-----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, OYriIjgR8gWMl/xInTTdcI5x6dwHsgfVmuDl4GVxP+ZFs+rWZuhuFJK26Gdtqgc2 ycHyrLSCJChXQreZOtU2KA== 0000950130-97-001118.txt : 19970327 0000950130-97-001118.hdr.sgml : 19970327 ACCESSION NUMBER: 0000950130-97-001118 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970321 DATE AS OF CHANGE: 19970326 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENERAL SIGNAL CORP CENTRAL INDEX KEY: 0000040834 STANDARD INDUSTRIAL CLASSIFICATION: 3620 IRS NUMBER: 160445660 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-00996 FILM NUMBER: 97560822 BUSINESS ADDRESS: STREET 1: ONE HIGH RIDGE PARK CITY: STAMFORD STATE: CT ZIP: 06904 BUSINESS PHONE: 2033578800 MAIL ADDRESS: STREET 1: P O BOX 10010 CITY: STAMFORD STATE: CT ZIP: 06904 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL RAILWAY SIGNAL CO DATE OF NAME CHANGE: 19710926 10-K405 1 FORM 10-K - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 1996 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, 1996 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) 5.75% Convertible Subordinated Debentures New York Stock Exchange due June 1, 2002 - - -------------------------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] The aggregate market value of voting stock held by non-affiliates as of February 28, 1997 was approximately $2.2 billion. As of February 28, 1997, there were 52.2 million shares of General Signal Corporation common stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE--PART III Portions of the Proxy Statement for 1997 Annual Meeting Page 1 of 293 - - ------------------------------------------------------------------------------- - - ------------------------------------------------------------------------------- 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 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................................... 15 11 Executive Compensation............................................. 15 12 Security Ownership of Certain Beneficial Owners and Management..... 15 13 Certain Relationships and Related Transactions..................... 15 14 Exhibits, Financial Statements, Schedules and Reports on Form 8-K.. 16 Signatures......................................................... 18 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 pumps, mixers, and valves for municipal water supply and wastewater treatment, pulp, paper, food, pharmaceutical and chemical manufacturing and ultra low-temperature freezers for life science research. In the Electrical industry, key products include uninterruptible power supply and conditioning equipment, power transformers, and fire detection systems. Products serving the Industrial Technology industry include auto and bicycle components, data networking equipment, and fare collection and vending equipment. During the last five years, the company invested approximately $440.7 million in cash and 4.4 million shares of common stock to acquire 20 businesses and/or product lines. The notes to the financial statements on pages F-18 through F-19 of this 10-K provide additional information for significant acquisitions during the last three years. Additionally, during the last five years, the company disposed of two units, accounted for as discontinued operations. Information regarding these dispositions is on page F-19 of this 10-K. FINANCIAL INFORMATION ABOUT BUSINESS SEGMENTS: Selected business segment information for the last five fiscal years is summarized on page F-21 of this 10-K. Net sales from the uninterruptible power systems (UPS) class of product accounted for 11.2%, 8.2% and 3.5% of consolidated net sales in 1996, 1995 and 1994, respectively. A summary of information by geographic area for the last five fiscal years is included on page F-22 of this 10-K. NARRATIVE DESCRIPTION OF BUSINESS MAJOR MARKETS AND PRODUCTS AND METHOD OF DISTRIBUTION: A description of the registrant's business follows:
TOP COMPETITORS BY PRINCIPAL BUSINESS MAJOR PRODUCTS TOP MARKETS MARKET ------------------ -------------- ----------- ------------------ PROCESS CONTROLS DEZURIK Industrial valves for Water supply and McWane; Mueller/Pratt; Sartell, Minnesota gases, liquids, slurries wastewater treatment Keystone; AMRI and dry solids Pulp and paper Neles-Jamesbury; Velan; manufacturing Fisher Chemical processing Fisher; Neles-Jamesbury; Velan; Duriron; Masonelian - - -------------------------------------------------------------------------------------------------- GENERAL SIGNAL Centrifugal, Municipal water supply ITT/Flygt PUMP GROUP submersible, and wastewater treatment North Aurora, regenerative turbine, Illinois and vertical turbine Commercial heating, Bell & Gossett pumps ventilation, and air conditioning Residential (wholesale Zoeller sump and ejector pumps) - - -------------------------------------------------------------------------------------------------- KAYEX Crystal growing furnaces Semiconductor wafer Ferrofluidics; Rochester, New York manufacturers Mitsubishi Machine - - -------------------------------------------------------------------------------------------------- LIGHTNIN Industrial fluid mixers Chemical process Robbins & Meyers Rochester, New York and agitators industries (Chemineer brand); Ekato; Philadelphia Mixers Water supply and Philadelphia Mixers; wateswater treatment Robbins & Meyers (Chemineer brand) Minerals processing Philadelphia Mixers; Robbins & Meyers (Prochem brand); Ekato
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TOP COMPETITORS BY PRINCIPAL BUSINESS MAJOR PRODUCTS TOP MARKETS MARKET ------------------ -------------- ----------- --------------------- REVCO/LINDBERG Ultra-low temperature Life science research Forma Scientific; Sybron Asheville, North laboratory freezers, laboratories, clinical PLC Carolina specialty refrigerators, laboratories, and and CO2 incubators industrial research laboratories Industrial and Transportation equipment Despatch; Surface laboratory ovens manufacturing Combustion - - -------------------------------------------------------------------------------------------------- STOCK EQUIPMENT Coal feed systems Electrical utilities Merrick; Ramsey COMPANY Chagrin Falls, Ohio Paper manufacturers; Ramsey industrial steam generators Feed systems and flow Waste supply and Wallace and Tiernan measurement devices for wastewater treatment water and wastewater - - -------------------------------------------------------------------------------------------------- ELECTRICAL CONTROLS BEST POWER Uninterruptible power OEM computer Exide/Deltec Dallas, Texas systems manufacturers PCs, workstations, American Power internetworking Conversion Corp. Telecommunications Melin Gerin - - -------------------------------------------------------------------------------------------------- DIELECTRIC Radio frequency Television and FM Andrew Corp.; Harris COMMUNICATIONS transmission equipment broadcasters Corp. Raymond, Maine Cable pressurization Telecommunication Puregas providers ------------------------------------------------------------------------------------------------- EDWARDS SYSTEMS Fire detection products, Commercial, industrial Simplex; Cerberus; TECHNOLOGY systems and services and institutional Pittway Corp. Cheshire, Connecticut facilities - - -------------------------------------------------------------------------------------------------- GS ELECTRIC Universal, blower, and Floor care appliance Ametek/Lamb Electric Carlisle, permanent magnet manufacturers Pennsylvania fractional horsepower electric motors Yard and garden MAMCO appliance manufacturers Fitness equipment United Technologies manufacturers, tubs, pools, spas - - -------------------------------------------------------------------------------------------------- GS ELECTRICAL GROUP Fittings, enclosures, Industrial and Crouse-Hinds; Appleton Farmington, industrial lighting, commercial construction Connecticut firestop, heat trace Power conditioning, DC Factory automation MRO Square D power supplies, low- and OEM voltage general-purpose transformers Industrial signaling Industrial and Federal Signal Corp. commercial facilities Emergency lighting and Industrial, commercial Lithonia exit signs and institutional facilities - - --------------------------------------------------------------------------------------------------
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TOP COMPETITORS BY PRINCIPAL BUSINESS MAJOR PRODUCTS TOP MARKETS MARKET ------------------ -------------- ----------- ------------------ WAUKESHA ELECTRIC Medium power Investor-owned and ABB Waukesha, Wisconsin transformers public power utilities Industrial and ABB; GE/Prolec commercial 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, Bytek; DMS; Dynatech; NETWORKS switching systems common carriers, Cornet 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 performance measurement companies, long-distance systems carriers, international telephone companies - - ----------------------------------------------------------------------------------------------- GFI GENFARE Automatic fare Bus and rail mass Cubic Corporation Elk Grove Village, collection passenger transportation Illinois processing, and information systems for U.S. Postal Service National Vendors; the mass transportation Westinghouse market, including electronic fareboxes and faregates, magnetic ticket processing systems and high- security vending equipment, stamp vending machines and audio products - - ----------------------------------------------------------------------------------------------- METAL FORGE Cold-forged solid and Automotive OEM Thompson Products Dublin, Ohio tubular metal components and assemblies for Bicycle OEM Arvin; Walker automobiles and bicycles Automotive OEM service - - -----------------------------------------------------------------------------------------------
The company's products are sold by its own sales organization and through distributors and manufacturers' representatives. MATERIALS AND SUPPLIES: The company manufactures many of the components used in its products. It also purchases a variety of basic materials and component parts. Although some basic materials and components have been and may be in short supply from time to time, the company believes that 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 and 14 of this 10-K. BACKLOG: The amount of unfilled orders was approximately $444.6 million as of December 31, 1996 and $435.8 million as of December 31, 1995. All unfilled orders are expected to be filled within the next succeeding year. 5 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-22 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 approximately 65 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 20 of these sites and believes that it has no liability with respect to 9 of these sites. The company is of the opinion, based on information currently available, that its aggregate probable remaining liability at the other 36 sites is less than $3 million, since the company would probably qualify for future de minimis settlements at many of these sites. 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 will consist of consolidation of contamination in the existing industrial landfill, capping the landfill, collecting contaminated groundwater downgradient of the landfill, and the removal of certain sediments in Kelsey Creek and a tributary creek. The future cost estimated by the company for site remediation is approximately $11.2 million. The company has filed litigation against the City of Watertown to challenge an increase in sewer discharge fees for leachate at the landfill and believes that it will ultimately prevail in such litigation. Hevi-Duty Facility: In August 1990, the EPA placed this manufacturing facility of the company, located in Goldsboro, North Carolina, on the National Priorities List (NPL); subsequently, the company challenged the listing and the EPA delisted the facility in June 1993. Following the delisting, the company investigated site contamination at this facility and conducted limited initial remediation. The company is participating in a voluntary clean-up program 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 $4.8 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 an Interim Agreement 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. 6 The company is conducting investigation and remedial activities due to contamination at six 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 approximately $2.0 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, 1996, the company had approximately 13,000 employees. Approximately 2,600 employees are represented by 31 different collective bargaining units. The company has generally experienced satisfactory labor relations at its various locations. EXECUTIVE OFFICERS OF THE REGISTRANT
NAME, POSITION, AGE AT DECEMBER 31 AND OTHER INFORMATION AGE - - -------------------------------------------------------- --- Michael D. Lockhart........................................................ 47 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.......................................................... 53 Executive Vice President and Chief Financial Officer since February 2, 1995. Previously, Chief Financial Officer of American Cyanamid Company since 1991 and Treasurer since 1988. Joanne L. Bober............................................................ 44 Senior Vice President, General Counsel, and Secretary since January 2, 1997. Previously, Partner at Jones, Day, Reavis & Pogue since 1989. Elizabeth D. Conklyn....................................................... 49 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. Ernest R. Verebelyi........................................................ 49 Senior Vice President--Operations since November 1, 1996. Previously, 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.
Raymond L. Arthur.......................................................... 37 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. William W. Clark........................................................... 55 Vice President--Sourcing since June 15, 1995. Previously, Vice President-- Operations of Tau-tron business, a division of General Signal Networks, since 1992. Served in various management positions with Eastman Kodak Company from 1968 to 1992. Nino J. Fernandez.......................................................... 55 Vice President--Investor Relations since May 1, 1987. Previously, Director of Communications since April 1, 1974. Terry J. Mortimer.......................................................... 51 Vice President and Treasurer since March 20, 1997. Previously, Vice President and Controller since May 25, 1990. Previously Director Finance and Chief Accountant for Apple Computer since June, 1988. Previously with Becton Dickinson and Company since 1981, most recently as Medical Sector Controller.
7 EXECUTIVE OFFICERS OF THE REGISTRANT
NAME, POSITION, AGE AT DECEMBER 31 AND OTHER INFORMATION AGE - - -------------------------------------------------------- --- Donald J. Noonan.......................................................... 56 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. Thomas E. Taylor.......................................................... 50 Vice President--Taxes since September 1, 1993. Previously with Elf Aquitaine, Inc. as Vice President--Taxes since 1985.
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 PERCENT NO. OF SQUARE ------------ LOCATION FACILITIES FOOTAGE OWNED LEASED -------- ---------- ------------- ----- ------ (IN MILLIONS) Process Controls 11 states and 7 foreign 26 3.1 92% 8% Sector................. countries Electrical Controls 15 states, Puerto Rico 40 3.3 79% 21% Sector................. and 5 foreign countries Industrial Technology 8 states 11 0.9 87% 13% Sector.................
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-23 of this 10-K. There were approximately 10,400 holders of record of the company's common stock on February 28, 1997. ITEM 6. SELECTED FINANCIAL DATA ELEVEN-YEAR FINANCIAL SUMMARY GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES
YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------------------------------------------ 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- (DOLLARS AND SHARES IN MILLIONS, EXCEPT PER-SHARE DATA) SUMMARY OF OPERATIONS Net sales........ $2,065.0 $1,863.2 $1,527.7 $1,354.2 $1,477.8 $1,424.1 $1,497.3 $1,522.4 $1,397.7 $1,249.2 $1,210.2 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Cost of sales.... 1,435.7 1,308.0 1,109.5 959.0 1,070.2 1,015.7 1,061.8 1,075.7 983.6 885.0 846.1 Selling, general and administrative expenses........ 406.2 354.4 292.3 259.3 287.7 282.7 304.9 326.7 335.8 276.0 263.2 Other charges and (credits)....... (20.8) 20.1 (46.2) (19.8) 85.6 -- 83.3 (8.7) 24.1 -- -- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Total operating costs and expenses........ 1,821.1 1,682.5 1,355.6 1,198.5 1,443.5 1,298.4 1,450.0 1,393.7 1,343.5 1,161.0 1,109.3 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Operating earnings........ 243.9 180.7 172.1 155.7 34.3 125.7 47.3 128.7 54.2 88.2 100.9 Interest expense (income), net... 21.5 24.3 11.8 16.6 24.8 28.3 31.8 38.7 (1.9) (1.7) 2.3 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Earnings from continuing operations before income taxes........... 222.4 156.4 160.3 139.1 9.5 97.4 15.5 90.0 56.1 89.9 98.6 Income taxes..... 89.0 56.3 56.2 41.0 3.2 28.2 7.3 23.4 25.9 25.5 36.0 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Earnings from continuing operations...... 133.4 100.1 104.1 98.1 6.3 69.2 8.2 66.6 30.2 64.4 62.6 Earnings (loss) from discontinued operations, net of income taxes........... -- -- 2.4 (31.5) 6.1 (5.2) (26.9) 11.9 (5.0) 5.1 12.0 Loss on disposal of discontinued operations, net of income taxes........... -- (64.0) (25.8) -- -- (9.8) (14.2) -- -- -- -- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Earnings (loss) before extraordinary charges and cumulative effect of accounting changes......... 133.4 36.1 80.7 66.6 12.4 54.2 (32.9) 78.5 25.2 69.5 74.6 Extraordinary charges......... -- -- -- (6.6) (0.3) -- -- -- -- -- -- Cumulative effect of accounting changes......... -- -- -- (25.3) (92.4) -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Net earnings (loss).......... $ 133.4 $ 36.1 $ 80.7 $ 34.7 $ (80.3) $ 54.2 $ (32.9) $ 78.5 $ 25.2 $ 69.5 $ 74.6 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- PER-SHARE DATA Earnings (loss) per share of common stock Continuing operations..... $ 2.68 $ 2.03 $ 2.20 $ 2.17 $ 0.15 $ 1.80 $ 0.21 $ 1.75 $ 0.55 $ 1.14 $ 1.09 Discontinued operations..... -- (1.30) (0.49) (0.70) 0.15 (0.40) (1.07) 0.31 (0.09) 0.09 0.21 Extraordinary charges........ -- -- -- (0.14) (0.01) -- -- -- -- -- -- Cumulative effect of accounting changes........ -- -- -- (0.56) (2.21) -- -- -- -- -- -- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Net earnings (loss).......... $ 2.68 $ 0.73 $ 1.71 $ 0.77 $ (1.92) $ 1.40 $ (0.86) $ 2.06 $ 0.46 $ 1.23 $ 1.30 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- Cash dividends per share....... 0.975 0.96 0.915 0.90 0.90 0.90 0.90 0.90 0.90 0.90 0.90 Book value per share........... 14.96 11.71 11.64 11.09 8.90 12.32 11.69 13.25 12.09 16.51 16.16 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- SUMMARY OF FINANCIAL POSITION Working capital........ 252.7 289.3 349.2 268.8 347.8 243.9 310.6 328.8 496.3 540.8 536.3 Property, plant and equipment.. 310.0 312.7 280.5 263.4 246.9 263.7 283.0 325.1 312.5 310.6 345.6 Total assets.... 1,551.0 1,613.2 1,357.9 1,224.9 1,258.4 1,180.2 1,294.6 1,324.3 1,396.6 1,397.4 1,458.1 Total long-term liabilities.... 368.0 603.0 442.0 373.9 537.7 345.7 440.8 373.1 539.9 163.3 179.8 Shareholders' equity......... 743.8 578.1 547.9 525.2 374.8 476.4 450.3 506.1 461.0 907.2 927.4 -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- -------- FINANCIAL RATIOS Working capital to sales....... 12.2% 15.5% 22.9% 19.8% 23.5% 17.1% 20.7% 21.6% 35.5% 43.3% 44.3% Selling, general and administrative expenses to sales.......... 19.7% 19.0% 19.1% 19.1% 19.5% 19.9% 20.4% 21.5% 24.0% 22.1% 21.7% Operating margin......... 11.8% 9.7% 11.3% 11.5% 2.3% 8.8% 3.2% 8.5% 3.9% 7.1% 8.3% After-tax return on net sales... 6.5% 5.4% 6.8% 7.2% 0.4% 4.9% 0.5% 4.4% 2.2% 5.1% 5.2%
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YEAR ENDED DECEMBER 31, ------------------------------------------------------------------------------------------------------- 1996 1995 1994 1993 1992 1991 1990 1989 --------- --------- --------- --------- --------- -------- --------- --------- (DOLLARS AND SHARES IN MILLIONS, EXCEPT PER-SHARE DATA) Return on average shareholders' equity......... 20.2% 6.3% 15.0% 7.7% (18.9%) 11.7% (6.9%) 16.2% Current ratio... 1.6 1.7 1.9 1.8 2.0 1.7 1.8 1.7 Total debt to capitalization.. 21.8% 43.1% 33.1% 27.6% 49.7% 38.9% 47.6% 40.2% --------- --------- --------- --------- --------- -------- --------- --------- SUPPLEMENTAL INFORMATION Capital expenditures... 59.3 49.0 74.8 55.1 49.9 48.1 68.8 62.0 Depreciation of property, plant and equipment.. 52.6 50.3 41.7 35.4 40.6 42.1 44.5 44.7 Research and development.... 47.5 46.9 49.7 53.1 56.2 87.3 93.4 92.8 Common stock price range: High............ 44 1/2 42 1/2 38 37 7/8 32 5/8 26 7/8 29 5/8 28 7/8 Low............. 32 28 30 1/8 30 25 7/8 17 5/8 15 5/8 22 7/8 Price-earnings ratio range-- continuing operations..... 12.1-16.4 20.9-13.8 17.3-13.7 17.5-13.8 21.1-16.8(/1/) 14.9-9.8 21.7-11.5(/1/) 16.5-13.1 Average common shares outstanding.... 49.7 49.2 47.3 45.2 41.8 38.6 38.4 38.1 Employees (in thousands)..... 13.0 12.9 12.2 11.2 12.1 12.6 11.6 16.9 --------- --------- --------- --------- --------- -------- --------- --------- YEAR ENDED DECEMBER 31, ---------------------------------------- 1988 1987 1986 -------------- ------------ ------------ (DOLLARS AND SHARES IN MILLIONS, EXCEPT PER-SHARE DATA) Return on average shareholders' equity......... 3.7% 7.6% 8.1% Current ratio... 2.3 2.7 2.5 Total debt to capitalization.. 52.2% 11.5% 12.5% -------------- ------------ ------------ SUPPLEMENTAL INFORMATION Capital expenditures... 38.8 34.0 45.7 Depreciation of property, plant and equipment.. 42.1 42.4 41.4 Research and development.... 93.7 84.1 74.4 Common stock price range: High............ 28 1/8 30 5/8 27 1/8 Low............. 20 16 5/8 19 5/8 Price-earnings ratio range-- continuing operations..... 36.1-25.7(/1/) 26.9-14.6 24.9-18.0 Average common shares outstanding.... 55.4 56.5 57.5 Employees (in thousands)..... 16.6 16.6 17.5 -------------- ------------ ------------
- - ------- (1) Excludes the impact of after-tax charges related to dispositions of businesses. 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 The amounts in the table below were derived from the Consolidated Financial Statements.
YEAR ENDED DECEMBER 31, --------------------------- 1996 1995 1994 REPORTED REPORTED REPORTED -------- -------- -------- Net sales........................................ $2,065.0 $1,863.2 $1,527.7 Gross profit..................................... 629.3 555.2 418.2 Selling, general and administrative expenses..... 406.2 354.4 292.3 Gain on disposition, transaction and consolidation charges, merger break-up fee and other special items............................. (20.8) 20.1 (46.2) Operating earnings............................... 243.9 180.7 172.1 Earnings from continuing operations.............. 133.4 100.1 104.1 Net earnings..................................... 133.4 36.1 80.7 Earnings per share from continuing operations.... $ 2.68 $ 2.03 $ 2.20 Earnings per share............................... $ 2.68 $ 0.73 $ 1.71
Over the last three years, the company included the following items in reported net earnings. To facilitate a more meaningful discussion of results of operations, these items are excluded from the discussion of comparative results of operations in the table which follows these items. ROYALTY INCOME: In July 1996, the company negotiated a royalty payment related to one of its previously divested semiconductor businesses. The company received $4.2 in connection with this agreement and has recognized this amount in the Industrial Technology sector's net sales. INSURANCE SETTLEMENT ON DESTROYED ASSETS: In May 1996, a fire at a supplier facility destroyed assets of a business in the Process Controls sector. In September 1996, the company received $1.8 in insurance proceeds, net of related expenses, and recognized a gain on the involuntary conversion of these assets. This amount is included as an offset to selling, general and administrative expenses. GAIN ON DISPOSITION: In January 1996, the company sold Kinney Vacuum Company, a unit of the Process Controls sector, for $29.0 and recorded a pre- tax gain of $20.8. Included in the gain was a LIFO liquidation of approximately $1.1 and transaction costs of approximately $0.5. 10 PRODUCT WARRANTY: In March 1996, the company decided to correct defects in certain products sold in prior years in the Process Controls sector for which the warranty period had expired, and provided $4.0 to cover the cost of repairs. Through December 31, 1996, the company made payments against this reserve of $1.7. It is anticipated that the remaining amount will be expended in 1997. CAPITALIZED SOFTWARE: Based on an assessment of future market potential made during the first quarter of 1996, the company decided to write-off $4.6 of capitalized software related to a product in the Industrial Technology sector. FACTORY CLOSURE AND OTHER: As part of the company's ongoing review of facilities, product lines and operations, the company decided in March 1996 to close a factory in the Electrical Controls sector and provided $4.7 primarily for lease termination costs, asset write-downs and severance. Also in connection with this review, the company identified property, plant and equipment that will not be utilized in future operations, and, therefore, recorded a $4.4 charge to write- off the assets. ENVIRONMENTAL: During the first quarter of 1996, the company changed its estimate of costs to be incurred related to environmental matters at one of its Electrical Controls sector facilities. The additional accrual of $2.0 was based on additional information received about the method and extent of remediation required. A more detailed discussion of environmental matters appears on pages 6 and 7 of this 10-K. TRANSACTION AND CONSOLIDATION CHARGES: During 1995, the company recorded charges of $20.1 for the acquisition of Best Power Technology Inc. (Best Power) and the merger with Data Switch Corporation (Data Switch). The Best Power charge of $7.4 was primarily for severance and other consolidation costs related to the combination of General Signal and Best Power locations. The Data Switch charge of $12.7 was primarily for severance and balance sheet valuation adjustments. DISCONTINUED OPERATIONS: The company adopted a plan to sell Leeds & Northrup (L&N) and Dynapower/Stratopower (Dynapower) in November 1994. In 1995, the company recorded after-tax net losses totaling $64.0 ($1.30 per share) in connection with the divestiture of these businesses. During 1994, the company recorded a net loss of $23.4 ($0.49 per share) for loss on the expected disposal and operating losses of these operations. A more detailed discussion of discontinued operations appears on page F-19 of this 10-K. RELIANCE MERGER BREAK-UP FEE: During the fourth quarter of 1994, the company's planned merger with Reliance Electric was not successfully concluded, and, as a result, the company received a break-up fee of $50.0. The company also incurred $3.8 of net expenses related to the merger. CONSOLIDATION OF OPERATIONS, ASSET VALUATIONS AND OTHER CHARGES: During the fourth quarter of 1994, the company recorded $46.2 of charges for the consolidation of certain operations ($11.8), asset valuations ($24.1) and environmental and other issues ($10.3). The following table summarizes the results of operations for the three years ended December 31, excluding the items discussed above.
YEAR ENDED DECEMBER 31, ---------------------------- 1996 1995 1994 ADJUSTED ADJUSTED ADJUSTED -------- -------- -------- Net sales....................................... $2,060.8 $1,863.2 $1,527.7 Gross profit.................................... 638.1 555.2 445.9 Gross margin.................................... 31.0% 29.8% 29.2% Selling, general and administrative expenses.... 401.3 354.4 276.2 Selling, general and administrative expenses as a percent of sales............................. 19.5% 19.0% 18.1% Operating earnings.............................. 236.8 200.8 169.7 Earnings from continuing operations............. 129.1 113.0 104.1 Earnings per share from continuing operations... $ 2.60 $ 2.30 $ 2.20
11 1996 COMPARED WITH 1995 REVENUES: Sales increased 10.6 percent over 1995 levels, approximately half of which was due to the acquisitions of Best Power and MagneTek Electric Inc. (Waukesha Electric) in June and July of 1995, respectively. Adjusted for acquisitions and dispositions, sales improved approximately 5 percent. Foreign and export sales in 1996 totaled approximately 23 percent of the company's net sales. Export sales increased approximately 8 percent and foreign sales increased approximately 18 percent, primarily reflecting the European sales of Best Power as well as an improvement in international mixer sales. Price changes, volume changes and acquisitions, net of dispositions, accounted for approximately 1 percent, 51 percent and 48 percent of the revenue increase, respectively. Process Controls sector sales improved 4.5 percent to $752.4 on strong second half volume activity in pumps, mixers and crystal growing furnaces. These increases were partially offset by the disposition of Kinney Vacuum, sold in January 1996, which generated revenues of $25.4 in 1995. Sales in the Electrical Controls sector increased 21.7 percent to $945.3. 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 electrical fittings also contributed to the improvement. Industrial Technology sector sales decreased 0.5 percent to $363.1. 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: Gross profit as a percentage of sales increased from 29.8 percent to 31.0 percent. Improved cost structures at several operating units was 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 as a percentage of sales 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 $3.1 of environmental insurance recoveries and the collection of a $1.3 previously written off receivable. 1995 operating expenses were positively impacted by $6.8 of environmental insurance recoveries and gains on the sale of assets of $4.1. Also included in selling, general and administrative expenses were pension credits of $8.8 in 1996 and $9.3 in 1995. These credits resulted from the company's overfunded pension plans and favorable long-term investment results. 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. 1995 COMPARED WITH 1994 REVENUES: Sales improved 22.0 percent over 1994 levels to $1,863.2, primarily related to acquisitions, with the remainder reflecting improved order activity. Foreign and export sales in 1995 totaled 22.3 percent of the company's net sales as compared to 19.4 percent in 1994. Export sales increased 59 percent to $199.1, reflecting greater export activity in Process and Electrical Controls and the acquisitions of Fairbanks Morse Pump Corporation (Fairbanks), Best Power and Data Switch. Price changes, volume changes and acquisitions accounted for approximately 10 percent, 6 percent and 84 percent of the revenue increase, respectively. Process Controls sector sales increased 18.7 percent to $719.7 from increased shipments of pumps, valves, industrial mixers, crystal growing furnaces and laboratory equipment. The increased pump sales resulted primarily from the acquisition of Fairbanks. The increased mixer business sales were primarily a result of higher domestic sales. 12 Sales in the Electrical Controls sector rose 25.6 percent to $777.0. The acquisitions of Best Power and Waukesha Electric accounted for approximately 80 percent of the sector's increase. The remainder resulted from improved volume in building and life safety products, broadcast equipment and power transformers. These improvements were offset by lower volume as a result of a major floor care customer's production curtailments. Industrial Technology sector sales increased 21.1 percent to $366.5 due mainly to the Data Switch merger, recorded effective January 1, 1995, which added $97.8 in revenue. This addition was partially offset by decreases in sales due to the completion of the U.S. Postal Service stamp vending machine contract in early 1995, as well as declines in the telecommunications and OEM bicycle and automotive component products. COSTS AND EXPENSES: Gross profit as a percentage of sales improved from 29.2 percent to 29.8 percent. Higher margins at acquired companies, as well as improved cost structures at several operating units, were the primary reasons for the improvement. Margin improvements were strongest for valve, broadcast equipment and telecommunication products. Margin improvements also were realized as a result of the completion of the lower margin U.S. Postal Service contract. Spending on research and development ranged from two to three percent of sales in both years. Selling, general and administrative expenses as a percentage of sales increased from 18.1 percent to 19.0 percent, primarily due to higher operating expenses-to-sales of acquired companies, as well as incremental spending related to acquisitions. These higher expenses were offset by insurance recoveries of $6.8 and gains on asset sales of $4.1. Selling, general and administrative expenses included pension credits of $9.3 in 1995 and $9.7 in 1994. These credits resulted from the company's overfunded pension plans and favorable long-term investment results. Net interest expense increased as a result of higher average debt levels resulting from acquisitions, the addition of higher-rate debt from Data Switch, and an overall increase in borrowing rates. The 1995 effective tax rate rose to 36 percent from 35 percent in 1994 for a number of reasons, including an increase in non-deductible goodwill and a $7.0 reduction in the deferred tax valuation allowance. LIQUIDITY AND CAPITAL RESOURCES The following information was derived from the Consolidated Financial Statements.
YEAR ENDED DECEMBER 31, ------------------ 1996 1995 REPORTED REPORTED -------- -------- Cash flow from operating activities........................ $ 191.7 $ 160.7 ------- ------- Acquisitions, primarily Best Power and Waukesha Electric... -- (272.4) Disposition of discontinued operations and Kinney Vacuum... 94.4 53.4 Capital expenditures....................................... (59.3) (49.0) Other investing activities................................. (2.8) 15.3 ------- ------- Cash flow from investing activities........................ 32.3 (252.7) ------- ------- Debt repayments, net of borrowings......................... (173.2) 139.2 Dividends paid............................................. (47.6) (45.6) Other financing activities................................. 13.5 (0.9) ------- ------- Cash flow from financing activities........................ (207.3) 92.7 ------- ------- Total debt to capitalization............................... 21.8% 43.1% ======= =======
The 1996 operating cash flow improvement was driven by higher earnings, lower spending in connection with divested operations and the utilization of deferred tax assets. Included in operating cash flows for 1996 and 1995 were expenditures of $24.6 and $40.8, respectively, related to previously divested operations and $6.0 and $7.5, respectively, for severance pay. 1996 capital expenditures were primarily comprised of upgrades to manufacturing facilities and purchases of management information systems (MIS) equipment. The company anticipates capital expenditures in 1997 will approximate depreciation. 1996 dispositions included $65.4 related to discontinued operations and $29.0 on the sale of Kinney. During 1995, the company acquired Best Power for $206.3 and Waukesha Electric for $73.9. Included in 1995 cash flow from investing activities were long-term receivable collections and fixed asset sales totaling approximately $14.5. 13 On December 12, 1996, the company called for the redemption of its $100.0 5.75% convertible subordinated notes. As of 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. Also on December 12, 1996, the Board of Directors approved a stock buy- back program of up to $100.0 to offset the dilutive impact of shares issued in connection with the convertible notes redemption. Total debt to capitalization decreased as cash generated from operations and divestitures was used to pay down debt incurred in connection with 1995 acquisitions. The partial conversion of the 5.75% subordinated notes also contributed to the decrease. At the end of 1996, the company had credit agreements of $603.9, consisting primarily of committed revolving credit agreements of $180.0 and $360.0 that expire in May 1997 and May 2001, respectively. The company also has $300.0 of unissued securities under a universal shelf registration with the Securities and Exchange Commission, providing the flexibility to issue a broad variety of securities. The company expects that cash provided from operations will be sufficient to provide for the company's 1997 financing needs, although the company may use available borrowing facilities to finance, in whole or in part, its buy-back of common stock. At December 31, 1996, the company's balance sheet reflected deferred tax assets of $178.7 that are reduced by deferred tax liabilities of $110.1 and a valuation allowance of $30.0. 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. The company enters into forward foreign exchange contracts to mitigate the risks of doing business in foreign currencies. The company hedges currency exposures of firm commitments and specific assets and liabilities denominated in non-functional currencies to protect against the possibility of diminished cash flow and adverse impact on earnings. The company's currency exposures vary, but are primarily concentrated in the Canadian dollar, British pound, Australian dollar, German mark, French franc and Singapore dollar. Translation exposures generally are not hedged. ENVIRONMENTAL MATTERS The company is involved in various stages of investigation and remediation relative to environmental protection matters. A more detailed discussion of environmental matters appears on pages 6 and 7 of this 10-K. In October 1996, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued SOP 96-1, Environmental Remediation Liabilities, the effect of which is not expected to be material to the operating results of the company. OTHER MATTERS Since the company is a producer of capital goods and equipment, its results can vary with the relative strength of the economy. Demand for products in the Process Controls sector follows the demand for capital goods orders. The Electrical Controls sector depends upon several markets, principally the nonresidential construction and computer equipment industries. The Industrial Technology sector depends on several markets, primarily automotive, mass transportation, and telecommunications equipment. Mass transportation depends upon continued federal and local government spending, and telecommunications is dependent upon continued research and development and the continued success of new products. While no one marketplace or industry has a major impact on the company's operations or results, the inherent pace of technological changes presents certain risks that the company monitors carefully. Success within all of the company's businesses is dependent upon the timely introduction and acceptance of new products. FORWARD-LOOKING STATEMENTS The company may from time to time make projections concerning future operations and earnings. 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 addition to the general factors identified in "Other Matters" above, the primary factors that could specifically affect the company's expectations include the failure of: (1) a continuation of the increased order rate experienced during 1996, (2) productivity improvements meeting or exceeding budget and (3) new products under development being produced and accepted as anticipated. 14 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. 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 1997 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 1997 annual meeting of shareholders. 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 1997 annual meeting of shareholders. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. 15 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 February 1, 1996 incorporated herein by reference to Exhibit 3.2 of the registrant's 1995 Form 10-K filed March 22, 1996. 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 Description of General Signal Corporation Incentive Compensation Plan. 10.2 General Signal Corporation Senior Executive Incentive Compensation Plan, as approved by shareholders on April 20, 1995. 10.3 Retirement Plan for Directors of General Signal Corporation is incorporated herein by reference to Exhibit 10.7 of the registrant's 1988 Form 10-K filed March 17, 1989. 10.4 General Signal Corporation Deferred Compensation Plan for Directors, as amended and restated through December 12, 1996. 10.5 General Signal Corporation Change in Control Severance Pay Plan, as amended and restated through June 20, 1996. 10.6 General Signal Corporation Deferred Compensation Plan, dated October 14, 1993, is incorporated herein by reference to Exhibit 10.4 of the registrant's 1993 Form 10-K filed March 21, 1994. 10.7 General Signal Corporation Benefit Equalization Plan as amended and restated October 14, 1993, is incorporated herein by reference to Exhibit 10.5 of the registrant's 1993 Form 10-K filed March 21, 1994. 10.8 General Signal Corporation 1996 Stock Incentive Plan as approved by shareholders on April 18, 1996. 10.9 General Signal Corporation 1992 Stock Incentive Plan as amended and restated July 7, 1993, is incorporated herein by reference to Exhibit 10.6 of the registrant's 1993 Form 10-K filed March 21, 1994. 10.10 General Signal Corporation 1989 Stock Option and Incentive Plan as amended July 7, 1993, is incorporated herein by reference to Exhibit 10.7 of the registrant's 1993 Form 10-K filed March 21, 1994. 10.11 General Signal Corporation 1985 Stock Option Plan as amended and restated July 7, 1993, is incorporated herein by reference to Exhibit 10.8 of the registrant's 1993 Form 10-K filed March 21, 1994. 10.12 Employment agreement between Michael D. Lockhart and the registrant dated October 3, 1994 is incorporated herein by reference to Exhibit 10.12 of the registrant's 1994 Form 10-K filed March 21, 1995. 10.13 Employment agreement between Terence D. Martin and the registrant dated February 2, 1995 is incorporated herein by reference to Exhibit 10.13 of the registrant's 1994 Form 10-K filed March 21, 1995.
