composite Transactions on the business day coincident with or immediately preceding the date as of which the determination is made. 3 ARTICLE III ----------- Eligibility 3.1 Each Employee with respect to whom allocations of Tax Deferred Contributions or Matching Contributions are reduced under the Savings Plan as a result of the Benefit Limitations. ARTICLE IV ---------- Savings Account Allocations 4.1 Each Employee who has made the maximum Tax Deferred Contributions permitted under the Savings Plan and who is prevented from making additional Tax Deferred Contributions to the Savings Plan by reason of the Benefit Limitations may elect (a) to reduce such Employee's Compensation by an amount designated by the Employee but not in excess of the difference, if any, between (i) the maximum Tax Deferred Contributions that could have been made under the Savings Plan on behalf of the Employee without regard to the Benefit Limitations, and (ii) the maximum Tax Deferred Contributions actually made to the Savings Plan on behalf of the Employee, and (b) to have such amount credited to such Employee's Savings Account under the Plan. Any such election shall be in writing and must be made no later than 15 days prior to the beginning of the calendar quarter in which the Compensation is to be earned and may not be revoked or changed thereafter except as to Compensation to be earned in subsequent calendar quarters (subject to the same requirement of an irrevocable election at least 15 days prior to the beginning of the calendar quarter). If the 15th day preceding the end of a calendar quarter is not a business day, the Employee will have an additional business day to make such an election. Allocations pursuant to this Section 4.1 shall be credited to the Savings Account as of the last business day of the month in which the Compensation would otherwise have been paid. 4.2 With respect to each Employee, there shall be credited to the Employee's Savings Account under the Plan the sum of (a) the additional Matching Contributions that would have been allocated to the Employee's account under the Savings Plan to match actual contributions made to the Savings Plan if the Benefit Limitations were not applicable, and (b) if the Employee elects to reduce such Employee's Compensation pursuant to Section 4.1, the Matching Contributions that would have been made to the Employee's account under the Savings Plan if the amounts allocated to such Employee's Savings Account pursuant to Section 4.1 were Tax Deferred Contributions to the Savings Plan and the Benefit Limitations and the Employment Requirement did not apply. Allocations pursuant to this Section 4.2 shall be credited to the Savings Account as of the last business day of the month in which the related Compensation would otherwise have been paid. 4 ARTICLE V --------- Deferred Account Allocations 5.1 Each Employee who has made the maximum contributions permitted under Section 4.1 may elect to reduce such Employee's salary, annual incentive compensation award or long term incentive compensation cash award by an amount equal to a percentage designated by the Employee in 1% increments. Any such election to reduce an Employee's salary, annual incentive compensation award or long term incentive compensation cash award shall be in writing and must be made as follows: (a) in the case of salary no later than 15 days prior to the beginning of the calendar quarter in which the salary is to be earned (if the 15th day preceding the end of a calendar quarter is not a business day, the Employee will have an additional business day to make such an election); (b) in the case of the annual incentive compensation award by December 31 of the year prior to the scheduled payment of such award; and (c) in the case of the long term incentive compensation cash award at least one year before the end of the performance period for the applicable long term incentive compensation cash award. Allocations pursuant to this Section shall be credited to the Deferred Account as of the last business day of the month in which the salary, the annual incentive compensation award or the long term incentive compensation award would otherwise have been paid. 5.2 With respect to each Employee who elects to reduce the incentive compensation award pursuant to Section 5.1 prior to January 1, 1997, an additional allocation shall be credited to such Employee's Deferred Account in an amount equal to 10% of the amount credited to such Employee's Deferred Account pursuant to Section 5.1. Allocations pursuant to this Section 5.2 shall be credited to the Deferred Account as of the same date as the related allocation under Section 5.1. ARTICLE VI ---------- Phantom Stock Units and Fixed Income Balances 6.1 Any amounts credited to an Employee's Savings Account pursuant to Section 4.1 or 4.2 or to an Employee's Deferred Account pursuant to Section 5.1 or 5.2 shall be converted into a number of Phantom Stock Units determined by dividing such amount by the Value of a share of Company Stock on the date such amount is so credited. If any cash dividends are paid on shares of Company Stock while Phantom Stock Units are held in the Employee's Savings Account or Deferred Account, there shall be credited to such Employee's Savings Account or Deferred Account, as the case may be, an additional number of Phantom Stock Units determined by dividing (a) the amount of the dividends that such Employee would have received if such Employee held the number of shares of Company Stock equal to the number of Phantom Stock Units held in the 5 Account immediately before the dividend is declared, by (b) the Value of a share of Company Stock on the date the dividend is declared. Such credit shall be made as of the date on which the dividend is declared. If any dividends on shares of Company Stock are paid in the form of Company Stock while Phantom Stock Units are held in an Employee's Savings Account or Deferred Account, there shall be credited to such Employee's Savings Account or Deferred Account, as the case may be, an additional number of Phantom Stock Units equal to the number of shares of Company Stock such Employee would have received as a dividend if such Employee held the number of shares of Company Stock equal to the number of Phantom Stock Units held in the applicable Account immediately before the dividend is declared. Such credit shall be made as of the date on which the dividend is declared. In the event of a stock split, combination of shares, recapitalization, reorganization, merger, consolidation, rights offering, or any other change in the corporate structure or shares of the Company, the Committee shall make such adjustments, if any, as it deems appropriate in the number of Phantom Stock Units and the shares to which they correspond. 6.2 An Employee who has attained age 62 may elect to convert any or all of the Phantom Stock Units in such Employee's Savings Account (but not in such Employee's Deferred Account) into a Fixed Income Balance as of the last day of any calendar quarter on 15 days' written notice to the Company. If the 15th day preceding the end of a calendar quarter is not a business day, the Employee will have an additional business day to make such an election. In the event that an Employee makes such an election, the number of Phantom Stock Units in such Employee's Savings Account shall be reduced in accordance with such an Employee's election, and such Employee's Fixed Income Balance shall initially be (or, in the case of subsequent conversions, shall be increased by) an amount equal to the product of the number of Phantom Stock Units so converted and the Value of a share of Company Stock on the last day of the calendar quarter as of which the conversion takes place. Thereafter, the Fixed Income Balance shall be adjusted at the end of each calendar quarter in the same manner as if such balance had been invested in the Fixed Income Fund under the Savings Plan. 6.3 An Employee's Savings Account and Deferred Account shall be bookkeeping accounts maintained by the Company. ARTICLE VII ----------- Vesting 7.1 An Employee shall at all times be 100% vested in the Phantom Stock Units and the portion of the Fixed Income Balance attributable to allocations credited to such Employee's Savings Account pursuant to Section 4.1 (including Phantom Stock Units and the portion of the Fixed Income Balance attributable to dividend equivalents [as described in Section 6.1] and earnings equivalents [as described in Section 6.2] resulting from such allocations). 6 7.2 An Employee's rights to the Phantom Stock Units attributable to allocations made pursuant to Sections 4.2 or 5.1 on and after January 1, 1997 (including any Phantom Stock Units resulting from dividend equivalents [as described in Section 6.1] on those Phantom Stock Units) and the portion of the Employee's Fixed Income Balance attributable to allocations made pursuant to Section 4.2 (including any earnings equivalents [as described in Section 6.2] on such portion), shall become nonforfeitable immediately. 7.3 An Employee's rights to the Phantom Stock Units attributable to allocations made pursuant to Sections 4.2, 5.1 or 5.2 prior to January 1, 1997 (including any Phantom Stock Units resulting from dividend equivalents [as described in Section 6.1] on those Phantom Stock Units) and the portion of the Employee's Fixed Income Balance attributable to allocations made pursuant to Section 4.2 (including any earnings equivalents [as described in Section 6.2] on such portion], shall become nonforfeitable on the first to occur of: (a) the date 12 months after each such allocation is credited under Sections 4.2, 5.1 or 5.2 to an Employee's Account, (b) the Employee's death, or (c) the Employee's Disability. 7.4 Upon the termination of an Employee's employment for any reason, other than death or Disability, such Employee shall forfeit the nonvested portion of such Employee's Savings Account and of such Employee's Deferred Account. ARTICLE VIII ------------ Distributions and Withdrawals 8.1 At the time of filing an election to reduce Compensation pursuant to Section 4.1 or to reduce any portion of salary, annual incentive compensation award or long term incentive compensation award pursuant to Section 5.1, an Employee shall also irrevocably elect the payment date for any Phantom Stock Units and Fixed Income Balance attributable to the allocations made to such Employee's Savings Account pursuant to Sections 4.1 and 4.2 or attributable to the allocations made to such Employee's Incentive Account pursuant to Sections 5.1 and 5.2, as the case may be, as a result of such election, including any Phantom Stock Units or Fixed Income Balance resulting from dividend equivalents (as described in Section 6.1) and earnings equivalents (as described in Section 6.2) on such Phantom Stock Units and Fixed Income Balance. Such election may be changed with respect to future allocations pursuant to Sections 4.1 and 4.2 in accordance with the election procedures set forth in Section 4.1 and with respect to future allocations pursuant to Sections 5.1 and 5.2 in accordance with the election procedures set forth in Section 5.1 (subject in each case to the same limitations on the right to revoke or change such election). 7 The payment date elected by the Employee may be: (a) a specified date no less than five years after the date of the election; (b) the date of the Employee's retirement on or after attainment of age 55; or (c) six months following termination for any reason other than retirement after attainment of age 55. Notwithstanding the foregoing, an Employee may irrevocably elect in writing to change the commencement date of payment if: (a) the election is made at least one year prior to the date the payment is to commence and have a commencement date no earlier than the date originally elected; or (b) the Employee terminates for any reason other than retirement on or after attainment of age 55. If an Employee request a second election to redefer under Section 8, 1(a), the commencement date shall not be earlier than three years after the date the payment was scheduled to commence. 8.2 Payment of any Phantom Stock Units and Fixed Income Balance shall be made in the form described in Section 8.3 as soon as administratively practicable after the earlier of (a) the applicable payment date elected by the Employee for such Phantom Stock Units and Fixed Income Balance, or (b) the date of the Employee's death. 8.3 Except as hereinafter provided, payment shall be made in a cash lump sum on the date determined pursuant to Section 8.2 in an amount equal to the sum of (a) the number of vested Phantom Stock Units multiplied by the Value of a share of Common Stock on the earlier of the dates specified in Section 8.2(a) or (b), and (b) the value of the vested Fixed Income Balance as of the last day of the calendar quarter next preceding the earlier of the dates specified in Section 8.2(a) or (b). Anything herein to the contrary notwithstanding, the Committee reserves the right (a) to designate a form of payment other than a lump sum payment or (b) to limit payments in any given year to such amount as would not cause a loss of deductibility pursuant to Section 162(m) of the Code. 8.4 Distributions or withdrawals from an Employee's Savings Account or Deferred Account shall not be permitted prior to the date of distribution pursuant to Section 8.2, except that a withdrawal may be made from an Employee's Savings Account (but not such Employee's Deferred Account) by reason of an unforeseeable emergency. For this purpose, an unforeseeable emergency 8 shall be an unanticipated emergency that is caused by an event beyond the control of the Employee and that would result in severe financial hardship if early withdrawal were not permitted. Any early withdrawal approved by the Committee pursuant to this Section 8.4 shall be limited to the amount necessary to meet the emergency. ARTICLE IX ---------- Source of Payment of Benefits 9.1 All payments provided for under the Plan shall be paid in cash from the general funds of the Company; provided, however, that such payments shall be reduced by the amount of any payments made to the Employee or such Employee's dependents, beneficiaries or estate from any trust or special or separate fund established by the Company to assure such payments. The Company shall not be required to establish a special or separate fund or other segregation of assets to assure such payments, and, if the Company shall make any investments to aid it in meeting its obligations hereunder, a participant shall have no right, title, or interest whatever in or to any such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind between the Company and any participants. To the extent that any participant acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company. 9.2 The Company may, for administrative reasons, establish a grantor trust for the benefit of participants in the Plan. The assets of said trust will be held separate and apart from other Company funds and shall be used exclusively for the purposes set forth in the Plan and the applicable trust agreement, subject to the following conditions: (a) the creation of said trust shall not cause the Plan to be other than "unfunded" for purposes of Title I of the Act; (b) the Company shall be treated as the "grantor" of said trust for purposes of Sections 671 and 677 of the Code; and (c) said trust agreement shall provide that its assets may be used to satisfy claims of the Company's general creditors, provided that the rights of such general creditors are enforceable under federal and state law. 9 ARTICLE X --------- Designation of Beneficiaries 10.1 Unless an Employee who participates in the Plan otherwise files with the Company a written designation of one or more persons as the Beneficiary who shall be entitled to receive the amount, if any, payable under this Plan upon such Employee's death, the Employee's beneficiary under the Savings Plan shall be deemed to have been designated such Employee's Beneficiary for benefits under this Plan. If the Committee is in doubt as to the right of any person to receive such amount, the Company may retain such amount, without liability for any interest thereon, until the rights thereto are determined, or the Company may pay such amount into any court of appropriate jurisdiction, and such payment shall be a complete discharge of the liability of the Plan and the Company therefor. ARTICLE XI ---------- Administration of the Plan 11.1 The Plan shall be administered by the Committee, which shall have full power and authority to interpret, construe and administer the Plan, and review claims for benefits under the Plan, and the Committee's interpretations and constructions of the Plan and actions thereunder shall be binding and conclusive on all persons and for all purposes. 