16 10.14 Employment agreement between Joanne L. Bober and the registrant dated October 29, 1996. 10.15 Employment agreement between Elizabeth D. Conklyn and the registrant dated November 2, 1995. 10.16 Employment agreement between Ernest R. Verebelyi and the registrant dated September 12, 1996. 10.17 Employment agreement between Donald J. Noonan and the registrant dated June 5, 1996. 10.18 Employment agreement between Raymond L. Arthur and the registrant dated January 28, 1997. 10.19 Severance agreement between Edgar J. Smith, Jr. and the registrant dated August 5, 1996. 10.20 Severance agreement between Edmund M. Carpenter and the registrant dated October 19, 1995 is incorporated herein by reference to Exhibit 10.12 of the registrant's 1995 Form 10-K filed March 22, 1996. 10.21 Severance agreement between Joel S. Friedman and the registrant dated December 21, 1995 is incorporated herein by reference to Exhibit 10.13 of the registrant's 1995 Form 10-K filed March 22, 1996. 10.22 Severance agreement between George Falconer and the registrant dated November 7, 1995 is incorporated herein by reference to Exhibit 10.14 of the registrant's 1995 Form 10-K filed March 22, 1996. 10.23 Shareholder Rights Plan dated February 1, 1996 is incorporated herein by reference to Exhibit 10.15 of the registrant's 1995 Form 10-K filed March 22, 1996. 10.24 Copies of the Credit Agreements among General Signal Corporation and Various Commercial Banking Institutions, dated through May 31, 1996, as described in the Notes to Financial Statements. 11.0 Computation of Earnings per Share. See page F-25 of this report. 12.0 Calculation of Ratios of Earnings to Fixed Charges. See page F-26 of this report. 21.0 Subsidiaries. See pages F-27 through F-29 of this report. 23.0 Consent of Ernst & Young LLP. See page F-30 of this report. 27.0 Financial Data Schedule.
(b) Reports on Form 8-K filed in the fourth quarter of 1996 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. 17 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 /s/ Michael D. Lockhart By: ________________________________________ (MICHAEL D. LOCKHART, CHAIRMAN) MARCH 20, 1997 PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. SIGNATURE TITLE DATE /s/ Michael D. Lockhart Chairman and March 20, - - ------------------------------- Director 1997 (MICHAEL D. LOCKHART) (Principal Executive Officer) /s/ Terence D. Martin Executive Vice March 20, - - ------------------------------- President and 1997 (TERENCE D. MARTIN) Chief Financial Officer /s/ Raymond L. Arthur Vice President March 20, - - ------------------------------- and Controller 1997 (RAYMOND L. ARTHUR) (Chief Accounting Officer) /s/ Ralph E. Bailey Director March 20, - - ------------------------------- 1997 (RALPH E. BAILEY) /s/ H. Kent Bowen Director March 20, - - ------------------------------- 1997 (H. KENT BOWEN) /s/ Van C. Campbell Director March 20, - - ------------------------------- 1997 (VAN C. CAMPBELL) /s/ Michael A. Carpenter Director March 20, - - ------------------------------- 1997 (MICHAEL A. CARPENTER) /s/ Ursula F. Fairbairn Director March 20, - - ------------------------------- 1997 (URSULA F. FAIRBAIRN) /s/ Ronald E. Ferguson Director March 20, - - ------------------------------- 1997 (RONALD E. FERGUSON) /s/ John P. Horgan Director March 20, - - ------------------------------- 1997 (JOHN P. HORGAN) /s/ Robert D. Kennedy Director March 20, - - ------------------------------- 1997 (ROBERT D. KENNEDY) /s/ Roland W. Schmitt Director March 20, - - ------------------------------- 1997 (ROLAND W. SCHMITT) /s/ John R. Selby Director March 20, - - ------------------------------- 1997 (JOHN R. SELBY) 18 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, 1996, 1995 and 1994.................................................................... F-4 Balance Sheet as of December 31, 1996 and 1995........................... F-5 Statement of Shareholders' Equity for the Years Ended December 31, 1996, 1995 and 1994........................................................... F-6 Statement of Cash Flow for the Years Ended December 31, 1996, 1995 and 1994.................................................................... F-7 Notes to the Financial Statements.............................F-8 through F-23 Schedule: II--Valuation and Qualifying Accounts.................................. F-24 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: 11.0--Computation of Earnings Per Share................................ F-25 12.0--Calculations of Ratios of Earnings to Fixed Charges.............. F-26 21.0--Subsidiaries of Registrant...........................F-27 through F-29 23.0--Consent of Ernst & Young LLP..................................... F-30
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 five 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 and Chief Financial Officer /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, 1996 and 1995, and the related statements of earnings, shareholders' equity, and cash flow for each of the three years in the period ended December 31, 1996. 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, 1996 and 1995, and the results of their operations and their cash flow for each of the three years in the period ended December 31, 1996, 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. /s/ Ernst & Young LLP Stamford, Connecticut January 24, 1997 F-3 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, ---------------------------- 1996 1995 1994 -------- -------- -------- (IN MILLIONS, EXCEPT PER- SHARE DATA) Net sales....................................... $2,065.0 $1,863.2 $1,527.7 -------- -------- -------- Cost of sales................................... 1,435.7 1,308.0 1,109.5 Selling, general and administrative expenses.... 406.2 354.4 292.3 Gain on disposition............................. (20.8) -- -- Transaction and consolidation charges........... -- 20.1 -- Merger break-up fee and other special items..... -- -- (46.2) -------- -------- -------- Total operating costs and expenses.............. 1,821.1 1,682.5 1,355.6 -------- -------- -------- Operating earnings.............................. 243.9 180.7 172.1 Interest expense, net........................... 21.5 24.3 11.8 -------- -------- -------- Earnings from continuing operations before income taxes................................... 222.4 156.4 160.3 Income taxes.................................... 89.0 56.3 56.2 -------- -------- -------- Earnings from continuing operations............. 133.4 100.1 104.1 Earnings (loss) from discontinued operations, net of income taxes: Operations.................................... -- -- 2.4 Disposal...................................... -- (64.0) (25.8) -------- -------- -------- Net earnings.................................... $ 133.4 $ 36.1 $ 80.7 ======== ======== ======== Earnings (loss) per share of common stock: Continuing operations......................... $ 2.68 $ 2.03 $ 2.20 Discontinued operations....................... -- -- 0.05 Disposal of discontinued operations........... -- (1.30) (0.54) -------- -------- -------- Net earnings.................................... $ 2.68 $ 0.73 $ 1.71 ======== ======== ======== Average common shares outstanding............... 49.7 49.2 47.3 ======== ======== ========
See accompanying notes to the financial statements. F-4 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES BALANCE SHEET
DECEMBER 31, ------------------ 1996 1995 -------- -------- (IN MILLIONS) ASSETS ------ Current assets: Cash and cash equivalents................................ $ 17.7 $ 1.0 Accounts receivable...................................... 353.0 323.6 Inventories.............................................. 240.6 234.7 Prepaid expenses and other current assets................ 19.8 30.1 Assets held for sale at estimated realizable value....... 4.9 60.4 Deferred income taxes.................................... 55.9 71.6 -------- -------- Total current assets................................... 691.9 721.4 Property, plant and equipment.............................. 310.0 312.7 Intangibles................................................ 381.3 406.0 Other assets............................................... 167.8 161.6 Deferred income taxes...................................... -- 11.5 -------- -------- Total assets........................................... $1,551.0 $1,613.2 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY ------------------------------------ Current liabilities: Short-term borrowings and current maturities of long-term debt.................................................... $ 5.6 $ 9.0 Accounts payable......................................... 187.3 158.1 Accrued expenses......................................... 214.6 233.8 Income taxes............................................. 31.7 31.2 -------- -------- Total current liabilities.............................. 439.2 432.1 Long-term debt, less current maturities.................... 201.3 428.6 Accrued post-retirement and post-employment obligations.... 133.2 146.9 Deferred income taxes...................................... 17.3 -- Other liabilities.......................................... 16.2 27.5 -------- -------- Total long-term liabilities............................ 368.0 603.0 Shareholders' equity: Common stock............................................. 78.2 77.9 Additional paid-in capital............................... 337.1 304.2 Retained earnings........................................ 667.4 582.9 Cumulative translation adjustments....................... (1.4) (3.9) -------- -------- 1,081.3 961.1 Common stock in treasury................................. (337.5) (383.0) -------- -------- Total shareholders' equity............................. 743.8 578.1 -------- -------- Total liabilities and shareholders' equity............. $1,551.0 $1,613.2 ======== ========
See accompanying notes to the financial statements. F-5 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES STATEMENT OF SHAREHOLDERS' EQUITY
ADDITIONAL CUMULATIVE COMMON COMMON PAID-IN RETAINED TRANSLATION STOCK IN STOCK CAPITAL EARNINGS ADJUSTMENTS TREASURY ------ ---------- -------- ----------- -------- (IN MILLIONS, EXCEPT PER-SHARE DATA) Balance at December 31, 1993... $77.1 $272.0 $583.1 $(8.5) $(398.5) Net earnings................. -- -- 80.7 -- -- Dividends declared ($0.915 per share).................. -- -- (43.3) -- -- Purchase of common stock..... -- -- -- -- (18.5) Exercise of stock options and savings and stock ownership plan funding..................... 0.3 9.1 -- -- (2.0) Translation adjustments...... -- -- -- (3.6) -- ----- ------ ------ ----- ------- Balance at December 31, 1994... 77.4 281.1 620.5 (12.1) (419.0) Restatement for Data Switch merger...................... -- 4.8 (27.7) (0.1) 45.7 Net earnings................. -- -- 36.1 -- -- Dividends declared ($0.96 per share)...................... -- -- (46.0) -- -- Purchase of common stock..... -- -- -- -- (18.0) Exercise of stock options and savings and stock ownership plan funding..................... 0.5 18.3 -- -- 8.3 Discontinued operations...... -- -- -- 7.4 -- Translation adjustments...... -- -- -- 0.9 -- ----- ------ ------ ----- ------- Balance at December 31, 1995... 77.9 304.2 582.9 (3.9) (383.0) 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% convertible subordinated notes.......... -- 20.5 -- -- 37.3 Translation adjustments...... -- -- -- 2.5 -- ----- ------ ------ ----- ------- Balance at December 31, 1996... $78.2 $337.1 $667.4 $(1.4) $(337.5) ===== ====== ====== ===== =======
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, ------------------------- 1996 1995 1994 ------- ------- ------- (IN MILLIONS) CASH FLOW FROM OPERATING ACTIVITIES: Earnings from continuing operations................ $ 133.4 $ 100.1 $ 104.1 Adjustments to reconcile earnings from continuing operations to net cash from operating activities: Gain on disposition.............................. (20.8) -- -- Asset write down and other charges............... 19.7 -- -- Transaction and consolidation charges............ -- 20.1 -- Deferred income taxes............................ 43.7 32.0 36.8 Depreciation..................................... 52.6 50.3 41.7 Amortization..................................... 16.6 12.5 6.7 Pension credits.................................. (8.8) (9.3) (9.7) Other, net....................................... 5.5 4.4 2.2 Changes in assets and liabilities, net of effects from acquisitions and divestitures: Accounts receivable............................ (30.8) (15.4) (25.2) Inventories.................................... (10.4) 21.4 (26.8) Prepaid expenses and other current assets...... 11.0 18.1 (1.0) Accounts payable............................... 28.8 (14.2) 29.5 Accrued expenses and other..................... (49.0) (71.6) (50.5) Income taxes................................... 0.2 12.3 7.9 ------- ------- ------- Net cash from operating activities................. 191.7 160.7 115.7 ------- ------- ------- CASH FLOW FROM INVESTING ACTIVITIES: Divestitures....................................... 94.4 53.4 26.2 Capital expenditures............................... (59.3) (49.0) (74.8) Acquisitions, net of cash acquired................. -- (272.4) (83.3) Other, net......................................... (2.8) 15.3 0.5 ------- ------- ------- Net cash from investing activities................. 32.3 (252.7) (131.4) ------- ------- ------- CASH FLOW FROM FINANCING ACTIVITIES: Issuance of long-term debt......................... 115.3 273.2 77.9 Redemption of long-term debt....................... (288.5) (134.0) (7.0) Purchase of common stock........................... (1.2) (18.0) (18.5) Issuance of common stock........................... 14.7 17.1 4.9 Dividends paid..................................... (47.6) (45.6) (42.6) ------- ------- ------- Net cash from financing activities................. (207.3) 92.7 14.7 ------- ------- ------- Net changes in cash and cash equivalents........... 16.7 0.7 (1.0) ------- ------- ------- Cash and cash equivalents at beginning of year..... 1.0 0.3 1.3 ------- ------- ------- Cash and cash equivalents at end of year........... $ 17.7 $ 1.0 $ 0.3 ======= ======= ======= Interest paid...................................... $ 25.7 $ 27.3 $ 12.4 Income taxes paid.................................. $ 44.0 $ 15.7 $ 21.5
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) 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 are not to exceed 40 years for buildings and range from three 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. The company periodically reviews the carrying value of intangibles for recoverability in relation to future undiscounted cash flow. REVENUE RECOGNITION: Revenues are primarily recognized as products are shipped and services are rendered. The percentage-of-completion method of accounting is followed for long-term contracts. Under this method, earnings accrue as contracts progress toward completion, generally based on the percentage of costs incurred or the units of product delivered. ENVIRONMENTAL: The company's environmental accruals cover all anticipated costs, including capital expenditures, investigation, remediation, and operation and maintenance of clean-up sites. Environmental obligations generally are not discounted and are not reduced by anticipated insurance recoveries. STOCK COMPENSATION: The company accounts for the options granted under its stock incentive program by recognizing as compensation any excess of quoted market price over exercise price at the date of grant. The exercise price of General Signal stock options granted equals the market value on the date of grant. EARNINGS PER SHARE: Earnings per share of common stock was calculated by dividing net earnings by the weighted average number of common shares outstanding. There was no dilutive impact from stock options or convertible debt securities outstanding during the periods. MERGER AND ACQUISITION INCOME AND EXPENSES: The company recognizes costs associated with potential mergers and acquisitions, along with proceeds from break-up fee provisions, as components of operating income. ACCOUNTING CHANGES: Effective January 1, 1996, the company adopted Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," the effect of which was not material to the consolidated financial statements. USE OF ESTIMATES: The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. RECLASSIFICATIONS: Certain reclassifications were made to conform prior years' data to the current presentation. F-8 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) ACCOUNTS RECEIVABLE Accounts receivable were net of allowances for doubtful accounts of $10.0 and $10.6 at December 31, 1996 and 1995, respectively. INVENTORIES
DECEMBER 31, -------------- 1996 1995 ------ ------ Finished goods............................................. $ 80.8 $ 73.9 Work in process............................................ 63.2 66.5 Raw material and purchased parts........................... 117.1 117.6 ------ ------ Total FIFO cost............................................ 261.1 258.0 Excess of FIFO cost over LIFO inventory value.............. (20.5) (23.3) ------ ------ $240.6 $234.7 ====== ======
Inventories valued using LIFO were approximately $61.9 and $69.4 at December 31, 1996 and 1995, respectively. In 1996, the company recorded a LIFO liquidation, which increased net income by $1.0. Additionally, included in the gain on sale of the Kinney Vacuum Company was a LIFO liquidation of approximately $1.1. Progress payments, netted against work in process at year end, were $11.0 in 1996 and $8.7 in 1995. CONTRACTS IN PROGRESS Prepaid expenses and other current assets include contracts in progress of $7.8 and $20.5 at December 31, 1996 and 1995, respectively. Contracts in progress represent revenue recognized on a percentage-of-completion basis over related progress billings of $36.0 and $83.7 at December 31, 1996 and 1995, respectively. Substantially all contracts in progress at year end are billed during the subsequent year. PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31, ---------------- 1996 1995 ------- ------- Land..................................................... $ 12.2 $ 14.1 Buildings and leasehold improvements..................... 173.7 167.6 Machinery and equipment.................................. 561.4 536.1 ------- ------- 747.3 717.8 Accumulated depreciation and amortization................ (437.3) (405.1) ------- ------- $ 310.0 $ 312.7 ======= =======
INTANGIBLES
DECEMBER 31, ---------------- 1996 1995 ------- ------- Excess of cost over net assets acquired.................. $ 465.3 $ 474.3 Other intangibles........................................ 40.4 42.9 ------- ------- 505.7 517.2 Accumulated amortization................................. (124.4) (111.2) ------- ------- $ 381.3 $ 406.0 ======= =======
F-9 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) ACCRUED EXPENSES
DECEMBER 31, ------------- 1996 1995 ------ ------ Payroll and compensation.................................... $ 62.5 $ 64.4 Environmental and legal..................................... 26.9 24.1 Dispositions and special items.............................. 23.0 32.7 Other....................................................... 102.2 112.6 ------ ------ $214.6 $233.8 ====== ======
INCOME TAXES For financial reporting purposes, earnings from continuing operations before income taxes includes the following components:
YEAR ENDED DECEMBER 31, ------------------------- 1996 1995 1994 ------- ------- ------- Pretax income: United States............................... $ 205.6 $ 151.5 $ 159.3 Foreign..................................... 16.8 4.9 1.0 ------- ------- ------- $ 222.4 $ 156.4 $ 160.3 ======= ======= ======= 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, ------------------------- 1996 1995 1994 ------- ------- ------- 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................................. 4.2 5.5 3.4 Foreign sales corporation..................... (1.3) (1.7) (1.4) Goodwill amortization......................... 1.9 2.1 1.0 Income from Puerto Rican operations........... (0.2) (0.7) (0.8) Foreign rates and foreign dividends........... 0.4 (1.4) (1.1) Reduction in valuation allowance.............. -- (4.5) -- Other......................................... -- 1.7 (1.1) ------- ------- ------- 40.0% 36.0% 35.0% ======= ======= ======= The components of the provision for income taxes are as follows: YEAR ENDED DECEMBER 31, ------------------------- 1996 1995 1994 ------- ------- ------- Current: Federal..................................... $ 32.8 $ 14.2 $ 11.5 Foreign..................................... 4.9 3.4 4.6 State....................................... 7.6 6.7 3.3 ------- ------- ------- Total current............................. 45.3 24.3 19.4 ------- ------- ------- Deferred: Federal..................................... 34.2 (6.5) 51.5 Foreign..................................... 1.9 (2.6) 0.4 State....................................... 7.6 5.2 9.5 ------- ------- ------- Total deferred............................ 43.7 (3.9) 61.4 ------- ------- ------- $ 89.0 $ 20.4 $ 80.8 ======= ======= =======
F-10 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) Income tax expense is included in the financial statements as follows:
YEAR ENDED DECEMBER 31, ------------------------- 1996 1995 1994 ------- -------- ------- Continuing operations........................... $ 89.0 $ 56.3 $ 56.2 Discontinued operations......................... -- (35.9) 24.6 ------- -------- ------- Total income tax expense........................ $ 89.0 $ 20.4 $ 80.8 ======= ======== =======
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, -------------- 1996 1995 ------ ------ Deferred tax assets: Acquired tax benefits and basis differences.............. $ 29.0 $ 45.1 Other post-retirement and post-employment benefits....... 58.3 63.6 Losses on dispositions and restructuring................. 11.7 22.4 Inventories.............................................. 14.8 15.7 NOL and credit carry-forwards............................ 32.9 42.9 Other.................................................... 32.0 34.2 ------ ------ Total deferred tax assets.............................. 178.7 223.9 Valuation allowance........................................ (30.0) (33.6) ------ ------ Net deferred tax assets................................ 148.7 190.3 Deferred tax liabilities: Accelerated depreciation................................. 35.7 32.5 Pension credits.......................................... 39.0 36.2 Reliance gain............................................ 19.8 19.8 Other.................................................... 15.6 18.7 ------ ------ Total deferred tax liabilities......................... 110.1 107.2 ------ ------ $ 38.6 $ 83.1 ====== ======
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 by $9.6 in 1995, affecting net income by $7.0. At December 31, 1996, the following net federal operating loss and tax credit carry-forwards were available:
EXPIRATION OPERATING TAX DATES LOSSES CREDITS ---------- --------- ------- 1997-1998............................................... $ 4.2 $17.1 1999-2000............................................... 2.0 5.1 2001-2002............................................... 16.6 --
F-11 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) Undistributed earnings of the company's foreign subsidiaries amounted to approximately $74.1 at December 31, 1996. Those earnings are considered to be indefinitely reinvested and, accordingly, no provision for U.S. federal and state income taxes or foreign withholding taxes has been made. Upon distribution of those earnings, the company would be subject to U.S. income taxes (subject to a reduction for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized deferred U.S. income tax liability is not practicable; however, unrecognized foreign tax credit carry-overs would be available to reduce some portion of the U.S. liability. Withholding taxes of approximately $5.0 would be payable upon remittance of all previously unremitted earnings at December 31, 1996.
Debt DECEMBER 31, ------------- 1996 1995 ------ ------ 5.75% Convertible Subordinated Notes due 2002 (convertible at approximately $39.50 per share)............ $ 42.6 $100.0 Commercial paper 1996, 5.6%, 1995, 5.9%..................... 114.5 249.0 Industrial Revenue Bonds due 2000-2014; no stipulated principal repayments prior to maturity (primarily variable rate)......................... 36.0 44.5 Other long-term borrowings.................................. 12.8 39.9 ------ ------ 205.9 433.4 Less current maturities..................................... 4.6 4.8 ------ ------ $201.3 $428.6 Short-term notes payable to banks........................... $ 1.0 $ 4.2 ====== ======
On December 12, 1996, the company called for the redemption of its 5.75% 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. Maturities of long-term debt through 2001 are: 1997-$4.6; 1998-$1.1; 1999- $1.1; 2000-$10.5; and 2001-$121.5. The company maintains credit arrangements with banks in the U.S. and abroad which aggregated $603.9 and $621.6 at December 31, 1996 and 1995, respectively. At December 31, 1996, the company had a committed revolving credit agreement of $180.0 that matures on May 30, 1997, and a committed revolving credit agreement of $360.0 that matures on May 30, 2001. 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 up to $300.0 in medium-term senior notes or medium-term subordinated notes. As of December 31, 1996, no amounts had been issued under the shelf registration. The company entered into an interest rate exchange agreement, expiring in March 2000, with a financial institution to limit exposure to interest rate volatility. The agreement involved a transaction with a notional principal amount of $25.0 at December 31, 1996 and 1995. The company monitors the risk of default by the swap counterparty and does not anticipate non-performance. At December 31, 1996, termination of this agreement would result in a $1.9 loss. F-12 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 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 and purchased currency options to hedge net consolidated currency transaction exposure for periods consistent with the terms of the underlying transactions, extending through November 28, 1997. 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. 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. At December 31, 1996, the company had approximately $33.0 of such contracts outstanding. The company purchased a currency option contract with a notional value at December 31, 1996 of $1.1. The option contract matures June 26, 1997. Premiums on purchased option contracts are amortized on a straight-line basis over the life of the contracts. 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 $35.5 as of December 31, 1996. 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 booked as liabilities, and the related amounts accrued. CONTINGENCIES AND COMMITMENTS LITIGATION: The company and certain of its subsidiaries are defendants in legal proceedings incidental to its business. Although the ultimate disposition of these proceedings is not presently determinable, management does not expect the outcome to have a material adverse impact on the company's financial position or results of operations. LEASES: The future minimum rental payments under leases with remaining noncancelable terms in excess of one year are: Year ending December 31, 1997.............................................................. $10.9 1998.............................................................. 8.8 1999.............................................................. 7.3 2000.............................................................. 6.0 2001.............................................................. 4.7 Subsequent to 2001................................................ 6.7 ----- Total minimum payments.......................................... $44.4 =====
Total rent expense in 1996, 1995 and 1994 was $20.3, $21.1 and $17.4, respectively. F-13 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 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. 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 64.6 issued in 1996 and 64.3 issued in 1995. 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 1996 1995 1994 ----- ----- ----- (IN MILLIONS) Balance at beginning of year......................... 15.0 16.6 16.0 Restatement for Data Switch merger................... -- (1.8) -- Common stock reacquired.............................. -- 0.5 0.6 Common stock issued under the company's incentive compensation and savings and stock ownership plans.. (0.3) (0.3) -- Conversion of convertible subordinated notes......... (1.5) -- -- ----- ----- ----- Balance at end of year............................... 13.2 15.0 16.6 ===== ===== =====
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% convertible subordinated notes. Through January 24, 1997, approximately 169,000 shares have been repurchased under this program. 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 since 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 1996, 13,639 of these warrants were redeemed for shares of common stock. F-14 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 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. 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, ------------------------- 1996 1995 1994 ------- ------- ------- Service cost - benefits earned during the period...................................... $ 14.6 $ 8.9 $ 10.0 Interest cost on projected benefit obligation.................................. 32.7 32.6 23.6 Actual return on assets...................... (77.4) (45.7) 9.6 Net amortization and deferral................ 21.3 (5.1) (52.9) ------- ------- ------- Net pension income......................... $ (8.8) $ (9.3) $ (9.7) ======= ======= ======= The actuarial assumptions used were: Discount rate................................ 7.60% 7.00% 8.75% Rate of increase in compensation levels...... 5.00% 5.00% 5.00% Expected long-term rate of return on assets.. 9.50% 9.50% 9.50%
The following table sets forth the plans' funded status and amounts recognized in the balance sheet:
DECEMBER 31, --------------------------------- 1996 1995 --------------- ---------------- OVER UNDER OVER UNDER FUNDED FUNDED FUNDED FUNDED ------- ------ ------- ------- Actuarial present value of benefit obligations: Vested benefit obligation........... $(343.0) $(71.2) $(314.2) $(123.6) ------- ------ ------- ------- Accumulated benefit obligation........ (361.2) (73.7) (333.6) (127.7) ------- ------ ------- ------- Fair value of plan assets............. 522.9 62.4 449.9 108.8 Projected benefit obligation.......... (377.7) (76.1) (355.2) (130.8) ------- ------ ------- ------- Plan assets in excess of (less than) projected benefit obligation......... 145.2 (13.7) 94.7 (22.0) Unrecognized net (gain) loss.......... (10.5) 4.0 28.8 16.9 Prior service cost not yet recognized in net pension cost.................. 6.0 3.1 5.7 3.3 Unrecognized net asset................ (24.5) (4.7) (28.1) (17.1) ------- ------ ------- ------- Prepaid (accrued) pension............. $ 116.2 $(11.3) $ 101.1 $ (18.9) ======= ====== ======= =======
F-15 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 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 $6.4 in 1996, $8.2 in 1995 and $7.9 in 1994, and were invested in shares of the company's common stock. At December 31, 1996, the plans held 2.6 million shares and 0.7 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, 1996 was determined using the terms of the company's various plans, together with relevant actuarial assumptions and health care cost - trend rates projected at estimated annual rates ranging from 7.1 percent in 1996 and 6.6 percent in 1997, to 5.0 percent through the year 2005, and a weighted average discount rate of 7.6 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 $1.3, 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, ------------------------- 1996 1995 1994 ------- ------- ------- Service cost for benefits attributed to serv- ice during the period........................ $ 0.6 $ 0.4 $ 0.6 Interest cost on the accumulated post-retire- ment benefit obligation...................... 6.0 4.5 4.7 Net amortization and deferral................. (4.5) (5.5) (6.2) ------- ------- ------- Net periodic post-retirement benefits....... $ 2.1 $ (0.6) $ (0.9) ======= ======= =======
The following table shows the plans' funded status and amounts recognized in the balance sheet:
DECEMBER 31, -------------------------------- 1996 1995 --------------- --------------- HEALTH LIFE HEALTH LIFE ------- ------ ------- ------ Accumulated post-retirement benefit obligation: Retirees............................ $ (55.8) $(15.3) $ (59.5) $(15.6) Fully-eligible active plan partici- pants.............................. (1.3) (0.2) (3.5) (0.3) Other active plan participants...... (8.2) (3.1) (10.6) (4.0) ------- ------ ------- ------ Total............................. (65.3) (18.6) (73.6) (19.9) Unrecognized net (gain) loss.......... (20.4) (1.7) (16.3) (0.5) Unrecognized prior service cost....... (19.5) -- (26.6) 0.1 ------- ------ ------- ------ Accrued post-retirement benefit cost.. (105.2) (20.3) (116.5) (20.3) Less amounts classified as current.... 7.3 1.3 7.3 1.3 ------- ------ ------- ------ $ (97.9) $(19.0) $(109.2) $(19.0) ======= ====== ======= ======
The accumulated post-retirement benefit obligation decreased from 1995 to 1996 as a result of a curtailment of benefits due to the sale of Leeds and Northrup, resulting in a net curtailment gain of $4.5. This gain was credited to the discontinued operations reserve in 1996. The unrecognized prior service cost at December 31, 1996 and 1995 represents unamortized amounts for plan amendments, resulting from revisions to company- sponsored health plans, which reduced benefit levels. F-16 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 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 1996 and 1995 for 11,568 shares and 172,529 shares of company common stock with a weighted-average price of $40.31 per share and $32.87 per share, respectively. The shares covered by the restricted stock award granted in 1996 vest at certain rates over a three-to- five-year period. The awards granted in 1995 vest at certain rates over a three-to-five-year period, or are based on performance criteria and time over a period from September 1, 1995 to March 25, 2014. Non-employee directors may elect to defer all or part of their cash compensation as directors and to receive in lieu thereof restricted stock. 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. In 1995, four non-employee directors received 3,829 shares of company common stock, subject to a five-year restriction period. Total compensation expense for restricted stock for 1996 and 1995 was $1.2 and $1.8, 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. All options granted have 10-year terms, and vest and become fully exercisable at the end of four years of continued employment. As of December 31, 1996 and 1995, 4.6 million and 2.7 million shares, respectively, of company common stock were reserved for issuance. 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 is recognized. Pro forma information regarding net income and earnings per share is required by SFAS 123, "Accounting for Stock-Based Compensation", 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 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:
1996 1995 ------- ------- Risk-free interest rate................................ 4.77% 5.39% Dividend yield......................................... 2.54% 2.76% Expected volatility of market price of company's common stock................................................. 0.235 0.20 Expected option life................................... 5 years 5 years
The risk-free interest rate is based on short-term 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:
1996 1995 ------ ----- Pro forma net income......................................... $132.5 $35.7 Pro forma earnings per share................................. $ 2.67 $0.73
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. F-17 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) OPTION ACTIVITY: The following table shows the option activity for the three years ended December 31, 1996. Options granted and exercised by Data Switch prior to the merger date are included in the 1995 activity.
WEIGHTED- OPTION PRICE AVERAGE SHARES PER SHARE EXERCISE PRICE ------------- ------------- -------------- (IN MILLIONS) Options outstanding at December 31, 1993........... 1.9 $19.44-$36.20 $27.00 Options granted.............. 0.6 $31.88-$37.25 $33.56 Options exercised............ (0.3) $19.44-$32.25 $23.66 ---- ------------- ------ 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 exercisable: 1996....................... 1.4 $13.94-$56.63 $31.13 1995....................... 1.1 $13.94-$56.63 $29.16 1994....................... 1.0 $19.44-$34.88 $25.72
The weighted-average fair value of options granted during 1996 and 1995 was $9.08 per share and $7.36 per share, respectively. 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........... 40 5.46 $17.03 29 $17.12 $20-$30........... 432 2.99 $25.89 415 $26.04 $30-$40........... 1,479 5.72 $34.04 964 $33.48 $40-$50........... 455 9.57 $41.33 6 $43.21 $50-$60........... 8 1.26 $53.63 8 $53.63 ----- ----- 2,414 1,422 ===== =====
BUSINESS COMBINATIONS During the three-year period ended December 31, 1996, the company acquired seven entities for cash and common stock valued at $423.0 plus the assumption of liabilities. The acquisitions, except 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, 1996. F-18 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 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 giving effect to the acquisitions of Best Power and Waukesha Electric as if they had been acquired at the beginning of 1994 are shown below:
YEAR ENDED DECEMBER 31, ----------------------- 1995 1994 ----------- ----------- Net sales.......................................... $1,974.3 $1,773.4 Net earnings....................................... $ 36.2 $ 90.3 Earnings per share................................. $ 0.74 $ 1.91
On November 9, 1995, the company merged with Data Switch Corporation by exchanging 1.8 million shares of 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 and consolidation costs of $12.7 ($8.1 after-tax). The transaction costs included investment banker and other professional fees. The consolidation costs included severance pay primarily for Data Switch and asset valuation adjustments. 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. The 1994 loss on disposal of these operations of $25.8 included $23.4 of tax charges primarily resulting from differences in carrying values for financial reporting and tax purposes, and from adjustments related to tax planning strategies that will not be utilized as a result of the planned disposal of the operations. From the measurement date to the end of the year, the operations incurred after-tax operating losses of $1.6. Sales of the discontinued operations from January 1, 1994 to the measurement date were $155.2. 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. Certain residual operations continue in some foreign jurisdictions. The ultimate disposition of these operations is not expected to have a material effect on the operating results of the company. During 1994, the company recognized as part of earnings from discontinued operations $6.1 of before-tax curtailment gains related to L&N's non-pension post-retirement benefits plan. F-19 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) DISPOSITION OF BUSINESS AND OTHER SPECIAL ITEMS In January 1996, the company sold Kinney Vacuum Company, a unit of the Process Controls sector, for $29.0 and recognized a pre-tax gain of $20.8. Included in the gain was a LIFO liquidation of approximately $1.1 and transaction costs of approximately $0.5. During the first quarter of 1996, the company recognized $19.7 of pre-tax charges for asset write-downs, lease termination costs and severance ($13.7), remediation for products for which the warranty period had expired ($4.0) and environmental matters ($2.0). 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. In August 1994, the company negotiated an agreement to merge with Reliance Electric Company. However, after entering into this agreement, Reliance was acquired by another corporation in a cash tender offer, with the result that the company was deprived of the benefits of the planned merger. Under the terms of the merger agreement, the company received $50.0 for break-up fees and $5.2 for partial reimbursement of expenses. The company incurred $9.0 of transaction costs in connection with the merger. During the fourth quarter of 1994, the company recognized $46.2 of charges for the consolidation of operations ($11.8), asset valuations ($24.1), environmental matters ($4.9) and other issues ($5.4), all related to the continuing operations of the company. The charges were included in cost of sales ($27.7), selling, general and administrative expenses ($16.1) and income taxes ($2.4). In 1994, the company completed the sale of the semiconductor businesses and incurred an additional $13.8 for operating losses, severance payments, idle facility costs and restructuring costs. F-20 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) 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 1996 1995 1994 1993 1992 - - --------------- -------- -------- -------- -------- -------- NET SALES: Process Controls........ $ 752.4 $ 719.7 $ 606.4 $ 545.8 $ 548.7 Electrical Controls..... 945.3 777.0 618.6 547.1 567.5 Industrial Technology... 367.3(/1/) 366.5 302.7 261.3 226.7 Dispositions............ -- -- -- -- 134.9 -------- -------- -------- -------- -------- $2,065.0 $1,863.2 $1,527.7 $1,354.2 $1,477.8 -------- -------- -------- -------- -------- OPERATING EARNINGS: Process Controls........ $ 128.9(/2/) $ 92.0 $ 66.8(/7/) $ 45.1(/8/) $ 60.5 Electrical Controls..... 86.4(/3/) 62.1(/5/) 30.7(/7/) 29.2(/8/) 43.1 Industrial Technology... 62.5(/4/) 51.1(/6/) 47.4(/7/) 44.8 33.1 Other charges and credits................ -- -- 46.2 48.0(/9/) (93.0) -------- -------- -------- -------- -------- 277.8 205.2 191.1 167.1 43.7 Equity income........... 1.1 0.9 1.0 0.2 1.9 Interest expense, net... (21.5) (24.3) (11.8) (16.6) (24.8) Unallocated expenses.... (35.0) (25.4) (20.0) (11.6) (11.3) -------- -------- -------- -------- -------- Earnings from continuing operations before income taxes........... $ 222.4 $ 156.4 $ 160.3 $ 139.1 $ 9.5 -------- -------- -------- -------- -------- IDENTIFIABLE ASSETS: Process Controls........ $ 434.9 $ 420.9 $ 391.4 $ 474.3 $ 477.0 Electrical Controls..... 700.7 692.0 399.4 326.5 330.8 Industrial Technology... 205.9 209.0 181.3 167.2 181.7 -------- -------- -------- -------- -------- 1,341.5 1,321.9 972.1 968.0 989.5 General corporate assets................. 183.1 210.3 211.8 213.1 160.3 Assets held for sale at estimated realizable value.................. 4.9 60.4 153.6 25.7 91.1 Investments in and advances to affiliates............. 21.5 20.6 20.4 18.1 17.5 -------- -------- -------- -------- -------- Total assets.......... $1,551.0 $1,613.2 $1,357.9 $1,224.9 $1,258.4 -------- -------- -------- -------- -------- DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT(/1//0/): Process Controls........ $ 17.8 $ 17.9 $ 16.6 $ 12.4 $ 12.9 Electrical Controls..... 22.1 19.0 14.5 13.0 12.3 Industrial Technology... 12.7 13.4 6.4 6.4 6.7 CAPITAL EXPENDITURES(/1//0/): Process Controls........ $ 21.8 $ 15.0 $ 28.7 $ 23.1 $ 19.7 Electrical Controls..... 25.1 21.1 21.8 22.3 19.5 Industrial Technology... 12.4 12.9 11.4 7.7 5.0
- - ------- (1) Includes $4.2 of royalty income. (2) Includes a $20.8 gain on disposition of Kinney Vacuum, a charge of $4.0 for product warranty costs and a $1.8 insurance gain on the recovery of destroyed assets. (3) Includes an $11.1 charge related to plant closure costs, asset valuations and environmental costs. (4) Includes a $4.6 charge for asset valuations and $4.2 of royalty income. (5) Includes $7.4 of one-time charges related to the acquisition of Best Power. (6) Includes $12.7 of one-time charges related to the merger with Data Switch. (7) 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. (8) 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. (9) Represents credits for the divested semiconductor operations ($53.2) and charges for the transportation businesses ($5.2). (10) Excludes discontinued operations. F-21 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) GEOGRAPHIC AREAS
1996 1995 1994 1993 1992 -------- -------- -------- -------- -------- NET SALES: United States............... $1,901.0 $1,699.8 $1,390.0 $1,218.9 $1,290.4 Foreign..................... 274.6 239.9 180.7 173.7 238.5 Intergeographic............. (110.6) (76.5) (43.0) (38.4) (51.1) -------- -------- -------- -------- -------- $2,065.0 1,863.2 $1,527.7 $1,354.2 $1,477.8 -------- -------- -------- -------- -------- OPERATING EARNINGS(/1/): United States............... $ 234.7 $ 212.0 $ 135.7 $ 113.4 $ 118.5 Other charges and credits... 20.8 (20.1) 46.2 48.0 (85.6) Foreign..................... 22.3 13.3 9.2 5.7 10.8 -------- -------- -------- -------- -------- $ 277.8 $ 205.2 $ 191.1 $ 167.1 $ 43.7 -------- -------- -------- -------- -------- IDENTIFIABLE ASSETS: United States............... $1,201.0 $1,175.6 $ 875.8 $ 822.5 $ 769.2 Foreign..................... 140.5 146.3 96.3 145.5 220.3 -------- -------- -------- -------- -------- $1,341.5 $1,321.9 $ 972.1 $ 968.0 $ 989.5 -------- -------- -------- -------- -------- Export sales to unaffiliated customers(/2/)............. $ 215.2 $ 199.1 $ 125.4 $ 110.9 $ 131.9
- - ------- (1) Excludes equity income, net interest expense and unallocated expenses. (2) Included in United States sales. SUPPLEMENTARY INFORMATION
YEAR ENDED DECEMBER 31, -------------------- 1996 1995 1994 ----- ------ ------ Liabilities assumed in conjunction with acquisitions: Fair value of assets acquired.......................... $ -- $332.1 $105.4 Cash paid.............................................. -- (280.2) (83.3) ----- ------ ------ $ -- $ 51.9 $ 22.1 ----- ------ ------ Research and development................................. $47.5 $ 46.9 $ 49.7 Advertising expense...................................... $17.9 $ 14.1 $ 10.1
F-22 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
FIRST SECOND THIRD FOURTH ------------------ ------------- ------------------ ------------- 1996 1995 1996 1995 1996 1995 1996 1995 ------ ------ ------ ------ ------ ------ ------ ------ Net sales............... $481.7 $434.1 $515.0 $446.3 $521.6 $481.1 $546.7 $501.7 Gross profit............ 130.3 125.2 157.7 132.6 165.4 144.7 175.9 152.7 Earnings from continuing operations............. 25.4 28.1 31.6 24.6 37.4 27.2 39.0 20.2 Disposal of discontinued operations............. -- -- -- (49.6) -- (14.4) -- -- ------ ------ ------ ------ ------ ------ ------ ------ Net earnings (loss)..... $ 25.4 $ 28.1 $ 31.6 $(25.0) $ 37.4 $ 12.8 $ 39.0 $ 20.2 ------ ------ ------ ------ ------ ------ ------ ------ Earnings (loss) per share of common stock: Continuing operations........... $ 0.51(/1/) $ 0.57(/3/) $ 0.64 $ 0.50(/4/) $ 0.75(/2/) $ 0.55 $ 0.78 $ 0.41(/5/) Disposal of discontinued operations........... -- -- -- (1.01) -- (0.29) -- -- ------ ------ ------ ------ ------ ------ ------ ------ Net earnings (loss)... $ 0.51 $ 0.57 $ 0.64 $(0.51) $ 0.75 $ 0.26 $ 0.78 $ 0.41 ------ ------ ------ ------ ------ ------ ------ ------ Common stock price range High.................. 37 3/4 36 3/8 40 1/8 40 44 1/4 42 1/2 44 1/2 33 7/8 Low................... 32 31 35 1/4 35 1/8 36 1/4 28 39 3/4 28 Dividends declared per share.................. $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $0.255 $ 0.24 Dividends paid per share.................. $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24
- - ------- Note: The sum of the quarters' earnings per share may not equal the full year per-share amounts. (1) Includes $0.25 of credit related to the gain on disposition of Kinney Vacuum and $0.24 of charges related to product warranty costs, plant closure costs, asset valuations and environmental costs. (2) Includes $0.05 of credit related to royalty income and $0.02 of credit related to insurance gain on the recovery of destroyed assets. (3) Includes $0.08 of credits related to non-recurring items, primarily cash settlements of royalty and insured matters. (4) Includes $0.10 of charges related to the acquisition of Best Power and $0.04 of credits related to accrual adjustments. (5) Includes $0.17 of transaction and consolidation charges related to the merger with Data Switch. F-23 GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 ---------------------------------------------------------- ADDITIONS CHARGED BALANCE AT (CREDITED) BALANCE AT BEGINNING TO COSTS AND END OF OF PERIOD EXPENSES DEDUCTIONS PERIOD ---------- ------------ ---------- ---------- (IN MILLIONS) ------------- 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)(/1/) $ -- Dispositions and special items: Consolidation of oper- ations and other..... $24.7 -- (13.9)(/1/) 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(/7/) $ 4.9 $ (5.0)(/2/) $10.6 Assets held for sale.. $ 8.6 59.5 (0.2)(/3/) $67.9 Dispositions and special items: Consolidation of oper- ations and other..... $15.9 40.4 (31.6)(/2/) 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 1994 Reserves deducted from assets: Allowance for doubtful accounts............. $10.5 $ 4.5 $ (4.9)(/2/) $10.1 Assets held for sale.. $14.4 8.6 (14.4)(/4/) $ 8.6 Dispositions and special items: Consolidation of oper- ations and other..... $ -- 19.3 (3.4)(/5/) 15.9 Acquisition related... 8.8 (1.5) (6.7)(/5/) 0.6 Semiconductor......... 13.3 (0.6) 5.4 (/5/),(/6/) 18.1 Restructuring......... 13.0 (3.5) (7.0)(/5/) 2.5 ----- ----- ------ ----- $35.1 $13.7 $(11.7) $37.1 ===== ===== ====== =====
- - ------- (1) Includes reclassification of $4.8 credit balance from assets held for sale reserve to discontinued operations reserve. (2) Write-off of bad debts, net of recoveries. Includes reclassifications in 1994 of discontinued operations to assets held for sale. (3) Reflects reclassification to accruals. (4) Charges to reserve related to businesses divested during 1994. (5) Charges to reserve for related costs incurred during the year. (6) Includes reclassification of $8.4 credit balance of GS Japan's cumulative translation adjustment as of December 31, 1994. (7) Includes $0.6 of reserves recorded by Data Switch which were consolidated effective January 1, 1995. F-24 EXHIBIT (11.0) GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
YEAR ENDED DECEMBER 31, ------------------------ 1996 1995 1994 ------- ------- ------- (IN MILLIONS, EXCEPT PER-SHARE DATA) I. Earnings (loss) per share of common stock (used for financial reporting): Continuing operations.............................. $ 133.4 $ 100.1 $ 104.1 Earnings (loss) from discontinued operations....... -- -- 2.4 Loss on disposal of discontinued operations........ -- (64.0) (25.8) ------- ------- ------- Net earnings (loss)................................ $ 133.4 $ 36.1 $ 80.7 Average number of common shares outstanding(/1/)... 49.7 49.2 47.3 Earnings (loss) per average share of common stock: Continuing operations............................ $ 2.68 $ 2.03 $ 2.20 Earnings (loss) from discontinued operations..... -- -- 0.05 Loss on disposal of discontinued operations...... -- (1.30) (0.54) ------- ------- ------- $ 2.68 $ 0.73 $ 1.71 II. Primary earnings per share (including common stock equivalents): Average number of common shares outstanding........ 49.7 49.2 47.3 Dilutive effect of outstanding options (as determined by application of the treasury stock method)........................................... 0.2 0.2 0.3 ------- ------- ------- Total shares used in calculation of primary earnings per share................................ 49.9 49.4 47.6 Primary earnings (loss) per share: Continuing operations............................ $ 2.67 $ 2.03 $ 2.19 Earnings (loss) from discontinued operations..... -- -- 0.05 Loss on disposal of discontinued operations...... -- (1.30) (0.54) ------- ------- ------- $ 2.67 $ 0.73 $ 1.70 III. Fully diluted earnings per share: Earnings (loss) from continuing operations......... $ 133.4 $ 100.1 $ 104.1 Interest expense recorded on 5.75% convertible notes............................................. 3.5 3.8 3.8 ------- ------- ------- Earnings (loss) from continuing operations used in the calculation of fully diluted earnings per share............................................. 136.9 103.9 107.9 Earnings (loss) from discontinued operations....... -- -- 2.4 Loss on disposal of discontinued operations........ -- (64.0) (25.8) ------- ------- ------- Net earnings (loss) used in the calculation of fully diluted earnings per share.................. 136.9 39.9 84.5 Average number of shares used in calculation of primary earnings per share above.................. 49.9 49.4 47.6 Additional dilutive effect of outstanding options (as determined by application of the treasury stock method)..................................... 0.1 -- -- Incremental shares from assumed conversion of 5.75% convertible notes................................. 2.5 2.5 2.5 ------- ------- ------- Total shares used in calculation of fully diluted earnings per share................................ 52.5 51.9 50.1 Fully diluted earnings (loss) per share: Continuing operations............................ $ 2.61 $ 2.00 $ 2.15 Earnings (loss) from discontinued operations..... -- -- 0.05 Loss on disposal of discontinued operations...... -- (1.23) (0.51) ------- ------- ------- $ 2.61 $ 0.77 $ 1.69 ======= ======= =======
- - ------- (1) Excludes common stock equivalents in accordance with provisions of APB Opinion No. 15 because such equivalent shares result in dilution of less than 3%. F-25 EXHIBIT (12.0) GENERAL SIGNAL CORPORATION AND CONSOLIDATED SUBSIDIARIES CALCULATIONS OF RATIOS OF EARNINGS TO FIXED CHARGES
YEAR ENDED DECEMBER 31, --------------------------------- 1996 1995 1994 1993 1992 ------ ------ ------ ------ ----- (DOLLARS IN MILLIONS) Earnings: Earnings from continuing operations before income taxes.............................. $222.4 $156.4 $160.3 $139.1 $ 9.5 Fixed charges.............................. 30.9 34.7 20.2 22.6 35.3 ------ ------ ------ ------ ----- $253.3 $191.1 $180.5 $161.7 $44.8 Fixed charges: Interest expense (gross)................... $ 24.1 $ 27.7 $ 14.4 $ 18.0 $28.6 One-third of rent expense.................. 6.8 7.0 5.8 4.6 6.7 ------ ------ ------ ------ ----- $ 30.9 $ 34.7 $ 20.2 $ 22.6 $35.3 ------ ------ ------ ------ ----- Ratio........................................ 8.20 5.51 8.94 7.15 1.27 ------ ------ ------ ------ -----
F-26 EXHIBIT (21.0) 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 Subsidiary of G.S. Building Corporation: Dual Lite Manufacturing, Inc........................... 100 Delaware General Signal (China) Co., Ltd......................... 100 China General Signal FSC, Inc................................. 100 Virgin Islands General Signal Holding Company.......................... 100 Delaware Subsidiary of General Signal Holding 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 S.E.G. SARL.............................. 100 France 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 Export Corp...................... 100 Barbados 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 India Best Power Technology Pvt. Limited............... 100 India
F-27
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 Leeds & Northrup Company................................ 100 Delaware Subsidiaries of Leeds & Northrup Company: Leeds & Northrup GmbH.................................. 100 Germany Leeds & Northrup Mexicanna, S.A........................ 100 Mexico Leeds & Northrup S.A................................... 100 Spain LDN, Ltd............................................... 100 Delaware Subsidiaries of LDN, Ltd.: Leeds & Northrup S.A.R.L.............................. 100 France L.D.N. Netherlands, B.V............................... 100 Netherlands Subsidiary of L.D.N. Netherlands, 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, Limited........................................ 50 China Sola Australia, Limited................................. 100 Australia Stock Japan, Ltd........................................ 100 Japan
F-28 2. OTHER SUBSIDIARIES The following minor foreign subsidiaries and the investment of 50 percent or less owned companies, which are not material individually or in the aggregate in relation to the financial statements, are carried at cost plus equity in undistributed earnings since acquisition.
PERCENT ORGANIZED UNDER OWNED THE LAWS OF ------- --------------- Subsidiaries of General Signal Corporation: DeZurik--India.......................................... 40 India DeZurik Japan Co., Ltd.................................. 48 Japan DeZurik Mexico, S.A. de C.V............................. 49 Mexico General Signal Corporation.............................. 100 Delaware HMS Ventures Ltd........................................ 14 California High Ridge Company, Limited............................. 100 Bermuda Industrias Sola Basic, S.A.............................. 49 Mexico Koyo Lindberg Ltd....................................... 50 Japan New Signal, Inc......................................... 100 Delaware Solamex, S.A. de C.V.................................... 48 Mexico Subsidiaries of Solamex S.A. de C.V.: Inmobiliaria S-Tres, S.A. de C.V....................... 99 Mexico Inmobiliaria S-Dos, S.A. de C.V........................ 99 Mexico Inmobiliaria Solamex, S.A. de C.V...................... 99 Mexico Productora Y Maquiladora Queretana S.A. de C.V............................................ 99 Mexico Teraski Nelson Ltd...................................... 50 Japan Maquiladora Solamex S.A. de C.V......................... 48 Mexico
F-29 EXHIBIT (23.0) 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-4 No. 33-62437) pertaining to the merger agreement with Data Switch Corporation, (Form S-8 to Form S-4 No. 33-62437-01) pertaining to stock options assumed as a result of the merger with Data Switch Corporation (Form S-3 to Form S-4 No. 33-62437-02) pertaining to the outstanding stock warrants as a result of the merger with Data Switch Corporation and related prospectuses of our report dated January 24, 1997, 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, 1996. /s/ Ernst & Young LLP Stamford, Connecticut March 20, 1997 F-30 EX-10.1 2 INCENTIVE COMPENSATION PLAN EXHIBIT 10.1 DESCRIPTION OF GENERAL SIGNAL CORPORATION ----------------------------------------- INCENTIVE COMPENSATION PLAN --------------------------- The General Signal Corporation Incentive Compensation Plan provides that key employees of the Corporation may be awarded bonuses determined annually by the Personnel and Compensation Committee (the "Committee"). Executive officers, unit presidents and senior staff managers throughout the Corporation are eligible for participation in the Incentive Compensation Plan. The Committee sets target awards using information from peer group and national compensation surveys and approves corporate and business unit performance goals. Each participant is assigned a competitive "target" percentage of base salary based on the individual's salary grade level. The current basis for award payments is corporate and business unit performance as measured by economic value added, which equals the dollar amount arrived at by taking net operating profit after tax, adjusting for certain noncash elements included therein, and subtracting a charge for the use of capital needed to generate that profit. The bonuses awarded to the executive officers reflect the achievement of consolidated unit and corporate performance goals, and the bonuses awarded to unit presidents reflect the performance of their individual units. The actual awards determined by the Committee for the Chief Executive Officer and other individuals who are named in the Summary Compensation Table of the Corporation's Annual Proxy Statement to Shareholders for any year are made under the Corporation's Senior Executive Incentive Compensation Plan. EX-10.2 3 SENIOR EXEC. INCENTIVE COMPENSATION PLAN EXHIBIT 10.2 GENERAL SIGNAL CORPORATION SENIOR EXECUTIVE INCENTIVE COMPENSATION PLAN* 1. PURPOSE The purpose of the General Signal Corporation Senior Executive Incentive Compensation Plan (the "Plan") is to provide senior executives of General Signal Corporation and its subsidiaries (the "Corporation") with incentive compensation based upon the achievement of established performance goals. 2. ADMINISTRATION The Plan shall be administered by a committee of not less than three (3) members appointed annually by the Board of Directors (the "Committee"). The Committee, which may but need not be the Personnel and Compensation Committee, shall be composed of members of the Board of Directors who are "outside directors" within the meaning of Section 162(m) of the Internal Revenue Code (the "Code"), and who are not eligible to participate or to receive any benefits pursuant to the Plan. The Committee shall have full power to administer and interpret the Plan and to establish rules for its administration. The Committee may designate employees of the Corporation to act in its behalf to engage in daily administration of the Plan. The Committee, in making any determination under or referred to in the Plan shall be entitled to rely on opinions, reports or statements of officers or employees of the Corporation and other entities and of counsel, public accountants and other professional expert persons. 3. ELIGIBILITY Eligibility for the Plan shall be limited to the Chief Executive Officer of the Corporation and any other individual employed by the Corporation at the end of any Plan Year who appears in the Summary Compensation Table of the Corporation's Proxy Statement to Shareholders for that Plan Year. Individuals eligible to participate in the Plan are herein called "Participant(s)". 4. AWARDS Each Participant shall be eligible to receive a share of an incentive compensation pool; provided, however, that the Committee shall have full discretion to reduce or eliminate the share for any Participant for any Plan Year. The incentive compensation pool for any Plan Year shall equal 5% of operating earnings of the Corporation for that Plan Year and it shall be based on reported operating earnings in the Corporation's financial statements included in the Corporation's Annual Report to Shareholders. The financial statements shall be prepared in accordance with generally accepted accounting principles and shall be audited by the Corporation's external auditors. For purposes of this Plan, reported operating earnings may be adjusted to exclude or include items of an unusual, non-recurring or extraordinary nature as shall be specifically defined by the Committee prior to the end of the first quarter of the Plan Year. In the event that the Committee pays out *Approved by shareholders on April 20, 1995 1 less than the amount of the incentive compensation pool for any Plan Year, the amount which is not paid out may, at the Committee's sole discretion, be added to the incentive compensation pool that is available for any subsequent Plan Year or Years. Each Participant shall be eligible to receive a maximum award of 30% of the incentive compensation pool for the applicable Plan Year. By the end of the first quarter of each Plan Year, the Committee shall approve the amount of each Participant's share of the incentive compensation pool. Following each Plan Year, the Committee shall certify the total amount of the incentive compensation pool. In determining the amount to be paid to a Participant, the Committee shall consider a number of performance factors based on individual merit and on the level of achievement of the earnings-per-share goal and the progress in carrying out the Corporation's objectives and strategies. Awards under the Plan shall be paid in cash as soon as practicable after the Plan Year, except to the extent deferred pursuant to the General Signal Corporation Deferred Compensation Plan. 5. MISCELLANEOUS PROVISIONS Amendment of the Plan. The Board of Directors shall have the right to suspend or terminate this Plan at any time and may amend or modify the Plan prior to the beginning of any Plan Year. Assignment or Transfer. No opportunity shall be assignable or transferable by a Participant. Costs and Expenses. The costs and expenses of administering the Plan shall be borne by the Corporation and shall not be charged against any Participant. Effect on Employment. Nothing contained in this Plan or any agreement related hereto or referred to herein shall affect or be construed as affecting, the terms of employment of any Participant except to the extent specifically provided herein or therein. Nothing contained in this Plan or any agreement related hereto or referred to herein shall impose, or be construed as imposing, any obligation on (a) the Corporation to continue the employment of any Participant and (b) any Participant to remain in the employ of the Corporation. Effective Date. Subject to shareholder approval, this Plan shall be effective as of January 1, 1995. Governing Law. The Plan shall be governed by the laws of the State of New York and applicable federal laws. Other Incentive Plans. The adoption of the Plan does not preclude the adoption by appropriate means of any other incentive plan for employees. 2 Plan Year. "Plan Year" means the calendar year commencing January 1, 1995, and each calendar year thereafter. Taxation. The Corporation shall have the right to deduct from any award to be paid under the Plan any federal, state or local taxes required by law to be withheld with respect to such payment. 3 EX-10.4 4 DEFERRED COMPENSATION PLAN FOR DIRECTORS EXHIBIT 10.4 GENERAL SIGNAL CORPORATION DEFERRED COMPENSATION PLAN FOR DIRECTORS* 1. PURPOSE AND ELIGIBILITY ----------------------- This Plan provides Directors of General Signal Corporation (the "Corporation") who are not employees of the Corporation the opportunity to defer all or a portion of their cash compensation ("Compensation"). 2. ELECTION -------- A Director may at any time elect to defer receipt of all or a portion of Compensation not yet earned. Such election shall be in writing, shall specify the form of deferral and the method of payment of deferred amounts in accordance with paragraphs 3 and 4, and shall continue until amended or terminated by written notice delivered to the Corporation. Such notice of amendment or termination shall not affect previously deferred Compensation; provided, however, that a Director may irrevocably elect in writing to change the method and/or commencement date of payment. This election must occur at least one year prior to the date payment of deferred compensation is to commence and have a commencement date no earlier than the date originally elected. In connection with the termination of the Retirement Plan for Directors of General Signal Corporation as of December 31, 1996, each current Director may irrevocably elect to transfer the lump sum value as of December 31, 1996 of his/her accrued benefits under the Retirement Plan to an account under this Plan. 3. MAINTENANCE OF DEFERRED ACCOUNTS -------------------------------- (a) Compensation which is deferred shall be credited to the Director's account ("Account") maintained on the books of the Corporation as of the date on which such Compensation would have been paid (the "Payment Date"). The amount of the Compensation so credited shall thereafter be adjusted, in accordance with each Director's election, either by treating such amount as cash generating interest as described in (i) below or as Units based on the value of the Corporation's common stock (the "Stock") as described in (ii) below: (i) As cash plus interest: interest shall be credited annually, calculated on the basis of the balance in the Account on December 31 at a rate based upon the prior year's December average annual yield for Long-Term Government Bonds (10-20 years) as published by an official agency to be determined by the Vice President-Finance and utilized on a consistent year-to- year basis; or (ii) As Units based on the value of the shares of the Stock: the number of Units credited from time to time to each Account shall be: - with respect to Compensation deferred: The number obtained by dividing the amount of Compensation which would have been paid on the Payment Date by the closing price of the Stock on the New York Stock Exchange (the "Stock Price") on the last business day of such month; * As amended and restated December 12, 1996. - with respect to cash dividends: The number obtained by multiplying the number of Units in the Account by any cash dividends declared by the Corporation on the Stock and dividing the product by the Stock Price on the related dividend record date to derive at the incremental shares to be credited to the Account; and - with respect to stock dividends: the number obtained by multiplying the number of Units in the Account by the stock dividend declared. (b) The number of Units credited to each Account shall be appropriately adjusted to take into account any changes in the number of outstanding shares of Stock resulting from split-ups or combinations of shares or recapitalization. 4. PAYMENT OF DEFERRED AMOUNTS --------------------------- (a) All amounts credited to a Director's Account shall be paid to the Director in cash, as elected by the Director, either: (i) in a lump sum on a date specified by the Director and in an amount equal to the value of the cash or Units then credited to the Director's Account, or (ii) in quarterly or annual installments over such period and commencing at such time as the Director shall have elected, each installment being equal to the value of the cash or Units then credited to the Account divided by the number of installments remaining to be paid. The value of each Unit shall be equal to the Stock Price on the last business day of the month preceding the date on which a payment is made. (b) In the event of a Director's death, all amounts credited to Director's Account as of the Director's date of death shall be paid promptly in a lump sum to the Beneficiary designated on the Director's election form, or, if none, to the Director's estate. 5. NON-ASSIGNMENT -------------- No right to receive payments under this Plan shall be transferable or assignable by a Director except by will or in accordance with the laws of descent and distribution. 6. EFFECTIVE DATE AND TERMINATION ------------------------------ This Plan, as amended and restated, shall be effective with respect to any Compensation earned by a Director after December 12, 1996, and may be amended or terminated at any time by resolution of the Board, but no amendment or termination shall affect amounts previously credited to Directors' Accounts. EX-10.5 5 CHANGE IN CONTROL SEVERANCE PAY PLAN EXHIBIT 10.5 GENERAL SIGNAL CORPORATION CHANGE IN CONTROL SEVERANCE PAY PLAN As Amended and Restated June 20, 1996 GENERAL SIGNAL CORPORATION CHANGE IN CONTROL SEVERANCE PAY PLAN Table of Contents ----------------- Section Page - - ------- ---- 1 Purpose........................................... 1 2 Definitions....................................... 1 3 Benefits.......................................... 3 4 Payments.......................................... 5 5 Administration of the Plan........................ 5 6 Litigation Expenses............................... 6 7 Amendment, Suspension, or Termination of the Plan 6 8 Miscellaneous..................................... 6 SECTION 1. PURPOSE The purpose of the General Signal Corporation Change in Control Severance Pay Plan is to encourage Employees to make and continue careers with General Signal Corporation by providing eligible Employees with certain severance pay benefits upon such Employees' Involuntary Termination of employment following a Change in Control, as set forth herein. This Plan was adopted by the Board of Directors on February 12, 1987 and was amended from time to time thereafter. SECTION 2. DEFINITIONS When used herein the following terms shall have the following meanings: 2.1 "Board of Directors" means the Board of Directors of General Signal Corporation. 2.2 "Change in Control" shall be deemed to have occurred if: (a) the shareholders of the Corporation approve a merger or consolidation of the Corporation with any other corporation, other than a merger or consolidation which would result in the Voting Securities of the Corporation held by such shareholders outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by converting into Voting Securities of the surviving entity) at least 51 percent of the total voting power represented by the Voting Securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation; (b) the shareholders of the Corporation approve an agreement providing for the sale, exchange or other disposition of all or substantially all the assets of the Corporation for the securities of another entity, cash or other property; (c) the shareholders of the Corporation approve a plan of liquidation or dissolution of the Corporation; (d) any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended), other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation or other than a corporation owned directly or indirectly by the shareholders of the Corporation in substantially the same proportions as their ownership of Voting Securities of the Corporation, is or becomes the "beneficial owner" (as defined in Rule 13d-3 under said Act), directly or indirectly, of Voting Securities of the Corporation representing at least 20 percent of the total voting power represented by the Voting Securities of the Corporation then outstanding; or - 1 - (e) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors of the Corporation and any new director whose election by the Board of Directors of the Corporation or nomination for election by the Corporation's shareholders was approved by a vote of at least two thirds of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute a majority thereof. 2.3 "Corporate Pension Board" means the Corporate Pension Board provided for in Section 5. 2.4 "Corporation" means General Signal Corporation and its successors and assigns. 2.5 "Employee" means any executive officer of the Corporation, any exempt salaried employee in Position Level 15 or above employed at the Corporation's headquarters in Connecticut and any President of a unit of the Corporation; provided, however, that an Employee shall not include any employee who has a severance agreement with the Corporation providing for a designated termination date set forth in such agreement. 2.6 "Involuntary Termination" shall mean any termination of an Employee's employment by the Corporation, or by one of its subsidiaries, within two years after a Change in Control; provided, however, such term shall not include a termination by the Corporation or any of its subsidiaries, for (i) serious, willful misconduct in respect of the Employee's obligations to the Corporation or its subsidiaries, which has caused demonstrable and serious injury to the Corporation, monetary or otherwise, as evidenced by a determination in a binding and final judgment, order or decree of a court or administrative agency of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal, in an action, suit or proceeding, whether civil, criminal, administrative or investigative; or (ii) conviction of a felony, which has caused demonstrable and serious injury to the Corporation, monetary or otherwise, as evidenced by binding and final judgment, order, or decree of a court of competent jurisdiction, in effect after exhaustion or lapse of all rights of appeal. In addition to actual termination of employment, as and when so declared to be by the Employee the following shall be deemed an Involuntary Termination: (i) a reduction or change in an Employee's responsibilities, duties, authority, powers, functions, title, working conditions or status from those in effect immediately prior to the Change in Control; or (ii) a reassignment to another geographic location more than 50 miles from the Employee's place of employment immediately prior to the Change in Control; or (iii) a reduction in base salary and incentive compensation, if any, from those in effect immediately prior to the Change in Control. For purposes of the preceding sentence, a reduction in incentive compensation will be deemed to have occurred if and only if the percentage of salary paid as incentive compensation under the Corporation's Incentive Compensation Plan for any calendar year is less than the average percentage of salary paid to the Employee as incentive compensation under such Plan for the three calendar years preceding the Change in Control. - 2 - Notwithstanding the foregoing, an Employee's failure to object in writing to the changes listed in subsections (i), (ii) and (iii) within 180 days of any such change shall constitute a waiver of such change being deemed an Involuntary Termination. 2.7 "Plan" means the General Signal Corporation Change in Control Severance Pay Plan as may be amended from time to time. 2.8 "Subsidiary" means a "subsidiary corporation" as defined in Section 425(f) of the Internal Revenue Code of 1986, as now in effect or as hereafter amended. 2.9 "Voting Securities" means any securities of the Corporation which vote generally in the election of directors. SECTION 3. BENEFITS 3.1 In the event of Involuntary Termination of any Employee who is an executive officer of the Corporation, the Corporation shall pay such officer 36 months of Compensation. 3.2 In the event of Involuntary Termination of any Employee who is not an executive officer of the Corporation or a President of a unit of the Corporation, the Corporation shall pay such person 24 months of Compensation. 3.3 In the event of Involuntary Termination of any President of a unit of the Corporation, the Corporation shall pay such person 12 months of the Employee's annual base salary in effect immediately prior to the date of Involuntary Termination. 3.4 For purposes of this Section, Compensation is calculated using the Employee's annual base salary in effect immediately prior to the date of Involuntary Termination plus the average of the three highest payments made to the Employee under the Corporation's Incentive Compensation Plan or any other applicable bonus plans in the five calendar years preceding the calendar year of Involuntary Termination. 3.5 Any payments pursuant to Sections 3.1, 3.2 or 3.3 of this Plan shall be paid in a lump sum within thirty (30) days following Involuntary Termination and such payments shall be reduced by the amount paid to the Employee pursuant to any other severance pay policy of the Corporation. 