11.2 If any claim for benefits under the Plan is wholly or partially denied, the Committee shall give written notice by registered or certified mail of such denial to the claimant within 90 days after receipt of the written claim by the Committee. Notice must be written in a manner calculated to be understood by the claimant, setting forth the specific reasons for such denial, specific reference to pertinent Plan provisions on which the denial is based, a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary, and an explanation of the Plan's claim review procedure. The Committee shall also advise the claimant that the claimant or the claimant's duly authorized representative may request a review by the Committee of the decision to deny the claim by filing with the Committee, within 65 days after such notice has been received by the claimant, a written request for such review. The claimant may review pertinent documents and submit issues and comments in writing within the same 65 day period. If such request is so filed, such review shall be made by the Committee with 60 days after receipt of such request, unless special circumstances (including, but not limited to, a need to hold a hearing) require an extension of time for processing, in which case a decision shall be rendered not later than 120 days after receipt of the request for review. The claimant shall be given written notice within such 60 day period of the decision resulting from such review, which shall include specific reasons for the 10 decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision was based. ARTICLE XII ----------- Amendment and Termination 12.1 The Plan may be amended, suspended or terminated, in whole or in part, by the Board of Directors, but no such action shall retroactively impair or otherwise adversely affect the rights of any person to benefits under the Plan which have accrued prior to the date of such action, as determined by the Committee. The Human Resources Officer may adopt amendments to the Plan which it deems necessary or appropriate to comply with applicable laws or government regulations or which do not materially increase the annual cost of the Plan. ARTICLE XIII ------------ General Provisions 13.1 This Plan shall be binding upon and inure to the benefit of the Company and its successors and assigns and the Employee, and the designees and the estate of the Employee. Nothing in this Plan shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation which assumes this Plan and all obligations of the Company hereunder. Upon such a consolidation, merger or transfer of assets and assumption, the term "Company" shall refer to such other corporation and this Plan shall continue in full force and effect. 13.2 Neither the Plan nor any action taken hereunder shall be construed as giving to an Employee the right to be retained in the employ of the Employer or as affecting the right of the Employer to dismiss any Employee. 13.3 The Company may withhold from any benefits payable under this Plan all Federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling. 13.4 Except insofar as may otherwise be required by law, no amount payable at any time under the Plan shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind nor in any manner be subject to the debts or liabilities of any person and any attempt to so alienate or subject any such amount, whether presently or thereafter payable, shall be void. If any person shall attempt to, or shall alienate, sell, transfer, assign, pledge, attach, charge or otherwise encumber any amount payable under the Plan, or any part thereof, or if by reason of such person's bankruptcy or other event happening at any such time such amount would be made subject to such person's debts or liabilities or would otherwise not be enjoyed by such person, then the Committee, if it so elects, may direct that such amount be withheld and that the same or any part thereof be paid or applied to 11 or for the benefit of such person, such person's spouse, children or other dependents, or any of them, in such manner and proportion as the Committee may deem proper. 13.5 If the Committee shall find that any person to whom any amount is or was payable hereunder is unable to care for such person's affairs because of illness or accident, or has died, then the Committee, if it so elects, may direct that any payment due such person's or such person's estate (unless a prior claim therefor has been made by a duly appointed legal representative) or any part thereof be paid or applied for the benefit of such person or to or for the benefit of such person's spouse, children or other dependents, an institution maintaining or having custody of such person, any other person deemed by the Committee to be a proper recipient on behalf of such person otherwise entitled to payment, or any of them, in such manner and proportion as the Committee may deem proper. Any such payment shall be in complete discharge of the liability of the Company therefor. 13.6 All elections, designations, requests, notices, instructions, and other communications from an Employee, Beneficiary or other person to the Committee required or permitted under the Plan shall be in such form as is prescribed from time to time by the Committee, shall be mailed by first-class mail or delivered to such location as shall be specified by the Committee, and shall be deemed to have been given and delivered only upon actual receipt thereof at such location. 13.7 The benefits payable under this Plan shall be in addition to all other benefits provided for Employees of the Company. 13.8 The captions preceding the sections and articles hereof have been inserted solely as a matter of convenience and in no way define or limit the scope or intent of any provisions of the Plan. 13.9 This Plan shall be governed by the laws of the State of New York from time to time in effect. 12 EX-10.7 5 1ST AMEND. TO GENERAL SIGNAL CORP. DEFERRED COMPENSATION PLAN EXHIBIT 10.7 FIRST AMENDMENT TO GENERAL SIGNAL CORPORATION DEFERRED COMPENSATION PLAN The General Signal Corporation Deferred Compensation Plan (the "Plan") is hereby amended effective as of November 19, 1997, as follows: 1. Article II of the Plan is hereby amended by adding the following definitions after Section 2.5, and renumbering the definitions the remaining definition in Article II accordingly: 2.5 "Change of Control" means: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then-outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (D) any acquisition pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c); or (b) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or (c) Approval by the shareholders of the Company of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a "Corporate Transaction"), in each case, unless, following such Corporate Transaction, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60% of, respectively, the then-outstanding shares of common stock and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction of the Outstanding Company Common Stock and Outstanding Voting Securities, as the case may be, (ii) no Person (excluding any employee benefit plan (or related trust) of the Company or such corporation resulting from such Corporate Transaction) beneficially own, directly or indirectly, 20% or more of, respectively, the then-outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then-outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Corporate Transaction and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Corporate Transaction; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 2.7 "Change of Control Price" means the higher of (a) the highest reported sales price, regular way, of a share of Company Stock in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares are listed or on NASDAQ during the 60-day period prior to and including the date of a Change of Control or (b) if the Change of Control is the result of a tender or exchange offer or a Corporate Transaction, the highest price per share of Company Stock paid in such tender or exchange offer or Corporate Transaction. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined in the sole discretion of the Board of Directors. 2. Article VI of the Plan is hereby amended by adding the following Section 6.3 after Section 6.2, and renumbering Section 6.3 to "6.4": 6.3 In the event of a Change of Control of the Company, an Employee may elect, prior to the effective date of such Change of Control, to convert up to 100% of the Phantom Stock Units in such Employee's Savings Account and Deferred Account into a Fixed -2- Income Balance. In the event an Employee makes such an election, the number of Phantom Stock Units in such Employee's Savings Account and Deferred Account shall be reduced in accordance with such Employee's election, and an Employee's Fixed Income Balance shall be an amount equal to the product of the number of Phantom Stock Units so converted and the Change in Control Price. Thereafter, the Fixed Income Balance shall be adjusted at the end of each calendar quarter in the same manner as if such balance had been invested in the Fixed Income Fund under the Savings Plan. Notwithstanding anything contained herein to the contrary, an Employee shall not have the rights granted under this Section 6.3, and the definitions of "Change of Control" and "Change of Control Price" contained in Sections 2.6 and 2.7 hereof shall not be effective, if, and to the extent that, as a result of giving effect to any such provision, the Company would be prevented from engaging in a transaction intended to be treated as a pooling of interests for accounting purposes. The Plan is in all other respects ratified and confirmed without amendment. -3- EX-10.8 6 GENERAL SIGNAL CORP. BENEFIT EQUALIZATION PLAN EXHIBIT 10.8 GENERAL SIGNAL CORPORATION BENEFIT EQUALIZATION PLAN As Amended and Restated October 17, 1996 GENERAL SIGNAL CORPORATION BENEFIT EQUALIZATION PLAN TABLE OF CONTENTS -----------------
PAGE ---- ARTICLE I Purpose..................... 1 ARTICLE II Definitions................. 1 ARTICLE III Eligibility................. 2 ARTICLE IV Pension Benefits............ 3 ARTICLE V Source of Payment........... 3 ARTICLE VI Designation of Beneficiaries 4 ARTICLE VII Administration of the Plan.. 4 ARTICLE VIII Amendment and Termination... 6 ARTICLE IX General Provisions.......... 6
GENERAL SIGNAL CORPORATION BENEFIT EQUALIZATION PLAN ARTICLE I --------- Purpose 1.1 General Signal Corporation established this amended and restated Benefit Equalization Plan effective as of October 14, 1993 solely for the purpose of providing to its eligible employees benefits which would have been payable from the tax-exempt trust under the tax-qualified pension benefit plan known as the Corporate Retirement Plan of General Signal Corporation but for the limitations placed by the Internal Revenue Code on benefits payable made with respect to such employees under such plan. This Plan constitutes an amendment and continuation of the Plan in effect prior to this restatement. The portions of the Plan providing benefits without regard to the limitation on compensation under Section 401(a)(17) of the Code ($150,000 for 1994), and taking into account deferrals under the General Signal Corporation Deferred Compensation Plan, constitutes an unfunded plan maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees. The portion of the Plan providing benefits above the limitations prescribed under Section 415 of the Code constitutes an "excess benefit plan" as defined in Section 3(36) of the Employee Retirement Security Act of 1974. ARTICLE II ---------- Definitions When used herein, the following terms shall have the following meanings: 2.1 "Act" means the Employee Retirement Income Security Act of 1974 as amended from time to time. 2.2 "Beneficiary" means the beneficiary or beneficiaries designated in accordance with Article VI of the Plan to receive the amount, if any, payable upon the death of an Employee who participates in the Plan. 2.3 "Benefit Limitations" means (a) the maximum "annual benefit" payable under the Corporate Retirement Plan in accordance with Section 415 of the Code, and (b) the maximum amount of pension plan benefits that could have been provided under the Corporate Retirement Plan without regard to the limitation prescribed under Section 401(a)(17) of the Code on the amount of annual compensation that can be taken into account under the Corporate Retirement Plan. 2.4 "Board of Directors" means the Board of Directors of the Company. 2.5 "Code" means the Internal Revenue Code, as amended from time to time. 2.6 "Company" means General Signal Corporation, a New York corporation, and its successors or assigns. 2.7 "Corporate Benefits Committee" means the committee appointed to administer and be the named fiduciary for administration of the Corporate Retirement Plan. 2.8 "Corporate Retirement Plan" means the Corporate Retirement Plan of General Signal Corporation, as amended and restated from time to time. 2.9 "Employee" means any person employed by an Employer who is eligible to receive a benefit under the Corporate Retirement Plan. 2.10 "Employer" means the Company and each subsidiary thereof that participates in the Corporate Retirement Plan. 2.11 "Human Resources Officer" means the chief human resources officer of the Company. 2.12 Investment Committee means the committee appointed to be responsible for all assets and be the named fiduciary for all assets of the Corporate Retirement Plan. 2.13 "Pension Benefits" means the benefits described in Article IV of the Plan. 2.14 "Plan" means the General Signal Corporation Benefit Equalization Plan as set forth herein and as amended and restated from time to time. ARTICLE III ----------- Eligibility 3.1 Each Employee with respect to whom benefits are reduced under the Corporate Retirement Plan as a result of any of the Benefit Limitations shall participate in the Plan. ARTICLE IV ---------- Pension Benefits 4.1 The amount of Pension Benefits payable to or in respect of an Employee shall be equal to the actuarial value of the difference between (a) the amount of benefits which would have been payable to or in respect of the Employee under the Corporate Retirement Plan without regard to the Benefit Limitations and (b) the amount of benefits actually payable to or in respect of the Employee thereunder. In addition, the amount of Pension Benefits shall be increased in the amount of additional benefits to which the Employee would have been entitled under the Corporate Retirement Plan had the deferral of any compensation under the General Signal Corporation Deferred Compensation Plan been included as part of the Employee's earnings and paid to the Employee during the applicable calendar year. 4.2 Subject to Section 4.3, Pension Benefits shall be payable in the form of a life annuity for a single Employee and in the form of a 50% joint and survivor annuity for a married Employee, beginning on the individual's retirement date, unless the Corporate Benefits Committee authorizes another manner or time of payment. The Company reserves the right to limit payments in any given year to such amount as would not cause a loss of deductibility pursuant to Section 162(m) of the Code. 4.3 In the event that the lump sum value of the Pension Benefits under the Plan shall be $20,000 or less, such Pension Benefits shall be payable in a lump sum settlement of Actuarially Equivalent (as defined in the Corporate Retirement Plan) value in full discharge of all liability in respect of such Pension Benefits. The lump sum payment shall be made as soon as administratively practicable following the Employee's termination of service or death. The Pension Benefits of any Employee who receives such a lump sum payment and who subsequently accrues Pension Benefits under this Plan shall be reduced by the Actuarial Equivalent of the Pension Benefits on which the lump sum amount was so paid. ARTICLE V --------- Source of Payment 5.1 All payments provided for under the Plan shall be paid in cash from the general funds of the Company; provided, however, that such payments shall be reduced by the amount of any payments made to the Employee or his or her dependents, beneficiaries or estate from any trust or special or separate fund established by the Company to assure such payments. The Company shall not be required to establish a special or separate fund or other segregation of assets to assure such payments, and, if the Company shall make any investments to aid it in meeting its obligations hereunder, a participant shall have no right, title, or interest whatever in or to any such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind between the Company and any participants. To the extent that any participant acquires a right to receive payments from the Company hereunder, such right shall be no greater than the right of an unsecured creditor of the Company. 5.2 The Investment Committee may, for financial reasons, establish a grantor trust for the benefit of participants in the Plan. The assets of said trust will be held separate and apart from other Company funds and shall be used exclusively for the purposes set forth in the Plan and the applicable trust agreement, subject to the following conditions: (a) the creation of said trust shall not cause the Plan to be other than "unfunded" for purposes of Title I of the Act: (b) the Company shall be treated as the "grantor" of said trust for purposes of Sections 671 and 677 of the Code; and (c) said trust agreement shall provide that its assets may be used to satisfy claims of the Company's general creditors, provided that the rights of such general creditors are enforceable under federal and state law. ARTICLE VI ---------- Designation of Beneficiaries 6.1 Unless an Employee who participates in the Plan otherwise files with the Corporate Benefits Committee a written designation of one or more persons as the Beneficiary who shall be entitled to receive the amount, if any, payable under the Plan upon such Employee's death, the Employee's beneficiary under the Corporate Retirement Plan shall be deemed to have been designated the Beneficiary for Pension Benefits. If the Corporate Benefits Committee is in doubt as to the right of any person to receive such amount, the Corporate Benefits Committee may retain such amount, without liability for any interest thereon, until the rights thereto are determined, or the Corporate Benefits Committee may pay such amount into any court of appropriate jurisdiction and such payment shall be a complete discharge of the liability of the Plan and the Company therefor. ARTICLE VII ----------- Administration of the Plan 7.1 The Plan shall be administered by the Corporate Benefits Committee which shall have full power and authority to interpret, construe and administer the Plan, and review claims for benefits under the Plan, and the Corporate Benefits Committee's interpretations and constructions of the Plan and actions thereunder shall be binding and conclusive on all persons and for all purposes. 