3.6 Within thirty (30) days following Involuntary Termination, the Corporation shall pay to an Employee described in Sections 3.1 or 3.2 a lump sum cash amount equal to the present value of the retirement benefit the Employee would have been entitled to receive under the terms of the Corporate Retirement Plan for Employees of General Signal Corporation as in effect on the day - 3 - preceding the Change in Control (without regard to vesting thereunder) and the Benefit Equalization Plan as in effect on the day preceding the Change in Control had the Employee accumulated additional service equal to the period for which the Employee is paid under Sections 3.1 or 3.2 of this Plan. For purposes of calculating the lump sum cash payments provided by this Section, the present value shall be determined by using the lump sum factors contained in such Corporate Retirement Plan on the date of Involuntary Termination. 3.7 Within thirty (30) days following Involuntary Termination, the Corporation shall pay to an Employee described in Sections 3.1 or 3.2 a lump sum cash amount equal to the present value of the aggregate Matching Contributions that would have been made by the Corporation under the terms of the General Signal Corporation Savings and Stock Ownership Plan as in effect on the day preceding the Change in Control if the Employee had continued to be employed and to participate in such Savings Plan to the same extent as he participated in the year of such Involuntary Termination during the period for which the Employee is paid under Sections 3.1 or 3.2 of this Plan. For purposes of calculating the lump sum cash payments provided by this Section, the present value shall be determined by using the Pension Benefit Guaranty Corporation interest rate for immediate annuities on the date of Involuntary Termination. 3.8 During the period for which an Employee is paid under Sections 3.1 or 3.2 of this Plan, the Employee shall be deemed to be on layoff status and continue to be entitled to all benefits and service credit for benefits under medical, insurance, and other welfare benefit plans, programs and arrangements of the Corporation as if he were actively employed during such period (including meeting any age and service requirements for post retirement benefits). With respect to such welfare benefit plans, an Employee shall be entitled to purchase continued coverage for himself and all covered family members and the Corporation shall arrange for, and make available, such coverage as of his Involuntary Termination. Such coverage shall be no less in scope than that provided to the covered Employee (and covered family members) at the time of Change in Control. The cost of such coverage shall be shared by the Corporation and the Employee in the same proportion as exists at the time of Change in Control. With respect to medical (including HMO) and dental coverage, such coverage shall be in lieu of the Corporation's practice of affording health care continuation coverage to terminating employees and covered family members pursuant to the Consolidated Omnibus Reconciliation Budget Act of 1986, as amended, ("COBRA"), to the extent that the availability of such coverage to such Employee (and covered family members) satisfies the Corporation's legal obligations under COBRA. 3.9 If, by reason of the requirements for tax qualification or any other reason, benefits or service credits under any welfare benefit plan shall not be payable or provided under any such plan to the Employee or his dependents, beneficiaries or estate despite the provisions of Section 3.8 above, the Corporation itself shall, to the extent necessary, pay or provide for payment of such benefits and service credit for such benefits to the Employee or his dependents, beneficiaries or estate. - 4 - SECTION 4. PAYMENTS 4.1 All severance payments shall be made from the general assets of the Corporation; provided, however, that such payments shall be reduced by the amount of any payments made to an Employee from any trust or special or separate fund established by the Corporation to assure such payments. The Corporation shall not be required to establish a special or separate fund or other segregation of assets to assure such payments, and, if the Corporation shall make any investments to aid it in meeting its obligations hereunder, Employees shall have no right, title or interest whatever in or to any such investments except as may otherwise be expressly provided in a separate written instrument relating to such investments. Nothing contained in this Plan, and no action taken pursuant to its provisions, shall create or be construed to create a trust of any kind between the Corporation and any Employees. To the extent that any Employee acquires a right to receive payments from the Corporation hereunder, such right shall be no greater than the right of an unsecured creditor of the Corporation. 4.2 The Corporation may deduct from severance payments any Federal, state or local withholding or other taxes or charges which is required to deduct under applicable laws. SECTION 5. ADMINISTRATION OF THE PLAN 5.1 The Corporate Pension Board shall have general responsibility for the administration and interpretation of the Plan. 5.2 The Corporate Pension Board may arrange for the engagement of such legal counsel, who may be counsel for the Corporation, and make use of such agents and clerical or other personnel as it shall require or may deem advisable for purposes of the Plan. The Corporate Pension Board may rely upon the written opinions of such counsel, may delegate to any agent or to any sub-committee or member of the Corporate Pension Board its authority to perform any act, including without limitation those matters involving the exercise of a discretion; provided, however, that such delegation shall be subject to revocation at any time at the discretion of the Corporate Pension Board. 5.3 If any claim for benefits under the Plan is wholly or partially denied, the Corporate Pension Board 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 Pension Board. 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 Pension Board shall also advise the claimant that he or his duly authorized representative may request a review by the Corporate Pension Board of the decision to deny the claim by filing with the Corporate Pension Board, within 65 days after such notice has been received by the claimant, a written request for such review. The claimant may review pertinent - 5 - 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 Board within 60 days after receipt of such request, unless special circumstances (including, but not limited to, a need to hold a hearing) require an extension of time for processing, in which case a decision shall be rendered not later than 120 days after receipt of the request for review. The claimant shall be given written notice within such 60 day period of the decision resulting from such review, which shall include specific reasons for the decision, written in a manner calculated to be understood by the claimant, and specific references to the pertinent Plan provisions on which the decision was based. SECTION 6. LITIGATION EXPENSES 6.1 In the event of any litigation or other proceeding between the Corporation and the Employee with respect to the subject matter of this Plan and the enforcement of his rights hereunder, the Corporation shall reimburse the Employee for all of his reasonable costs and expenses relating to such litigation or other proceeding, including his reasonable attorney's fees and expenses, provided that such litigation or proceeding results in any (a) settlement requiring the Corporation to make a payment to the Employee, or (b) judgment or order in whole or in part in favor of the Employee, regardless of whether such judgment or order is subsequently reversed on appeal or in a collateral proceeding. In no event shall the Employee be required to reimburse the Corporation for any of the costs and expenses relating to such litigation or other proceeding. The obligation of the Corporation under this section shall survive the termination for any reason of this Plan. SECTION 7. AMENDMENT, SUSPENSION, OR TERMINATION OF THE PLAN 7.1 At any time prior to the occurrence, if any, of a Change in Control, the Board of Directors shall have the power to amend, suspend or terminate the Plan in whole or in part and for any reason. 7.2 For at least two years after the occurrence of a Change in Control, the Plan may not be amended, suspended or terminated. SECTION 8. MISCELLANEOUS 8.1 Nothing contained in the Plan shall give any Employee the right to be retained in the employment of the Corporation or any of its affiliated or associated corporations or affect the right of any such Employer to dismiss any Employee. 8.2 If the Corporate Pension Board shall find that any person to whom any amount is payable under the Plan is unable to care for his or her affairs because of illness or accident, or is a minor, or has died, then any payment due him or her or his or her estate (unless a prior claim therefor - 6 - has been made by a duly appointed legal representative) may, if the Corporate Pension Board so elects, be paid to his or her spouse, a child, a relative, an institution maintaining or having custody of such person, or any other person deemed by the Corporate Pension Board to be a proper recipient on behalf of such person otherwise entitled to payment. Any such payment shall be a complete discharge of the liability of the Plan therefor. 8.3 Except insofar as may otherwise be required by law, no amount payable at any time under the Plan shall be subject in any manner to alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind or in any manner be subject to the debts or liabilities of any person and any attempt so to alienate or subject any such amount, whether at the time or thereafter payable, shall be void. If any person shall attempt to, or shall, alienate, sell, transfer, assign, pledge, attach, charge or otherwise encumber any amount payable under the Plan, or any part thereof, or if by reason of his or her bankruptcy or other occurrence at any time such amount would be made subject to his debts or liabilities or would otherwise not be enjoyed by him or her, then the Corporate Pension Board, if it so elects, may direct that such amount be withheld and that the same amount or any part thereof be paid or applied to or for the benefit of such person, in such manner and proportion as the Corporate Pension Board may deem proper. 8.4 The captions preceding the Sections of the Plan have been inserted solely as a matter of convenience and in no way define or limit the scope or intent of any provisions of the Plan. 8.5 The Plan and all rights thereunder shall be governed by and construed in accordance with the laws of the State of New York. - 7 - EX-10.8 6 1996 STOCK INCENTIVE PLAN EXHIBIT 10.8 GENERAL SIGNAL CORPORATION 1996 STOCK INCENTIVE PLAN* 1. PURPOSE The purpose of this Plan is to offer as an additional incentive to the officers and other designated employees most responsible for the growth and success of General Signal Corporation (the "Corporation") the opportunity to increase their proprietary interest in the Corporation under conditions which will encourage their continued employment in the service of the Corporation. In addition, this Plan provides an opportunity for non-employee directors to increase their interest as shareholders of the Corporation, which serves to align the interests of non-employee directors with other shareholders. 2. ADMINISTRATION The portion of this Plan with respect to options, restricted stock, performance shares and performance units applicable to employees shall be administered by a Committee of not less than two (2) members appointed annually by the Board of Directors. The Committee, which may but need not be the Personnel and Compensation Committee, shall be composed of members of the Board of Directors who are not eligible to receive awards applicable to employees under this Plan. The Committee shall act by a majority vote or by a written statement signed by a majority of the members. Subject to the express provisions of this Plan, the Committee shall determine the individuals to whom, and the time or times at which awards shall be granted, the number of shares or units to be subject to each award and other terms and conditions thereof. The portion of this Plan with respect to non-employee directors shall be administered by the Secretary of the Corporation. Since the restricted stock is based on deferral elections by non-employee directors, this function will be limited to matters of interpretation and administrative oversight. 3. STOCK SUBJECT TO PLAN The shares to be issued under this Plan shall be made available, at the discretion of the Board of Directors or the Committee, either from the authorized but unissued shares of Common Stock of the Corporation or from shares of Common Stock reacquired by the Corporation, including shares purchased in the open market. Subject to adjustment as provided in the last paragraph of this Section 3: (a) the aggregate number of shares of Common Stock reserved and available for issuance under this Plan, subject to Section 3(b) below, shall be 2,400,000 shares; and (b) the shares available for granting awards in any year shall be increased by any shares represented by options or other awards granted under this Plan or the Corporation's 1992 Stock Incentive Plan which have been cancelled, terminated, forfeited or expire unexercised for any reason. In the event that the number of outstanding shares of Common Stock of the Corporation shall be changed by reason of split-ups or combinations of shares or recapitalization or by reason of stock dividends or equity distributions, the number of shares for which awards may thereafter be granted under this Plan in the aggregate and to any single participant, the number of shares then subject to awards theretofore granted *Approved by shareholders on April 18,1996. under this Plan, and the price per share payable upon exercise of such awards, shall be appropriately adjusted as determined by the Board of Directors so as to reflect such change. Awards may also contain provisions for their continuation or for other equitable adjustments after changes in shares of Common Stock resulting from reorganization, sale, merger, consolidation or similar occurrence. Options assumed in acquiring another company shall not count against the shares available for granting awards under this Plan. 4. ELIGIBILITY AND PARTICIPATION Awards of options, restricted stock, performance shares and performance units applicable to employees may be granted only to officers and other designated employees of the Corporation and of its subsidiaries, present and future. A director of the Corporation who is not also an officer or other employee of the Corporation or of one of its subsidiaries ("Eligible Director") will be eligible only with respect to the provisions of this Plan concerning the deferral of directors' fees into restricted stock. 5. STOCK OPTIONS Grant Subject to the provisions of this Plan, the Committee shall have sole and complete authority to determine the persons to whom options shall be granted, the number of shares to be covered by each option and the conditions and limitations, if any, in addition to those set forth in this Section 5, applicable to such options. At the discretion of the Committee, options may be granted to replace shares of the Corporation's Common Stock used as part or all of the purchase price of other options under this Plan or any other stock option plan of the Corporation. Subject to adjustment as provided in the last paragraph of Section 3, the maximum number of shares of Common Stock with respect to which any option or options may be granted to any optionee in any one taxable year of the Corporation shall not exceed 300,000 shares under this Plan or any other stock option plan of the Corporation. Option Prices The purchase price of the Common Stock under each option shall be not less than 100% of the fair market value of the stock on the date the option is granted. Stock options shall not be repriced, i.e., there shall be no grant of an option to an optionee in exchange for an optionee's agreement to cancellation of a higher-priced stock option that was previously granted to such optionee. The purchase price is to be paid in full upon the exercise of the option, and payment shall be made in cash, or by check, bank draft or money order payable to the order of the Corporation, or, with the approval of the Committee, by delivering shares of Common Stock of the Corporation of equivalent fair market value on the date the option is exercised. Fair market value shall be the closing price on the New York Stock Exchange or, in the event that no sale shall have taken place, the mean between the closing bid and asked prices. If the Committee grants any incentive stock options, within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), the aggregate fair market value, determined at the time such option is granted, of the shares with respect to which such options are exercisable for the first time by any one employee during any calendar year (under this Plan and any other plan which is maintained by the Corporation or its subsidiaries and which provides for the granting of such options) shall not exceed $100,000. 2 Form of Option Options granted pursuant to this Plan to employees shall be evidenced by Stock Option Agreements in such form as the Committee shall from time to time adopt. Options may, but need not, be subject to such terms and conditions as will qualify their holders for special Federal income tax treatment pursuant to any provision of the Code. Each option granted under this Plan shall be exercisable on such date or dates and during such period and for such number of shares as shall be determined pursuant to the provisions of the Stock Option Agreement with respect to such option; provided, however, that no option shall be exercised later than ten years from the date of grant of the option. In any event, all options granted hereunder shall terminate and expire upon the first to occur of the following events: (a) the termination date specified in the option agreement; (b) the date an optionee ceases to be employed by the Corporation or its subsidiaries other than by reason of death or retirement; provided, however, that the Committee may permit an additional period of up to one (1) year to exercise an option from the date an optionee ceases to be employed involuntarily by the Corporation or its subsidiaries; and (c) the expiration of one (1) year from the date of an optionee's death if his or her death occurs at a time when the optionee is in the employ of the Corporation or a subsidiary. After termination of employment for any reason, an optionee, or his or her legal representative, may exercise, subject to the above time limitations, only that portion of the option which the optionee has a right to exercise on such date of termination unless the Stock Option Agreement specifically allows a greater portion of the option to continue to become exercisable within such time limitations. The Committee may in its sole discretion include in any option granted pursuant to this Section 5 a provision to the effect that, in the event of a change in control of the Corporation (as such term may be defined by the Committee), either of the following shall occur: (i) each outstanding option shall be cancelled at such time as the Committee shall specify, and in lieu thereof the participant shall have a right to receive cash payments or shares in such amounts and subject to such vesting and payout terms as the Committee may prescribe, or (ii) each outstanding option shall become fully exercisable subject to such terms and conditions as the Committee may prescribe. Compensation in Lieu of Exercise Upon written application of an optionee, the Corporation may, with the approval of the Committee, substitute for the exercise of an option compensation to the optionee not in excess of the difference between the option price and the fair market value, determined in accordance with this Section 5, of the shares covered by such written application as of the date thereof. Such compensation may be in cash or shares of Common Stock of equivalent fair market value, or both, as the Committee may determine. In the event compensation is substituted pursuant to this Section 5 for the exercise, in whole or in part, of an option, the option shall be reduced by the option shares for which such compensation is substituted, and such shares shall again be available for awards under this Plan. Notwithstanding anything to the contrary contained herein, for the purpose of determining the difference between the option price and the fair market value to optionees who request such substitution, such fair market value shall be deemed to be the closing sale price of the Corporation's Common Stock on the New York Stock Exchange on the date of such request or, with respect to requests during the period beginning on the third business day following the date of release by the Corporation of its quarterly financial results and ending on the twelfth business day following the date of 3 such release, such fair market value shall be determined by the Committee but shall not exceed the highest closing price or be less than the lowest closing price of the Corporation's Common Stock on the New York Stock Exchange during such period. Non-Transferability of Option No option granted under this Plan to any employee shall be transferable otherwise than by will or the laws of descent and distribution, and an option may be exercised during the lifetime of the holder thereof, only by such holder; provided, however, that the Committee may permit limited transferability in conformance with rules promulgated by the Securities and Exchange Commission. 6. RESTRICTED STOCK Grant Subject to the provisions of this Plan, the Committee shall have sole and complete authority to determine the officers and other employees to whom, and the time or times at which, grants of restricted stock will be made, the number of shares to be awarded, the time or times within which such awards may be subject to forfeiture, and all other terms and conditions of the awards. Restricted stock awards granted pursuant to this Plan shall be evidenced by a Restricted Stock Agreement in such form as the Committee shall from time to time adopt. The Committee may condition the lapse of restrictions on restricted stock upon continued employment and the attainment of specified performance goals or such other factors as the Committee may determine, in its sole discretion. The Committee must certify in writing prior to the lapse of restrictions conditioned on attainment of performance goals that such performance goals were in fact satisfied. Restrictions and Conditions The shares of restricted stock awarded pursuant to this Section 6 shall be subject to the following restrictions and conditions: (a) During a period set by the Committee commencing with the date of such award (the "Restriction Period"), the participant shall not be permitted to sell, transfer, pledge or assign shares of restricted stock awarded under the Plan. Within these limits, the Committee, in its sole discretion, may provide for the lapse of such restrictions in installments and may accelerate or waive such restrictions in whole or in part, based on service, performance and/or such other factors or criteria as the Committee may determine; provided, however, that the Restricted Stock Agreement may preclude discretion to accelerate or waive restrictions. (b) Except as provided in paragraph (a) above, the participant shall have, with respect to the shares of restricted stock, all of the rights of a shareholder of the Corporation, including the right to vote the shares, and the right to receive any cash dividends; (c) Upon termination of a participant's employment with the Corporation or any subsidiary for any reason during the Restriction Period, shares still subject to restriction will vest, or be forfeited, in accordance with the terms and conditions established by the Committee in the Restricted Stock Agreement; and 4 (d) If and when the Restriction Period expires without a prior forfeiture of the restricted stock subject to such Restriction Period, certificates for an appropriate number of unrestricted shares of stock shall be delivered promptly to the participant, and the certificates for the shares of restricted stock shall be cancelled. The Committee may in its sole discretion include in any restricted stock award pursuant to this Section 6 a provision to the effect that, in the event of a change in control of the Corporation (as such term may be defined by the Committee), either of the following shall occur: (i) such restricted stock (to the extent not vested) shall be forfeited at such time as the Committee shall specify, and in lieu thereof the participant shall have a right to receive cash payments in such amounts and subject to such vesting and payout terms as the Committee may prescribe, or (ii) the restrictions on such restricted stock shall lapse subject to such terms and conditions as the Committee may prescribe. 7. PERFORMANCE SHARES AND PERFORMANCE UNITS Grant Subject to the provisions of this Plan, the Committee shall have sole and complete authority to determine the officers and other employees to whom, and the time or times at which, grants of performance shares or performance units will be made, the number of shares or units to be awarded, the time or times within which such awards may be subject to forfeiture, and all other terms and conditions of the awards. Performance shares or performance unit awards granted pursuant to this Plan shall be evidenced by a Performance Share or Performance Unit Agreement in such forms as the Committee shall from time to time adopt. Performance Period The Committee shall determine a performance period (the "Performance Period") of one or more years and shall determine the performance objectives for grants of performance shares and performance units. Performance objectives may vary from participant to participant and shall be based upon such performance criteria as the Committee may deem appropriate. Performance Periods may overlap and participants may participate simultaneously with respect to performance shares and performance units for which different Performance Periods are prescribed. Award Value At the beginning of a Performance Period, the Committee shall determine for each participant or group of participants with respect to that Performance Period the range of number of shares, if any, in the case of performance shares, and the range of dollar values, if any, in the case of performance units, which may be fixed or may vary in accordance with such performance or other criteria specified by the Committee, which shall be paid to a participant as an award if the relevant measure of performance of the Corporation for the Performance Period is met. Significant Events If during the course of a Performance Period there shall occur significant events as determined by the Committee which the Committee expects to have a substantial effect on a performance objective during such period, the Committee may revise such objective; provided, however, that, if a Performance Share and Performance Unit Agreement so provides, the Committee shall not have any discretion to increase the 5 amount of compensation payable under the award to the extent such an increase would cause the award to lose its qualification as performance-based compensation for purposes of Section 162(m)(4)(c) of the Code and the regulations thereunder. Forfeiture Except as otherwise determined by the Committee, at the date of grant or thereafter, upon termination of employment during the applicable Performance Period, performance shares and performance units for which the Performance Period was prescribed shall be forfeited; provided, however, that the Committee may provide in any Performance Share or Performance Unit Agreement that restrictions or forfeiture conditions relating to performance shares and performance units will be waived in whole or in part in the event of terminations resulting from specified causes. The Committee may in its sole discretion include in any performance share or performance unit award pursuant to this Section 7 a provision to the effect that, in the event of a change in control of the Corporation (as such term may be defined by the Committee), either of the following shall occur: (i) such performance share or performance unit (to the extent not vested) shall be forfeited at such time as the Committee shall specify, and in lieu thereof the participant shall have a right to receive cash payments or shares in such amounts and subject to such vesting and payout terms as the Committee may prescribe, or (ii) such performance share or performance unit (to the extent not vested) shall vest subject to such terms and conditions as the Committee may prescribe. Non-transferability Performance shares and performance units may not be sold, transferred, pledged or assigned prior to payment and the lapse of any restrictions. Payment Each performance share or performance unit may be paid in whole shares, or cash, or a combination of shares and cash either as a lump sum payment or in installments, all as the Committee shall determine, at the time of grant of the performance share or performance unit or otherwise, commencing as soon as practicable after the end of the relevant Performance Period. The Committee must certify in writing prior to payment that the performance goals and any other material terms were in fact satisfied. 8. DIRECTORS' FEES Deferral of Regular Cash Compensation into Restricted Stock Each Eligible Director may elect to reduce all or part of the cash compensation otherwise payable for services to be rendered by him or her as a director (including the annual retainer and any fees payable for serving on the Board or a Committee of the Board) and to receive in lieu thereof restricted stock. Any such election shall be in writing and must be made at least six months before the services are rendered giving rise to such compensation, and may not be revoked or changed thereafter except as to compensation for services rendered at least six months after any such election to revoke or change is made in writing. In consideration for forgoing cash compensation, the amount so deferred shall be increased by 10% for purposes of determining the amount of restricted stock to be credited to such director. If an Eligible Director so elects to defer, there shall be credited to such director a number of shares of restricted stock equal to the amount of the deferral (increased by 10% as described in the preceding 6 sentence) divided by the reported closing price of the stock on the New York Stock Exchange-Composite Transactions on the last business day of the month in which the compensation would have been paid in the absence of a deferral election. Restrictions and Forfeiture Restricted stock issued under this Section shall have a restriction period of five (5) years. Notwithstanding any other provision of this Section, such restricted stock shall be subject to the following terms and conditions: (a) Restricted stock shall be represented by a stock certificate registered in the name of the holder. The holder shall have the right to enjoy all shareholder rights during the restriction period (including the right to vote the shares and the right to receive any cash dividends) with the exception that: (i) The holder may not sell, transfer, pledge or assign the stock during the restriction period; (ii) The Corporation may either issue shares subject to such restrictive legends and/or stop transfer instructions as it deems appropriate or provide for retention of custody of the stock during the restriction period; and (iii) A breach of the terms and conditions during the restriction period shall cause a forfeiture of the restricted stock. (b) All restrictions shall lapse and the holder of restricted stock shall be entitled to the delivery of a stock certificate or certificates upon the earliest of the following: (i) Five (5) years from the date the applicable shares are credited to such holder; (ii) The date of the holder's death or disability; (iii) The date the holder, after being nominated by the Board, is not elected by the shareholders in an election for the Board; (iv) The date on which the Board determines that the holder will not be nominated for election to the Board; or (v) The date on which the holder resigns from the Board in connection with his or her entering into any governmental, diplomatic or other service or employment, but only if, in the opinion of outside legal counsel selected by the Corporation, the holder's continued service on the Board would have created an inadvisable potential conflict of interest. (c) Restricted stock shall be entirely forfeited in the event that during a restriction period the holder: (i) Resigns (other than by reason of disability or pursuant to subsection (b)(v) above) or is dismissed for cause from the Board during his or her elected term; or 7 (ii) Refuses to stand for an election to the Board after having been nominated by the Board. For purposes of subsection (b) above, "disability" shall mean long term disability as determined under rules and procedures that apply under the Corporation's Long Term Disability Plan then in effect. For purposes of subsection (c) above, a holder shall be considered to have been dismissed for cause if and only if he or she is dismissed on account of any act of (a) fraud or intentional misrepresentation, or (b) embezzlement, misappropriation, or conversion of assets or opportunities of the Corporation or any direct or indirect majority-owned subsidiary of the Corporation. The holder may elect in writing at least three months before the end of any restriction period irrevocably to re-defer restricted stock for additional five (5)-year periods subject to the above terms and conditions. 9. WITHHOLDING The Corporation or any subsidiary shall have the right to deduct from all amounts paid in cash hereunder any taxes required by law to be withheld therefrom. In the case of payments of awards in the form of Common Stock, the participant shall be required to pay to the Corporation or subsidiary the amount of any taxes required to be withheld with respect to such Common Stock; in lieu thereof, the Corporation or subsidiary shall have the right to retain, or sell without notice, a sufficient number of shares to cover the amount required to be withheld. The Committee may from time to time establish procedures with respect to stock withholding consistent with applicable requirements of Rule 16b-3 promulgated by the Securities and Exchange Commission. 10. GOVERNING LAW The validity, construction and effect of this Plan, any rules and regulations relating to this Plan, and any awards under this Plan, shall be determined in accordance with the laws of New York without giving effect to principles of conflict of laws. 11. EFFECTIVE PERIOD OF PLAN This Plan shall become effective upon the date of its approval by the shareholders of the Corporation. Unless earlier terminated by the Board of Directors, this Plan shall terminate on April 18, 2001; provided, however, that any such termination shall not affect awards granted prior thereto. 12. AMENDMENT OF PLAN The Board of Directors of the Corporation may from time to time make such amendments of this Plan as it shall deem advisable; provided, however, that the Board of Directors may not, without further approval of the holders of a majority of all outstanding shares of the Corporation entitled to vote thereon, (i) increase the maximum number of shares as to which awards may be granted under this Plan (except as otherwise provided in Section 3), (ii) permit the granting of options at less than 100% of fair market value at time of grant, (iii) change the class of persons eligible to receive awards under this Plan, or (iv) make any other amendment for which shareholder approval is required pursuant to Rule 16b-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, or Section 422 of the Code. No amendment of this Plan may, without the consent of the holder of an existing award, adversely affect such holder's rights thereunder. In addition, the provisions of this Plan applicable to non- 8 employee directors may not be amended more than once every six months other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, or the rules thereunder. 9 EX-10.14 7 EMPLOYMENT AGREEMENT DATED OCT. 29, 1996 EXHIBIT 10.14 [LETTERHEAD OF GENERAL SIGNAL] October 29, 1996 Ms. Joanne L. Bober 300 East 75th Street, Apt. 4C New York, NY 10021 Dear Joanne: I am pleased to confirm our verbal offer to join General Signal in the position of Senior Vice President and General Counsel. In this position you would report to Mike Lockhart, Chief Executive Officer, and be located in Stamford, CT. The following confirms the terms and conditions of our offer: 1. Your starting base salary will be an annual rate of $230,000, paid bi-weekly. 2. You will be a participant in General Signal's Incentive Compensation Plan beginning in calendar year 1997. As such, you will be eligible for a Target Award of 50% of base salary (with a cap of 200% of target) with actual awards payable in 1998, depending on performance, and as administered by the Personnel and Compensation Committee of the Board of Directors. 3. Soon after your arrival you will be granted, subject to Board approval, 5,000 shares of restricted stock. The restricted stock will vest at a 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 restricted period. 4. You will be eligible to participate in the executive stock option program which currently would equal 12,000 shares for your position. 5. You will be eligible for the Officers' and Presidents' Deferred Compensation Program that supplements your Savings Plan (SSOP) with investment opportunities that partially offset many of the restrictions imposed on qualified plans by government regulation as well as other General Signal benefits programs. 6. You will be a participant in the GS Salaried Pension Plan, and 1.5 years of service will be credited to your pension calculation for each year of service you complete. 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. 7. You will be eligible for a company car and a one-time grossed up parking allowance, as well as four weeks of vacation. Ms. Joanne L. Bober Page 2 8. As discussed, we will not announce your new position at General Signal until early December, and would plan on a start date of January 2, 1997. 9. If you move within 12 months after your start date, you will be entitled to the benefits of General Signal's relocating policy. You will be required to complete a company physical examination before beginning employment. Please contact Julia Sweitzer at 203-329-4201 to schedule an appoint-ment. 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. If the foregoing is acceptable to you, please sign and return the attached copy of this letter by November 15. Joanne, we are very enthusiastic about your joining General Signal. It will be great to have you with us. If you have any questions, please call. Sincerely, /s/ Elizabeth D. Conklyn Elizabeth D. Conklyn Senior Vice President - Human Resources Accepted: /s/ Joanne Bober November 7, 1996 ------------------------- ------------------- Joanne Bober Date EX-10.15 8 EMPLOYMENT AGREEMENT DATED NOVEMBER 2, 1995 EXHIBIT 10.15 [LETTERHEAD OF GENERAL SIGNAL] November 2, 1995 Ms. Elizabeth D. Conklyn 14 Captain Lawrence Drive South Salem, NY 10590 Dear Liz: On the basis of our discussion and your interviews, I am pleased to extend this written confirmation of our verbal offer to become Sr. Vice President, Human Resources of General Signal Corporation reporting to me as Chairman and Chief Executive Officer. Your employment will be effective November 6, 1995 and your appointment as an Officer of the Corporation will be acted upon by the Board of Directors at the December 14, 1995 meeting. The following confirms the terms and conditions of our offer: 1. Your starting base salary will be at an annual rate of $190,000. 2. You will be a participant in General Signal's Incentive Compensation Plan commencing in 1996. As such you will be eligible for a Target Award of 45% with actual awards depending on performance and as administered by the Board of Directors. 3. You will be recommended for an award of 5,000 shares of restricted common stock under our 1992 Stock Incentive Plan with a vesting schedule as follows: 12/14/98 - 1,250 shares 12/14/99 - 1,250 shares 12/15/00 - 2,500 shares From the date of grant, you will receive dividends paid quarterly and have voting rights for the shares during the vesting period. 4. You will also be recommended for an award of 5,000 shares of non-qualified stock options under the 1992 Stock Incentive Plan. This award is subject to the usual terms and conditions of awards under the Plan, including an initial period of one year of employment, and shares may be exercised in 25% Ms. Elizabeth D. Conklyn November 2, 1995 Page 2 cumulative installments assuming continued employment. The option price will be set at 100% of fair market value on the date of grant which is anticipated to be the Board meeting of December 14, 1995. In addition, you will be eligible to receive further awards under the Plan in future years as administered by our Personnel and Compensation Committee. 5. For purposes of your retirement benefits, the Company will recognize 1 1/2 years of credited service for each year of your employment with the Company. These special additional benefits must necessarily be provided outside the Corporate Retirement Plan of General Signal and will be paid from the general funds of the Company. 6. You will be authorized to purchase a company car for up to $36,000 including taxes and all other costs. 7. Your medical and life insurance benefits coverage with General Signal will commence after 90 days of employment. You should continue medical coverage with your current employer under COBRA, and we will reimburse you for the expense involved. 8. As an officer of the Company, you will be included in the Financial Counseling perquisite recently approved by the Personnel and Compensation Committee. 9. We have agreed you will be eligible for 4 weeks vacation beginning in 1996. 10. Liz, you should know that General Signal, in common with most other companies, does not offer or ask for employment commitments for a set period of time. In addition, this offer is conditioned upon satisfactorily completing a physical examination (which includes drug testing) and fulfilling the requirements of the Immigration Reform and Control Act of 1986. Ms. Elizabeth D. Conklyn November 2, 1995 Page 3 Assuming the foregoing is acceptable to you, please sign and return one copy of this letter to me no later than Monday, November 6, 1995. Sincerely, /s/ Michael D. Lockhart/cm - - -------------------------- Michael D. Lockhart MDL:cm Enclosure Accepted By /s/ Elizabeth D. Conklyn Date 11/13/95 ---------------------------- ------------ Elizabeth D. Conklyn EX-10.16 9 EMPLOYMENT AGREEMENT DATED SEP. 12, 1996 EXHIBIT 10.16 September 12, 1996 Mr. Ernest R. Verebelyi 15875 Lymington Common Chesterfield, Missouri 63005 Dear Ernie: I am pleased to confirm our verbal offer to join General Signal as Senior Vice President, Operations. In this position you would report to Mike Lockhart, Chief Executive Officer, and be located in Stamford, CT. The following confirms the terms and conditions of our offer: 1. Your starting base salary will be an annual rate of $250,000. 2. You will be a participant in General Signal's Incentive Compensation Plan beginning in calendar year 1997. As such, you will be eligible for a Target Award of 50% of base salary (with a cap of 200% of target) with actual awards payable in 1998, depending on performance, and as administered by the Personnel and Compensation Committee of the Board of Directors. In February 1997, a guaranteed payment of $42,000, or four months of incentive, whichever is greater, will be made to you. 3. You will be granted a one time payment of $200,000 after you begin employment. 4. You will be granted, subject to Board approval, 5,000 shares of restricted stock. The restricted stock will vest at a rate of 33 1/3% per year over a three year period. However, you will be entitled to receive dividends on the stock during the restricted period. Also, subject to Board approval, you will receive 5,000 stock options which will vest at a rate of 25% per year over a four year period. 5. Subject to Board approval of a proposed Long Term Incentive Plan, you will be eligible to receive an annual non-qualified option grant, expected to equal about 10,000 shares. In response to your request, as with other employees, additional share grants will be considered for outstanding contributions. 6. You are eligible for the following relocation benefits: . Two house hunting 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. 7. As discussed, an appraisal on your home will be done immediately. 8. You will be eligible for the Officers' and Presidents' Deferred Compensation Program that supplements your Savings Plan (SSOP) with investment opportunities that partially offset many of the restrictions imposed on qualified plans by government regulation. Please see attached material. 9. Financial Planning assistance reimbursement will be made up to $8,000 in your first year of employment and up to $6,000 thereafter. 10. 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. 11. The attached booklet which is being reprinted outlines medical costs after retirement. Laura Markowitz, 203-329-4207 will be pleased to answer any questions you may have. 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. If the foregoing is acceptable to you please sign and return the attached copy of this letter by October 1/st/. Ernie, we would like you and your spouse to make a preliminary house hunting trip to the Stamford area as quickly as possible. Please let Anita Wheeler, Director of Staffing, or me know if we can help you arrange your trip. I hope the preceding provides adequate information on the compensation and benefits of your new position. If you have any questions, please call. Sincerely, /s/ Elizabeth D. Conklyn Elizabeth D. Conklyn Senior Vice President Human Resources Accepted: /s/ Ernest R. Verebelyi September 18, 1996 ------------------------ ------------------------ Ernest R. Verebelyi Date EX-10.17 10 EMPLOYMENT AGREEMENT DATED JUNE 5, 1996 EXHIBIT 10.17 [LOGO] GENERAL SIGNAL HIGH RIDGE PARK P.O. BOX 10010 STAMFORD, CT 06904 PHONE 203-329-4100 June 5, 1996 Mr. Donald J. Noonan C/O Hotel Sofitel - Cambodian Room 447 Phnom Penh, Cambodia Dear Don: I am pleased to confirm our verbal offer to become Vice President, Asia Pacific Development for General Signal. In this position you will be reporting to the Chairman & CEO, Mike Lockhart. The position is stationed in Singapore and will be responsible for working with all the General Signal units to develop business throughout the Pacific Rim. You will begin your new position on September 1, 1996. The following confirms the terms and conditions of our offer: 1. Your starting base salary will be an annual rate of US$ 150,000. 2. You will be a participant in General Signal's Incentive Compensation Plan beginning in calendar year 1997. As such you will be eligible for a target award of 30% of base salary (to a cap of 200% of target) with actual awards depending upon General Signal's performance, and as administered by the Personnel & Compensation Committee of the Board of Directors. The award for the remainder of 1996 will be $25,000. 3. As a permanent resident of Singapore you will participate in the Central Provident Fund (CPF). GSC will pay both the employer's and employee's portion to the maximum required and will deduct your contribution from base salary. 4. Until we have established a regional or country benefits plan you will be covered under the welfare benefits provided to employees of the General Signal Corporate Staff in Stamford, Ct. although you will not have managed care options available for your medical coverage. Some of these plans will require a contribution by you, the amount of which will be determined by the coverage selected and the number of dependents covered. 5. We have noted that although you took out permanent residency in Singapore eight years ago, you have not participated in the CPF. You have indicated this was an oversight by General Electric. Your acceptance of our offer will confirm your understanding that any liability arising from the eight years where coverage under CPF would normally be required is not the liability of General Signal. You also acknowledge by your acceptance that any consequences resulting from this action will be the sole responsibility of your former employer, General Electric, and yourself to the extent Singapore authority holds you personally responsible. 2 [LOGO] GENERAL SIGNAL 6. You will be granted a housing allowance in the amount of US$110,000 per annum, subject to appropriate withholding requirements, that will be paid evenly over the 12 month period. This amount will be used for housing and all other expenses associated with housing (e.g. utilities). You will not be required to provide an accounting for this amount. This allowance will be increased or decreased on an annual basis utilizing a commonly used annual expense factor and the GSC programs then in effect. The adjustment, if any, will be made effective and retroactive to the first of every calendar year. You will not be provided with a cost-of-living allowance, a location premium, home leave, or any type of tax equalization. 7. As you will be moving from your current housing to new facilities we will provide a transfer allowance equal to two months of base salary. You will not be required to provide an accounting for this amount. 8. You will be provided use of a car of a make and model that is appropriate to your position. This will be determined by General Signal after recommendation from the GSC's Sourcing department. You will not be provided with a driver. 9 GSC will provide you with an office and a secretary. 10. GSC will continue to reimburse you for a membership in the Tanglin Sailing Club. We will evaluate with you the business value of this club versus another membership or no company sponsored membership. This review will be done annually. 11. We will provide you with five weeks vacation per year. 12. You will be allowed to use Business Class air service on all business trips in excess of 3 hours, airport to airport, or across 2 time zones. 13. GSC will provide one round-trip business class airfare for your spouse to the U.S. per year. 14. Subject to the Board of Director's approval, you will receive a grant of 3000 restricted shares of General Signal common stock. You will vest in the first 1500 shares after three years of service and the remaining 1500 shares after 5 years of service. You will also receive a non-qualified option grant of 5000 shares. The option grant will be at a price equal to 100% of the fair market value on the date of the grant and will be exercisable during a period that begins one year after the date of grant and ends 10 years after the date of grant. Options will be subject to a four year vesting schedule (25% after 1 year, 50% after 2 years, 75% after 3 years, and 100% after 4 years). 15. Until we have established a local payroll procedure for Singapore you will be paid by the Corporate Office payroll department in US dollars. Payments will be made bi-weekly to your US bank account via Fed Wire. Deductions for US taxes, Singapore taxes (e.g. CPF), Social Security, Medicare, and benefits contributions will be made in the US. GSC does not take responsibility for foreign exchange fluctuations in converting some or all of your pay into Singapore dollars. 16. Although we will not provide Tax Equalization you will be permitted to retain the use of the current IRS exemption from US tax obligation. 3 [LOGO] GENERAL SIGNAL 17. In the event that your employment is involuntarily terminated by the General Signal during the first three years of your employment, other than for cause, we will provide you with severance benefits for the period remaining between the date of your termination and two years from the original date of your employment, with a minimum payment of 6 months. After the initial three year period, the severance payment would be in accordance with GSC policy in effect at the time. 18. General Signal, in common with most other companies, does not offer, or ask for, employment commitment for a set period of time, nor does it guarantee employment for a set period of time. That is, you are an "at will" employee, and you or General Signal may terminate your employment at any time and for any reason, subject to the terms of this letter agreement. In addition, this offer is conditional upon satisfactorily completing a physical examination (which includes drug testing) by August 1, 1996 and fulfilling the requirements of the Immigration Reform and Control Act of 1986. If the foregoing is acceptable to you, please sign and return a copy of this letter to me by June 15, 1996. Sincerely, /s/ Elizabeth D. Conklyn - - -------------------------------------- Elizabeth D. Conklyn Senior Vice President, Human Resources Accepted and Agreed: /s/ Donald J. Noonan June 13, 1996 ................................ ................................ Donald J. Noonan Date EX-10.18 11 EMPLOYMENT AGREEMENT DATED JAN. 28, 1997 EXHIBIT 10.18 January 28, 1997 Mr. Raymond L. Arthur 31 Iowa Road Wayne, NJ 07470 Dear Mr. Arthur: I am pleased to confirm our offer of Vice President and Controller at an annual rate of $160,000, paid bi-weekly. You will participate in General Signal's Incentive Compensation Plan beginning in calendar year 1997. In this Plan, you will be eligible for a Target Award of 40% of base salary (with a cap of 200% of target). Actual rewards will be payable in 1998 depending on performance and as administered by the Personnel and Compensation Committee of the Board of Directors. You will be granted a one time payment of $40,000 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 10,000 shares for your position. Also subject to Board approval, you will be granted 4,000 shares of restricted stock. This stock will vest at the rate of 50% at the end of 3 years, and 100% at the end of 5 years. However, you will be entitled to receive dividends on the stock during the restricted period. You are eligible for the following relocation benefits: . 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. 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 thereafter. 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 for the Officers and Presidents Deferred Compensation Program that supplements your savings plan (SSOP) with investment opportunities that partially affect many of the restrictions imposed on qualified plans by government regulations. You will be eligible for 80% of a health club membership up to $1,000 per year; 80% of club initiation fees up to $1,000; and 100% of a trainers fees for up to 3 months. In support of a Drugfree Workplace, this offer is contingent on the successful completion of a substance abuse screen. Please call Julia Sweitzer at (203) 329-4201 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 February 7, 1997. We look forward to your joining General Signal. If you have any questions regarding this offer, please do not hesitate to call. Sincerely, /s/ Anita L. Wheeler - - ----------------------------- Anita L. Wheeler ALW:cm Attachment cc: Terence D. Martin Accepted by: /s/ Raymond L. Arthur Date: 2/11/97 ---------------------------- --------- Raymond L. Arthur EX-10.19 12 SEVERANCE AGREEMENT DATED AUG. 5, 1996 EXHIBIT 10.19 August 5, 1996 Mr. Edgar J. Smith, Jr. 26 Lefurgy Avenue Hastings-on-Hudson, New York 10706 Dear Ed: In connection with the termination of your employment with General Signal, this letter and the attachment hereto set forth the severance terms that the Corporation has agreed to provide you. These terms are: 1. Your employment will continue until December 31, 1996, during which time you would be required to perform your normal duties and responsibilities as well as working for an orderly transition of your duties and responsibilities as directed by Mike Lockhart. You shall be paid your base salary (at the rate of $215,000 per annum), in accordance with the Corporation's standard payroll practices, through December 31, 1996. Effective December 31, 1996, you will resign all officer and employee positions with the Corporation and its subsidiaries and would resign your membership on all Boards and Committees of the Corporation and its subsidiaries. 2. You shall be paid your Incentive Compensation under the Corporation's Incentive Compensation Plan for the entire calendar year of 1996 at the same percentage rate as the average of target payments treated as earned by all other corporate officers under said Incentive Compensation Plan with respect to 1996 (but excluding any guaranteed minimum bonus received by any corporate officer pursuant to a contractual obligation of the Corporation if such guaranteed minimum bonus represents a greater percentage of the applicable target bonus than such average determined without regard to any such minimum bonus or bonuses). Such Incentive Compensation would be paid to you at the same time that 1996 Incentive Compensation is paid to other officers under said Incentive Compensation Plan. -2- 3. You shall be paid an additional $100,000 in substantially equal bi- weekly installments over the 12-month period beginning on January 1, 1997. You agree that during such 12-month period you will provide consulting services to the Corporation at the reasonable request of the Corporation but not to exceed 64 hours per month. Such consulting services shall be as requested by the CEO of the Corporation and will be reasonably related to your previous responsibilities and will only be requested in situations where the Corporation will benefit from the special knowledge you have gained from your previous work experience. Such services will be reasonable in both time and duration. The Corporation will reimburse you for any actual and reasonable expenses incurred by you which are related to any such consulting work. Such services will be reasonable in both time and duration and will be scheduled at a time reasonably convenient to you. 4. Benefits under the Corporation's Corporate Retirement Plan and Benefits Equalization Plan will be determined in accordance with the terms of such plans on the basis of your actual service and age at the time of your retirement on December 31, 1996 ("Retirement Date"). 5. All Corporation matching contributions with respect to your deferrals under the Corporation's Deferred Compensation Plan prior to your Retirement Date that otherwise would be forfeited under the Corporation's Deferred Compensation Plan nonetheless would become fully vested and paid to you in accordance with the terms of such plan. 6. Stock options will continue to vest before and after your Retirement Date in accordance with the terms of the applicable stock option plan and agreement. The vested portion of such options will be exercisable for five years after your Retirement Date which is to say December 31, 2001 (unless the remaining term were shorter) as provided under the applicable stock option plan and agreement. 7. With respect to the restricted stock award granted to you in December 1994, your employment continuing through December 31, 1996 will result in an additional one-third of the award vesting in accordance with the terms of such award. On the first business day in the calendar year 1997, the Corporation will make a cash payment for the remaining one-third of such award that shall not have vested at December 31, 1996 (calculated on the basis of the closing price of shares of the Corporation's common stock on December 31, 1996 as reported for the New York Stock Exchange - Composite Transactions). -3- 8. The Corporation will transfer to you on the first business day in calendar year 1997 title to the company car, lap-top computer and portable fax machine you are using (subject to satisfaction of applicable withholding requirements, if any). 9. In the event of your death while still employed by the Corporation, your beneficiary would be entitled to such benefits as may be provided under the terms of the Corporation's applicable employee benefit plans. Payments and transfers pursuant to paragraphs 1, 2 and 3 would be made to your beneficiary in the event of your death while still employed by the Corporation. 10. By your signature set forth in the space provided below, you agree with these terms and the terms of the agreement attached to this letter agreement, entitled "Retirement Agreement and General Release" which you will execute simultaneously with this agreement. If the foregoing and the attached agreement entitled "Separation Agreement and General Release" are acceptable to you, please sign each of the same and the Corporation will do likewise, whereupon they shall be binding agreements. Very truly yours, Attachment Agreed to and Accepted: /s/ Edgar J. Smith August 6, 1996 - - ----------------------------- --------------------- Edgar J. Smith, Esq. Date General Signal Corporation By:/s/ Elizabeth D. Conklyn August 6, 1996 ------------------------ --------------------- Elizabeth D. Conklyn Date -4- RETIREMENT AGREEMENT AND GENERAL RELEASE THIS RETIREMENT AGREEMENT AND GENERAL RELEASE is made and entered into as of this 5th day of August, 1996 by and between EDGAR J. SMITH, JR. (the "Executive") and GENERAL SIGNAL CORPORATION, a New York corporation (the "Corporation"). W I T N E S S E T H: WHEREAS, the Executive has been employed by the Corporation as its Chief Legal Officer and in other capacities since January, 1960; and WHEREAS, the Corporation and the Executive have agreed that the Executive will retire and in connection therewith resign all officer and employee positions with the Corporation and its subsidiaries and his membership on all Boards and Committees of the Corporation and its subsidiaries, effective as of December 31, 1996; and WHEREAS, the Executive and the Corporation desire to settle fully and finally all matters between them to date, including, but in no way limited to, any issues that might arise out of the Executive's employment or the termination of his employment; NOW, THEREFORE, in consideration of the mutual covenants and promises contained herein, the parties hereto agree as follows: 1. The Executive agrees to continue to perform his normal duties and responsibilities until December 31, 1996 and during such period will work for an orderly transition of his duties as directed by the Chief Executive Officer of the Corporation. Effective December 31, 1996, the Executive hereby retires and resigns all officer and employee positions with the Corporation and its subsidiaries as well as his membership on all Boards and Committees of the Corporation and its subsidiaries. During the 12-month period beginning on January 1, 1997, the Executive shall provide consulting services to the Corporation in accordance with paragraph 3 of the letter agreement between the Corporation to the Executive dated August 5, 1996 (a copy of which is attached hereto) (the "Letter Agreement"). -5- 2. The Corporation agrees that it shall perform, and provide to the Executive the payments and benefits set forth in, the Letter Agreement, the terms of which are incorporated herein by reference with the same force and effect as if set forth at length. 3. The Executive understands and agrees that the consideration described in the Letter Agreement is more than the Executive would otherwise be entitled to under the Corporation's existing plans and policies. 4. The Executive will as soon as practicable after his retirement (but in any event no later than 30 days after his retirement) return to the Corporation all Corporation Information and related reports, files, memoranda, and records; credit cards, cardkey passes; door and file keys; computer access codes; software; and other physical or personal property which the Executive received or prepared or helped prepare in connection with his employment and which are in his actual possession or control on the date of his retirement. The Executive will not intentionally retain any copies, duplicates, reproductions, or excerpts thereof. The term "Corporation Information" as used in this Agreement means all information relating to the Corporation or any of its subsidiaries which is not already in the public domain and which is regarded by the Corporation as confidential, proprietary or private in nature, including, without limitation, information received from third parties under confidential conditions, technical, business, or financial information, and other information concerning the business, contemplated future business prospects, and other affairs of the Corporation. The Corporation shall not treat information as confidential, proprietary or private for purposes of this Agreement if it has treated the same information as not being confidential, proprietary or private with respect to any other former employee. There shall be expressly excepted from the scope and coverage of this section, the books, articles, documents, forms of documents and other professional materials that the Executive has accumulated in the course of his employment with the Corporation, provided that the information contained in any such professional materials is not currently confidential in nature. 5. The Executive agrees that in the course of his employment with the Corporation, he has acquired Corporation Information as defined in Section 4. The Executive understands and agrees that such Corporation Information has been disclosed to the Executive in confidence and for Corporation use only. -6- Unless otherwise required by a court of competent jurisdiction or pursuant to any recognized subpoena power, or as is reasonably necessary in connection with any adversarial process between the Executive and the Corporation, the Executive understands and agrees that he (i) will keep Corporation Information confidential at all times during and after his employment with the Corporation, (ii) will not disclose or communicate Corporation Information to any third party, and (iii) will not make use of Corporation Information on the Executive's own behalf, or on behalf of any third party. In view of the nature of the Executive's employment and the nature of Corporation Information which the Executive has received during the course of his employment, the Executive agrees that any unauthorized disclosure to third parties of Corporation Information or other violation, or threatened violation, of this Agreement would cause irreparable damage to the trade secret status of Corporation Information and to the Corporation, and that, therefore, the Corporation shall be entitled to an injunction prohibiting the Executive from any such disclosure, attempted disclosure, violation, or threatened violation. When Corporation Information becomes generally available to the public other than by the Executive's acts or omissions, it is no longer subject to these restrictions. However, Corporation Information shall not be deemed to come under this exception merely because it is embraced by more general information which is or becomes generally available to the public. The undertakings set forth in this Section 5 shall survive the termination of this Agreement or other arrangements contained in this Agreement. 6. Unless otherwise required by a court of competent jurisdiction or pursuant to any recognized subpoena power or as is reasonably necessary in connection with any adversarial process between the Executive and the Corporation, the Executive agrees and promises that he will not make any oral or written statements or reveal any information to any person, company, or agency which may be construed to be negative, disparaging or damaging to the reputation or business of the Corporation, its subsidiaries, directors, officers or affiliates, or which would be damaging to the business relations between the Corporation or any of its subsidiaries or affiliates and any of their customers or potential customers. 7. Unless otherwise required by a court of competent jurisdiction or pursuant to any recognized subpoena power or as is reasonably necessary in connection with any adversarial process between the Executive and the Corporation, the Corporation agrees and promises that neither it nor its -7- directors or officers will make any oral or written statements or reveal any information to any person, company, or agency which may be construed to be negative, disparaging or damaging to the reputation or business of the Executive or any member of his family or which would interfere in any way with any future professional or business relationships of the Executive. 8. The Executive represents and agrees that, unless compelled by legal process or as is reasonably necessary in connection with any adversarial process between the Corporation and the Executive, he will keep the terms of this Agreement and the Letter Agreement completely confidential, and that he will not hereafter disclose any information concerning this Agreement or the Letter Agreement to anyone except his financial, legal or tax advisor(s), his accountants, and his immediate family; provided that these individuals agree to keep said information confidential and not disclose it to others. 9. The Corporation represents and agrees that, unless compelled by legal process or applicable legal requirements, or as is reasonably necessary in connection with any adversarial process between the Corporation and the Executive, it will keep the terms of this Agreement and the Letter Agreement completely confidential, and that it will not hereafter disclose any information concerning this Agreement or the Letter Agreement to anyone except its financial, legal or tax advisor(s), its accountants, its directors, and those employees of the Corporation who have a need to know about its terms; provided that these individuals agree to keep said information confidential and not disclose it to others. 10. In consideration of the payments and benefits to the Executive as described in the Letter Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Executive, the Executive knowingly, voluntarily and unconditionally hereby forever waives, releases and discharges, and covenants never to sue on, any and all claims, liabilities, causes of actions, judgments, orders, assessments, penalties, fines, expenses and costs (including without limitation attorneys' fees) and/or suits of any kind arising out of any actions, events or circumstances before the date of execution of this Agreement ("Claims") which the Executive has, ever had or may have, including, without limitation, any Claims arising in whole or in part from the Executive's employment or the termination of the Executive's employment with the Corporation as contemplated by this Agreement or the manner of said termination; provided, -8- however, that this Section 11 shall not apply to any of the obligations of the Corporation specifically provided for in this Agreement or the Letter Agreement. This Agreement is intended as a full and final settlement and compromise of each, every and all Claims of every kind and nature, whether known or unknown, which have been or could be asserted against the Corporation and/or any of its subsidiaries, shareholders, officers, directors, agents, and employees, past or present, and their respective heirs, successors and assigns (collectively, the "Releasees"), including, without limitation -- (1) any Claims arising out of any employment agreement or other contract, side-letter, resolution, promise or understanding of any kind, whether written or oral or express or implied; (2) any Claims arising under the Age Discrimination in Employment Act ("ADEA"), as amended, 29 U.S.C. (S) 621 et seq.; and -- --- (3) any Claims arising under any federal, state, or local civil rights, human rights, anti-discrimination, labor, employment, contract or tort law, rule, regulation, order or decision, including, without limitation, the Americans with Disabilities Act of 1990, 42 U.S.C. (S) 12101 et seq., and Title VII of the -- --- Civil Rights Act of 1964, 42 U.S.C. (S) 2000e et seq., and as -- --- each of these laws have been or will be amended, It is expressly agreed by the Corporation that to the extent that any governmental authority or other third party, i.e., other than one of the --- Releasees, files a charge or institutes an investigation, lawsuit or any proceeding against the Executive based on any event, occurrence or omission during the period of the Executive's employment with the Corporation, in which case the Executive will be permitted to implead or bring a court action against the Corporation and/or any of the Releasees for indemnification of any liability or other appropriate remedy, provided such impleader or court action is otherwise available but for this Agreement. Notwithstanding anything to the contrary in this Section 10, the Executive does not release (i) any claim he may have under any employee benefit plan in which he was a participant during his employment with the Corporation for the payment -9- of a benefit thereunder to which he would be entitled upon his termination of employment in accordance with the terms of such plan or (ii) any claim that he may have under this Agreement or the Letter Agreement or that certain Indemnification Agreement referred to in Section 13 hereof. 11. The Executive understands that this Agreement affects significant rights and represents and agrees that he has carefully read and fully understands all of the provisions of this Agreement, that he is voluntarily entering into this Agreement, and that he has been advised to consult with and has in fact consulted with legal counsel before entering into this Agreement. In particular, the Executive acknowledges that he has been given twenty-one (21) days during which time he has carefully considered and voluntarily approved the terms of this Agreement. The Executive understands that, pursuant to the provisions of the ADEA, he shall have a period of seven (7) days from the date of execution of this Agreement during which he may revoke this Agreement via hand delivery of a notice of revocation to the Corporation's offices to the attention of Michael D. Lockhart, Chairman and Chief Executive Officer. This Agreement shall not become effective or enforceable until the revocation period has expired. 12. The Corporation's obligations to make payments, to transfer property, and to provide benefits hereunder and under the Letter Agreement shall be subject to the Executive's satisfaction of any applicable withholding tax requirements. 13. This Agreement together with the Letter Agreement and that certain Indemnification Agreement between the Executive and the Corporation constitute the entire understanding and agreement between the Corporation and the Executive with regard to all matters herein and supersedes all prior oral and written agreements and understandings of the parties with respect to such matters, whether express or implied. There are no other agreements, conditions, or representations, oral or written, express or implied, with regard thereto. This Agreement and the Letter Agreement may be amended only in a writing of even or subsequent date, signed by all parties hereto. 14. If any term or provision of this Agreement or the Letter Agreement, or the application thereof to any person or circumstances, will to any extent be invalid or unenforceable, the remainder of this Agreement and the Letter Agreement, or the application of such terms to persons or circumstances other than those as to which it is invalid or unenforceable, -10- will not be affected thereby, and each term of this Agreement and the Letter Agreement will be valid and enforceable to the fullest extent permitted by law. 15. This Agreement and the Letter Agreement shall be construed and enforced in accordance with the laws of the State of Connecticut without reference to its choice of law provisions and shall be binding upon the parties and their respective heirs, executors, successors and assigns. 16. This Agreement and the Letter Agreement may be executed in several counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. -11- IN WITNESS WHEREOF, the Corporation and the Executive have caused this Agreement to be executed as of the date first above written. GENERAL SIGNAL CORPORATION By: /s/ Elizabeth D. Conklyn ----------------------------- Its WITNESS: /s/ Edgar J. Smith, Jr. - - ----------------------------- -------------------------------- Edgar J. Smith, Jr. EX-10.24 13 COPIES OF CREDIT AGREEMENT AMENDMENT THIS AMENDMENT, dated as of January 12, 1995, among GENERAL SIGNAL CORPORATION (the "Company") and the undersigned commercial banking institutions (herein called collectively "Banks"). WITNESSETH: WHEREAS, the Company and the Banks are parties to a certain Four Year Credit Agreement, dated as of January 12, 1994 (the "Four Year Agreement"); and WHEREAS, the parties desire to amend certain terms of the Agreement; NOW, THEREFORE, in consideration for the agreements herein con tained, 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 Agreement. 2. The aggregate amount of the Credit as set forth in Sec tion 1.1.4 of the Agreement, is hereby increased to an amount no to exceed at any one time $360,000,000 (or such greater or lesser amount as may be determined pursuant to Section 1.1 of the Agreement). Each Bank's Commit ment is hereby increased to the amount set forth opposite such Bank's sig nature 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. 3. The "Revolver Expiration Date" is hereby amended to mean the earlier of January 11, 2000 or the date of termination in whole of the Commitments. All references to the "Four Year Agreement" shall be deemed to refer to the 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: 0.175% 0.300% AA-/Aa3 or higher Level 2: 0.225% 0.350% A-/A3 or higher, but less than Level 1 Level 3: 0.3625% 0.4875% BBB-/Baa3 or higher, but less than Level 2 Level 4: 0.500% 0.625% Less than BBB-/Baa3 5. The table in Section 3.2, Facility Fee, is hereby deleted and replaced with the following: -2- Public Debt Rating Facility Fee Percentage - - ------------------ ----------------------- Level 1: 0.100% AA-/Aa3 or higher Level 2: 0.120% A-/A3 or higher, but less than Level 1 Level 3: 0.1875% BBB-/Baa3 or higher, but less than Level 2 Level 4: 0.275% Less than BBB-/Baa3 6. Except as set forth in this Amendment, all terms and con ditions of the Four Year Agreement shall remain unchanged. -3- 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 By: /s/ Julian B. Twombly --------------------------------- Vice President and Treasurer One High Ridge Park Stamford, Connecticut 06904 Attention: Treasurer Telecopier No.: (203) 329-4365 -4- [4-Year Facility, As Amended] Amount of Commitment - - ---------- $40,000,000 THE CHASE MANHATTAN BANK, N.A. By: /s/ Edward F. McNulty ---------------------------- Title: Managing Director Lending Office for Loans The Chase Manhattan Bank, N.A. One Chase Plaza, 17th Floor New York, New York 10081 Attn: Edward F. McNulty Telecopier No.: (212) 552-1457 -5- [4-Year Facility, As Amended] Amount of Commitment - - ---------- $40,000,000 CHEMICAL BANK By: /s/ J.B. Treger -------------------------- Title: Vice President Lending Office for Loans Chemical Bank 270 Park Avenue New York, New York 10017 Attn: James B. Treger Telecopier No.: (212) 270-7138 -6- [4-Year Facility, As Amended] Amount of Commitment - - ---------- $40,000,000 NATIONSBANK OF NORTH CAROLINA, N.A. By: /s/ M.K. Vandenberg ---------------------------- Title: Senior Vice President Lending Office for Loans NationsBank of North Carolina, N.A. NationsBank Plaza Charlotte, North Carolina 28225 Attn: Lisa McClelland, NC1-002-17-21 Telecopier No.: (704) 386-8694 cc: Margaret K. Vandenberg NationsBank of North Carolina, N.A. 767 Fifth Avenue New York, New York 10153 Telecopier No.: (212) 751-6909 -7- [4-Year Facility, As Amended] Amount of Commitment - - ---------- $40,000,000 WACHOVIA BANK OF GEORGIA, N.A. By: /s/ Linda M. Harris ----------------------------- Title: Senior Vice President Lending Office for Loans Wachovia Bank of Georgia, N.A 191 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Walter R. Gillikin Telecopier No.: (404) 332-6898 -8- [4-Year Facility, As Amended] Amount of Commitment - - ---------- $25,000,000 CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ E.L. Gordon ------------------------- Title: Authorized Signatory Lending Office for Loans Canadian Imperial Bank of Commerce 425 Lexington Avenue New York, New York 10017 Attn: E. Lindsay Gordon Telecopier No.: (212) 856-3991 -9- [4-Year Facility, As Amended] Amount of Commitment - - ---------- $25,000,000 COMMERZBANK A.G. By: /s/ Juergen Boysen ----------------------------- Title: Senior Vice President By: /s/ Michael D. Hintz ----------------------------- Title: Senior Vice President Lending Office for Loans CommerzBank A.G. 2 World Financial Center New York, New York 10281-1050 Attn: Michael Hintz Telecopier No.: (212) 266-7235 -10- [4-Year Facility, As Amended] Amount of Commitment - - ----------- $25,000,000 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Hames W. Peterson --------------------------- Title: Vice President Lending Office for Loans The First National Bank of Chicago 153 West 51st Street New York, New York 10019 Attn: James W. Peterson Telecopier No.: (212) 373-1388 -11- [4-Year Facility, As Amended] Amount of Commitment - - ----------- $25,000,000 THE HONGKONG & SHANGHAI BANKING CORPORATION LIMITED By: /s/ J.S. Dykes -------------------------- Title: Vice President Lending Office for Loans The Hongkong & Shanghai Banking Corporation Limited 140 Broadway, 4th Floor New York, New York 10015 Attn: Jeffry S. Dykes Telecopier No. (212) 658-5109 -12- [4-Year Facility, As Amended] Amount of Commitment - - ---------- $25,000,000 NATIONAL WESTMINSTER BANK Plc By: /s/ Anne Marie Torre --------------------------- Title: Senior Vice President Lending Office for Loans National Westminster Bank Plc Corporate and Institutional Finance 175 Water Street New York, New York 10038-4924 Attn: Jordon Fragiacomo Telecopier No.: (212) 602-4500 -13- [4-Year Facility, As Amended] Amount of Commitment - - ---------- $25,000,000 THE NORTHERN TRUST COMPANY By: /s/ J. C. McCall, III -------------------------- Title: Vice President Lending Office for Loans The Northern Trust Company 50 South LaSalle Street Chicago, Illinios 60675 Attn: J. Chip McCall, III Telecopier No.: (312) 444-3508 -14- [4-Year Facility, As Amended] Amount of Commitment - - ---------- $25,000,000 THE SANWA BANK LIMITED By: /s/ Stephen C. Small Title: Vice President Lending Office for Loans The Sanwa Bank Limited New York Branch Park Avenue Plaza 55 East 52nd Street New York, New York 10055 Attn: Stephen C. Small Telecopier No.: (212) 754-1304 -15- [4-Year Facility, As Amended] Amount of Commitment - - ---------- $25,000,000 SHAWMUT BANK By: /s/ Robert Surdham,Jr. -------------------------- Title: Director Lending Office for Loans Shawmut Bank 777 Main Street Hartford, CT 06115 Attn: Robert Surdham, Jr. Telecopier No.: (203) 358-2039 Four-Year Credit Agreement AMENDMENT NO. 2 THIS AMENDMENT NO. 2, dated as of May 31, 1996, among GENERAL SIGNAL CORPORATION (the "Company") and the undersigned commercial banking institutions (herein called collectively "Banks"). WITNESSETH: WHEREAS, the Company and the Banks are parties to a certain Four Year Credit Agreement, dated as of January 12, 1994 (the "Four Year Agreement"); WHEREAS, the Company and the Banks amended the Four Year Agree ment as of January 12, 1995; and WHEREAS, the parties desire to further amend certain terms of the Agreement. NOW, THEREFORE, in consideration for the agreements herein con tained, 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 Agreement. 2. Each Bank's Commitment shall be the amount set forth op posite 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 Agreement. 