7.2 The members of the Corporate Benefits Committee shall be the named fiduciaries of the Plan for administration of the Plan (including but not limited to complying with reporting and disclosure requirements and establishing and maintaining Plan records), and shall engage such certified public accountants, who may be accountants for the Company, as it shall require or may deem advisable for purposes of administration of the Plan. The Corporate Benefits Committee may arrange for the engagement of such legal counsel, who may be counsel for the Company, and make use of such agents and clerical or other personnel as they each shall require or may deem advisable for purposes of the Plan. The Corporate Benefits Committee may rely upon the written opinion of such counsel and the accountants engaged by the Corporate Benefits Committee and may delegate to any such agent or to any sub-committee or member of the Corporate Benefits Committee its authority to perform any act hereunder, including without limitation those matters involving the exercise of discretion, provided that such delegation shall be subject to revocation at any time at the discretion of the Corporate Benefits Committee. 7.3 To the maximum extent permitted by law, no member of the Corporate Benefits Committee or Investment Committee shall be personally liable by reason of any contract or other instrument executed by such member or on such member's behalf in his or her capacity as a member of said Committees nor for any mistake of judgment made in good faith, and the Company shall indemnify and hold harmless, directly from its own assets (including the proceeds of any insurance policy the premiums of which are paid from the Company's own assets), each member of the Corporate Benefits Committee, Investment Committee and each other officer, employee or director of the Company to whom any duty or power relating to the administration or interpretation of the Plan, or to the management and control of the assets of the Plan, may be delegated or allocated, against any cost or expense (including counsel fees) or liability (including any sum paid in settlement of a claim with the approval of the Company) arising out of any act or omission to act in connection with the Plan unless arising out of such person's own fraud or willful misconduct. Each Employer will pay such proportion of any claim and/or expense as the Company directs. 7.4 If any claim for benefits under the Plan is wholly or partially denied, the Corporate Benefits Committee shall give written notice by registered or certified mail of such denial to the claimant within 90 days after receipt of the written claim by the Corporate Benefits Committee. Notice must be written in a manner calculated to be understood by the claimant, setting forth the specific reasons for such denial, specific reference to pertinent Plan provisions on which the denial is based, a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary, and an explanation of the Plan's claim review procedure. The Corporate Benefits Committee shall also advise the claimant that the claimant or the claimant's duly authorized representative may request a review by the Corporate Benefits Committee of the decision to deny the claim by filing with the Corporate Benefits Committee, within 65 days after such notice has been received by the claimant, a written request for such review. The claimant may review pertinent documents and submit issues and comments in writing within the same 65 day period. If such request is so filed, such review shall be made by the Corporate Benefits Committee with 60 days after receipt of such request, unless special circumstances (including, but not limited to, a need to hold a hearing) require an extension of time for processing, in which case a decision shall be rendered not later than 120 days after receipt of the request for review. The claimant shall be given written notice within such 60 day period of the decision resulting from such review, which shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision was based. ARTICLE VIII ------------ Amendment and Termination 8.1 The Company expects and intends to maintain the Plan in force indefinitely, but the Company, by action of the Board of Directors, may change, suspend or terminate the Plan at any time. The Human Resources Officer may adopt amendments to the Plan which it deems necessary or appropriate to comply with applicable laws or government regulations or which do not materially increase the annual cost of the Plan. Notwithstanding the foregoing, no such action shall retroactively impair or otherwise adversely affect the rights of any person to benefits under the Plan which have accrued prior to the date of any such action, as determined by the Corporate Benefits Committee. ARTICLE IX ---------- General Provisions 9.1 This Plan shall be binding upon and inure to the benefit of the Company and its successors and assigns and the Employee and the designees and the estate of the Employee. Nothing in this Plan shall preclude the Company from consolidating or merging into or with, or transferring all or substantially all of its assets to, another corporation which assumes this Plan and all obligations of the Company hereunder. Upon such a consolidation, merger or transfer of assets and assumption, the term "Company" shall refer to such other corporation and this Plan shall continue in full force and effect. 9.2 Neither the Plan nor any action taken hereunder shall be construed as giving to an Employee the right to be retained in the employ of the Employer or as affecting the right of the Employer to dismiss any Employee. 9.3 The Company may withhold from any benefits payable under this Plan all Federal, state, city or other taxes as shall be required pursuant to any law or governmental regulation or ruling. 9.4 Except insofar as may otherwise be required by law, no amount payable at any time under the Plan and the Fund shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind nor in any manner be subject to the debts or liabilities of any person and any attempt to so alienate or subject any such amount, whether presently or thereafter payable, shall be void. If any person shall attempt to, or shall alienate, sell, transfer, assign, pledge, attach, charge or otherwise encumber any amount payable under the Plan and Fund, or any part thereof, or if by reason of such person's bankruptcy or other event happening at any such time such amount would be made subject to such person's debts or liabilities or would otherwise not be enjoyed by the such person, then the Corporate Benefits Committee, if it so elects, may direct that such amount be withheld and that the same or any part thereof be paid or applied to or for the benefit of such person, such person's spouse, children or other dependents, or any of them, in such manner and proportion as the Corporate Benefits Committee may deem proper. 9.5 If the Corporate Benefits Committee shall find that any person to whom any amount is or was payable hereunder is unable to care for such person's affairs because of illness or accident, or has died, then the Company, if it so elects, may direct that any payment due such person or such person's estate (unless a prior claim therefor has been made by a duly appointed legal representative) or any part thereof be paid or applied for the benefit of such person or to or for the benefit of such person's spouse, children or other dependents, an institution maintaining or having custody of such person, any other person deemed by the Corporate Benefits Committee to be a proper recipient on behalf of such person otherwise entitled to payment, or any of them, in such manner and proportion as the Company may deem proper. Any such payment shall be in complete discharge of the liability of the Corporate Benefits Committee therefor. 9.6 Whenever, under this Plan, it is necessary to determine whether one benefit is less than, equal to, or larger than another, whether or not such benefits are provided under this Plan, such determination shall be made by the Company's independent consulting actuary, using mortality, interest and any other assumptions normally used at the time by such actuary in determining actuarial equivalents under the Corporate Retirement Plan. 9.7 All elections, designations, requests, notices, instructions, and other communications from an Employee, Beneficiary or other person to the Corporate Benefits Committee required or permitted under the Plan shall be in such form as is prescribed from time to time by the Corporate Benefits Committee, shall be mailed by first-class mail or delivered to such location as shall be specified by the Corporate Benefits Committee, and shall be deemed to have been given and delivered only upon actual receipt thereof at such location. 9.8 The benefits payable under this Plan shall be in addition to all other benefits provided for Employees of the Company. 9.9 The captions preceding the sections and articles hereof have been inserted solely as a matter of convenience and in no way define or limit the scope or intent of any provisions of the Plan. 9.10 This Plan shall be governed by the laws of the State of New York from time to time in effect. EX-10.10 7 1ST AMENDMENT TO THE 1996 STOCK INCENTIVE PLAN EXHIBIT 10.10 FIRST AMENDMENT TO GENERAL SIGNAL CORPORATION 1996 STOCK INCENTIVE PLAN The General Signal Corporation 1996 Stock Incentive Plan (the "Plan") is hereby amended, effective as of November 19, 1997, as follows: 1. The last paragraph of the subsection entitled "Form of Option" in Section 5 of the Plan is hereby deleted in its entirety. 2. The last paragraph of the subsection entitled "Restrictions and Conditions" in Section 6 of the Plan is hereby deleted in its entirety. 3. The last paragraph of the subsection entitled "Forfeiture" in Section 7 of the Plan is hereby deleted in its entirety. 4. The following Section 8 is hereby added after Section 7 of the Plan, and Sections 8, 9, 10, 11 and 12 are renumbered as Sections 9, 10, 11, 12 and 13, respectively. 8. CHANGE OF CONTROL (a) Impact of Event. Except as provided in subsection (e) of this Section 8, in the event of a Change of Control: (i) Any options outstanding as of the date such Change of Control is determined to have occurred, and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant, without regard to the second paragraph of the subsection entitled "Option Prices" in Section 5. (ii) The restrictions, performance goals and deferral limitations applicable to restricted stock (other than restricted stock credited to an Eligible Director) shall lapse, and such restricted stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant. (iii) All performance shares and performance units shall be considered to be earned and payable in full, and any deferral or other restriction shall lapse and such performance units shall be settled in cash as promptly as is practicable. (b) Change of Control Cash-Out. Except as provided in subsection (e) of this Section 8, during the 60-day period from and after a Change of Control (the "Exercise Period"), unless the Committee shall determine otherwise at the time of grant, an Optionee shall have the right, whether or not the option is fully exercisable and in lieu of the payment of the purchase price for the shares of Common Stock being purchased under the option and by giving notice to the Corporation, to elect (within the Exercise Period) to surrender all or part of the option to the Corporation and to receive cash, within 30 days of such notice, in an amount equal to the amount by which the Change of Control Price per share of Common Stock on the date of such election shall exceed the purchase price per share of Common Stock under the option (the "Spread") multiplied by the number of shares of Common Stock granted under the option as to which the right granted under this Section 8(b) shall have been exercised; provided, however, that if the Change of Control is within six months of the date of grant of a particular option held by an optionee who is an officer or director of the Corporation and is subject to Section 16(b) of the Exchange Act, such election may not be made by such optionee with respect to such option at any time until the date that is six months and one day after the date of grant of such option. Notwithstanding the foregoing, if any right granted pursuant to Section 8(a)(iii) and this Section 8(b) would make a Change of Control transaction ineligible for pooling-of-interests accounting under APB No. 16 that but for the nature of such grant would otherwise be eligible for such accounting treatment, the Committee shall have the ability to substitute for the cash payable pursuant to such right Common Stock or other securities with a fair market value equal to the cash that would otherwise be payable hereunder. (c) Definition of Change of Control. For purposes of the Plan, a "Change of Control" shall mean: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (a) the then outstanding shares of common stock of the Corporation (the "Outstanding Common Stock") or (b) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); provided, however, that -2- for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Corporation, (B) any acquisition by the Corporation, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation or (D) any acquisition pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 8(c); or (ii) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or (iii) Approval by the shareholders of the Corporation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation or the acquisition of assets of another entity (a "Corporate Transaction"), in each case, unless, following such Corporate Transaction, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be, (B) no Person (excluding any employee -3- benefit plan (or related trust) of the Corporation or such corporation resulting from such Corporate Transaction) beneficially own, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Corporate Transaction and (C) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Corporate Transaction; or (iv) Approval by the shareholders of the Corporation of a complete liquidation or dissolution of the Corporation. (d) Definition of Change of Control Price. For purposes of the Plan "Change of Control Price" means the higher of (i) the highest reported sales price, regular way, of a share of Common Stock in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares are listed or on NASDAQ during the 60-day period prior to and including the date of a Change of Control or (ii) if the Change of Control is the result of a tender or exchange offer or a Corporate Transaction, the highest price per share of Common Stock paid in such tender or exchange offer or Corporate Transaction; provided, however, that (x) in the case of a option which (A) is held by an optionee who is an officer or director of the Corporation and is subject to Section 16(b) of the Exchange Act and (B) was granted within 240 days of the Change of Control, then the Change of Control Price for such option shall be the fair market value of the Common Stock on the date such option is exercised or deemed exercised and (y) in the case of incentive stock options, the Change of Control Price shall be in all cases the fair market value of the Common Stock on the date such incentive stock option is exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined in the sole discretion of the Board of Directors. (e) Effectiveness. Notwithstanding anything contained herein to the contrary, a participant shall not have the rights granted under subsections (a) and (b) of this Section 8, and the definition of "Change of Control" contained in Section 8(c) hereof shall not be effective, if, and to the extent that, as a result of giving effect to any such provision, the Corporation -4- would be prevented from engaging in a transaction intended to be treated as a pooling of interests for accounting purposes. In addition, the rights granted under subsection (b) hereof shall not apply to incentive stock options (intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended) granted prior to the effective date of this First Amendment. 5. The Plan is in all other respects ratified and confirmed without amendment. -5- EX-10.12 8 1ST AMENDMENT TO THE 1992 STOCK INCENTIVE PLAN EXHIBIT 10.12 FIRST AMENDMENT TO GENERAL SIGNAL CORPORATION 1992 STOCK INCENTIVE PLAN The General Signal Corporation 1992 Stock Incentive Plan (the "Plan") is hereby amended, effective as of November 19, 1997, as follows: 1. The last paragraph of the subsection entitled "Form of Option" in Section 5 of the Plan is hereby deleted in its entirety. 2. The last paragraph of the subsection entitled "Restrictions and Conditions" in Section 6 of the Plan is hereby deleted in its entirety. 