3. The "Revolver Expiration Date" is hereby amended to mean the earlier of May 30, 2001 or the date of termination in whole of the Com mitments. All references to the "Four Year Agreement" shall be deemed to refer to the 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: 0.16% 0.285% AA-/Aa3 or higher Level 2: 0.20% 0.325% A-/A3 or higher, but less than Level 1 Level 3: 0.30% 0.425% BBB-/Baa3 or higher, but less than Level 2 Level 4: 0.50% 0.625% Less than BBB-/Baa3 -2- 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: 0.08% AA-/Aa3 or higher Level 2: 0.10% A-/A3 or higher, but less than Level 1 Level 3: 0.175% BBB-/Baa3 or higher, but less than Level 2 Level 4: 0.275% Less than BBB-/Baa3 6. Except as set forth in this Amendment, all terms and con ditions of the Four Year Agreement shall remain unchanged. -3- 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 By: /s/ Julian B. Twombly ----------------------------- Vice President and Treasurer One High Ridge Park Stamford, Connecticut 06904 Attention: Treasurer Telecopier No.: (203) 329-4365 -4- [4-Year Facility, Amendment No.2] Amount of Commitment - - ---------- $50,000,000 THE CHASE MANHATTAN BANK, N.A. By: /s/ Claudia Stone ------------------------ Title: Managing Director Lending Office for Loans The Chase Manhattan Bank, N.A. One Chase Plaza, 17th Floor New York, New York 10081 Attn: Claudia Stone Telecopier No.: (212) 552-1457 -5- [4-Year Facility, Amendment No. 2] Amount of Commitment - - ----------- $50,000,000 NATIONSBANK, N.A. By: /s/ M.K. Vandenberg ------------------------------ Title: Senior Vice President Lending Office for Loans NationsBank, N.A. NationsBank Plaza Charlotte, North Carolina 28225 Attn: Lisa McClelland, NC1-002-17-21 Telecopier No.: (704) 386-8694 cc: Margaret K. Vandenberg NationsBank, N.A. 767 Fifth Avenue New York, New York 10153 Telecopier No.: (212) 751-6909 -6- [4-Year Facility, Amendment No. 2] Amount of Commitment - - ---------- $50,000,000 WACHOVIA BANK OF GEORGIA, N.A. By: /s/ Jane Deaver ----------------------------- Title: Vice President Lending Office for Loans Wachovia Bank of Georgia, N.A 191 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Jane Deaver Telecopier No.: (404) 332-6898 -7- [4-Year Facility, Amendment No. 2] Amount of Commitment - - ---------- $30,000,000 CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ E.L. Gordon -------------------------- Title: Authorized Signatory Lending Office for Loans Canadian Imperial Bank of Commerce 425 Lexington Avenue New York, New York 10017 Attn: E. Lindsay Gordon Telecopier No.: (212) 856-3991 -8- [4-Year Facility, Amendment No.2] Amount of Commitment - - ---------- $30,000,000 COMMERZBANK A.G. By: /s/ Sean Harrigan -------------------------- Title: Senior Vice President By: /s/ Juergen Boysen ----------------------------- Title: Senior Vice President Lending Office for Loans CommerzBank A.G. 2 World Financial Center New York, New York 10281-1050 Attn: Andrew Campbell Telecopier No.: (212) 266-7235 -9- [4-Year Facility, Amendment No. 2] Amount of Commitment - - ---------- $30,000,000 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Daniel Leuchor ----------------------------- Title: Vice President Lending Office for Loans The First National Bank of Chicago 153 West 51st Street New York, New York 10019 Attn: James W. Peterson Telecopier No.: (212) 373-1388 -10- [4-Year Facility, Amendment No. 2] Amount of Commitment - - ----------- $30,000,000 MARINE MIDLAND BANK By: /s/ William M. Holland ------------------------------ Title: Vice President Lending Office for Loans Marine Midland Bank Asset Syndication Office 1 Marine Midland Center Buffalo, New York 14203 Attn: Patricia Miller Telecopier No. (716) 841-2325 -11- [4-Year Facility, Amendment No. 2] Amount of Commitment - - ---------- $30,000,000 NATIONAL WESTMINSTER BANK Plc By: /s/ Anne Marie Torre ----------------------- Title: Vice President Lending Office for Loans National Westminster Bank Plc New York Branch 175 Water Street New York, New York 10038-4924 Attn: Anne Marie Torre Telecopier No.: (212) 602-4500 By: /s/ Anne Marie Torre ------------------------------- Title: Vice President Lending Office for Loans National Westminster Bank Plc Nassau Branch 175 Water Street New York, New York 10038-4924 Attn: Anne Marie Torre Telecopier No.: (212) 602-4500 -12- [4-Year Facility, Amendment No. 2] Amount of Commitment - - ----------- $30,000,000 THE SANWA BANK LIMITED By: /s/ Stephen C. Small ------------------------- Title: Vice President Lending Office for Loans The Sanwa Bank Limited New York Branch Park Avenue Plaza 55 East 52nd Street New York, New York 10055 Attn: Stephen C. Small Telecopier No.: (212) 754-1304 -13- [4-Year Facility, Amendment No. 2] Amount of Commitment - - ---------- $30,000,000 FLEET NATIONAL BANK By: /s/ Gary Kearns ____________________________ Title: Senior Vice President Lending Office for Loans Fleet National Bank One Landmark Square Stamford, CT 06901 CTFD0752 Attn: Gwen Pesce cc: Barbara Agostini Telecopier No.: (203) 358-6111 364 Day Credit Agreement AMENDMENT NO. 1 THIS AMENDMENT NO. 1, dated as of May 31, 1996, among GENERAL SIGNAL CORPORATION (the "Company") and the undersigned commercial banking institutions (herein called collectively "Banks"). WITNESSETH: WHEREAS, the Company and the Banks are parties to a certain 364 Day Credit Agreement, dated as of June 1, 1995 (the "364 Day Agreement"); and WHEREAS, the parties desire to further amend certain terms of the Agreement. NOW, THEREFORE, in consideration for the agreements herein con tained, 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 Agreement. 2. Each Bank's Commitment shall be the amount set forth op posite 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 Agreement. 3. The "Revolver Expiration Date" is hereby amended to mean the earlier of May 30, 1997 or the date of termination in whole of the Com mitments. All references to the "364 Day Agreement" shall be deemed to re fer to the 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: 0.200% 0.325% AA-/Aa3 or higher Level 2: 0.225% 0.350% A-/A3 or higher, but less than level 1 Level 3: 0.375% 0.500% BBB-/Baa3 or higher, but less than level 2 Level 4: 0.625% 0.750% Less than BBB-/Baa3 5. The table in Section 3.2, Facility Fee, is hereby deleted and replaced with the following: -2- Public Debt Rating Facility Fee Percentage - - ------------------ ----------------------- Level 1: 0.040% AA-/Aa3 or higher Level 2: 0.075% A-/A3 or higher, but less than level 1 Level 3: 0.100% BBB-/Baa3 or higher, but less than Level 2 Level 4: 0.150% Less than BBB-/Baa3 6. Except as set forth in this Amendment, all terms and con- ditions 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 By: /s/ Julian B. Twombly ----------------------------- Vice President and Treasurer One High Ridge Park Stamford, Connecticut 06904 Attention: Treasurer Telecopier No.: (203) 329-4365 -3- [364 Day Facility, Amendment No. 1] Amount of Commitment - - ---------- $25,000,000 THE CHASE MANHATTAN BANK, N.A. By: /s/ Claudia Stone --------------------------- Title: Managing Director Lending Office for Loans The Chase Manhattan Bank, N.A. One Chase Plaza, 17th Floor New York, New York 10081 Attn: Claudia Stone Telecopier No.: (212) 552-1457 -4- [364 Day Facility, Amendment No. 1] Amount of Commitment - - ---------- $25,000,000 NATIONSBANK, N.A. By: /s/ M.K. Vandenberg ------------------------- Title: Senior Vice President Lending Office for Loans NationsBank, N.A. NationsBank Plaza Charlotte, North Carolina 28225 Attn: Lisa McClelland, NC1-002-17-21 Telecopier No.: (704) 386-8694 cc: Margaret K. Vandenberg NationsBank, N.A. 767 Fifth Avenue New York, New York 10153 Telecopier No.: (212) 751-6909 -5- [364 Day Facility, Amendment No. 1] Amount of Commitment - - ---------- $25,000,000 WACHOVIA BANK OF GEORGIA, N.A. By: /s/ Jane Deaver --------------------------- Title: Vice President Lending Office for Loans Wachovia Bank of Georgia, N.A 191 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Jane Deaver Telecopier No.: (404) 332-6898 -6- [364 Day Facility, Amendment No. 1] Amount of Commitment - - ---------- $15,000,000 CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ E.L.Gordon ------------------------------- Title: Authorized Signatory Lending Office for Loans Canadian Imperial Bank of Commerce 425 Lexington Avenue New York, New York 10017 Attn: E. Lindsay Gordon Telecopier No.: (212) 856-3991 -7- [364 Day Facility, Amendment No. 1] Amount of Commitment - - ---------- $15,000,000 COMMERZBANK A.G. By: /s/ Sean Harrigan ----------------------------- Title: Senior Vice President By: /s/ Juergen Boysen ------------------------------ Title: Senior Vice President Lending Office for Loans CommerzBank A.G. 2 World Financial Center New York, New York 10281-1050 Attn: Andrew Campbell Telecopier No.: (212) 266-7235 -8- [364 Day Facility, Amendment No. 1] Amount of Commitment - - ---------- $15,000,000 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ Daniel Leuchor ----------------------------- Title: Vice President Lending Office for Loans The First National Bank of Chicago 153 West 51st Street New York, New York 10019 Attn: James W. Peterson Telecopier No.: (212) 373-1388 -9- [364 Day Facility, Amendment No. 1] Amount of Commitment - - ---------- $15,000,000 MARINE MIDLAND BANK By: /s/ William M. Holland ____________________________ Title: Vice President Lending Office for Loans Marine Midland Bank Asset Syndication Office 1 Marine Midland Center Buffalo, New York 14203 Attn: Patricia Miller Telecopier No.: (716) 841-2325 -10- [364 Day Facility, Amendment No. 1] Amount of Commitment - - ---------- $15,000,000 NATIONAL WESTMINSTER BANK Plc By: /s/ Anne Marie Torre ----------------------------- Title: Vice President Lending Office for Loans National Westminster Bank Plc New York Branch 175 Water Street New York, New York 10038-4924 Attn: Anne Marie Torre Telecopier No.: (212) 602-4500 By: /s/ Anne Marie Torre ----------------------------- Title: Vice President Lending Office for Loans National Westminster Bank Plc Nassau Branch 175 Water STreet New York, New York 10038-4924 Attn: Anne Marie Torre Telecopier No.: (212) 602-4500 -11- [364 Day Facility, Amendment No. 1] Amount of Commitment - - ---------- $15,000,000 THE SANWA BANK LIMITED By: /s/ Stephen C. Small ------------------------ Title: Vice President Lending Office for Loans The Sanwa Bank Limited New York Branch Park Avenue Plaza 55 East 52nd Street New York, New York 10055 Attn: Stephen C. Small Telecopier No.: (212) 754-1304 -12- [364 Day Facility, Amendment No. 1] Amount of Commitment - - ----------- $15,000,000 FLEET NATIONAL BANK By: /s/ Gary Kearns _____________________________ Title: Senior Vice President Lending Office for Loans Fleet National Bank One Landmark Square Stamford, CT 06901 CTFD0752 Attn: Gwen Pesce cc: Barbara Agostini Telecopier No.: (203) 358-6111 [CONFORMED AS EXECUTED] 364 DAY CREDIT AGREEMENT dated as of June 1, 1995 among GENERAL SIGNAL CORPORATION and VARIOUS COMMERCIAL BANKING INSTITUTIONS 364 DAY CREDIT AGREEMENT THIS 364 DAY CREDIT AGREEMENT, dated as of June 1, 1995 (the "Agreement"), among GENERAL SIGNAL CORPORATION, a New York corporation (the "Company"), each other Borrower hereunder, and the undersigned commercial banking institutions (herein called collectively "Banks"). W I T N E S S E T H: WHEREAS, the Company desires by this Agreement (capitalized terms being used herein with the meanings respectively ascribed to them in Article XII) to obtain commitments for revolving credit loans to be made in an aggregate outstanding principal amount not to exceed $200,000,000 on or prior to the Revolver Expiration Date and to provide for the making of Market Rate Loans by the several Banks; and WHEREAS, Banks are willing, severally and not jointly, upon the terms and conditions hereinafter set forth, to extend such revolving loan commitments and to make loans pursuant thereto and to make non-committed Market Rate Loans for general working capital and other corporate purposes (including, without limitation, acquisitions and the purchase of securities and assets, including repurchases of the Company's securities); NOW, THEREFORE, in consideration of the agreements herein contained, the parties hereto hereby agree as follows: ARTICLE I COMMITMENTS OF BANKS; BORROWING PROCEDURES AND CONDITIONS SECTION 1.1. Commitments. Subject to the terms and conditions of ----------- this Agreement, each Bank severally agrees to make Revolving Loans hereunder to any Borrower up to the maximum amounts specified in Section 1.1.4 as follows: ------- ----- SECTION 1.1.1. Revolving Loan Commitments. Loans on a revolving -------------------------- basis (i.e., subject to the terms and conditions of this Agreement, Revolving --- Loans may be borrowed, prepaid, repaid and re-borrowed) from time to time on or before the Revolver Expiration Date to any Borrower equal to such Bank's Percentage of the aggregate amount of such Revolving Loan (each herein called a "Revolving Loan") except as each Bank's obligation to make Revolving Loans may be created or modified as provided in this Section 1.1 and Section 13.5. ------- --- ------- ---- -2- SECTION 1.1.2. Term Loan Commitments. A loan (herein called a "Term --------------------- Loan") on the Revolver Expiration Date in such Bank's Percentage of such aggregate amount as Borrower may request from all Banks, such aggregate amount not to exceed the amount of the Credit. SECTION 1.1.3. Domestic and Eurodollar Loan Commitments. Subject to ---------------------------------------- the terms and conditions of this Agreement, each Revolving Loan and each Term Loan shall be either a Domestic Loan or a Eurodollar Loan, as Borrower shall request in the relevant notice of borrowing pursuant to Section 1.2 or 5.4, it ------- --- --- being understood that both Domestic Loans and Eurodollar Loans may be outstanding at the same time. As to any Eurodollar Loan or Domestic Loan, each Bank may, if it so elects (which election shall be made by such Bank in a manner consistent with its undertaking contained in Section 5.7 and otherwise in good ------- --- faith with a view to not increasing unnecessarily the obligations of any Borrower hereunder), fulfill its aforesaid commitment by causing a foreign branch or affiliate of such Bank (such foreign branch or affiliate or any U.S. branch or affiliate from which a Bank funds a Eurodollar Loan herein called such Bank's "Eurodollar Office") to make such Loan, provided that in such event for the purposes of this Agreement such Eurodollar Loan shall be deemed to have been made by such Bank, and the obligation of Borrower to repay such Eurodollar Loan shall nevertheless be to such Bank and shall be deemed held by it, to the extent of such Eurodollar Loan, for the account of such branch or affiliate. SECTION 1.1.4. Commitment Limits. The aggregate principal amount of ----------------- Revolving Loans and Term Loans which any Bank shall be committed to lend to Borrower shall not at any one time exceed such Bank's Commitment; and the aggregate amount of the Credit shall not at any one time exceed $190,000,000 (or such greater or lesser amount as may be determined pursuant to this Section ------- 1.1). Except as may be otherwise required by Section 5.6, no Bank's obligation - - --- ------- --- to make any Revolving Loan or Term Loan shall, the ratability provisions of Section 1.1.3 to the contrary notwithstanding, be affected by any other Bank's - - ------- ----- failure or inability to make any Revolving Loan or Term Loan. SECTION 1.1.5. Mandatory Reduction of the Commitments. On the -------------------------------------- Revolver Expiration Date the Commitment of each Bank shall be reduced to zero; provided that on the Revolver Expiration Date any Borrower may borrow a Term - - -------- Loan pursuant to Section 1.2. The aggregate amount of the Commitments of the ------- --- Banks once reduced pursuant to this Section 1.1.5 may not be reinstated. ------- ----- -3- SECTION 1.1.6. Optional Pro Rata Reduction. The Company shall have --------------------------- the right, at any time or from time to time, upon not less than three Business Days' prior notice to the Depositary Bank (and the Depositary Bank shall promptly notify each Bank of each termination or reduction) to terminate or reduce, in whole or in part, on a pro rata basis the unused portions of the respective Commitments of the Banks, provided that each partial reduction shall -------- be in an aggregate principal amount of $5,000,000 or a multiple thereof. The aggregate amount of the Commitments of the Banks once reduced pursuant to this Section 1.1.6 may not be reinstated, except pursuant to Section 1.1.8. - - ------- ----- ------- ----- SECTION 1.1.7. Optional Non-Pro Rata Reduction. The Company shall ------------------------------- have the right, upon not less than five Business Days' prior notice to a Bank (with a copy to the Depositary Bank), to terminate in whole such Bank's Commitment; provided, that at the time such notice of termination is given (A) -------- no Credit Suspension Event has occurred and is continuing and (B) either (i) the Public Debt Rating of the Company is A-/A3 or higher or (ii) concurrently with the termination of such Bank's Commitment a Commitment Increase becomes effective pursuant to Section 1.1.8 in an amount not less than the Commitments ------- ----- concurrently being terminated pursuant to this Section 1.1.7. Such termination ------- ----- shall be effective, (A) with respect to such Bank's unused Commitment, on the date set forth in such notice, provided, however, that such date shall be no -------- ------- earlier than ten Business Days after receipt of such notice and (B) with respect to each Loan outstanding to such Bank, on the last day of the then current Interest Period relating to such Loan. Upon termination of a Bank's Commitment under this Section 1.1.7, the Company will pay or cause to be paid all principal ------- ----- of, and interest accrued to the date of such payment on Loans owing to such Bank and pay any facility fees or other fees payable to such Bank pursuant to Section ------- 3.2, and all other amounts payable to such Bank hereunder; and upon such - - --- payments, the obligations of such Bank hereunder shall, by the provisions hereof, be released and discharged. The aggregate amount of the Commitments of the Banks once reduced pursuant to this Section 1.1.7, may not be reinstated, ------- ----- except pursuant to Section 1.1.8. ------- ----- SECTION 1.1.8. Increase in Commitments. The Company may at any time, ----------------------- by notice to the Depositary Bank, propose that the aggregate of the Commitments be increased in excess of the aggregate of the Commitments then in effect (a "Commitment Increase"), effective as of a date prior to the Revolver Expiration Date (the "Increase Date") as to which agreement is to be reached by an earlier date specified in such notice (the -4- "Commitment Date"); provided, however, that (A) the minimum proposed Commitment -------- ------- Increase per notice shall be in an amount no less than $5,000,000, (B) no Event of Default has occurred and is continuing and (C) the warranties of the Company in Article VII shall be true and correct in all material respects with the same ------- --- effect as if made on such Increase Date. The Depositary Bank shall notify the Banks thereof promptly upon its receipt of any such notice. If agreement is reached on or prior to the Commitment Date with one or more Banks and Assuming Banks, if any, as to a Commitment Increase (which may be less than specified in the applicable notice from the Company), such agreement to be evidenced by a notice in reasonable detail from the Company to the Depositary Bank on or prior to the Commitment Date, the Assuming Banks, if any, shall become Banks hereunder as of the Increase Date and the Commitments of such Banks and such Assuming Banks shall become or be, as the case may be, as of the Increase Date the amounts specified in such notice (and the Depositary Bank shall give notice thereof to the Banks (including such Assuming Banks)); provided, however, that: -------- ------- (a) the Depositary Bank shall have received (with copies for each Bank, including each Assuming Bank), on or prior to the Increase Date, an opinion of counsel for the Company in substantially the form of Exhibit D ------- - hereto and an opinion of counsel for each other Borrower substantially in the form of Exhibit F hereto, dated such Increase Date, together with a ------- - copy, certified on the Increase Date by the Secretary or an Assistant Secretary of the pertinent Borrower, of the resolutions adopted by the Board of Directors of the Company and each such other Borrower authorizing such Commitment Increase; (b) each such Assuming Bank shall have delivered, on or prior to the Increase Date, to the Depositary Bank an appropriate Assumption Agreement; and (c) each Bank which proposes to increase its Commitment in connection with such Commitment Increase shall have delivered, on or prior to the Increase Date, confirmation in writing satisfactory to the Depositary Bank as to its increased Commitment. In the event that the Depositary Bank shall not have received notice from the Company as to such agreement on or prior to the Commitment Date or the Company shall, by notice to the Depositary Bank prior to the Increase Date, withdraw such proposal or any of the actions provided for above in clauses (a) through --- (c) of this Section 1.1.8. shall not have occurred by the Increase Date, such - - --- ------- ------ -5- proposal by the Company shall be deemed not to have been made. In such event, the actions theretofore taken under clauses (a) through (c) of this Section --- --- ------- 1.1.8., shall be deemed to be of no effect and all the rights and obligations of - - ------ the parties shall continue as if no such proposal had been made. Following any Commitment Increase, the Borrower shall be deemed to repay and reborrow each Revolving Loan having an Interest Period commencing prior to such Increase Date on the date of the continuation or conversion of any Revolving Loan that is a Fixed Rate Loan or the next Interest Date for any Revolving Loan that is a Prime Rate Loan. SECTION 1.2. Borrowing Procedures. Borrower shall provide The Chase -------------------- Manhattan Bank, N.A. (herein called "Depositary Bank"), with notice (of which Depositary Bank shall give prompt notice to each other Bank), by 10:00 a.m. New York City time on the day of a proposed borrowing of Prime Rate Loans, at least two Business Days prior to each proposed borrowing of CD Loans or at least three Eurodollar Days prior to each proposed borrowing of Eurodollar Loans, as the case may be, of the date and amount of such borrowing (except that if the Term Loan borrowing shall comprise both Domestic and Eurodollar Loans, there shall be a single notice at least three Eurodollar Days prior to such proposed borrowing), the interest rate applicable thereto and, in the case of a Eurodollar Loan or CD Loan, the duration of the initial Interest Period. Each Bank shall provide Depositary Bank at its address set forth below its signature hereto, by not later than 12:30 p.m., New York City time, on the date of a proposed borrowing, with immediately available funds covering such Bank's Percentage of the borrowing (or, in the case of the Term Loan borrowing, of any excess of the aggregate Term Loan borrowing over the aggregate principal amount of the Revolving Loans then outstanding plus accrued interest unpaid at the Revolver Expiration Date), and Depositary Bank shall pay over such immediately available funds to Borrower upon each Bank's (including, without limitation, Depositary Bank's) receipt of the documents required under Article IX with ------- -- respect to such borrowing. Each borrowing hereunder shall be in an aggregate amount that is an integral multiple of $1,000,000 and at least $5,000,000. SECTION 1.3. Market Rate Loans. (a) Notwith-standing any provisions ----------------- of this Agreement to the contrary, any Bank may, from time to time, make Market Rate Loans denominated in Dollars or in any Alternate Currency to any Borrower bearing interest at such rate (hereinafter called such Bank's "Market Rate") of interest as may be agreed upon by the Borrower and such Bank. -6- Each Bank may in its sole discretion negotiate with any Borrower concerning the offering of Loans at a Market Rate (hereinafter called "Market Rate Loans"); provided, that nothing contained in this Agreement shall be deemed to require - - -------- any Bank to offer Market Rate Loans to any Borrower. In the event that any Borrower and any Bank agree to the making of a Market Rate Loan, such Market Rate Loan shall be made severally by such Bank directly to such Borrower without participation in such Market Rate Loan by any other Bank. Such Market Rate Loan may be on such further terms and conditions, including the right of the Borrower to prepay such Market Rate Loan, as may be agreed upon by the Borrower and such Bank. (b) Notwithstanding anything to the contrary contained in this Agreement, all payments or prepayments made in respect of Market Rate Loans made by a Bank pursuant to Section 1.3(a) shall be made directly to such Bank, and ------- ------ such Bank shall not be subject to the provisions of Section 6.3 or 6.4 in ------- --- --- respect of any such payments so received. (c) Upon the making of, or any repayment of principal of, any Market Rate Loan, Borrower shall give the Depositary Bank prompt written, facsimile or telephonic notice of such Market Rate Loan or repayment, which notice shall state the Borrower, the principal amount of such Market Rate Loan or the amount of such repayment, the maturity date of such Market Rate Loan (if applicable) and, if such Market Rate Loan is an Alternate Currency Loan, the Alternate Currency, the Dollar equivalent of the principal amount thereof and the Alternate Currency Payment Office. (d) Market Rate Loans shall not be subject to the limitations on the aggregate amount of the Credit as provided in Section 1.1.4 and shall not reduce ------- ----- the amount of any Bank's unused Commitment. (e) The Company shall designate for each Alternate Currency in which any Borrower proposes to borrow an Alternate Currency Loan an office of a bank at which the proceeds of Alternate Currency Loans denominated in such Alternate Currency will be made available to Borrower and payments in such Alternate Currency will be made (an "Alternate Currency Payment Office") by written notice to Depositary Bank. Any Borrower and any Bank making a Market Rate Loan that is an Alternate Currency Loan may agree upon a different Alternate Currency Payment Office with respect to such Market Rate Loan. The Company or Borrower shall provide the Depositary Bank with written notice of any such designation. -7- SECTION 1.4. Conditions to Each Loan. Notwithstanding any other ----------------------- provision of this Agreement, no Revolving Loan or Term Loan shall be required to be made hereunder if the conditions precedent to the making of such Loan specified in Article IX have not been satisfied. ARTICLE II NOTES EVIDENCING LOANS SECTION 2.1. Revolving Notes. The Revolving Loans of each Bank shall --------------- be evidenced by a promissory note (herein called a "Revolving Note") substantially in the form set forth in Exhibit A, with appropriate insertions, ------- - payable to the order of such Bank on the Revolver Expiration Date in the principal amount equal to the amount of such Bank's Commitment or in the aggregate unpaid principal amount of all of its Revolving Loans, whichever is less. The date and amount of each Revolving Loan made by such Bank and of each repayment of principal thereof received by such Bank, and, in the case of each Eurodollar Loan or CD Loan, the dates on which each Interest Period as to such Loan shall begin and end, shall be recorded by such Bank on the schedule attached to the Revolving Note issued to such Bank, and the aggregate unpaid principal amount shown on such schedule shall be conclusive evidence absent demonstrable error of the principal amount owing and unpaid on such Revolving Note. The failure to record any such amount on such schedule shall not, however, limit or otherwise affect the obligations of Borrower hereunder or under any Note to repay the principal amount of the Loans together with all interest accruing thereon or any other amount owing hereunder. Each Revolving Loan shall be repaid on the Revolver Expiration Date, subject to the right of Borrower to prepay such Revolving Loan and, prior to the Revolver Expiration Date, to reborrow hereunder, in accordance with the provisions of this Agreement. SECTION 2.2. Term Notes. The Term Loan of each Bank shall be ---------- evidenced by a promissory note (herein called a "Term Note") substantially in the form set forth in Exhibit B, with appropriate insertions, dated the Revolver ------- - Expiration Date, payable to the order of such Bank in the original principal amount of such Term Loan on the date which is one year after the Revolver Expiration Date. SECTION 2.3. Market Rate Notes. A Market Rate Loan made by any Bank ----------------- to Borrower shall be evidenced by a promissory note (herein called a "Market Rate Note") substantially in the form set forth in Exhibit C, with appropriate --------- insertions, and -8- containing such other terms as the Borrower and such Bank may agree. ARTICLE III INTEREST AND FEES SECTION 3.1. Interest. Subject to the provisions of Section 4.4, (i) -------- ------- --- interest prior to maturity (whether by acceleration or otherwise) on each Prime Rate Loan shall be payable in arrears on the last day of each March, June, September and December and on the Revolver Expiration Date (herein, subject to the requirements of Section 3.4, and including the final maturities, by ------- --- acceleration or otherwise, of all of the Revolving Loans, called a "Prime Rate Interest Date"), and (ii) interest prior to maturity on each Eurodollar Loan and CD Loan shall be payable on the last day of the Interest Period for such Loan (herein called a "Fixed Rate Interest Date"). Interest from and after maturity (whether by acceleration or otherwise) on all Loans shall be payable on demand. Interest on each Loan shall accrue from and including the Borrowing Date thereof, but shall not accrue on any principal amount of such Loan for the day on which such principal amount is paid. For purposes of the foregoing computations, a conversion of Eurodollar Loans to Domestic Loans or of Domestic Loans to Eurodollar Loans, or a conversion of CD Loans to Prime Rate Loans or of Prime Rate Loans to CD Loans, or a continuation of Eurodollar Loans or CD Loans, pursuant to Article V shall be deemed to comprise a payment of principal ------- - together with the making of a concurrent Loan. SECTION 3.1.1. Interest on Domestic Loans. Interest on the unpaid -------------------------- portion of the principal amount of Domestic Loans shall accrue until paid with respect to each Bank at the following rates per annum: SECTION 3.1.1.1. Revolving Loans and Term Loans. (i) Prior to ------------------------------ maturity, at a rate equal to the Prime Rate, from time to time in effect, or the CD Rate, as the Borrower has specified in its notice of borrowing pursuant to Section 1.2 hereof; and (ii) after maturity, whether by acceleration or - - ------- --- otherwise, until paid, at a rate equal to the sum of the Prime Rate, in effect from time to time, plus 1%. SECTION 3.1.1.2. Changes in Prime Rate. The applicable interest rate --------------------- on Prime Rate Loans shall change simultaneously with the effectiveness of each change in the Prime Rate. -9- SECTION 3.1.2. Interest on Eurodollar Loans. Interest on the unpaid ---------------------------- principal amount of each Eurodollar Loan shall accrue at a rate per annum (herein called the "Eurodollar Interest Rate") calculated for each Eurodollar Period as follows: SECTION 3.1.2.1. Revolving Loans and Term Loans. The Eurodollar ------------------------------ Interest Rate for each Eurodollar Period shall be a rate per annum which is equal to the sum of the Eurodollar Margin in effect on the first day of the applicable Eurodollar Period plus the rate obtained by dividing (i) the arithmetic average (rounded to the nearest whole multiple of 1/16 of 1%) of the rates per annum calculated by Depositary Bank on the basis of notification from the Reference Banks at which Dollar deposits are offered to each Reference Bank by prime banks in the London Interbank Eurodollar market in immediately available funds at 11:00 a.m., London time, two Eurodollar Days before the beginning of such Eurodollar Period for a period comparable to such Eurodollar Period and in a principal amount comparable to the Eurodollar Loan of such Reference Bank for such Eurodollar Period divided (and rounded to the nearest whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including without limitation any marginal, emergency, supplemental, special or other reserves) applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D of the Board of Governors of the Federal Reserve System (herein called "Regulation D") or any successor category of liabilities under Regulation D. SECTION 3.1.2.2. After Maturity. In the event of default by any -------------- Borrower in the payment when due (whether by acceleration or otherwise) of part or all of the principal amount of any Eurodollar Loan, such Borrower shall pay interest on such unpaid amount from the date such amount shall have become due to the date of actual payment, accruing on a daily basis, at a rate per annum (i) in the event such default shall occur prior to the scheduled expiration of the Eurodollar Period for such Loan, then during the remaining portion of such Eurodollar Period, equal to 1% plus the Eurodollar Interest Rate for such Eurodollar Period of such Loan during which such default occurred and (ii) after the expiration of the Eurodollar Period for such Loan (or expiring concurrently with such default) equal to the Prime Rate, from time to time in effect, plus 1%. SECTION 3.1.3. Notice of CD Rate or Eurodollar Interest Rate. The CD ------------------------------- ------------- Rate for each CD Interest Period and the Eurodollar Interest Rate for each Eurodollar Period shall be determined by Depositary Bank as provided herein and notice -10- thereof (including a calculation in reasonable detail) shall be given by Depositary Bank promptly to each Bank and to the Company. SECTION 3.1.4. Rate Determination Conclusive. Each calculation of ----------------------------- the Eurodollar Interest Rate or the CD Rate, furnished to the Banks and to the Company by Depositary Bank pursuant to Section 3.1.3 shall, unless objected to ------- ----- by any Bank or the Company within 30 days thereafter, be conclusive and binding upon the parties hereto, in the absence of demonstrable error. If any one or more of the Reference Banks is unable or for any reason fails to notify Depositary Bank of the applicable interest rate on the day specified in Section ------- 3.1.2.1, in the case of a Eurodollar Loan, or in the definition of "CD Rate", in - - ------- the case of a CD Loan, by 9:00 p.m., London time in the case of a Eurodollar Loan and 4:00 p.m., New York City time in the case of a CD Loan, the applicable Eurodollar Interest Rate or CD Rate, as the case may be, shall be determined on the basis of the rate or rates of which Depositary Bank is given notice by the remaining Reference Bank or Banks by such time. If none of the Reference Banks is able to notify Depositary Bank of such a rate, the provisions of clauses (a), ------- --- (b) and (c) of Section 5.5 shall apply. - - --- --- ------- --- SECTION 3.1.5. Increased Cost of Fixed Rate Loans. Borrower agrees ---------------------------------- to pay directly to each Bank additional amounts as will compensate such Bank for (i.e., make such Bank whole against, but only to the extent and for the duration --- of) (i) any increase in the cost to such Bank of making or maintaining any Eurodollar Loan or CD Loan hereunder, or of its obligation to make or maintain any Eurodollar Loans or CD Loans hereunder, or (ii) any reduction in the amount of any sum receivable by such Bank hereunder in respect of any Eurodollar Loan or CD Loan, from time to time, by reason of: (a) any reserve, special deposit, or similar requirements against assets of, deposits with or for the account of or credit extended by, such Bank which are imposed on, or deemed applicable by, such Bank, under or pursuant to any law, treaty, rule, regulation (including, without limitation, Regulation D) or requirement in effect on or after the date hereof, any change therein, or any interpretation thereof by any governmental authority charged with administration thereof or by any central bank or other fiscal, monetary or other authority having jurisdiction over the CD Loans, the Eurodollar Loans, such Bank, or a Eurodollar Office which is a foreign branch or affiliate of such Bank, or any requirement imposed by any central bank or -11- such other authority, whether or not having the force of law; or (b) any change in (including the introduction of any new) applicable law, treaty, rule, regulation or requirement or in the interpretation thereof by any official authority, or the imposition of any requirement of any central bank, whether or not having the force of law, which shall subject such Bank or Borrower to any tax (other than taxes on net income or net worth or franchise taxes), levy, impost, charge, fee, duty, deduction or withholding of any kind whatsoever or change the taxation of a Eurodollar Office which is a foreign branch or affiliate of such Bank with respect to any Eurodollar Loan of such Bank hereunder and the interest thereon (other than any change which affects, and to the extent that it affects, the taxation of net income); provided, however, that no Bank shall seek compensation for any such increase in - - -------- ------- cost, or for any such reduction in the amount of any sum receivable, for any period when any Eurodollar Loan or CD Loan shall be outstanding if such Bank shall, on or prior to the date of making such Eurodollar Loan or CD Loan, have notified the Borrower that it will not seek compensation therefor and will not give notice thereof in accordance with the following paragraph of this Section; provided, further, that the Borrower shall not be required to pay any additional - - -------- ------- amount on account of any taxes imposed by the United States pursuant to this Section 3.1.5. to any Bank which (i) is not entitled, on the date hereof (or, in - - ------- ------ the case of an assignee of a Bank, on the date on which the assignment to it became effective), to submit Form 1001 or Form 4224 (or any successor forms) so as to meet its obligations to submit such a form pursuant to Section 13.18 or ------- ----- Section 13.5, or (ii) shall have failed to submit any form or other - - ------- ---- certification which it was required to file pursuant to Section 13.18 or Section ------- ----- ------- 13.5 and entitled to file under applicable law, or (iii) shall have filed any - - ---- such form which is incorrect or incomplete in any material respect. In any such event, each Bank so affected shall promptly notify Borrower and Depositary Bank (which shall give prompt notice thereof to each other Bank) thereof by telephone, confirmed in writing, stating the reasons therefor and the additional amounts required fully to compensate such Bank for such increased cost or reduced amount. Such additional amounts shall be payable on the Fixed Rate Interest Date of each Eurodollar Loan and CD Loan so affected, and upon demand if such notice is not given to Borrower prior to such Fixed Rate Interest -12- Date or if there are no Eurodollar Loans or CD Loans outstanding when such notice is given, provided that such compensation will cover a period beginning -------- not more than 90 days prior to such notice. A certificate as to any such increased cost or reduced amount (including calculations, in reasonable detail, showing how such Bank computed such cost or reduction) shall be submitted by each affected Bank to Borrower and Depositary Bank (which shall promptly furnish copies thereof to each other Bank) and shall, in the absence of demonstrable error, be conclusive and binding. SECTION 3.1.6. Interest on Market Rate Loans. The applicable ----------------------------- interest rate, and the time of payment therefor, for each Market Rate Loan shall be as agreed upon by Borrower and the Bank making such Market Rate Loan. SECTION 3.1.7. Additional Costs. Without limiting the effect of the ---------------- foregoing provisions of Section 3.1.5 (but without duplication), the Borrower ------- ----- shall pay directly to each Bank from time to time on demand such amounts as such Bank may determine to be necessary to compensate such Bank for any costs which such Bank determines are attributable to any Revolving Loan outstanding hereunder or to its obligation to make any Revolving Loans hereunder and to other loans or commitments of this type in respect of any amount of capital maintained by such Bank or any of its affiliates pursuant to any law or regulation of any jurisdiction, or any change therein, or any interpretation, guidelines, directive or request (whether or not having the force of law) of any court or governmental or monetary authority, whether in effect on the date of this Agreement or thereafter. Without limiting the foregoing, such compensation shall include an amount equal to any reduction in return on assets or return on equity to a level below that which such Bank could have achieved but for such law, regulation, change, interpretation, directive or request; provided, -------- however, that no Bank shall seek compensation for any such increase in cost, or - - ------- for any such reduction in the amount of any sum receivable, in respect of any Revolving Loan outstanding hereunder for any period when any Revolving Loan shall be outstanding if such Bank shall, on or prior to the date of making such Revolving Loan, have notified the Borrower that it will not seek compensation therefor and will not give notice thereof in accordance with the following paragraph of this Section. In any such event, each Bank so affected shall promptly notify the Company and Depositary Bank (which shall give prompt notice thereof to each other Bank) thereof by telephone, confirmed in writing, stating the reasons therefor and the additional amounts required fully to compensate such Bank for -13- such increased cost or reduced amount. Such additional amounts shall be payable on the next Interest Date, or upon demand if there are no Loans outstanding when such notice is given, provided that such compensation will cover a period -------- beginning not more than 90 days prior to such notice. A certificate as to any such increased cost or reduced amount (including calculations, in reasonable detail, showing how such Bank computed such cost or reduction) shall be submitted by each affected Bank to Borrower and Depositary Bank (which shall promptly furnish copies thereof to each other Bank) and shall, in the absence of demonstrable error, be conclusive and binding. SECTION 3.1.8. Applicable Margin. The "Eurodollar Margin" or "CD ----------------- Margin" means, as of any date, with respect to any Eurodollar Loan or CD Loan, respectively, the applicable percentage set opposite the Public Debt Rating in effect on such date: Public Debt Rating Eurodollar Margin CD Margin - - ------------------ ----------------- --------- Level 1: AA-/Aa3 0.225% 0.350% or higher Level 2: A-/A3 or higher, but 0.260% 0.385% less than Level 1 Level 3: BBB-/Baa3 or higher, 0.425% 0.550% but less than Level 2 Level 4: Less than BBB-/Baa3 0.625% 0.750% Any adjustment to the Eurodollar Margin or CD Margin pursuant to this Section 3.1.8 shall become effective for Interest Periods commencing after a - - ------- ----- public announcement of a change in debt rating which requires an adjustment to be made hereunder. SECTION 3.2. Facility