3. The following Section 10 is hereby added after Section 9 of the Plan. 10. CHANGE OF CONTROL (a) Impact of Event. Except as provided in subsection (e) of this Section 10, in the event of a Change of Control: (i) Any options outstanding as of the date such Change of Control is determined to have occurred, and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant. (ii) The restrictions, performance goals and deferral limitations applicable to restricted stock (other than restricted stock credited to an Eligible Director) shall lapse, and such restricted stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant. (b) Change of Control Cash-Out. Except as provided in subsection (e) of this Section 10, during the 60-day period from and after a Change of Control (the "Exercise Period"), unless the Committee shall determine otherwise at the time of grant, an Optionee shall have the right, whether or not the option is fully exercisable and in lieu of the payment of the purchase price for the shares of Common Stock being purchased under the option and by giving notice to the Corporation, to elect (within the Exercise Period) to surrender all or part of the option to the Corporation and to receive cash, within 30 days of such notice, in an amount equal to the amount by which the Change of Control Price per share of Common Stock on the date of such election shall exceed the purchase price per share of Common Stock under the option (the "Spread") multiplied by the number of shares of Common Stock granted under the option as to which the right granted under this Section 10(b) shall have been exercised. Notwithstanding the foregoing, if any right granted pursuant to this Section 10(b) would make a Change of Control transaction ineligible for pooling- of-interests accounting under APB No. 16 that but for the nature of such grant would otherwise be eligible for such accounting treatment, the Committee shall have the ability to substitute for the cash payable pursuant to such right Common Stock or other securities with a fair market value equal to the cash that would otherwise be payable hereunder. (c) Definition of Change of Control. For purposes of the Plan, a "Change of Control" shall mean: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (a) the then outstanding shares of common stock of the Corporation (the "Outstanding Common Stock") or (b) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Corporation, (B) any acquisition by the Corporation, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation or (D) any acquisition pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 10(c); or (ii) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose -2- initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or (iii) Approval by the shareholders of the Corporation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation or the acquisition of assets of another entity (a "Corporate Transaction"), in each case, unless, following such Corporate Transaction, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such Corporate Transaction) beneficially own, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Corporate Transaction and (C) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Corporate Transaction; or (iv) Approval by the shareholders of the Corporation of a complete liquidation or dissolution of the Corporation. (d) Definition of Change of Control Price. For purposes of the Plan "Change of Control Price" means the higher of (i) the highest reported sales price, regular way, of a share of Common -3- Stock in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares are listed or on NASDAQ during the 60-day period prior to and including the date of a Change of Control or (ii) if the Change of Control is the result of a tender or exchange offer or a Corporate Transaction, the highest price per share of Common Stock paid in such tender or exchange offer or Corporate Transaction; provided, however, that in the case of incentive stock options, the Change of Control Price shall be in all cases the fair market value of the Common Stock on the date such incentive stock option is exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined in the sole discretion of the Board of Directors. (e) Effectiveness. Notwithstanding anything contained herein to the contrary, a participant shall not have the rights granted under subsections (a) and (b) of this Section 10, and the definition of "Change of Control" contained in Section 10(c) hereof shall not be effective, if, and to the extent that, as a result of giving effect to any such provision, the Corporation would be prevented from engaging in a transaction intended to be treated as a pooling of interests for accounting purposes. In addition, the rights granted under subsection (b) of this Section 10 shall not apply to incentive stock options (intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended) granted prior to the effective date of this First Amendment. 4. The Plan is in all other respects ratified and confirmed without amendment. -4- EX-10.14 9 1ST AMENDMENT TO 1989 STOCK OPTION AND INCENTIVE PLAN EXHIBIT 10.14 FIRST AMENDMENT TO GENERAL SIGNAL CORPORATION 1989 STOCK OPTION AND INCENTIVE PLAN The General Signal Corporation 1989 Stock Option and Incentive Plan (the "Plan") is hereby amended, effective as of November 19, 1997, as follows: The following Section 9 is hereby added after Section 8 of the Plan. 9. Change of Control (a) Impact of Event. Except as provided in subsection (e) of this Section 9, in the event of a Change of Control: (i) Any options outstanding as of the date such Change of Control is determined to have occurred, and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant. (ii) The restrictions, performance goals and deferral limitations applicable to any restricted stock shall lapse, and such restricted stock shall become free of all restrictions and become fully vested and transferable to the full extent of the original grant. (b) Change of Control Cash-Out. Except as provided in subsection (e) of this Section 9, during the 60-day period from and after a Change of Control (the "Exercise Period"), unless the Committee shall determine otherwise at the time of grant, an Optionee shall have the right, whether or not the option is fully exercisable and in lieu of the payment of the purchase price for the shares of Common Stock being purchased under the option and by giving notice to the Corporation, to elect (within the Exercise Period) to surrender all or part of the option to the Corporation and to receive cash, within 30 days of such notice, in an amount equal to the amount by which the Change of Control Price per share of Common Stock on the date of such election shall exceed the purchase price per share of Common Stock under the option (the "Spread") multiplied by the number of shares of Common Stock granted under the option as to which the right granted under this Section 9(b) shall have been exercised. Notwithstanding the foregoing, if any right granted pursuant to this Section 9(b) would make a Change of Control transaction ineligible for pooling-of- interests accounting under APB No. 16 that but for the nature of such grant would otherwise be eligible for such accounting treatment, the Committee shall have the ability to substitute for the cash payable pursuant to such right Common Stock or other securities with a fair market value equal to the cash that would otherwise be payable hereunder. (c) Definition of Change of Control. For purposes of the Plan, a "Change of Control" shall mean: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (a) the then outstanding shares of common stock of the Corporation (the "Outstanding Common Stock") or (b) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Corporation, (B) any acquisition by the Corporation, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation or (D) any acquisition pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 9(c); or (ii) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or (iii) Approval by the shareholders of the Corporation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets -2- of the Corporation or the acquisition of assets of another entity (a "Corporate Transaction"), in each case, unless, following such Corporate Transaction, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such Corporate Transaction) beneficially own, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Corporate Transaction and (C) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Corporate Transaction; or (iv) Approval by the shareholders of the Corporation of a complete liquidation or dissolution of the Corporation. (d) Definition of Change of Control Price. For purposes of the Plan "Change of Control Price" means the higher of (i) the highest reported sales price, regular way, of a share of Common Stock in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares are listed or on NASDAQ during the 60-day period prior to and including the date of a Change of Control or (ii) if the Change of Control is the result of a tender or exchange offer or a Corporate Transaction, the highest price per share of Common Stock paid in such tender or exchange offer or Corporate Transaction; provided, however, that in the case of incentive stock options, the Change of Control Price shall be in all cases -3- the fair market value of the Common Stock on the date such incentive stock option is exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other noncash consideration, the value of such securities or other noncash consideration shall be determined in the sole discretion of the Board of Directors. (e) Effectiveness. Notwithstanding anything contained herein to the contrary, a participant shall not have the rights granted under subsections (a) and (b) of this Section 9, and the definition of "Change of Control" contained in Section 9(c) hereof shall not be effective, if, and to the extent that, as a result of giving effect to any such provision, the Corporation would be prevented from engaging in a transaction intended to be treated as a pooling of interests for accounting purposes. In addition, the rights granted under subsection (b) of this Section 9 shall not apply to incentive stock options (intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended) granted prior to the effective date of this First Amendment. The Plan is in all other respects ratified and confirmed without amendment. -4- EX-10.16 10 1ST AMENDMENT TO THE 1985 STOCK OPTION PLAN EXHIBIT 10.16 FIRST AMENDMENT TO GENERAL SIGNAL CORPORATION 1985 STOCK OPTION PLAN The General Signal Corporation 1985 Stock Option Plan (the "Plan") is hereby amended, effective as of November 19, 1997, as follows: The following Section 11 is hereby added after Section 10 of the Plan. 11. CHANGE OF CONTROL (a) Impact of Event. Except as provided in subsection (e) of this Section 11, in the event of a Change of Control, any options outstanding as of the date such Change of Control is determined to have occurred, and which are not then exercisable and vested, shall become fully exercisable and vested to the full extent of the original grant. (b) Change of Control Cash-Out. Except as provided in subsection (e) of this Section 11, during the 60-day period from and after a Change of Control (the "Exercise Period"), unless the Committee shall determine otherwise at the time of grant, an optionee shall have the right, whether or not the option is fully exercisable and in lieu of the payment of the purchase price for the shares of Common Stock being purchased under the option and by giving notice to the Corporation, to elect (within the Exercise Period) to surrender all or part of the option to the Corporation and to receive cash, within 30 days of such notice, in an amount equal to the amount by which the Change of Control Price per share of Common Stock on the date of such election shall exceed the purchase price per share of Common Stock under the option (the "Spread") multiplied by the number of shares of Common Stock granted under the option as to which the right granted under this Section 11(b) shall have been exercised. Notwithstanding the foregoing, if any right granted pursuant to this Section 11(b) would make a Change of Control transaction ineligible for pooling-of-interests accounting under APB No. 16 that but for the nature of such grant would otherwise be eligible for such accounting treatment, the Committee shall have the ability to substitute for the cash payable pursuant to such right Common Stock or other securities with a fair market value equal to the cash that would otherwise be payable hereunder. (c) Definition of Change of Control. For purposes of the Plan, a "Change of Control" shall mean: (i) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (a) the then outstanding shares of common stock of the Corporation (the "Outstanding Common Stock") or (b) the combined voting power of the then outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Voting Securities"); provided, however, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Corporation, (B) any acquisition by the Corporation, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Corporation or any corporation controlled by the Corporation or (D) any acquisition pursuant to a transaction which complies with clauses (A), (B) and (C) of subsection (iii) of this Section 11(c); or (ii) Individuals who, as of the date hereof, constitute the Board of Directors (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Corporation's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or (iii) Approval by the shareholders of the Corporation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Corporation or the acquisition of assets of another entity (a "Corporate Transaction"), in each case, unless, following such Corporate Transaction, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Common Stock and Outstanding Voting Securities immediately -2- prior to such Corporate Transaction beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Corporate Transaction (including, without limitation, a corporation which as a result of such transaction owns the Corporation or all or substantially all of the Corporation's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Corporate Transaction of the Outstanding Common Stock and Outstanding Voting Securities, as the case may be, (B) no Person (excluding any employee benefit plan (or related trust) of the Corporation or such corporation resulting from such Corporate Transaction) beneficially own, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Corporate Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Corporate Transaction and (C) at least a majority of the members of the board of directors of the corporation resulting from such Corporate Transaction were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Corporate Transaction; or (iv) Approval by the shareholders of the Corporation of a complete liquidation or dissolution of the Corporation. (d) Definition of Change of Control Price. For purposes of the Plan "Change of Control Price" means the higher of (i) the highest reported sales price, regular way, of a share of Common Stock in any transaction reported on the New York Stock Exchange Composite Tape or other national exchange on which such shares are listed or on NASDAQ during the 60-day period prior to and including the date of a Change of Control or (ii) if the Change of Control is the result of a tender or exchange offer or a Corporate Transaction, the highest price per share of Common Stock paid in such tender or exchange offer or Corporate Transaction; provided, however, that in the case of incentive stock options, the Change of Control Price shall be in all cases the fair market value of the Common Stock on the date such incentive stock option is exercised. To the extent that the consideration paid in any such transaction described above consists all or in part of securities or other noncash consideration, the value of such securities or -3- other noncash consideration shall be determined in the sole discretion of the Board of Directors. (e) Effectiveness. Notwithstanding anything contained herein to the contrary, an optionee shall not have the rights granted under subsections (a) and (b) of this Section 11, and the definition of "Change of Control" contained in Section 11(c) hereof shall not be effective, if, and to the extent that, as a result of giving effect to any such provision, the Corporation would be prevented from engaging in a transaction intended to be treated as a pooling of interests for accounting purposes. In addition, the rights granted under subsection (b) of this Section 11 shall not apply to incentive stock options (intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended) granted prior to the effective date of this First Amendment. The Plan is in all other respects ratified and confirmed without amendment. -4- EX-10.24 11 EMPLOYMENT AGREEMENT EXHIBIT 10.24 August 1, 1997 Mr. Jeffrey Johnson 3241 Somerset Ft. Lauderdale, FL 33332 Dear Jeff: I am pleased to confirm our offer of Vice President Sourcing at an annual salary of $165,000, paid bi-weekly. You will participate in General Signal's Incentive Compensation Plan with a target award of 35% of base salary and a cap of 200% of target. Your award payable in the first quarter of 1998 will be pro-rated based on the total number of months worked in 1997. Subsequent awards will depend on performance and the judgment of the Personnel and Compensation Committee. You will be granted a one-time payment of $30,000 shortly after you begin employment. Subject to Board approval, you will be eligible to receive an annual non- qualified option grant which currently would be in the area of 12,000 shares for your position. Also subject to Board approval, you will be granted 1,000 shares of restricted stock at the December Board meeting. This stock will vest at the rate of 50% at the end of three years and 100% at the end of five years. However, you will be entitled to receive dividends on the stock during the restriction period. You are eligible for the following relocation benefits if you relocate to the Stamford area within 12 months: . Two househunting trips with your family . Packing, shipping and unloading of your household goods . Up to sixty days temporary housing . Closing costs associated with the purchase of your new home . Prudential Relocation Smart Start/Market Value Driven Services to facilitate the sale of your current home . We will pay for two appraisals of your Ft. Lauderdale home to establish market price with a 120 day marketing parameter. We will reimburse you for any potential amount between the selling price of your home and lessor of the appraised market price or $308,000. . You will receive an additional payment of $30,000 in your first month of employment to help defray the cost of purchasing a home in Connecticut. You will be eligible for four weeks vacation and a company car. Financial Planning assistance reimbursement will be made up to $8,000 in your first year of employment and up to $6,000 in subsequent years. Page 2 You will be a participant in the GS Salaried Pension Plan; any benefits exceeding the government imposed limits will be paid from the GS Benefits Equalization Program on a non-qualified basis. You will be vested in this benefit when you complete five years of service. You will be eligible to participate in the Officers and Presidents Deferred Compensation Program that supplements the General Signal 401(K) with investment opportunities that partially restore benefits lost due to restrictions imposed on qualified plans by governmental regulations. You will be reimbursed for 80% of a health club membership up to $1,000 per year; 80% of health club initiation fees up to $1,000; and 100% of a personal trainer's fees for up to three months. In support of a Drug Free Workplace, this offer is contingent on the successful completion of a substance abuse screen. Please call Carolyn Jordan at 203-329-4204 to schedule this test. General Signal does not offer, nor ask for, employment commitments for a set period of time. This offer of employment is not considered a contract. Assuming that the foregoing is acceptable to you, please sign and return the attached copy of this letter by August 9, 1997. We look forward to your joining General Signal. If you have any questions regarding this offer, please do not hesitate to call. Sincerely, ALW:cj /s/ Anita Wheeler cc: E. R. Verebelyi Accepted by: /s/ Jeffrey Johnson Date: August 3, 1997 ------------------- EX-10.25 12 CHANGE-OF-CONTROL EMPLOYMENT AGREEMENT EXHIBIT 10.25 CHANGE-OF-CONTROL EMPLOYMENT AGREEMENT AGREEMENT by and between General Signal Corporation, a New York corporation (the "Company"), and Michael D. Lockhart (the "Executive"), dated as of the 2nd day of Februaury, 1998. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the ------------------- first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anni- versary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. (c) The "Multiple" means the lesser of (i) three and (ii) the number of years and fractions thereof from the Date of Termination (as defined in Section 5(e) below) through the date the Executive would have become entitled to full retirement benefits under the Company's Corporate Retirement Plan or any successor thereto, as in effect immediately before the Change of Control or, if sooner, as in effect immediately before the Date of Termination, in each case if the Executive had remained in the employ of the Company. 2. Change of Control. For the purpose of this Agreement, a ----------------- "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent 2 Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 3. Employment Period. The Company hereby agrees to continue the ----------------- Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing 3 on the Effective Date and ending on the third anniversary of such date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the ------------------- ------------------- Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location not more than 50 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, ------------ ----------- the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereaf- 4 ter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the ------------ Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's target bonus under the Company's Annual Incentive Plan, or any comparable bonus under any predecessor or successor plan, for the fiscal year during which occurs the Effective Date or, if no target bonus had been established for such fiscal year as of the Effective Date, for the most recently completed fiscal year before the Effective Date (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Target Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Incentive, Savings and Retirement Plans. During the --------------------------------------- Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (iv) Welfare Benefit Plans. During the Employment Period, the --------------------- Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies 5 (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (v) Expenses. During the Employment Period, the Executive shall -------- be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vi) Fringe Benefits. During the Employment Period, the Executive --------------- shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Office and Support Staff. During the Employment Period, the ------------------------ Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to administrative assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day pe- riod immediately preceding the Effective Date or, if more favor-able to the Executive, as provided generally at any time after the Effective Date with respect to other peer executives of the Company and its affiliated companies. (viii) Vacation. During the Employment Period, the Executive -------- shall be entitled to paid vacation in accordance with 6 the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. Termination of Employment. (a) Death or Disability. The ------------------------- ------------------- Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) Cause. The Company may terminate the Executive's employment ----- during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" 7 unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. The Executive's employment may be terminated by ----------- the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (iii) the Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company business to a substantially 8 greater extent than required immediately prior to the Effective Date; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. (d) Notice of Termination. Any termination by the Company for --------------------- Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the ------------------- Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disability, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligations of the Company upon Termination. (a) Good Reason; ------------------------------------------- ----------- Other Than for Cause, Death or Disability. If, dur- - ----------------------------------------- 9 ing the Employment Period, the Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the excess of (A) the product of (x) the higher of (I) the Recent Target Bonus and (II) the Executive's target annual bonus for the most recently completed fiscal year during the Employment Period, if any (such higher amount being referred to as the "Highest Target Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, over (B) any Annual Bonus amount for such fiscal year that has previously been paid to the Executive and (3) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to the product of (1) the Multiple and (2) the sum of (x) the Executive's Annual Base Salary and (y) the Highest Target Bonus; and C. an amount, calculated in accordance with Appendix A hereto, equal to the excess of (i) the present value of the pension benefits the Executive would have been entitled to receive, if the Executive had remained in the employ of the Company for a number of years following the Date of Termination equal to the Multiple, under the terms of the Company's Corporate Retirement Plan and any successor qualified defined benefit pension plan (the "Corporate Retirement Plan"), the Company's Benefit Equalization Plan and any successor nonqualified defined benefit pension plan (the "BEP") and any individual contract, agreement, letter or other arrangement to which the Executive is a party (collectively, the "Individual Pension") (taking into account, without limitation, any additional age and/or service credit that would have been earned thereunder), all whether or not vested thereunder, over (ii) the present value of the pension benefits the Executive is actually entitled to receive 10 under or pursuant to the Corporate Retirement Plan, the BEP and any Individual Pension as of the Date of Termination; and D. an amount equal to the present value (determined by using the Pension Benefit Guaranty Corporation interest rate for immediate annuities as in effect on the Date of Termination) of the aggregate matching and other employer contributions that would have been made by the Company under the terms of the Company's Savings and Stock Ownership Plan and the Company's Deferred Compensation Plan or any successor thereto (collectively, the "Savings Plans") as in effect on the day before the Effective Date or, if more favorable to the Executive, as in effect immediately before the Date of Termination, if the Employee had continued, for a number of years after the Date of Termination equal to the Multiple, to be employed and to participate in the Savings Plans, to the same extent as the Executive participated therein for the plan year during which the Date of Termination occurs. (ii) for a number of years after the Executive's Date of Termination equal to the Multiple, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until three years after the Date of Termination and to have retired on the last day of such period; (iii) the Company shall, at its sole expense, provide the Executive with outplacement services through the pro- 11 vider of the Company's choice, the scope of which shall be chosen by the Executive in his sole discretion, but at a cost not to exceed 15 percent of the sum of the Annual Base Salary and the Highest Target Bonus; (iv) upon the Date of Termination, the Executive shall have the right and option to purchase at "fair market value", in accordance with the Company's automobile purchase policy as in effect immediately prior to the Change of Control, the automobile which the Company was providing to the Executive immediately prior to the Date of Termination; (v) for one year after the Date of Termination, the Company shall continue to provide the Executive with financial counselling on terms and conditions no less favorable than those in effect immediately before the Change of Control or, if more favorable to the Executive, those in effect immediately before the Date of Termination; (vi) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"); and (vii) to the extent not theretofore paid or provided, the total amount of the deferred compensation payable upon the Executive's attainment of age 62, in accordance with item six of the letter agreement between the Executive and the Company dated September 23, 1994, shall become immediately and fully vested, but such amount shall continue to be deferred with payment commencing upon the Executive's attainment of age 62. (b) Death. If the Executive's employment is terminated by ----- reason of the Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least 12 equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death benefits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries. (c) Disability. If the Executive's employment is terminated by ---------- reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. (d) Cause; Other than for Good Reason. If the Executive's --------------------------------- employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 13 7. Non-exclusivity of Rights. Nothing in this Agreement shall ------------------------- prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which the Executive may qualify, nor, subject to Section 12(g), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 8. Full Settlement. The Company's obligation to make the payments --------------- provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"); provided, however, that the Company shall not -------- ------- be required to pay any such legal fees or expenses if there is a determination by a court or other fact-finder having jurisdiction of the claim that the Executive's claim was frivolous. 9. Certain Additional Payments by the Company. ------------------------------------------ (a) (i) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or its affiliates to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Sec- 14 tion 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing, if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that could be paid to the Executive such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. (ii) Notwithstanding the provisions of Section 9(a)(i), if the payment of the Gross-Up Payment as provided in Section 9(a)(i) would make a transaction entered into in connection with a Change of Control that would otherwise be eligible for pooling-of-interests accounting treatment under APB No. 16 ineligible for such treatment, then the following conditions shall apply: (A) no Gross-Up Payment shall be made unless it shall be determined that a Gross-Up Payment would have been payable pursuant to the preceding sentence (without regard to this sentence) if the Executive had not received any Payments that are considered to be "parachute payments" as defined in Section 280G of the Code that consist of, or relate to, common stock or other equity interest in the Company or any of its affiliated companies ("Equity Payments"); and (B) if a Gross-Up Payment is permitted to be made after application of clause (A) of this sentence, the amount of such Gross-Up Payment shall be only that amount necessary so that after payment of all taxes (including any interest or penalties imposed with respect to such taxes), by the Executive with respect to Payments other than the Equity Payments, including without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment (as computed in accordance with this clause (B)), the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments other than the Equity Payments. In determining the Gross-Up Amount pursuant to clause (B) of the preceding sentence, the rules for allocation of the "base amount" set forth in Question and Answer 38 of Proposed Treasury Regulation 1.280G-1, or any successor 15 provision in any proposed, temporary or final regulations that may hereinafter be promulgated, shall be applied. (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young LLP or such other nationally recognized certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, 16 (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Ex- 17 ecutive receives any refund with respect to such claim, the Executive shall (subject to the Company's complying with the requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information. The Executive shall hold in a ------------------------ fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. Successors. (a) This Agreement is personal to the Executive ---------- and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had 18 taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: ------------------- Michael D. Lockhart 43 Harbor Drive #503 Stamford, CT 06902 If to the Company: ----------------- General Signal Corporation One High Ridge Park P.O. Box 10010 Stamford, CT 06904 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may 19 have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement. (f) This Agreement may not be amended, modified or terminated otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. Notwithstanding the foregoing, subject to Section 1(a) hereof, the Company shall have the right, at any time prior to the Effective Date, to amend, modify or terminate this Agreement upon a change in the Executive's employment position. (g) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive's employment may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. /s/ Michael D. Lockhart ------------------------------- Michael D. Lockhart GENERAL SIGNAL CORPORATION By /s/ Elizabeth D. Conklyn ---------------------------- 20 APPENDIX A The amount payable under Section 6(a)(i)(C) of the Agreement shall be calculated so as to be not less than the excess, if any, of the "Gross Amount" (calculated as set forth in (a) below), over the "Offset" (calculated as set forth in (b) below). For an Executive who has an Individual Pension, the amount payable under Section 6(a)(i)(C) of the Agreement shall be subject to the provisions of (c) below. Definitions and rules of general application are set forth in (d) below. (i) The Gross Amount is determined as follows: (i) Determine the retirement benefit, payable as a life annuity from normal retirement date, that the Executive would become entitled to receive, assuming that all accrued benefits were vested, under the terms of the Corporate Retirement Plan, the Benefit Equalization Plan and any pension benefit specified by an Individual Pension, all as in effect on the day immediately preceding the Effective Date, if the Executive were to continue his or her employment with the Company for the number of years following the Date of Termination equal to the Multiple plus any additional service credit provided under an Individual Pension. For this purpose, it shall be assumed that the Social Security Taxable Wage Base and any other factor used to calculate retirement benefits remains constant after the Date of Termination. (ii) Determine the retirement benefit, payable as a life annuity commencing at Adjusted Early Retirement Date (as defined in (d)(i) below), based on the life annuity calculated in (i) above and using the Corporate Retirement Plan's early retirement factors as in effect on the day immediately preceding the Effective Date. (iii) Determine, as of the Adjusted Severance Date (as defined in (d)(i) below), the present value of (ii) above, using the interest rate and mortality table assumptions applicable under the Corporate Retirement Plan to employees receiving lump sums on immediate retirement on the first day of the month coincident with or next following the Date of Termination, based on the provisions of the Corporate Retirement Plan as it existed on the day immediately preceding the Effective Date. (iv) Determine the present value of the gross benefit by discounting the value determined in (iii) above to the 21 Date of Termination at the interest rate determined in (iii) above and without reduction for mortality. (ii) The Offset is determined as follows: (i) Determine the vested retirement benefit, payable as a life annuity from normal retirement date, to which the Executive is entitled at the Date of Termination, under the terms of the Corporate Retirement Plan, the Benefit Equalization Plan and any Individual Pension, all as in effect on the day preceding the Date of Termination. (ii) Determine the retirement benefit, payable as a life annuity commencing at the earliest retirement date on or after the Date of Termination, based on the life annuity calculated in (i) above and using the Corporate Retirement Plan's early retirement factors as of the Date of Termination. (iii) Determine, as of the Date of Termination, the present value of the Offset by calculating the lump sum equivalent to (ii) above under the provisions of the Corporate Retirement Plan, but using the interest rate and mortality table assumptions applicable to employees receiving lump sums on immediate retirement (regardless of whether a lump sum is actually permissible under said Plan). (iii) Notwithstanding the foregoing, for any Executive who has a pension benefit specified by an Individual Pension, the following provisions shall apply: (i) To determine the value of any benefit payable from a prior employer's plan, the early retirement factors of the prior employer's plan shall be used to determine the early retirement benefit payable at the earliest retirement date, subsequent to the Date of Termination, under the prior employer's plan, and the methods and factors of (b)(ii) and (b)(iii) above shall be used, as applicable, to determine the present value of such annuity at the Date of Termination. (ii) In no event shall the benefit payable pursuant to Section 6(a)(i)(C) of the Agreement be less than the benefit that would have been payable from such section of the Agreement in the absence of the Individual Pension. (iv) The calculations of this Appendix A are subject to the following definitions and rules of general application: 22 (i) The "Adjusted Severance Date" shall be the first day of the month coincident with or next following the end of the period of years equal to the Multiple plus any additional service credit provided under an Individual Pension. The "Adjusted Early Retirement Date" shall be the first date on or after the Adjusted Severance Date on which the Executive could choose to retire under the terms of the Corporate Retirement Plan as it existed on the day immediately preceding the Effective Date. (ii) Final average compensation, where applicable, shall be determined using the procedures followed by the Administrator of the Corporate Retirement Plan immediately prior to the Effective Date. Actual compensation shall be used through the Date of Termination. The Executive's Annual Base Salary shall be deemed to be earned ratably throughout the period equal to the Multiple. The Highest Target Bonus shall be deemed paid on the historical anniversary of the date on which bonus compensation was last actually paid. (iii) In the absence of specific guidance to the contrary as contained herein, the procedures of the Plan Administrator used to calculate benefits under the Corporate Retirement Plan and the Benefit Equalization Plan, as in effect immediately prior to the Effective Date, will be followed for purposes of calculating the benefits payable under Section 6(a)(i)(C) of the Agreement. 23 EX-10.26 13 FORM OF CHANGE-OF-CONTROL EMPLOYMENT AGREEMENT EXHIBIT 10.26 FORM OF CHANGE-OF-CONTROL EMPLOYMENT AGREEMENT AGREEMENT by and between General Signal Corporation, a New York corporation (the "Company"), and _____________ _____________ (the "Executive"), dated as of the 2nd day of February, 1998. The Board of Directors of the Company (the "Board"), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage the Executive's full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Executive with compensation and benefits arrangements upon a Change of Control which ensure that the compensation and benefits expectations of the Executive will be satisfied and which are competitive with those of other corporations. Therefore, in order to accomplish these objectives, the Board has caused the Company to enter into this Agreement. NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS: 1. Certain Definitions. (a) The "Effective Date" shall mean the ------------------- first date during the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if a Change of Control occurs and if the Executive's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination of employment. (b) The "Change of Control Period" shall mean the period commencing on the date hereof and ending on the third anniversary of the date hereof; provided, however, that commencing on the date one year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof shall be hereinafter referred to as the "Renewal Date"), unless previously terminated, the Change of Control Period shall be automatically extended so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal Date the Company shall give notice to the Executive that the Change of Control Period shall not be so extended. (c) The "Multiple" means the lesser of (i) three and (ii) the number of years and fractions thereof from the Date of Termination (as defined in Section 5(e) below) through the date the Executive would have become entitled to full retirement benefits under the Company's Corporate Retirement Plan or any successor thereto, as in effect immediately before the Change of Control or, if sooner, as in effect immediately before the Date of Termination, in each case if the Executive had remained in the employ of the Company. 2. Change of Control. For the purpose of this Agreement, a ----------------- "Change of Control" shall mean: (a) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (i) the then outstanding shares of common stock of the Company (the "Outstanding Company Common Stock") or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (iv) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2; or (b) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof 2 whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (c) Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 60% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (d) Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company. 3 3. Employment Period. The Company hereby agrees to continue the ----------------- Executive in its employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms and conditions of this Agreement, for the period commencing on the Effective Date and ending on the third anniversary of such date (the "Employment Period"). 4. Terms of Employment. (a) Position and Duties. (i) During the ------------------- ------------------- Employment Period, (A) the Executive's position (including status, offices, titles and reporting requirements), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 120-day period immediately preceding the Effective Date and (B) the Executive's services shall be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location not more than 50 miles from such location. (ii) During the Employment Period, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the business and affairs of the Company and, to the extent necessary to discharge the responsibilities assigned to the Executive hereunder, to use the Executive's reasonable best efforts to perform faithfully and efficiently such responsibilities. During the Employment Period it shall not be a violation of this Agreement for the Executive to (A) serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill speaking engagements or teach at educational institutions and (C) manage personal investments, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities as an employee of the Company in accordance with this Agreement. It is expressly understood and agreed that to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of activities similar in nature and scope thereto) subsequent to the Effective Date shall not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Company. (b) Compensation. (i) Base Salary. During the Employment Period, ------------ ----------- the Executive shall receive an annual base salary ("Annual Base Salary"), which shall be paid at a monthly rate, at least equal to twelve times the highest monthly base salary paid or payable, including any base salary which has been earned but deferred, to the Executive by the Company and its affiliated companies in respect of the twelve-month period immedi- 4 ately preceding the month in which the Effective Date occurs. During the Employment Period, the Annual Base Salary shall be reviewed no more than 12 months after the last salary increase awarded to the Executive prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement. Annual Base Salary shall not be reduced after any such increase and the term Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased. As used in this Agreement, the term "affiliated companies" shall include any company controlled by, controlling or under common control with the Company. (ii) Annual Bonus. In addition to Annual Base Salary, the ------------ Executive shall be awarded, for each fiscal year ending during the Employment Period, an annual bonus (the "Annual Bonus") in cash at least equal to the Executive's target bonus under the Company's Annual Incentive Plan, or any comparable bonus under any predecessor or successor plan, for the fiscal year during which occurs the Effective Date or, if no target bonus had been established for such fiscal year as of the Effective Date, for the most recently completed fiscal year before the Effective Date (annualized in the event that the Executive was not employed by the Company for the whole of such fiscal year) (the "Recent Target Bonus"). Each such Annual Bonus shall be paid no later than the end of the third month of the fiscal year next following the fiscal year for which the Annual Bonus is awarded, unless the Executive shall elect to defer the receipt of such Annual Bonus. (iii) Incentive, Savings and Retirement Plans. During the --------------------------------------- Employment Period, the Executive shall be entitled to participate in all incentive, savings and retirement plans, practices, policies and programs applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with incentive opportunities (measured with respect to both regular and special incentive opportunities, to the extent, if any, that such distinction is applicable), savings opportunities and retirement benefit opportunities, in each case, less favorable, in the aggregate, than the most favorable of those provided by the Company and its affiliated companies for the Executive under such plans, practices, policies and programs as in effect at any time during the 120-day period immediately preceding the Effective Date or if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. 5 (iv) Welfare Benefit Plans. During the Employment Period, the --------------------- Executive and/or the Executive's family, as the case may be, shall be eligible for participation in and shall receive all benefits under welfare benefit plans, practices, policies and programs provided by the Company and its affiliated companies (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs) to the extent applicable generally to other peer executives of the Company and its affiliated companies, but in no event shall such plans, practices, policies and programs provide the Executive with benefits which are less favorable, in the aggregate, than the most favorable of such plans, practices, policies and programs in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, those provided generally at any time after the Effective Date to other peer executives of the Company and its affiliated companies. (v) Expenses. During the Employment Period, the Executive shall -------- be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies, practices and procedures of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vi) Fringe Benefits. During the Employment Period, the Executive --------------- shall be entitled to fringe benefits, including, without limitation, tax and financial planning services, payment of club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance with the most favorable plans, practices, programs and policies of the Company and its affiliated companies in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. (vii) Office and Support Staff. During the Employment Period, the ------------------------ Executive shall be entitled to an office or offices of a size and with furnishings and other appointments, and to administrative assistance, at least equal to the most favorable of the foregoing provided to the Executive by the Company and its affiliated companies at any time during the 120-day pe- riod immediately preceding the Effective Date or, if more favor-able to the Executive, as provided generally at any time after the 6 Effective Date with respect to other peer executives of the Company and its affiliated companies. (viii) Vacation. During the Employment Period, the Executive -------- shall be entitled to paid vacation in accordance with the most favorable plans, policies, programs and practices of the Company and its affiliated companies as in effect for the Executive at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies. 5. Termination of Employment. (a) Death or Disability. The ------------------------- ------------------- Executive's employment shall terminate automatically upon the Executive's death during the Employment Period. If the Company determines in good faith that the Disability of the Executive has occurred during the Employment Period (pursuant to the definition of Disability set forth below), it may give to the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to terminate the Executive's employment. In such event, the Executive's employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive (the "Disability Effective Date"), provided that, within the 30 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" shall mean the absence of the Executive from the Executive's duties with the Company on a full-time basis for 180 consecutive business days as a result of incapacity due to mental or physical illness which is determined to be total and permanent by a physician selected by the Company or its insurers and acceptable to the Executive or the Executive's legal representative. (b) Cause. The Company may terminate the Executive's employment ----- during the Employment Period for Cause. For purposes of this Agreement, "Cause" shall mean: (i) the willful and continued failure of the Executive to perform substantially the Executive's duties with the Company or one of its affiliates (other than any such failure resulting from incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or 7 (ii) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The cessation of employment of the Executive shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (i) or (ii) above, and specifying the particulars thereof in detail. (c) Good Reason. The Executive's employment may be terminated by ----------- the Executive for Good Reason. For purposes of this Agreement, "Good Reason" shall mean: (i) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; (ii) any failure by the Company to comply with any of the provisions of Section 4(b) of this Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive; 8 (iii) the Company's requiring the Executive to be based at any office or location other than as provided in Section 4(a)(i)(B) hereof or the Company's requiring the Executive to travel on Company business to a substantially greater extent than required immediately prior to the Effective Date; (iv) any purported termination by the Company of the Executive's employment otherwise than as expressly permitted by this Agreement; or (v) any failure by the Company to comply with and satisfy Section 11(c) of this Agreement. For purposes of this Section 5(c), any good faith determination of "Good Reason" made by the Executive shall be conclusive. (d) Notice of Termination. Any termination by the Company for --------------------- Cause, or by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a "Notice of Termination" means a written notice which (i) indicates the specific termination provision in this Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated and (iii) if the Date of Termination (as defined below) is other than the date of receipt of such notice, specifies the termination date (which date shall be not more than thirty days after the giving of such notice). The failure by the Executive or the Company to set forth in the Notice of Termination any fact or circumstance which contributes to a showing of Good Reason or Cause shall not waive any right of the Executive or the Company, respectively, hereunder or preclude the Executive or the Company, respectively, from asserting such fact or circumstance in enforcing the Executive's or the Company's rights hereunder. (e) Date of Termination. "Date of Termination" means (i) if the ------------------- Executive's employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii) if the Executive's employment is terminated by the Company other than for Cause or Disability, the Date of Termination shall be the date on which the Company notifies the Executive of such termination and (iii) if the Executive's employment is terminated by reason of death or Disabil- 9 ity, the Date of Termination shall be the date of death of the Executive or the Disability Effective Date, as the case may be. 6. Obligations of the Company upon Termination. (a) Good Reason; ------------------------------------------- ----------- Other Than for Cause, Death or Disability. If, during the Employment Period, the - ----------------------------------------- Company shall terminate the Executive's employment other than for Cause or Disability or the Executive shall terminate employment for Good Reason: (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after the Date of Termination the aggregate of the following amounts: A. the sum of (1) the Executive's Annual Base Salary through the Date of Termination to the extent not theretofore paid, (2) the excess of (A) the product of (x) the higher of (I) the Recent Target Bonus and (II) the Executive's target annual bonus for the most recently completed fiscal year during the Employment Period, if any (such higher amount being referred to as the "Highest Target Bonus") and (y) a fraction, the numerator of which is the number of days in the current fiscal year through the Date of Termination, and the denominator of which is 365, over (B) any Annual Bonus amount for such fiscal year that has previously been paid to the Executive and (3) any accrued vacation pay, in each case to the extent not theretofore paid (the sum of the amounts described in clauses (1), (2), and (3) shall be hereinafter referred to as the "Accrued Obligations"); and B. the amount equal to the product of (1) the Multiple and (2) the sum of (x) the Executive's Annual Base Salary and (y) the Highest Target Bonus; and C. an amount, calculated in accordance with Appendix A hereto, equal to the excess of (i) the present value of the pension benefits the Executive would have been entitled to receive, if the Executive had remained in the employ of the Company for a number of years following the Date of Termination equal to the Multiple, under the terms of the Company's Corporate Retirement Plan and any successor qualified defined benefit pension plan (the "Corporate Retirement Plan"), the Company's Benefit Equalization Plan and any successor nonqualified defined benefit pension plan (the "BEP") and any individual contract, agreement, letter or other arrangement to which the Executive is a party (collectively, the "Individual Pen- 10 sion") (taking into account, without limitation, any additional age and/or service credit that would have been earned thereunder), all whether or not vested thereunder, over (ii) the present value of the pension benefits the Executive is actually entitled to receive under or pursuant to the Corporate Retirement Plan, the BEP and any Individual Pension as of the Date of Termination; and D. an amount equal to the present value (determined by using the Pension Benefit Guaranty Corporation interest rate for immediate annuities as in effect on the Date of Termination) of the aggregate matching and other employer contributions that would have been made by the Company under the terms of the Company's Savings and Stock Ownership Plan and the Company's Deferred Compensation Plan or any successor thereto (collectively, the "Savings Plans") as in effect on the day before the Effective Date or, if more favorable to the Executive, as in effect immediately before the Date of Termination, if the Employee had continued, for a number of years after the Date of Termination equal to the Multiple, to be employed and to participate in the Savings Plans, to the same extent as the Executive participated therein for the plan year during which the Date of Termination occurs. (ii) for a number of years after the Executive's Date of Termination equal to the Multiple, or such longer period as may be provided by the terms of the appropriate plan, program, practice or policy, the Company shall continue benefits to the Executive and/or the Executive's family at least equal to those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 4(b)(iv) of this Agreement if the Executive's employment had not been terminated or, if more favorable to the Executive, as in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies and their families, provided, however, that if the Executive becomes reemployed with another employer and is eligible to receive medical or other welfare benefits under another employer provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan during such applicable period of eligibility. For purposes of determining eligibility (but not the time of commencement of benefits) of the Executive for retiree benefits pursuant to such plans, practices, programs and policies, the Executive shall be considered to have remained employed until 11 three years after the Date of Termination and to have retired on the last day of such period; (iii) the Company shall, at its sole expense, provide the Executive with outplacement services through the provider of the Company's choice, the scope of which shall be chosen by the Executive in his sole discretion, but at a cost not to exceed 15 percent of the sum of the Annual Base Salary and the Highest Target Bonus; (iv) upon the Date of Termination, the Executive shall have the right and option to purchase at "fair market value", in accordance with the Company's automobile purchase policy as in effect immediately prior to the Change of Control, the automobile which the Company was providing to the Executive immediately prior to the Date of Termination; and (v) for one year after the Date of Termination, the Company shall continue to provide the Executive with financial counselling on terms and conditions no less favorable than those in effect immediately before the Change of Control or, if more favorable to the Executive, those in effect immediately before the Date of Termination; (vi) to the extent not theretofore paid or provided, the Company shall timely pay or provide to the Executive any other amounts or benefits required to be paid or provided or which the Executive is eligible to receive under any plan, program, policy or practice or contract or agreement of the Company and its affiliated companies (such other amounts and benefits shall be hereinafter referred to as the "Other Benefits"). (b) Death. if the Executive's employment is terminated by reason of the ----- Executive's death during the Employment Period, this Agreement shall terminate without further obligations to the Executive's legal representatives under this Agreement, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive's estate or beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(b) shall include, without limitation, and the Executive's estate and/or beneficiaries shall be entitled to receive, benefits at least equal to the most favorable benefits provided by the Company and affiliated companies to the estates and beneficiaries of peer executives of the Company and such affiliated companies under such plans, programs, practices and policies relating to death bene- 12 fits, if any, as in effect with respect to other peer executives and their beneficiaries at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive's estate and/or the Executive's beneficiaries, as in effect on the date of the Executive's death with respect to other peer executives of the Company and its affiliated companies and their beneficiaries. (c) Disability. If the Executive's employment is terminated by ---------- reason of the Executive's Disability during the Employment Period, this Agreement shall terminate without further obligations to the Executive, other than for payment of Accrued Obligations and the timely payment or provision of Other Benefits. Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. With respect to the provision of Other Benefits, the term Other Benefits as utilized in this Section 6(c) shall include, and the Executive shall be entitled after the Disability Effective Date to receive, disability and other benefits at least equal to the most favorable of those generally provided by the Company and its affiliated companies to disabled executives and/or their families in accordance with such plans, programs, practices and policies relating to disability, if any, as in effect generally with respect to other peer executives and their families at any time during the 120-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect at any time thereafter generally with respect to other peer executives of the Company and its affiliated companies and their families. (d) Cause; Other than for Good Reason. If the Executive's --------------------------------- employment shall be terminated for Cause during the Employment Period, this Agreement shall terminate without further obligations to the Executive other than the obligation to pay to the Executive (x) his Annual Base Salary through the Date of Termination, (y) the amount of any compensation previously deferred by the Executive, and (z) Other Benefits, in each case to the extent theretofore unpaid. If the Executive voluntarily terminates employment during the Employment Period, excluding a termination for Good Reason, this Agreement shall terminate without further obligations to the Executive, other than for Accrued Obligations and the timely payment or provision of Other Benefits. In such case, all Accrued Obligations shall be paid to the Executive in a lump sum in cash within 30 days of the Date of Termination. 7. Non-exclusivity of Rights. Nothing in this Agreement shall ------------------------- prevent or limit the Executive's continuing or future participation in any plan, program, policy or practice provided by the Company or any of its affiliated companies and for which 13 the Executive may qualify, nor, subject to Section 12(g), shall anything herein limit or otherwise affect such rights as the Executive may have under any contract or agreement with the Company or any of its affiliated companies. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company or any of its affiliated companies at or subsequent to the Date of Termination shall be payable in accordance with such plan, policy, practice or program or contract or agreement except as explicitly modified by this Agreement. 8. Full Settlement. The Company's obligation to make the payments --------------- provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and such amounts shall not be reduced whether or not the Executive obtains other employment. The Company agrees to pay, to the full extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a result of any contest (regardless of the outcome thereof) by the Company, the Executive or others of the validity or enforceability of, or liability under, any provision of this Agreement or any guarantee of performance thereof (including as a result of any contest by the Executive about the amount of any payment pursuant to this Agreement), plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended (the "Code"); provided, however, that the Company shall not be required to pay any such legal fees or expenses if there is a determination by a court or other fact-finder having jurisdiction of the claim that the Executive's claim was frivolous. 9. Certain Additional Payments by the Company. ------------------------------------------ (a) (i) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any payment or distribution by the Company or its affiliates to or for the benefit of the Executive (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any additional payments required under this Section 9) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties are incurred by the Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, are 14 hereinafter collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing, if it shall be determined that the Executive is entitled to a Gross-Up Payment, but that the Payments do not exceed 110% of the greatest amount (the "Reduced Amount") that could be paid to the Executive such that the receipt of Payments would not give rise to any Excise Tax, then no Gross-Up Payment shall be made to the Executive and the Payments, in the aggregate, shall be reduced to the Reduced Amount. (ii) Notwithstanding the provisions of Section 9(a)(i), if the payment of the Gross-Up Payment as provided in Section 9(a)(i) would make a transaction entered into in connection with a Change of Control that would otherwise be eligible for pooling-of-interests accounting treatment under APB No. 16 ineligible for such treatment, then the following conditions shall apply: (A) no Gross-Up Payment shall be made unless it shall be determined that a Gross-Up Payment would have been payable pursuant to the preceding sentence (without regard to this sentence) if the Executive had not received any Payments that are considered to be "parachute payments" as defined in Section 280G of the Code that consist of, or relate to, common stock or other equity interest in the Company or any of its affiliated companies ("Equity Payments"); and (B) if a Gross-Up Payment is permitted to be made after application of clause (A) of this sentence, the amount of such Gross-Up Payment shall be only that amount necessary so that after payment of all taxes (including any interest or penalties imposed with respect to such taxes), by the Executive with respect to Payments other than the Equity Payments, including without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment (as computed in accordance with this clause (B)), the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments other than the Equity Payments. In determining the Gross-Up Amount pursuant to clause (B) of the preceding sentence, the rules for allocation of the "base amount" set forth in Question and Answer 38 of Proposed Treasury Regulation 1.280G-1, or any successor provision in any proposed, temporary or final regulations that may hereinafter be promulgated, shall be applied. 15 (b) Subject to the provisions of Section 9(c), all determinations required to be made under this Section 9, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by Ernst & Young LLP or such other nationally recognized certified public accounting firm as may be designated by the Executive (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made hereunder. In the event that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be given as soon as practicable but no later than ten business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writ- 16 ing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 9(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), the Executive receives any refund with respect to such claim, the Executive shall (subject to the Company's complying with the re- 17 quirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 9(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 10. Confidential Information. The Executive shall hold in a ------------------------ fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its affiliated companies, and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Company or any of its affiliated companies and which shall not be or become public knowledge (other than by acts by the Executive or representatives of the Executive in violation of this Agreement). After termination of the Executive's employment with the Company, the Executive shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those designated by it. In no event shall an asserted violation of the provisions of this Section 10 constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. 