Fee. Borrower agrees to pay the Banks a ------------ facility fee for the period from and including June 1, 1995 to the later of the Revolver Expiration Date or the repayment of all Revolving Loans and Term Loans in full, equal to the percentage per annum set forth for the applicable Public Debt Rating in the table below on the daily average amount of the Credit; provided that no facility fee shall be payable to any - - -------- -14- Bank on that portion of the Credit then borrowed as Prime Rate Loans as a result of a conversion of any Fixed Rate Loan pursuant to Section 4.2, 5.5, 5.6 or 5.7. ------- --- --- --- --- Public Debt Rating Facility Fee Percentage ------------------ ----------------------- Level 1: AA-/Aa3 or higher 0.050% Level 2: A-/A3 or higher, 0.085% but less than Level 1 Level 3: BBB-/Baa3 or higher, 0.125% but less than Level 2 Level 4: Less than BBB-/Baa3 0.150% Such facility fee shall be payable on the last day of March, June, September and December for the period then ending for which such facility fee shall not have been theretofore paid (the first such payment to be made on June 30, 1995) and on the earlier of the Revolver Expiration Date or the date of termination of the Credit for any period then ending for which such facility fee shall not have been theretofore paid. SECTION 3.3. Basis of Computation. Interest on Prime Rate Loans and -------------------- the facility fee shall be computed for the actual number of days elapsed on the basis of a year consisting of 365 or, if applicable, 366 days. Interest on Fixed Rate Loans shall be computed for the actual number of days elapsed on the basis of a year consisting of 360 days. Interest on each Market Rate Loan shall be computed on the same basis as Fixed Rate Loans unless otherwise agreed upon by Borrower and the Bank making such Market Rate Loan. SECTION 3.4. Extension of Due Date. If any payment of principal of, --------------------- or interest on, any Domestic Loan or any payment of a facility fee falls due on a day which is not a Business Day, then such due date shall be extended to the next following Business Day. If any payment of principal of, or interest on, any Eurodollar Loan falls due on a day which is not a Eurodollar Day, then such due date shall be extended to the next Eurodollar Day, unless such Eurodollar Day falls in another calendar month, in which case the date for payment thereof shall be the preceding Eurodollar Day. If the date for any payment of principal is -15- extended pursuant to this Section 3.4 additional interest shall accrue and be ------- --- payable for the period of such extension. SECTION 3.5. Interest Rate Determination. Each Reference Bank agrees --------------------------- to furnish to the Depositary Bank timely information for the purpose of determining each Prime Rate, CD Rate or Eurodollar Rate, as applicable. If any one or more of the Reference Banks shall not furnish such timely information to the Depositary Bank for determination of any such interest rate, the Depositary Bank shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. The Depositary Bank shall give prompt notice to the Borrower and, if different, the Company and the Banks of the applicable interest rate determined by the Depositary Bank and of the applicable rate, if any, furnished by each Reference Bank for determining the applicable interest rate under Section 3.1. ----------- SECTION 3.6. Currency Equivalents. For purposes of the provisions of -------------------- Articles I, II, III, IV and V, (i) the equivalent in Dollars of any Alternate - - -------- - -- --- -- - Currency shall be determined by using the quoted spot rate at which the principal office in New York City of the pertinent Bank or the principal office in New York City of any affiliate of such Bank offers to exchange Dollars for such Alternate Currency in New York City at 11:00 a.m. (New York City time), two Business Days prior to the date on which such equivalent is to be determined, (ii) the equivalent in any Alternate Currency of any other Alternate Currency shall be determined by using the quoted spot rate at which such Bank's principal office in New York City or the principal office in New York City of any affiliate of such Bank offers to exchange such Alternate Currency for the equivalent in Dollars of such other Alternate Currency in New York City at 11:00 a.m. (New York City time), two Business Days prior to the date on which such equivalent is to be determined, and (iii) the equivalent in any Alternate Currency of Dollars shall be determined by using the quoted spot rate at which such Bank's principal office in New York City or the principal office in New York City of any affiliate of such Bank offers to exchange such Alternate Currency for Dollars in New York City at 11:00 a.m. (New York City time), two Business Days prior to the date on which such equivalent is to be determined. -16- ARTICLE IV PREPAYMENTS SECTION 4.1. Prepayment Upon Reduction or Termination of the Credit. ------------------------------------------------------ On the effective date of any reduction of the Commitments pursuant to Section ------- 1.1.6 Borrower shall prepay the amount, if any, by which the aggregate unpaid - - ----- principal amount of all Revolving Notes exceeds the then reduced amount of the Credit; provided, that on the later of the termination of the Commitments in -------- their entirety or the maturity of the Term Loan, if made, each Borrower shall pay in full all of its obligations hereunder and under the Notes accrued or payable through such date (all such obligations being herein collectively called the "Liabilities"). SECTION 4.2. Change in Law Rendering Fixed Rate Loans Unlawful. In ---------------------------------------- -------- the event that any change in (including the introduction of any new) applicable laws or regulations, or in the interpretation thereof by any governmental or other regulatory authority charged with the administration thereof, shall make it unlawful for any Bank to make or continue any Eurodollar Loan or CD Loan to be made or continued by it hereunder, the obligation of such Bank pursuant to which such Eurodollar Loan or CD Loan would otherwise be made shall, upon the happening of such event, forthwith terminate and such Bank shall, by telephonic notice confirmed in writing to Borrower (with a copy to Depositary Bank, which shall give prompt notice thereof to each other Bank), declare that such obligation has so terminated. If any such change shall make it unlawful for any Bank to maintain any Eurodollar Loan or CD Loan made by it hereunder, such Bank shall, upon the happening of such event, notify Borrower thereof by telephone, confirmed in writing (with a copy to Depositary Bank, which shall give prompt notice thereof to each other Bank), stating the reasons therefor and Borrower shall, at such time as required by law and no later than at the end of the Interest Period of such Loan, convert such Eurodollar Loan or CD Loan into a Prime Rate Loan by such Bank pursuant to the provisions (other than as to prior notice, to the extent that compliance therewith would violate applicable law) of Article V. If prior to the Revolver Expiration Date circumstances subsequently - - ------- - change so that any such Bank shall no longer be so affected, such Bank shall reinstate its Commitment to make Eurodollar Loans or CD Loans upon written notice to Borrower thereof (with a copy to Depositary Bank, which shall give prompt notice thereof to each other Bank). -17- SECTION 4.3. Optional Prepayment. Borrower may from time to time, ------------------- upon at least three Eurodollar Days' prior written notice to each Bank, prepay the Loans in whole or in part, subject to the provisions of Sections 6.1 and -------- --- 6.3, without premium or penalty other than as provided in Section 4.5; provided - - --- ------- --- -------- however, that such optional prepayment shall, if it occurs before the Revolver - - ------- Expiration Date, not reduce the Credit and any partial prepayment shall be in an aggregate principal amount of at least $5,000,000 and an integral multiple of $1,000,000. SECTION 4.4. Interest on Principal Prepaid. Any prepayment of ----------------------------- principal of the Loans shall include accrued interest to the date of prepayment on the principal amount being prepaid. Upon any conversion of a Fixed Rate Loan pursuant to Section 4.2, 5.6 or 5.7, Borrower shall on the date of such ------- --- --- --- conversion pay accrued interest on such Fixed Rate Loan to such date. Payments of interest on account of a conversion pursuant to Section 4.2, 5.6 or 5.7 shall ------- --- --- --- be made directly to each Bank so affected. SECTION 4.5. Prepayment Compensation. If (i) any optional or ----------------------- mandatory payment or prepayment of a Eurodollar Loan or CD Loan (including, without limitation, on account of a reduction or termination of the Credit) or any conversion of a Eurodollar Loan or CD Loan pursuant to Article V or Section ------- - ------- 4.2 is made on a day which is not the originally scheduled last day (designated - - --- in Borrower's notice pursuant to Section 1.2 or 5.4) of an Interest Period of ------- --- --- such Loan, or (ii) the Borrower fails to borrow, continue, or convert another Loan into, a Eurodollar Loan or CD Loan on the date for such borrowing, continuation, or conversion specified in the Borrower's notice pursuant to Section 1.2 or 5.4, Borrower shall pay directly to the Bank having made such - - ------- --- --- Loan or which would have made such Loan such amount or amounts as will fully compensate such Bank for any net losses and expenses incurred by it (or any branch or affiliate thereof) in connection with its repayment or reinvestment in respect of funds borrowed by it or deposited with it for the purpose of making or maintaining such Loan, it being understood that the amount of any such -- ----- ---------- loss shall be determined with reference only to reduced earnings derived by such Bank on, and shall not include any loss of, any principal amount of such funds as the result of such Bank's reinvestment thereof. Any such payment by Borrower to any Bank shall be payable on demand made by such Bank (accompanied by a calculation in reasonable detail of such payment which, in the absence of demonstrable error, shall be conclusive and binding as to the amount thereof). -18- ARTICLE V SPECIAL PROVISIONS WITH RESPECT TO CONTINUATION OF FIXED RATE LOANS AND CONVERSION OF LOANS BETWEEN EURODOLLARS AND DOMESTIC DOLLARS SECTION 5.1. Continuation of Eurodollar Loans. Borrower may elect to -------------------------------- continue a group of Eurodollar Loans from any Eurodollar Period into a subsequent Eurodollar Period, provided that such continuation shall take place -------- on the last day of the prior Eurodollar Period (herein, in such case, called a "Continuation Date"). Such election shall be subject to the notice requirements of Section 5.4. If no such election is made in compliance with the requirements ------- --- hereof and Borrower does not pay in full the outstanding principal amount of any Eurodollar Loan on the last day of the Eurodollar Period thereof, such Eurodollar Loan shall automatically, without any notice from or to Borrower, be converted into a Prime Rate Loan in accordance with the other provisions of this Article V (other than as to prior notice) at the end of such Eurodollar Period. - - ------- - SECTION 5.1.1. Continuation of CD Loans. Borrower may elect to ------------------------ continue a group of CD Loans from any CD Interest Period into a subsequent CD Interest Period, provided that such continuation shall take place on the last -------- day of the prior CD Interest Period (herein, in such case, called a "Continuation Date"). Such election shall be subject to the notice requirements of Section 5.4. If no such election is made in compliance with the requirements ------- --- hereof and Borrower does not pay in full the outstanding principal amount of any CD Loan on the last day of the CD Interest Period thereof, such CD Loan shall automatically, without any notice from or to Borrower, be converted into a Prime Rate Loan in accordance with the other provisions of this Article V (other than ------- - as to prior notice) at the end of such CD Interest Period. SECTION 5.2. Conversion. Borrower may elect (i) on any Eurodollar ---------- Day to convert any outstanding Domestic Loans into Eurodollar Loans or any outstanding Eurodollar Loans into Domestic Loans and (ii) on any Business Day to convert any outstanding CD Loans into Prime Rate Loans or any outstanding Prime Rate Loans into CD Loans (herein, in such case, called a "Conversion Date"), it -- being understood that any such conversion of a Eurodollar Loan or CD Loan into - - ----- ---------- another type of Loan on a day other than the last day of the Eurodollar Period or CD Interest Period, as the case may be, of such Loan shall be subject to the applicable provisions of Section 4.5. Such ------- --- -19- election shall be subject to the notice requirements of Section 5.4. ------- --- SECTION 5.3. Restrictions on Borrower's Continuation and Conversion --------------------------------------- -------------- Rights. Notwithstanding any other provisions of this Article V, Banks shall not - - ------ ------- - be obligated to effect (i) any continuation or conversion under this Article V, ------- - so long as any Event of Default or Credit Suspension Event has occurred and remains continuing or (ii) any continuation of any type of Loan outstanding or any conversion of any outstanding type of Loan into another type of Loan so long as any of the circumstances described in Sections 4.2, 5.5, 5.6 and 5.7 -------- --- --- --- --- affecting such continuation or conversion have occurred and remain continuing. SECTION 5.4. Notice of Continuations and Conversions. Except as --------------------------------------- otherwise provided in this Agreement, Borrower shall, at least three Eurodollar Days prior to any Continuation Date or Conversion Date involving a Eurodollar Loan, or at least two Business Days prior to any Continuation Date involving a CD Loan or conversion of a CD Loan into a Prime Rate Loan or Prime Rate Loan into a CD Loan, give notice to Depositary Bank (which shall give prompt notice thereof to each other Bank) of such proposed continuation or conversion, and in the case of any Eurodollar Loans or CD Loans to be continued or to be made by conversion on such date, as the case may be, the duration of the subsequent Eurodollar Period or CD Interest Period thereof. SECTION 5.5. Interest Rate Unascertainable. In the event that, prior ----------------------------- to any Borrowing Date of any group of Eurodollar Loans or CD Loans, Banks having, in the aggregate, a Percentage of 66 2/3% or more shall have determined (which determination shall be conclusive and binding on all parties hereto) that (i) with respect to Eurodollar Loans and CD Loans, the circumstances described in the third sentence of Section 3.1.4 have occurred, or that, (ii) by reason of ----- -------- ------------- other circumstances affecting the London interbank eurodollar market or certificate of deposit market, adequate and reasonable means do not exist for ascertaining the Eurodollar Interest Rate or CD Rate applicable to such group of Eurodollar Loans or CD Loans, (a) such Banks shall give notice of such determination promptly (and in any event within three Eurodollar Days after making such determination with respect to Eurodollar Loans and within two Business Days after making such determination with respect to CD Loans) to the other parties hereto and, (b) with respect to any new Eurodollar Loans or CD Loans, as the case may be, Borrower's request for Eurodollar Loans or CD Loans, as the case may be, shall be deemed a request for Prime Rate Loans and (c) with respect to outstanding Eurodollar Loans or CD Loans, as the case -20- may be, to be continued on such Borrowing Date, such Loans shall be converted into Prime Rate Loans in accordance with the provisions of this Article V on ------- - such Borrowing Date, notwithstanding any failure of Borrower to comply with the notice provisions of Section 1.2 or 5.4, as the case may be. ------- --- --- SECTION 5.6. Bank Unable to Make Eurodollar Loan. In the event that, ----------------------------------- prior to any Borrowing Date of any Eurodollar Loan as Borrower shall request in its relevant notice of borrowing pursuant to Section 1.2 or 5.4, any Bank ------- --- --- requested to make or continue such Eurodollar Loan shall (i) have determined (which determination if made in good faith shall be conclusive and binding on all parties hereto) that Dollar deposits in the relevant amount and for the relevant Eurodollar Period for such Eurodollar Loan are not available to such Bank in the London interbank eurodollar market by reason of law or otherwise, or (ii) learn of any change in (including the introduction of any new) applicable laws or regulations, or in the interpretation thereof by any governmental or other regulatory authority charged with the administration thereof, which shall make it unlawful for such Bank to make or continue such Eurodollar Loan for the proposed duration thereof, such Bank shall promptly give notice of such determination to Borrower (with a copy to Depositary Bank, which shall give prompt notice thereof to each other Bank) and (a) with respect to any new Eurodollar Loan, Borrower's request for such Loan shall be deemed a request for a Prime Rate Loan, and (b) with respect to any outstanding Eurodollar Loan to be continued on such Borrowing Date, such Loan shall be converted into a Prime Rate Loan in accordance with the provisions of this Article V on such Borrowing ------- - Date, notwithstanding any failure of Borrower to comply with the notice provisions of Section 1.2 or 5.4, as the case may be. ------- --- --- SECTION 5.7. Conversions Affecting Some Banks. Within ten days of -------------------------------- notification by any Bank that any of the circumstances described in Section ------- 3.1.5 or 3.1.7 shall have occurred and remain continuing with respect to any - - ----- ----- outstanding Eurodollar Loan or CD Loan made by such Bank, Borrower may elect to convert such Eurodollar Loan or CD Loan to a Prime Rate Loan. Borrower shall, at least three Eurodollar Days prior to the proposed Conversion Date in respect of such Eurodollar Loan or two Business Days prior to the proposed Conversion Date in respect of such CD Loan, give notice of such conversion to Depositary Bank (which shall give prompt notice to each other Bank). The exemption from the ratability provisions of Section 1.1.3 shall apply to all Banks or Loans ------- ----- affected by conversions made pursuant to this Section or Section 4.2 or 5.6 and ------- ------- --- --- so long as any of the circumstances which permitted or required such -21- conversion shall remain continuing. Any Bank so affected shall use all commercially reasonable efforts to cease being so affected, it being understood -- ----- ---------- that such obligation shall in no way reduce the rights of Banks hereunder nor require any Bank to take any action which would have a material adverse effect on such Bank, to make any Eurodollar Loan at any office located in the United States or to fund any Eurodollar Loan in domestic Dollars. ARTICLE VI MAKING AND PRORATION OF PAYMENTS; OFFSET SECTION 6.1. Making of Payments. All payments made by Borrower ------------------ hereunder shall be in immediately available funds and, except for payments pursuant to Sections 1.3(b), 3.1.5, 3.1.7 and 4.5 and as otherwise indicated in -------- ------ ----- ----- --- Sections 3.2 and 4.4, shall be made to Depositary Bank at its address set forth - - -------- --- --- below its signature hereto not later than 12:30 p.m., New York City time, on the date due; funds received after that hour shall be deemed to have been received by Depositary Bank on the next Eurodollar Day or Business Day, as the case may be. Depositary Bank shall remit in immediately available funds to each Bank or other holder its share of all such payments received by Depositary Bank for the account of such Bank or holder, as determined pursuant to Section 6.3, promptly ------- --- (and, in the event of any payment received prior to 12:30 p.m., New York City time, on any Business Day, on such Business Day). SECTION 6.2. Payment on Revolver Expiration Date. Any Borrower may ----------------------------------- effect payment of all or part of the Revolving Loans, together with accrued interest thereon, on the Revolver Expiration Date by directing Depositary Bank, in Borrower's notice of its proposed borrowing of the Term Loans pursuant to Section 1.2, to apply the proceeds of the Term Loans to the extent necessary to - - ------- --- the concurrent payment of principal of and interest on the Revolving Loans; provided, that the aggregate principal amount of the Term Loan shall not exceed - - -------- the amount of the Credit. SECTION 6.3. Allocation of Payments. All payments of principal of ---------------------- the Revolving Notes and Term Notes by Borrower shall be for the account of the holders of the Revolving Notes and Term Notes pro rata according to the respective unpaid principal amounts of the Revolving Notes and Term Notes held by them, and shall be applied by each such holder (except as Borrower may, in a manner not inconsistent with other terms and provisions hereof, otherwise elect in a notice, furnished on or prior to the date of -22- such payment, to Depositary Bank, which shall give prompt notice thereof to each other Bank) first to its then outstanding Domestic Loans other than Loans made by conversions pursuant to Section 4.2, 5.6 or 5.7 (herein called an "Equivalent ------- --- --- --- Domestic Loan"), second to any then outstanding Equivalent Domestic Loans, and finally to its then outstanding Eurodollar Loans. (For purposes of this Section, any Equivalent Domestic Loan shall be deemed an ordinary Domestic Loan to the extent that the Eurodollar Loan from which such Equivalent Domestic Loan was converted would otherwise have been converted to any ordinary Domestic Loan.) All payments of interest on Domestic Loans hereunder, except Equivalent Domestic Loans made by an affected Bank pursuant to Section 4.2, 5.6 ------- --- --- or 5.7, shall be for the account of the holders of the Revolving Notes and Term --- Notes pro rata according to the respective unpaid principal amounts of Domestic Loans evidenced by the Revolving Notes and Term Notes held by them; all payments of interest on Equivalent Domestic Loans made by an affected Bank pursuant to Section 4.2, 5.6 or 5.7, shall be for the account of the holders of the - - ------- --- --- ---- Revolving Notes and Term Notes pro rata according to the respective unpaid principal amounts of Equivalent Domestic Loans evidenced by the Revolving Notes and Term Notes held by them; and all payments of interest on Eurodollar Loans hereunder, except those pursuant to Section 4.4 on account of a conversion ------- --- pursuant to Section 4.2, 5.6 or 5.7, shall be for the account of the holders of ------- --- --- --- the Revolving Notes and Term Notes pro rata according to the respective unpaid principal amounts of Eurodollar Loans evidenced by the Revolving Notes and Term Notes held by them. All payments of facility fees shall be for the account of all Banks pro rata according to the daily average amount of each Bank's Commitment, provided that any reduction of facility fees in respect of Equivalent Domestic Loans that are Prime Rate Loans shall be borne pro rata by each affected Bank under Section 4.2, 5.5, 5.6 or 5.7. ------- --- --- --- --- Notwithstanding any other provision of this Section 6.3 payments of ------- --- principal, interest, facility fees and other obligations hereunder to any Bank upon termination of its Commitment pursuant to Section 1.1 or pursuant to ------- --- Section 3.1.7 shall be solely for the account of such Bank. - - ------- ----- SECTION 6.4. Proration of Other Recoveries. If any Bank or other ----------------------------- holder of a Revolving Note or Term Note shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise), other than a -23- prepayment compensation pursuant to Section 4.5, on account of principal of or ------- --- interest on any Revolving Note or Term Note, or facility fees, in excess of its pro rata share, as determined pursuant to Section 6.3, of payments and other ------- --- recoveries obtained by all Banks or other holders on account of principal of and interest on Revolving Notes or Term Notes then held by them, or facility fees, such Bank or other holder shall purchase from the other Banks or holders such participation in the Revolving Notes or Term Notes held by them, or shall make such other payments, as shall be necessary to cause such purchasing Bank or other holder to share the excess payment or other recovery ratably with each of them; provided, however, that if all or any portion of the excess payment or -------- ------- other recovery is thereafter recovered from such purchasing holder, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. SECTION 6.5. Offset. In addition to and not in limitation of all ------ rights of offset that any Bank or other holder of a Note may have under applicable law, each Bank or other holder of a Note shall, upon the occurrence of any Event of Default described in Section 11.1.3 or any Credit Suspension ------- ------ Event which would constitute such an Event of Default described in Section ------- 11.1.3, have the right, subject to Section 6.4, to appropriate and apply to the - - ------ ------- --- payment of such Note any and all balances, credits, deposits, accounts or moneys of Borrower then or thereafter with such Bank or other holder. If, in the aggregate, the recovery by the Banks by offset, under applicable law, or otherwise shall exceed the obligations of Borrower under the Notes and hereunder, any Bank receiving such an excess agrees to promptly restore the same to Borrower. ARTICLE VII WARRANTIES To induce Banks to grant the Credit and to make Loans hereunder, the Company warrants to Banks that: SECTION 7.1. Organization, etc. The Company is a corporation duly ----------------- existing and in good standing under the laws of the State of New York; and each Significant Subsidiary is a corporation duly existing and in good standing under the laws of the jurisdiction of its respective incorporation. SECTION 7.2. Authorization; No Conflict. The execution and delivery -------------------------- of this Agreement, the borrowings hereunder, the execution and delivery of the Notes, and the -24- performance by the Company of its obligations under this Agreement and the Notes, are within the Company's corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required), and do not and will not violate, contravene or conflict in any material respect with any provision of law or of the charter or by-laws of the Company or of any judgment or any material agreement or indenture binding upon or applicable to the Company the contravention of or conflict with which would materially adversely effect the consolidated financial condition or continued operations of the Company and its Subsidiaries as a whole or materially impair the ability of the Company to perform any of its obligations hereunder. SECTION 7.3. Validity and Binding Nature. This Agreement is, and the --------------------------- Notes when duly executed and delivered will be, legal, valid and binding obligations of the Company enforceable against it in accordance with their respective terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of rights of creditors generally. SECTION 7.4. Financial Statements. The Company's audited -------------------- consolidated financial statements as at December 31, 1994, copies of which have been furnished to each Bank, have been prepared in conformity with GAAP applied on a basis consistent with that of the preceding fiscal year and fairly present the financial condition of the Company and its Consolidated Subsidiaries as at such date and the results of their operations for the period covered by such statements. SECTION 7.5. Litigation. No litigation or arbitration proceedings ---------- are pending or, to the knowledge of the Company, threatened against the Company or any Significant Subsidiary as to which there is a reasonable likelihood of an adverse determination and which would reasonably be expected to have a material adverse effect on the consolidated financial condition or continued operations of the Company and its Subsidiaries as a whole or materially impair the ability of the Company to perform any of its obligations hereunder. SECTION 7.6. Liens. None of the assets of the Company is subject to ----- any mortgage, pledge, title retention lien, or other lien, encumbrance or security interest which is not permitted by Section 8.6. ------- --- SECTION 7.7. ERISA. Neither the Company nor any Significant ----- Subsidiary has incurred any liability to the Pension -25- Benefit Guaranty Corporation in connection with any employee benefit plan which could reasonably be expected to materially adversely affect the consolidated financial condition or continued operations of the Company and its Subsidiaries as a whole or materially impair the ability of the Company to perform any of its obligations hereunder. SECTION 7.8. Investment Company Act. The Company is not an ---------------------- "investment company," or a company "controlled" by or "controlling" an "investment company," within the meaning of the Investment Company Act of 1940, as amended. SECTION 7.9. Public Utility Holding Company Act. Neither the Company ---------------------------------- nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 7.10. Regulations G, U, and X. The Company will not use the ----------------------- proceeds of the Loans in violation of Regulations G, U, and X of the Board of Governors of the Federal Reserve System. ARTICLE VIII COVENANTS Until the expiration or termination of the Credit and thereafter until all Liabilities are paid in full, the Company agrees that, unless at any time Banks having, in the aggregate, a Percentage of 66 2/3% or more shall otherwise expressly consent in writing, it will: SECTION 8.1. Reports, Certificates and Other ------------------------------- Information. Furnish to each Bank: - - ----------- SECTION 8.1.1. Audit Report. Within 120 days after each fiscal year ------------ of the Company, a copy of an annual audit report of the Company and its Subsidiaries prepared on a consolidated basis and in conformity with GAAP, duly certified by, and containing an opinion of, Ernst & Young or other independent certified public accountants of recognized national standing selected by the Company, which opinion shall be unqualified (excepting any qualification relating to any change in the application of GAAP concurred in by such accountants). The requirements of this Section (other than the requirement that any opinion shall be unqualified as aforesaid) shall be satisfied by -26- the Company's furnishing each Bank with a copy of its annual report on Form 10-K filed with the Securities and Exchange Commission in accordance with the instructions therefor. SECTION 8.1.2. Interim Reports. Within 60 days after each quarter --------------- (except the last quarter) of each fiscal year of the Company, a copy of an unaudited financial statement of the Company and its Subsidiaries prepared on a consolidated basis and in conformity with GAAP applied on a basis consistent with the most recent audit report referred to in Section 8.1.1, signed by a ------- ----- proper accounting officer of the Company and consisting of at least a balance sheet as at the close of such quarter, a statement of earnings for such quarter and for the period from the beginning of such fiscal year to the close of such quarter and a statement of cash flows for the period from the beginning of such fiscal year to the close of such quarter. The requirements of this Section shall be satisfied by the Company's furnishing each Bank with a copy of its quarterly report on Form 10-Q filed with the Securities and Exchange Commission in accordance with the instructions therefor. SECTION 8.1.3. Certificates. Contemporaneously with the furnishing ------------ of a copy of each annual audit report and of each quarterly statement provided for in Section 8.1.1 or 8.1.2, a certificate dated the date of such annual ------- ----- ----- report or such quarterly statement and signed by the Chairman of the Board, any Senior Vice President, the Chief Financial Officer or the Treasurer of the Company, to the effect that no Event of Default or Credit Suspension Event has occurred and is continuing, or, if there is any such event, describing it and the steps, if any, being taken to cure it. SECTION 8.1.4. Reports to SEC and to Shareholders. Copies of each ---------------------------------- report on Form 10-K, 10-Q or 8-K (excluding exhibits thereto) made by any Borrower with the Securities and Exchange Commission, and of each annual report, quarterly report, special report or proxy statement from the Company to its shareholders generally, promptly after the filing or making thereof. SECTION 8.1.5. Notice of Default or Litigation. Forthwith upon ------------------------------- learning of the occurrence of an Event of Default, or a Credit Suspension Event, or of the institution of, or any adverse determination in, any litigation or arbitration proceeding as to which there is a reasonable likelihood of an adverse determination and which would reasonably be expected to have a material adverse effect on the consolidated financial condition or continued operations of the Company and its -27- Subsidiaries as a whole or materially impair the ability of the Company to perform any of its obligations hereunder, written notice thereof describing the same and the steps being taken by the Company or the Subsidiary affected with respect thereto. SECTION 8.1.6. ERISA. As soon as practicable after the occurrence of ----- any Reportable Event (as defined in the Employee Retirement Income Security Act of 1974) which is material to the Company and its Significant Subsidiaries taken as a whole, in connection with any employee pension benefit plan maintained by the Company or any Significant Subsidiary, written notice thereof describing the same. SECTION 8.1.7. Other Information. From time to time such other ----------------- information concerning the Company and its Subsidiaries as any Bank may reasonably request. SECTION 8.2. Books, Records and Inspections. Maintain, and cause ------------------------------ each Subsidiary to maintain, proper books and records in the form customarily employed by them; permit, and cause each Subsidiary to permit, upon reasonable notice and during normal business hours, access by any Bank to the books and records of the Company and of any Subsidiary; and permit, and cause each Subsidiary to permit, any Bank to inspect upon reasonable notice and during normal business hours the properties and operations of the Company and of any Subsidiary. SECTION 8.3. Insurance. Maintain, and cause each Significant --------- Subsidiary to maintain, such insurance as may be required by law and such other insurance to such extent and against such hazards and liabilities, as is customarily maintained by companies similarly situated. SECTION 8.4. Taxes and Liabilities. Pay, and cause each Significant --------------------- Subsidiary to pay, when due all taxes, assessments and other liabilities except as contested in good faith and by appropriate proceedings. SECTION 8.5. Purchase or Redemption of the Company's Securities; --------------------------------------- ----------- Dividend Restrictions. Not purchase, prepay or redeem, or permit any Subsidiary - - --------------------- to purchase, any shares of the capital stock of the Company, not declare or pay any dividends thereon (other than stock dividends), not make any distribution to shareholders or set aside any funds for any such purpose, not prepay, and not permit any Subsidiary to purchase or prepay, any subordinated indebtedness for borrowed money of the Company if, after giving effect thereto, any Event of Default or Credit Suspension Event shall have occurred and be continuing; provided - - -------- -28- that the foregoing shall not prevent the payment of any dividend or distribution within 60 days of the declaration thereof if, on the date of such declaration, such dividend or distribution would have complied with this Section 8.5. ------- --- SECTION 8.6. Liens. If the ratio of Consolidated Debt to ----- Consolidated Capitalization of the Company is more than 0.35:1, not create, incur, assume or suffer to exist any mortgage, pledge, lien or other encumbrance of any kind (including the charge upon property purchased under conditional sales or other title retention agreements) upon, or any security interest in, any of its property or assets, whether now owned or hereafter acquired, except (i) liens for taxes, assessments and governmental charges not delinquent or being contested in good faith or by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, (ii) existing liens securing indebtedness, including mortgage debt, as reflected in the Company's consolidated balance sheet as of December 31, 1994, (iii) liens arising in favor of the United States Government, any state or local government or any subdivision or agency thereof in the ordinary course of the Company's business with any of the foregoing for advances, progress payments or partial prepayments, (iv) liens in connection with workers' compensation, unemployment insurance or social security obligations, (v) liens or deposits or pledges to secure bids, tenders, contracts (other than contracts for repayment of borrowed money), leases, statutory obligations, surety and appeal bonds, indemnity, performance and similar bonds and other obligations of like nature arising in the ordinary course of business, (vi) mechanics', workmen's, materialmen's, carriers', warehousemen's or other like liens arising in the ordinary course of business with respect to obligations which are not due or which are being contested in good faith or by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, (vii) liens arising out of judgments or awards with respect to which appeals are being prosecuted, levy of execution pending such appeal having been stayed, (viii) rights-of-way, easements, water rights, sewage and drainage rights, zoning or use regulations or similar defects in title which do not materially impair the use of any property for the purposes for which held, (ix) the lien or any right or privilege reserved in leases for rent to secure compliance with the terms of any lease, but not including any lien arising from a violation of any lease provision other than one relating to conditional assignment of rents, (x) liens of attachment not exceeding in the aggregate $15,000,000 outstanding at any one time, (xi) liens of attachment exceeding in the aggregate $15,000,000 (but not exceeding in the aggregate $150,000,000) -29- outstanding at any one time, provided, however, that any such liens shall be released, discharged or vacated by bonding or otherwise within 30 days, (xii) deposits to obtain releases of liens imposed by law and permitted hereunder, (xiii) any mortgage, encumbrance or other lien upon, or security interest in, any property or asset (whether real, personal or mixed) hereafter acquired created contemporaneously with or within 365 days after such acquisition to secure or provide for the payment or financing of any part of the purchase price thereof, or the assumption of any mortgage, encumbrance or lien upon, or security interest in, any such property or asset hereafter acquired existing at the time of such acquisition, or the acquisition of any such property or asset subject to any mortgage, encumbrance or other lien or security interest without the assumption thereof (provided, at any one time that each such mortgage, -------- encumbrance, lien or security interest shall attach only to the property or asset so acquired and improvements thereon), (xiv) other liens which do not, in the aggregate, relate to or secure obligations exceeding 5% of Consolidated Capitalization, (xv) any encumbrance or lien upon margin stock and (xvi) any renewal, modification, extension, refinancing or replacement of any mortgage, encumbrance, lien or security interest permitted under clause (ii), (xiii) or (xiv), provided that the amount of indebtedness secured thereby is not increased and that any such mortgage, encumbrance, lien, or security interest is limited to all or part of the same property and any fixed improvement thereon; provided, -------- that nothing in this Section 8.6 shall be construed as prohibiting (x) ------- --- conveyances of property to a political subdivision pursuant to an industrial revenue or pollution control bond financing whereby equitable title to such property remains in the Company (provided, however, any mortgage, deed of trust or other security interest in the facility in connection therewith shall not be so excluded), or (y) the deposit of property or money with a trustee or other entity, or the establishment of an escrow, trust or similar account, for the purpose of defeasing indebtedness of the Company. SECTION 8.7. Mergers and Consolidations. Not be a party to any -------------------------- merger or consolidation unless (i) after giving effect to such merger or consolidation, no Event of Default and no Credit Suspension Event shall have occurred and be continuing, (ii) the corporation resulting from or surviving such merger or consolidation (if other than the Company) shall expressly assume in writing (in a form reasonably acceptable to Banks having, in the aggregate, a Percentage of 66 2/3% or more) and agree to perform all the Company's obligations under this Agreement and (iii) immediately after giving effect to such merger or consolidation the surviving corporation shall have a Consolidated -30- Net Worth at least equal to the Consolidated Net Worth of the Company immediately preceding such merger or consolidation; provided, that nothing in -------- this Agreement shall prevent the merger of any Subsidiary with and into the Company or into another Subsidiary or the liquidation of any Subsidiary. SECTION 8.8. Sale or Other Disposition of Assets. Not, and not ----------------------------------- permit any Subsidiary to, sell or otherwise dispose of, whether by merger or otherwise, all or any substantial portion of its assets, except (i) to or with any other Subsidiary or the Company, (ii) in the ordinary course of