11. Successors. (a) This Agreement is personal to the Executive ---------- and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal representatives. (b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, "Company" shall mean the Company as hereinbefore defined and any successor to its business 18 and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 12. Miscellaneous. (a) This Agreement shall be governed by and ------------- construed in accordance with the laws of the State of New York, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: If to the Executive: ------------------- If to the Company: ----------------- General Signal Corporation One High Ridge Park P.O. Box 10010 Stamford, CT 06904 Attention: General Counsel or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) The Executive's or the Company's failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement, shall not be deemed to be 19 a waiver of such provision or right or any other provision or right of this Agreement. (f) This Agreement may not be amended, modified or terminated otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. Notwithstanding the foregoing, subject to Section 1(a) hereof, the Company shall have the right, at any time prior to the Effective Date, to amend, modify or terminate this Agreement upon a change in the Executive's employment position. (g) The Executive and the Company acknowledge that, except as may otherwise be provided under any other written agreement between the Executive and the Company, the employment of the Executive by the Company is "at will" and, subject to Section 1(a) hereof, prior to the Effective Date, the Executive's employment may be terminated by either the Executive or the Company at any time prior to the Effective Date, in which case the Executive shall have no further rights under this Agreement. From and after the Effective Date this Agreement shall supersede any other agreement between the parties with respect to the subject matter hereof. IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand and, pursuant to the authorization from its Board of Directors, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. ------------------------------- EXECUTIVE GENERAL SIGNAL CORPORATION By ------------------------------- 20 APPENDIX A The amount payable under Section 6(a)(i)(C) of the Agreement shall be calculated so as to be not less than the excess, if any, of the "Gross Amount" (calculated as set forth in (a) below), over the "Offset" (calculated as set forth in (b) below). For an Executive who has an Individual Pension, the amount payable under Section 6(a)(i)(C) of the Agreement shall be subject to the provisions of (c) below. Definitions and rules of general application are set forth in (d) below. (i) The Gross Amount is determined as follows: (i) Determine the retirement benefit, payable as a life annuity from normal retirement date, that the Executive would become entitled to receive, assuming that all accrued benefits were vested, under the terms of the Corporate Retirement Plan, the Benefit Equalization Plan and any pension benefit specified by an Individual Pension, all as in effect on the day immediately preceding the Effective Date, if the Executive were to continue his or her employment with the Company for the number of years following the Date of Termination equal to the Multiple plus any additional service credit provided under an Individual Pension. For this purpose, it shall be assumed that the Social Security Taxable Wage Base and any other factor used to calculate retirement benefits remains constant after the Date of Termination. (ii) Determine the retirement benefit, payable as a life annuity commencing at Adjusted Early Retirement Date (as defined in (d)(i) below), based on the life annuity calculated in (i) above and using the Corporate Retirement Plan's early retirement factors as in effect on the day immediately preceding the Effective Date. (iii) Determine, as of the Adjusted Severance Date (as defined in (d)(i) below), the present value of (ii) above, using the interest rate and mortality table assumptions applicable under the Corporate Retirement Plan to employees receiving lump sums on immediate retirement on the first day of the month coincident with or next following the Date of Termination, based on the provisions of the Corporate Retirement Plan as it existed on the day immediately preceding the Effective Date. (iv) Determine the present value of the gross benefit by discounting the value determined in (iii) above to the 21 Date of Termination at the interest rate determined in (iii) above and without reduction for mortality. (ii) The Offset is determined as follows: (i) Determine the vested retirement benefit, payable as a life annuity from normal retirement date, to which the Executive is entitled at the Date of Termination, under the terms of the Corporate Retirement Plan, the Benefit Equalization Plan and any Individual Pension, all as in effect on the day preceding the Date of Termination. (ii) Determine the retirement benefit, payable as a life annuity commencing at the earliest retirement date on or after the Date of Termination, based on the life annuity calculated in (i) above and using the Corporate Retirement Plan's early retirement factors as of the Date of Termination. (iii) Determine, as of the Date of Termination, the present value of the Offset by calculating the lump sum equivalent to (ii) above under the provisions of the Corporate Retirement Plan, but using the interest rate and mortality table assumptions applicable to employees receiving lump sums on immediate retirement (regardless of whether a lump sum is actually permissible under said Plan). (iii) Notwithstanding the foregoing, for any Executive who has a pension benefit specified by an Individual Pension, the following provisions shall apply: (i) To determine the value of any benefit payable from a prior employer's plan, the early retirement factors of the prior employer's plan shall be used to determine the early retirement benefit payable at the earliest retirement date, subsequent to the Date of Termination, under the prior employer's plan, and the methods and factors of (b)(ii) and (b)(iii) above shall be used, as applicable, to determine the present value of such annuity at the Date of Termination. (ii) In no event shall the benefit payable pursuant to Section 6(a)(i)(C) of the Agreement be less than the benefit that would have been payable from such section of the Agreement in the absence of the Individual Pension. (iv) The calculations of this Appendix A are subject to the following definitions and rules of general application: 22 (i) The "Adjusted Severance Date" shall be the first day of the month coincident with or next following the end of the period of years equal to the Multiple plus any additional service credit provided under an Individual Pension. The "Adjusted Early Retirement Date" shall be the first date on or after the Adjusted Severance Date on which the Executive could choose to retire under the terms of the Corporate Retirement Plan as it existed on the day immediately preceding the Effective Date. (ii) Final average compensation, where applicable, shall be determined using the procedures followed by the Administrator of the Corporate Retirement Plan immediately prior to the Effective Date. Actual compensation shall be used through the Date of Termination. The Executive's Annual Base Salary shall be deemed to be earned ratably throughout the period equal to the Multiple. The Highest Target Bonus shall be deemed paid on the historical anniversary of the date on which bonus compensation was last actually paid. (iii) In the absence of specific guidance to the contrary as contained herein, the procedures of the Plan Administrator used to calculate benefits under the Corporate Retirement Plan and the Benefit Equalization Plan, as in effect immediately prior to the Effective Date, will be followed for purposes of calculating the benefits payable under Section 6(a)(i)(C) of the Agreement. 23 EX-10.28 14 COPIES OF THE CREDIT AGREEMENTS EXHIBIT 10.28 364 Day Credit Agreement AMENDMENT NO. 2 THIS AMENDMENT NO. 2, (this "Amendment"), dated as of May 29, 1997, among GENERAL SIGNAL CORPORATION (the "Company") and the undersigned commercial banking institutions (herein collectively "Banks"). WITNESSETH: WHEREAS, the Company and the Banks are parties to a certain 364 Day Credit Agreement, dated as of June 1, 1995 as amended as of May 31, 1996 (the "364 Day Credit Agreement"); and WHEREAS, the parties desire to amend further certain terms of the 364 Day Credit Agreement; NOW, THEREFORE, in consideration of the agreements herein contained, the parties hereto hereby agree as follows: 1. Except as otherwise defined herein, the capitalized terms used herein shall have the meanings respectively ascribed to them in the 364 Day Credit Agreement. 2. Each Bank's Commitment shall be the amount set forth opposite its signature hereto, as such amount may be reduced or increased from time to time pursuant to Sections 1.1.6, 1.1.7 and 1.1.8 or Section 13.5 of the 364 Day Credit Agreement. 3. The "Revolver Expiration Date" is hereby amended to mean the earlier of May 28, 1998 or the date of termination in whole of the Commitments. All references to the "364 Day Credit Agreement" shall be deemed to refer to the 364 Day Credit Agreement as hereby amended. 4. The table in Section 3.1.8, Applicable Margin, is hereby deleted and replaced with the following:
Public Debt Rating Eurodollar Margin CD Margin - ------------------ ----------------- --------- Level 1: .185% .310% AA-/Aa3 or higher Level 2: .200% .325% A-/A3 or higher, but less than Level 1 Level 3: .350% .475% BBB-/Baa3 or higher, but less than Level 2 Level 4: .500% .625% Less than BBB-/Baa3
5. The table in Section 3.2, Facility Fee, is hereby deleted and replaced with the following:
Public Debt Rating Facility Fee Percentage - ------------------ ----------------------- Level 1: .040 % AA-/Aa3 or higher Level 2: .060 % A-/A3 or higher, but less than Level 1 Level 3: .100% BBB-/Baa3 or higher, but less than Level 2 Level 4: .150 % Less than BBB-/Baa3
6. Except as set forth in this Amendment, all terms and conditions of the 364 Day Agreement shall remain unchanged. IN WITNESS WHEREOF, the Company and each Bank have caused this Amendment to be executed, as of the day and year first above written, by one of its officers thereunto duly authorized. GENERAL SIGNAL CORPORATION /s/ Terry J. Mortimer By: ________________________________ Vice President and Treasurer One High Ridge Park Stamford, CT 06904 Attention: Treasurer Telecopier No.: (203) 329-4365 2 Four Year Credit Agreement AMENDMENT NO. 3 THIS AMENDMENT NO. 3, (this "Amendment"), dated as of May 29, 1997, among GENERAL SIGNAL CORPORATION (the "Company") and the undersigned commercial banking institutions (herein collectively "Banks"). WITNESSETH: WHEREAS, the Company and the Banks are parties to a certain Four Year Credit Agreement, dated as of January 12, 1994, as amended as of January 12, 1995 and May 31, 1996 (the "Four Year Credit Agreement"); and WHEREAS, the parties desire to amend further certain terms of the Four Year Credit Agreement; NOW, THEREFORE, in consideration of the agreements herein contained, the parties hereto hereby agree as follows: 1. Except as otherwise defined herein, the capitalized terms used herein shall have the meanings respectively ascribed to them in the Four Year Credit Agreement. 2. Each Bank's Commitment shall be the amount set forth opposite its signature hereto, as such amount may be reduced or increased from time to time pursuant to Sections 1.1.6, 1.1.7 and 1.1.8 or Section 13.5 of the Four Year Credit Agreement. 3. The "Revolver Expiration Date" is hereby amended to mean the earlier of May 28, 1998 or the date of termination in whole of the Commitments. 4. The term "Agreement" is hereby amended to mean this "Five Year Credit Agreement" and all references to the "Five Year Credit Agreement" shall be deemed to refer to the Four Year Credit Agreement as hereby amended. 5. The table in Section 3.1.8, Applicable Margin, is hereby deleted and replaced with the following:
Public Debt Rating Eurodollar Margin CD Margin - ------------------ ----------------- --------- Level 1: .165% .290% AA-/Aa3 or higher Level 2: .180% .305% A-/A3 or higher, but less than Level 1 Level 3: .300% .425% BBB-/Baa3 or higher, but less than Level 2
Level 4: .400% .525% Less than BBB-/Baa3
6. The table in Section 3.2, Facility Fee, is hereby deleted and replaced with the following:
Public Debt Rating Facility Fee Percentage - ------------------ ----------------------- Level 1: .060% AA-/Aa3 or higher Level 2: .080% A-/A3 or higher, but less than Level 1 Level 3: .150% BBB-/Baa3 or higher, but less than Level 2 Level 4: .250 % Less than BBB-/Baa3
6. Except as set forth in this Amendment, all terms and conditions of the Four Year Credit Agreement shall remain unchanged. IN WITNESS WHEREOF, the Company and each Bank have caused this Amendment to be executed, as of the day and year first above written, by one of its officers thereunto duly authorized. GENERAL SIGNAL CORPORATION /s/ Terry J. Mortimer By: ________________________________ Vice President and Treasurer One High Ridge Park Stamford, CT 06904 Attention: Treasurer Telecopier No.: (203) 329-4365 2 EX-10.29 15 AMENDMENT TO RETIREMENT PLAN OFDIRECTORS EXHIBIT 10.29 Amendment to Retirement Plan For Directors of General Signal Corporation The Retirement Plan for Directors of General Signal Corporation (the "Plan") is hereby amended, effective as of December 12, 1996, by adding a new section 11 at the end thereof, reading in its entirety as follows: 11. Termination of Plan ------------------- Notwithstanding any other provision of this plan, no benefits shall accrue for any director pursuant to section 4 above with respect to any period after December 31, 1996. The benefits hereunder of any director who has retired on or before December 31, 1996 shall continue to be paid in accordance with the terms hereof, unless such director and the corporation have previously agreed that such benefits shall be paid in a lump sum payment in full discharge of such director's benefits under this plan. the benefits hereunder of any individual who is a director as of December 31, 1996 (a "current director") shall be payable solely as follows. The lump sum value (the "lump sum amount") of the accrued benefits under this plan hereto (the "accrued benefit") of each current director as of April 30, 1996 is set forth on schedule I hereto. Schedule I also indicates whether or not each such current director has elected irrevocably to have his or her lump sum amount transferred to an account under the corporation's deferred compensation plan for directors. No amounts shall be payable pursuant to this plan to or with respect to current directors who have so elected. The accrued benefit of each current director who has not so elected shall be payable pursuant to this plan, in quarterly installments during such current director's lifetime, beginning as soon as practicable after the later of the date such current director ceases to be a member of the board and such current director's 65th birthday; provided, that if such current director dies while a member of the board or after ceasing to be a member of the board but before reaching age 65, such current director shall not be entitled to receive any payment with respect to his or her accrued benefit. The plan is in all other respects ratified and confirmed without amendment. EX-24 16 POWER OF ATTORNEY Exhibit (24) POWER OF ATTORNEY The undersigned members of the Board of Directors of General Signal Corporation, a New York corporation, with principal offices at 1 High Ridge Park, Stamford, Connecticut 06904, hereby appoint Terence D. Martin as their Attorney-in-Fact for the purpose of signing General Signal Corporation's Securities and Exchange Commission Form 10-K (and any and all amendments thereto) for the fiscal year ended December 31, 1997. Dated: February 5, 1998.
Signature Title - --------- ----- /s/ Van C. Campbell DIRECTOR - ------------------------------------------------------- Van C. Campbell /s/ John R. Selby - ------------------------------------------------------- John R. Selby DIRECTOR /s/ Ursula Fairbairn - ------------------------------------------------------- Ursula Fairbairn DIRECTOR /s/ H. Kent Bowen - ------------------------------------------------------- H. Kent Bowen DIRECTOR /s/ Michael A. Carpenter - ------------------------------------------------------- Michael A. Carpenter DIRECTOR
EX-27 17 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1997 DEC-31-1997 50,000 0 300,500 15,100 156,800 568,100 576,300 335,600 1,388,000 376,500 207,400 0 0 78,500 551,200 1,388,000 1,954,600 1,954,600 1,378,500 1,700,400 0 8,600 13,200 252,800 121,800 131,000 2,300 0 (3,700) 129,600 2.58 2.58
EX-27.1 18 RESTATED FINANCIAL DATA SCHEDULE 12-31-96
5 RESTATED FINANCIAL DATA SCHEDULE - CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR DEC-31-1996 DEC-31-1996 17,700 90 368,300 15,300 240,600 691,900 747,300 437,300 1,551,000 439,200 201,300 0 0 78,200 665,600 1,551,000 2,065,000 2,065,000 1,435,700 1,821,100 0 2,100 21,500 222,400 89,000 133,400 0 0 0 133,400 2.68 2.62
EX-27.2 19 RESTATED FINANCIAL DATA SCHEDULE 12-31-95
5 RESTATED FINANCIAL DATA SCHEDULE - CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 YEAR DEC-31-1995 DEC-31-1995 1 1 339 16 235 721 718 405 1,613 432 429 0 0 78 578 1,613 1,863 1,863 1,308 1,683 0 0 24 156 56 100 (64) 0 0 36 0.74 0.77
EX-27.3 20 RESTATED FINANCIAL DATA SCHEDULE 3-31-97
5 RESTATED FINANCIAL DATA SCHEDULE - CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS DEC-31-1997 MAR-31-1997 40,000 90 367,800 15,000 247,100 718,000 753,700 448,400 1,565,800 422,600 241,800 0 0 78,400 653,400 1,565,800 505,600 505,600 357,300 461,700 0 823 3,400 40,500 16,200 24,300 0 0 0 24,300 0.47 0.47
EX-27.4 21 RESTATED FINANCIAL DATA SCHEDULE 6-30-97
5 RESTATED FINANCIAL DATA SCHEDULE - CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1997 JUN-30-1997 24,300 90 378,300 15,900 242,600 703,300 767,100 461,300 1,549,900 411,300 243,200 0 0 78,400 644,000 1,549,900 1,045,200 1,045,200 733,200 939,300 0 1,764 8,000 97,900 39,200 58,700 0 0 0 58,700 1.15 1.14
EX-27.5 22 RESTATED FINANCIAL DATA SCHEDULE 9-30-97
5 RESTATED FINANCIAL DATA SCHEDULE - CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1997 SEP-30-1997 82,800 90 297,500 15,300 160,200 602,800 597,600 357,100 1,429,700 403,800 89,800 0 0 78,500 673,600 1,429,700 1,520,900 1,520,900 1,079,700 1,319,800 0 1,900 11,300 189,800 95,000 94,800 2,300 0 0 97,100 1.91 1.90
EX-27.6 23 RESTATED FINANCIAL DATA SCHEDULE 3-31-96
5 RESTATED FINANCIAL DATA SCHEDULE - CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 3-MOS DEC-31-1996 MAR-31-1996 16 1 335 16 243 691 703 400 1,568 449 349 0 0 78 520 1,568 482 482 351 433 0 0 7 42 17 25 0 0 0 25 0.51 0.51
EX-27.7 24 RESTATED FINANCIAL DATA SCHEDULE 6-30-96
5 RESTATED FINANCIAL DATA SCHEDULE-CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 6-MOS DEC-31-1996 JUN-30-1996 13981 90 352604 16867 245181 699512 714124 408608 1565313 444247 329511 0 0 77977 547339 1565313 996732 996732 708722 889345 0 0 12372 95015 38007 57008 0 0 0 57008 1.15 1.13
EX-27.8 25 RESTATED FINANCIAL DATA SCHEDULE 9-30-96
5 RESTATED FINANCIAL DATA SCHEDULE-CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AND THE STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 9-MOS DEC-31-1996 SEP-30-1996 24400 90 366339 17667 237900 707600 737055 428726 1572800 434800 306200 0 0 78100 577100 1572800 1518300 1518300 1064900 1343000 0 0 17900 157400 63000 94400 0 0 0 94400 1.90 1.86
-----END PRIVACY-ENHANCED MESSAGE-----