business, (iii) all of the assets of, or the ownership interest in, any Subsidiary which is not a Significant Subsidiary or (iv) on such other terms and conditions as shall have been approved by the Company's Board of Directors but, in the case of any transfer made pursuant to clause (iii) or (iv), only if, after giving effect ------ ----- ---- thereto, no Event of Default or Credit Suspension Event shall have occurred and be continuing. SECTION 8.9. Interest Coverage and Consolidated Debt to Consolidated ------------------------------------------------------- Capitalization Ratio. Not permit, as of the end of any fiscal quarter, both (A) - - -------------------- the ratio of Consolidated EBDIT to Consolidated Cash Interest Expense for the twelve month period including such fiscal quarter and the three immediately preceding fiscal quarters to be less than 2.50 to 1.0 and (B) the ratio of Consolidated Debt to Consolidated Capitalization at the end of such fiscal quarter to be more than .60 to 1.0. ARTICLE IX CONDITIONS OF LENDING SECTION 9.1. Initial Revolving Loans. The obligation of each Bank to ----------------------- make its initial Revolving Loan hereunder is subject to the receipt by such Bank of all of the following, each duly executed: SECTION 9.1.1. Revolving Note. The Revolving Note of the Company -------------- payable to the order of such Bank. SECTION 9.1.2. Resolutions. Copies of resolutions of the Board of ----------- Directors of the Company authorizing or ratifying the execution, delivery and performance, respectively, of this Agreement, the Notes, and other documents provided for in this Agreement, certified by the Secretary or an Assistant Secretary of the Company. SECTION 9.1.3. Consents, etc. Copies of all documents evidencing any ------------- necessary corporate action, consents and governmental approvals (if any) with respect to this Agreement -31- and the Notes, certified by the Secretary or an Assistant Secretary of the Company. SECTION 9.1.4. Incumbency and Signatures. A Certificate of the ------------------------- Secretary or an Assistant Secretary of the Company certifying the names of the officer or officers of the Company authorized to sign this Agreement and the Notes and other documents provided for in this Agreement, together with a sample of the true signature of each such officer. SECTION 9.1.5. Opinion of Counsel to Borrower. The opinion of ------------------------------ Messrs. Cahill Gordon & Reindel, counsel for the Company, addressed to Banks, substantially in the form of Exhibit D. SECTION 9.1.6. Other. Such other documents as any Bank may ----- reasonably request. SECTION 9.2. All Revolving Loans. The obligation of each Bank to ------------------- make each Revolving Loan (including, without limitation, its initial Revolving Loan but excluding, however, any Loan made by a continuation or conversion pursuant to Article V and any repayment and reborrowing deemed to have been made ------- - pursuant to Section 1.1.8) is subject to the following further conditions ------- ----- precedent that: SECTION 9.2.1. No Default. After giving effect to all Loans then ---------- being made (a) no Event of Default, or Credit Suspension Event, shall have occurred and be continuing, (b) the warranties of the Company contained in Sections 7.1, 7.2, 7.3, 7.6, 7.7, 7.8, 7.9 and 7.10 shall be true and correct in - - -------- --- --- --- --- --- --- --- ---- all material respects with the same effect as though made on such date and (c) if the Borrower of such Loan is a Designated Subsidiary, the warranties of such Borrower in its Designation Letter shall be true and correct in all material respects with the same effect as though made on such date. SECTION 9.2.2. Confirmatory Certificate. Depositary Bank shall have ------------------------ received (in sufficient number of signed counterparts to provide, and Depositary Bank shall provide, one to each Bank) a certificate dated the date of such requested Loan and signed by the Chairman of the Board, any Senior Vice President, the Chief Financial Officer or the Treasurer of the Company as to the matters set out in Sections 9.2.1 and 9.2.3. -------- ----- ----- SECTION 9.2.3. Litigation. No litigation, arbitration proceedings or ---------- governmental investigation or proceedings not disclosed in writing by the Company to Banks prior to the date of the immediately preceding Revolving Loan hereunder (or in the case of the initial Revolving Loan, prior to the date of execution and delivery of this Agreement) is pending or known to -32- be threatened against the Company or any Subsidiary and no material development not so disclosed has occurred in any litigation, arbitration proceeding or governmental proceeding so disclosed, which in the opinion of Banks having, in the aggregate, a Percentage of 66 2/3% or more, is likely to materially adversely affect the consolidated financial condition or continued operations of the Company and its Subsidiaries as a whole or materially impair the ability of the Company to perform its obligations hereunder. SECTION 9.3. Initial Loan to Any Designated Subsidiary. The ----------------------------------------- obligation of each Bank to make the initial Loan to each Designated Subsidiary hereunder is subject to the further conditions precedent that such Bank shall have received: SECTION 9.3.1. Basic Documents. The Revolving Note of such --------------- Designated Subsidiary payable to the order of the Bank and, with respect to such Designated Subsidiary the documents contemplated by Sections 9.1.2, 9.1.3 and -------- ----- ----- 9.1.4. - - ----- SECTION 9.3.2. Designation. The Designation Letter of such ----------- Designated Subsidiary, substantially in the form of Exhibit E. SECTION 9.3.3. Opinion of Counsel. A signed copy of an opinion of ------------------ counsel to such Designated Subsidiary, substantially in the form of Exhibit F. ------- - SECTION 9.4. Term Loans. The obligation of each Bank to make Term ---------- Loans is subject to the conditions precedent (i) that such Bank shall have received the Term Note of Borrower payable to the order of such Bank, duly executed and dated the date of such Term Loan, and that the principal of and accrued interest on all Revolving Notes shall have been or be paid in full prior to or concurrently with the making of such Term Loan and (ii) that, if the original principal amount of such Bank's Term Notes exceeds the principal amount of its Revolving Notes outstanding immediately prior thereto, each of the conditions precedent set forth in Sections 9.2.1 through 9.2.3 shall have been -------------- ----- satisfied as if such Term Loan were a Revolving Loan. ARTICLE X GUARANTEE SECTION 10.1. Unconditional Guarantee. For valuable consideration, ----------------------- receipt whereof is hereby acknowledged, and to induce each Bank to make Loans to the Designated Subsidiaries, the Company, as principal and not merely as surety, hereby unconditionally and irrevocably guarantees to each Bank that: (i) the principal of and interest on each Loan to each Designated -33- Subsidiary shall be promptly paid in full when due (whether at stated maturity, by acceleration or otherwise) in accordance with the terms hereof, and, in case of any extension of time of payment, in whole or in part, of such Loan, that all such sums shall be promptly paid when due (whether at stated maturity, by acceleration or otherwise) in accordance with the terms of such extension; and (ii) all other amounts payable hereunder by any Designated Subsidiary to any Bank shall be promptly paid in full when due in accordance with the terms hereof (the obligations of the Designated Subsidiaries under these subsections (i) and (ii) of this Section 10.1 being the "Obligations"). ------- ---- In addition, the Company hereby unconditionally and irrevocably agrees that upon default in the payment when due (whether at stated maturity, by acceleration or otherwise) of any principal of, or interest on, any Loan to any Designated Subsidiary or such other amounts payable by any Designated Subsidiary to any Bank, the Company will forthwith pay the same, without further notice or demand. SECTION 10.2. Guarantee Absolute. The Company guarantees that the ------------------ Obligations will be paid strictly in accordance with the terms of this Agreement, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Bank with respect thereto. The liability of the Company under this guarantee shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of this Agreement or any other agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations,or any other amendment or waiver of or any consent to departure from this Agreement (including, without limitation, any extension of the Revolver Expiration Date or any Commitment Increase); (iii) any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations; or (iv) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Company, any Borrower or a guarantor. The guarantee shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by any of the Banks upon the insolvency, bankruptcy or reorganization of the Company or any Borrower or otherwise, all as though such payment had not been made. SECTION 10.3. Waivers. The Company hereby expressly waives ------- diligence, notice of acceptance of this guarantee, presentment, demand for payment, protest, any requirement that any right or power be exhausted or any action be taken against -34- any Designated Subsidiary or against any other guarantor of all or any portion of the Loans, and all other notices and demands whatsoever. The Company irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon the making of any payment under the guarantee contained in this Article X to be subrogated to the rights of the ------- - payee against any Designated Subsidiary with respect to such payment or to otherwise be reimbursed, indemnified or exonerated by a Designated Subsidiary in respect thereof. SECTION 10.4. Remedies. Each of the Banks may pursue its respective -------- rights and remedies under this Article X and shall be entitled to payment ------- - hereunder notwithstanding any other guarantee of all or any part of the Loans to the Designated Subsidiaries, and notwithstanding any action taken by any such Bank to enforce any of its rights or remedies under such other guarantee, or any payment received thereunder. The Company hereby irrevocably waives any claim or other rights that it may now or hereafter acquire against the Designated Subsidiary that arise from the existence, payment, performance or enforcement of the Company's obligations under this Article X, including, without limitation, ------- - any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Banks against the Designated Subsidiary, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Designated Subsidiary, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right. If any amount shall be paid to the Company in violation of the preceding sentence at any time when all the Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of the Banks and shall forthwith be paid to the Depositary Bank for the accounts of the respective Banks to be credited and applied to the Obligations, whether matured or unmatured, in accordance with the terms of this Agreement, or to be held as collateral for any Obligations or other amounts payable under this Agreement thereafter arising. The Company acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Agreement and that the waiver set forth in this section is knowingly made in contemplation of such benefits. SECTION 10.5. Survival. This guaranty is a continuing guaranty and -------- shall (i) remain in full force and effect until payment in full of the Obligations and all other amounts payable under this guaranty, (ii) be binding upon the Company, its successors and assigns, (iii) inure to the benefit of and be -35- enforceable by each Bank and their respective successors, transferees and assigns and (iv) be reinstated if at any time any payment to a Bank hereunder is required to be restored by such Bank. ARTICLE XI EVENTS OF DEFAULT AND THEIR EFFECT SECTION 11.1. Events of Default. Each of the following shall ----------------- constitute an Event of Default under this Agreement: SECTION 11.1.1. Non-Payment of Notes, etc. Default, and continuance ------------------------- thereof for five days after the due date thereof, in the payment when due of any interest on any Note or any facility fee, or default in the payment when due of any principal of any Note or other amounts payable by any Borrower hereunder (excluding, however, to the extent disputed by Borrower in good faith, amounts payable pursuant to Section 3.1.5, 3.1.7 or 4.5 in an aggregate amount not ------- ----- ----- --- exceeding $1,000,000 for all Banks). SECTION 11.1.2. Non-Payment of Other Indebtedness. Default in the --------------------------------- payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any other indebtedness for borrowed money or other obligations evidenced by a note, debenture, or similar instrument (including capitalized lease obligations) in an aggregate principal amount exceeding $50,000,000 of, or guaranteed by, the Company or any Significant Subsidiary or default in the performance or observance of any obligation or condition with respect to any such other indebtedness if the effect of such default in the performance or observance is to accelerate the maturity of any such indebtedness or to permit the holder or holders thereof, or any trustee or agent for such holders, to cause such indebtedness to become due and payable prior to its expressed maturity. SECTION 11.1.3. Bankruptcy, Insolvency, etc. (i) The Company or any --------------------------- Significant Subsidiary becomes insolvent or admits in writing its inability to pay its debts or fails to pay its debts, generally as they become due; or the Company or any Significant Subsidiary applies for, consents to, or acquiesces in the appointment of, a trustee, custodian or receiver for the Company or such Significant Subsidiary or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, custodian or receiver is appointed for the Company or any Significant Subsidiary or for a substantial part of the property of any thereof and is not discharged within 60 days; or any bankruptcy, reorganization, debt arrangement, or other proceeding or case under any bankruptcy or insolvency law, or any -36- dissolution or liquidation proceeding (except the voluntary dissolution, not under any bankruptcy or insolvency law, of a Significant Subsidiary), is commenced in respect of the Company or any Significant Subsidiary, and if such proceeding is not commenced by the Company or Significant Subsidiary, it is consented to or acquiesced in by the Company or Significant Subsidiary or remains for 60 days undismissed; or any corporate action is taken by the shareholder(s) or board of directors of the Company or any Significant Subsidiary to authorize or further any of the actions described in this Section ------- 11.1.3. - - ------ SECTION 11.1.4. Non-Compliance with This Agreement. Failure by the ---------------------------------- Company to comply with or to perform any provision of this Agreement (and not constituting an Event of Default under any of the preceding provisions of this Article XI) and continuance of such failure for 30 days, after notice thereof to - - ------- -- the Company from any Bank or the holder of any Note stating that such Bank or holder is of the opinion that such failure is material; provided, that, any failure by the Company to comply with any provision of this Agreement solely as a result of a change in GAAP shall not constitute an Event of Default. SECTION 11.1.5. Warranties. Any warranty made by the Company herein ---------- is breached in any material respect, or any schedule, certificate, financial statement or report furnished by the Company to any Bank is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified. SECTION 11.1.6. ERISA. The Company or any Significant Subsidiary ----- incurs any liability to the Pension Benefit Guaranty Corporation or any successor thereto in excess of $50,000,000. SECTION 11.2. Effect of Event of Default. If any Event of Default -------------------------- described in Section 11.1.3 shall occur, the Credit (if it has not theretofore ------- ------ terminated) shall immediately terminate and all Notes and all other amounts payable hereunder shall become immediately due and payable, all without presentment or notice of any kind all of which are hereby waived; and, in the case of any other Event of Default which shall have occurred and remain continuing, Banks having, in the aggregate, a Percentage of 66 2/3% or more may, by the giving of notice in writing to the Company, declare the Credit (if it has not theretofore terminated) to be terminated and/or all Notes and all other amounts payable hereunder to be immediately due and payable, whereupon the Credit shall immediately terminate and/or all Notes and all other amounts payable hereunder shall become immediately due and payable, all without presentment or notice of any kind all of which are hereby waived. Notwithstanding the foregoing, the effect as an Event of Default of any event described in Section 11.1.1 or Section 11.1.3 may be waived by the written ------- ------ ------- ------ -37- concurrence of Banks having, in the aggregate, a Percentage of 100%, and the effect as an Event of Default of any other event described in Section 11.1 may ------- ---- be waived by the written concurrence of Banks having, in the aggregate, a Percentage of 66 2/3% or more. SECTION 11.3. Defaults by Designated Subsidiaries. If any of the ----------------------------------- following defaults with respect to any Designated Subsidiary have occurred and are continuing then Section 11.4 shall apply: SECTION 11.3.1. Warranties. Any warranty made by such Designated ---------- Subsidiary herein or in the Designation Letter pursuant to which it is designated as a Borrower hereunder is breached in any material respect or any schedule, certificate, financial statement or report furnished by such Designated Subsidiary to any Bank is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified. SECTION 11.3.2. Non-Payment of Other Indebtedness. Default in the --------------------------------- payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any other indebtedness for borrowed money or other obligations evidenced by a note, debenture, or similar instrument (including capitalized lease obligations) in an aggregate principal amount exceeding $50,000,000 of, or guaranteed by, a Designated Subsidiary or default in the performance or observance of any obligation or condition with respect to any such other indebtedness if the effect of such default in the performance or observance is to accelerate the maturity of any such indebtedness or to permit the holder or holders thereof, or any trustee or agent for such holders, to cause such indebtedness to become due and payable prior to its expressed maturity. SECTION 11.3.3. Bankruptcy, Insolvency, etc. A Designated Subsidiary --------------------------- becomes insolvent or admits in writing its inability to pay its debts or fails to pay its debts, generally as they become due; or the Designated Subsidiary applies for, consents to, or acquiesces in the appointment of, a trustee, custodian or receiver for such Designated Subsidiary or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, custodian or receiver is appointed for any Designated Subsidiary or for a substantial part of the property of any thereof and is not discharged within 60 days; or any bankruptcy, reorganization, debt arrangement, or other proceeding or case under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding is commenced in respect of the Company or any Significant Subsidiary, and if such proceeding is not commenced by such Designated Subsidiary, it is -38- consented to or acquiesced in by such Designated Subsidiary or remains for 60 days undismissed; or any corporate action is taken by the shareholder(s) or board of directors of any Designated Subsidiary to authorize or further any of the actions described in this Section 11.3.3. ------- ------ SECTION 11.3.4. Non-Compliance with This Agreement. Failure by ---------------------------------- Designated Subsidiary to comply with or to perform any provision of this Agreement (and not constituting an Event of Default under any of the preceding provisions of this Section 11.3) and continuance of such failure for 30 days, ------- ---- after notice thereof to the Company and the Designated Subsidiary from any Bank or the holder of any Note stating that such Bank or holder is of the opinion that such failure is material. SECTION 11.4. Effect of Default by Designated Subsidiary. If any ------------------------------------------ default described in Section 11.3.2 or 11.3.3 shall occur, without any action by ------- ------ ------ the Bank, the Banks shall have no obligation to make Loans to such Designated Subsidiary under this Agreement and all Loans under this Agreement to such Designated Subsidiary and all other amounts payable hereunder by such Designated Subsidiary shall become immediately due and payable, all without presentment or notice of any kind; and, in the case of any other default described in Section ------- 11.3 which shall have occurred and remain continuing, Banks having, in the - - ---- aggregate, a Percentage of 66 2/3% or more may, by the giving of notice in writing to the Company, decline to make further Loans to such Designated Subsidiary and/or declare all Loans under this Agreement to such Designated Subsidiary and all other amounts payable hereunder by such Designated Subsidiary to be immediately due and payable, without presentment or notice of any kind. Notwithstanding the foregoing, the effect of any event described in Section 11.3 ------- ---- may be waived by the written concurrence of Banks having, in the aggregate, a Percentage of 66 2/3% or more. ARTICLE XII CERTAIN DEFINITIONS When used herein, the following terms shall have the following meanings (which shall be equally applicable to the singular and plural forms thereof): "Alternate Currency" means any currency other than Dollars which is ------------------ freely transferable and convertible into Dollars. "Alternate Currency Loan" see the definition below of "Loan." ----------------------- "Alternate Currency Payment Office" has the meaning specified --------------------------------- in Section 1.3(e). ------- ------ -39- "Alternate Rating Agency" shall mean (i) Fitch Investors Service, ----------------------- Inc., (ii) Duff & Phelps Credit Rating Co. or (iii) another nationally recognized rating agency selected by the Borrower to rate its senior debt securities, which, in the case of clause (iii), shall be approved by Banks having, in the aggregate, a Percentage of at least 66 2/3%. "Assuming Bank" shall mean, at any time, a Person which ------------- proposes to become a Bank hereunder pursuant to Section 1.1.8. ------- ----- "Assumption Agreement" shall mean an agreement by which an institution -------------------- agrees to become a Bank party to this Agreement pursuant to Section 1.1.8. ------- ----- "Bank" shall mean the Banks listed on the signature pages hereof and ---- each institution that becomes a party hereto pursuant to Section 1.1.8 or 13.5. ------- ----- ---- "Bank Indemnitees" -- see Section 13.9. ---------------- ------------ "Borrower" shall mean the Company or any Designated Subsidiary, -------- as the context may require. "Borrowing Date" shall mean, with respect to each Loan, the date upon -------------- which a Bank makes such Loan hereunder to Borrower. "Business Day" shall mean a day on which banks are not authorized or ------------ required by law to close for business in New York City. "CD Interest Period" shall mean as to each CD Loan, the period which ------------------ shall begin on (and include) the most recent Borrowing Date with respect to such Loan, and shall end, as Borrower shall elect in its notice pursuant to Section ------- 1.2 or 5.4, as the case may be, on (and include) the day 30, 60, 90 or 180 days - - --- --- thereafter, as selected by Borrower; provided that no CD Interest Period -------- commencing prior to the Revolver Expiration Date or the final maturity, by acceleration or otherwise, of all of the Term Loans shall end later than such Revolver Expiration Date or date of maturity of the Term Loans, as the case may be, and further, provided that any CD Interest Period which would otherwise end ------- -------- on a day which is not a Business Day shall be extended to the next succeeding Business Day. "CD Loan" -- see definition below of "Loan". ------- "CD Margin" -- see Section 3.1.8. --------- ------- ----- "CD Rate" shall mean for each CD Interest Period a rate per annum ------- which is equal to the CD Margin as of the first day of the applicable Interest Period plus the sum (rounded if necessary -40- to the nearest 1/20 of 1%) of (i) the rate obtained by dividing (x) the arithmetic mean as calculated by the Depositary Bank of the respective rates per annum (rounded if necessary to the nearest 1/20 of 1%) of the Reference Banks, in each such case determined by each Reference Bank to be the average of the bid rates quoted to it at its principal office at approximately 10:00 a.m. New York City time (or as soon thereafter as practicable) on the first day of the CD Interest Period for such Loan by New York certificate of deposit dealers of recognized standing selected by such Reference Bank for the purchase at face value in the secondary certificate of deposit market of certificates of deposit of such Reference Bank for a period, and in an amount, comparable to such CD Interest Period and the principal amount of the CD Loan which shall be made by such Reference Bank and outstanding during such CD Interest Period, provided, that, if such quotations from such dealers are not available to any Reference Bank, such Reference Bank shall determine a reasonably equivalent rate on the basis of another source or sources selected by it, by (y) a percentage equal to 100% minus the stated maximum rate of all reserve requirements as specified in Regulation D (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable on the first day of such CD Interest Period to a negotiable certificate of deposit in excess of $100,000 with a maturity equal to such CD Interest Period of any member bank of the Federal Reserve System, plus (ii) the daily net annual assessment rate as estimated by the Depositary Bank on the first day of such CD Interest Period for determining the current annual assessment payable by the Depositary Bank to the Federal Deposit Insurance Corporation for insuring such certificates of deposit. "Commitment" shall mean the amount set forth opposite each Bank's ---------- 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. -------- ----- ----- ----- ------- ---- "Commitment Increase" has the meaning specified in Section 1.1.8. ------------------- ------- ----- "Consolidated Capitalization" shall mean the sum of Consolidated --------------------------- Debt and Consolidated Net Worth. "Consolidated Cash Interest Expense" means, with respect to the ---------------------------------- Company for any period, total interest expense deducted in calculating Consolidated Net Income (including that attributable to capitalized lease liabilities of the Company and Consolidated Subsidiaries in accordance with GAAP, but excluding interest expense not payable in cash (including amortization of discount)), with respect to all outstanding Consolidated Debt, as determined on a consolidated basis for the Company and Consolidated Subsidiaries in conformity with GAAP. -41- "Consolidated Debt" shall mean the sum of all indebtedness for ----------------- borrowed money of the Company and Consolidated Subsidiaries, all indebtedness secured by assets of (and whether or not assumed by) the Company or any Consolidated Subsidiary (which indebtedness shall be valued at the lesser of the outstanding principal amount thereof or the book value of such assets), all capitalized lease liabilities of the Company and Consolidated Subsidiaries and all outstanding obligations under guarantees and similar undertakings with respect to any such indebtedness or liabilities of Persons other than the Company and Consolidated Subsidiaries which is required to be reflected on the Company's balance sheet (excluding any notes thereto) in accordance with GAAP; provided, that there shall be excluded from Consolidated Debt any such - - -------- indebtedness which by its terms is presently convertible into or exchangeable for capital stock of the Company at a price per share at least 15 percent below the Current Market Price per share of such capital stock. "Consolidated EBDIT" shall mean, without duplication, with respect to ------------------ the Company and Consolidated Subsidiaries for any period, the sum of the amounts for such period of (i) Consolidated Net Income, (ii) provision for taxes based on income, (iii) depreciation expense, (iv) amortization expense, (v) total interest expense deducted in calculating Consolidated Net Income, and (vi) other non-cash items reducing Consolidated Net Income all as determined on a consolidated basis for the Company and Consolidated Subsidiaries in conformity with GAAP. "Consolidated Net Income" shall mean with respect to the Company for ----------------------- any period, the net income (or loss) of the Company and Consolidated Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP; provided that there shall -------- be excluded (i) the income (or loss) of any Person (other than a Subsidiary of the Company) in which any other Person (other than the Company or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any of its Subsidiaries by such Person during such period and (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of the Company or is merged into or consolidated with any of the Company's Subsidiaries or that Person's assets are acquired by the Company or any of its Subsidiaries. "Consolidated Net Worth" shall mean the par value (or value stated on ---------------------- the books of the Company) of the capital stock of all classes of the Company and Consolidated Subsidiaries issued and outstanding, plus (or minus in the case of a surplus deficit), the amount of the consolidated surplus, whether capital or earned, of the Company and its Subsidiaries plus the principal amount of any indebtedness of the Company and the Consolidated -42- Subsidiaries which by its terms is presently convertible into or exchangeable for capital stock of the Company at a price per share at least 15 percent below the Current Market Price per share of such capital stock. "Consolidated Subsidiary" shall mean any Subsidiary the accounts of ----------------------- which are consolidated with those of the Company in accordance with GAAP. "Continuation Date" -- see Section 5.1. ----------------- ------- --- "Conversion Date" -- see Section 5.2. --------------- ------- --- "Credit" shall mean the sum of (i) the aggregate unused Commitments of ------ all Banks hereunder to make Revolving Loans or Term Loans plus (ii) the aggregate principal amount of Revolving Loans or Term Loans outstanding hereunder. "Credit Suspension Event" shall mean any event which if it continues ----------------------- uncured will, with lapse of time or notice or lapse of time and notice, constitute an Event of Default. "Current Market Price" shall mean for any class of capital stock of -------------------- the Company the average for any 20 consecutive Stock Trading Days ending within 30 days of the date of determination of the average of the high and low sale prices per share, or if no sales are reported, the average of the bid and ask prices per share or, if more than one in either case, the average of the average bid and average ask prices per share) for each Stock Trading Day in such 20 consecutive Stock Trading Day period, as reported in the composite transactions for the New York Stock Exchange, or if such capital stock is not listed or admitted to trading on such exchange, as reported in the composite transactions for the principal national or regional United States securities exchange on which such capital stock is listed or admitted to trading or, if such capital stock is not listed or admitted to trading on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or by the National Quotation Bureau Incorporated. A "Stock Trading Day" means each day on which the securities exchange or quotation system which is used to determine the Current Market Price is open for trading or quotation. "Depositary Bank" -- see Section 1.2. --------------- ------- --- "Designated Subsidiary" shall mean any corporate Subsidiary of the --------------------- Company designated for borrowing privileges under this Agreement pursuant to Section 13.10 hereof. - - ------- ----- -43- "Designation Letter" shall mean, in respect of any Designated ------------------ Subsidiary, a letter in the form of Exhibit E hereto signed by such Designated --------- Subsidiary and the Company. "Dollars" and the sign "$" shall mean lawful money of the United ------- States of America. "Domestic Loan" -- see definition below of "Loan." ------------- "Equivalent Domestic Loan" -- see Section 6.3. ------------------------ ----------- "Eurodollar Day" shall mean a day on which dealings are carried on in -------------- the London Interbank market in Dollars and on which banks are not authorized or required by law to close for business in New York City. "Eurodollar Interest Rate" -- see Section 3.1.2. ------------------------ ------- ----- "Eurodollar Loan" -- see definition below of "Loan." --------------- "Eurodollar Margin" -- see Section 3.1.8. ----------------- ------- ----- "Eurodollar Office" -- see Section 1.1.3. ----------------- ------- ----- "Eurodollar Period" shall mean, as to each Eurodollar Loan, the period ----------------- which shall begin on (and include) the most recent Borrowing Date with respect to such Loan and shall end, as Borrower shall elect in its notice pursuant to Section 1.2 or 5.4, as the case may be, on (and include) the day one, two, three - - ------- --- --- or six months thereafter, as selected by Borrower; provided that no Eurodollar -------- Period commencing prior to the Revolver Expiration Date or the final maturity, by acceleration or otherwise, of all of the Revolving Loans or Term Loans shall end later than such Revolver Expiration Date or date of maturity, as the case may be. Subject to the proviso in the preceding sentence, any Eurodollar Period which would otherwise end on a day which would not be a Eurodollar Day shall instead continue to and end on the next succeeding Eurodollar Day, unless such next succeeding Eurodollar Day would be the first Eurodollar Day in a calendar month, in which case such Eurodollar Period shall instead end on the next preceding Eurodollar Day, and any Eurodollar Period which begins on the last Eurodollar Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Eurodollar Period) shall end on the last Eurodollar Day of a calendar month. "Event of Default" shall mean any of the events described in ---------------- Section 11.1. ------- ---- "Federal Funds Rate" shall mean for any period, a fluctuating interest ------------------ rate equal for each day during such period -44- to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for each day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Depositary Bank from three Federal Funds brokers of recognized standing selected by the Depositary Bank. "Fixed Rate Interest Date" -- see Section 3.1. ------------------------ ------- --- "Fixed Rate Loan" -- see definition below of "Loan". --------------- "GAAP" shall mean generally accepted accounting principles set forth ---- in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination. "Increase Date" has the meaning assigned to that term in Section ------------- ------- 1.1.8. - - ----- "Indemnified Liabilities" -- see Section 13.9. ----------------------- ------- ---- "Interest Date" shall mean Fixed Rate Interest Date and/or Prime ------------- Rate Interest Date, as the case may be. "Interest Period" shall mean a CD Interest Period or a --------------- Eurodollar Period, as the context requires, or both. "Liabilities" -- see Section 4.1. ----------- ------- --- "Loan" shall mean each lending by any Bank hereunder. Particular ---- types of Loans are as follows: (i) "Alternate Currency Loan" shall mean any Loan denominated in an ----------------------- Alternate Currency; (ii) "CD Loan" shall mean any Loan which bears interest at the CD ------- Rate; (iii) "Domestic Loan" shall mean any Loan which is a Prime Rate ------------- Loan or a CD Loan; (iv) "Eurodollar Loan" shall mean any Loan which bears interest at --------------- the Eurodollar Interest Rate; -45- (v) "Fixed Rate Loan" shall mean a CD Loan or a Eurodollar Loan; --------------- (vi) "Market Rate Loan" -- see Section 1.3; ---------------- ------- --- (vii) "Prime Rate Loan" shall mean any Loan bearing interest at --------------- the Prime Rate; (viii) "Revolving Loan" shall mean any Loan made pursuant to the -------------- unused Commitments contained in Section 1.1.1 but shall exclude any Market Rate ------- ----- Loan; and (ix) "Term Loan" shall mean any Loan made pursuant to the --------- commitments contained in Section 1.1.2. ------- ----- "Market Rate" -- see Section 1.3(a). ----------- ------- ------ "Market Rate Loan" -- see definition above of "Loan." ---------------- "Market Rate Note" -- see Section 2.3. ---------------- ------- --- "Notes" shall mean the Revolving Notes, Market Rate Notes and Term ----- Notes, or any of them. "Obligations" see Section 10.1. ----------- ------- ---- "Percentage" with respect to any Bank shall mean at any time the ---------- percentage of the Credit represented by such Bank's Commitment. "Person" shall mean any corporation, partnership, association, ------ trust, individual or other entity. "Prime Rate" shall mean the greater of: (a) the average of the ---------- rates per annum from time to time announced by each of the Reference Banks at the address set forth below its signature hereto as such Bank's prime commercial lending rate and (b) the effective Federal Funds Rate for overnight funds plus 1/2 of 1% per annum. "Prime Rate Interest Date" -- see Section 3.1. ------------------------ ------- --- "Prime Rate Loan" -- see definition of "Loan" above. --------------- "Public Debt Rating" means, as of any date, the highest rating that ------------------ has been most recently announced by either Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") or an Alternate Rating Agency in substitution for Moody's or S&P (but not both), for any class of long- term unsecured senior debt issued by the Company; provided, that if the ratings -------- determined by Moody's or S&P (or an Alternate Rating -46- Agency) differ by more than one rating category the Public Debt Rating shall be the average of the two ratings. For purposes of the foregoing, (a) if an Alternate Rating Agency is used, the ratings provided by such Alternate Rating Agency shall be converted into an equivalent of Moody's or S&P, as nearly as practicable, for purposes of determining the Eurodollar Margin and CD Margin; and (b) if any rating established or deemed to have been established by Moody's or S&P shall be changed (other than as a result of a change in the rating system of either Moody's or S&P), such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change. Any change in the Eurodollar Margin or CD Margin due to a change in the Public Debt Rating shall be effective for Interest Periods commencing after the public announcement of the change in debt rating. If the rating system of either Moody's or S&P shall change, the Company and the Banks shall negotiate in good faith to amend the references to specific ratings in this definition to reflect such changed rating system. "Reference Banks" shall mean Chemical Bank, NationsBank, N.A. --------- ----- (Carolinas) (formerly NationsBank of North Carolina N.A.), and The Chase Manhattan Bank, N.A. or, with respect to Eurodollar Loans, the Eurodollar Office of any of them. "Regulation D" -- see Section 3.1.2.1. ------------ ------- ------- "Revolver Expiration Date" means the earlier of May 31, 1996 or the ------------------------ date of termination in whole of the Commitments. "Revolving Loan" -- see definition above of "Loan." --------- ---- "Revolving Note" -- see Section 2.1. -------------- ------- --- "Significant Subsidiary" shall have the meaning assigned to such ---------------------- term in Regulation C (S) 230.405 promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, as such definition is in effect as of the date of this Agreement. "Subsidiary" shall mean a corporation of which the Company and its ---------- other Subsidiaries own directly or indirectly more than 50% of the ordinary voting power for the election of directors. -47- "Term Loan" -- see definition above of "Loan." --------- "Term Note" -- see Section 2.2. --------- ------- --- ARTICLE XIII GENERAL SECTION 13.1. Waiver; Amendments. No delay on the part of any Bank ------------------ or the holder of any Note in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any of them of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or the Notes shall in any event be effective unless the same shall be in writing (including telegram or telex) and signed and delivered by the Company and Banks having an aggregate Percentage of not less than the Percentage expressly designated herein with respect thereto or, in the absence of such designation as to any provision of this Agreement or the Notes, by Banks having, in the aggregate, a Percentage of 66 2/3% or more, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment, modification, waiver or consent (i) shall extend or increase the amount of the Credit, the scheduled maturity of the Notes, or the scheduled date for the payment of interest or fees, or reduce the fees or the rate of interest payable with respect to the Notes or modify the provisions of Section 3.1.5, 3.1.7, 4.5, 6.3, ------- ----- ----- --- --- 6.4, or 13.9 or modify the provisions of Article X in a manner adverse to the - - --- ---- ------- - Banks or impose an additional obligation on any of the Banks or reduce the aggregate Percentage required to effect an amendment, modification, waiver or consent without the consent of all of the Banks or (ii) shall extend the scheduled maturity of, or the scheduled date for the payment of interest or fees on, or reduce the principal amount of, or rate of interest on, any Note without the consent of the holder of such Note. The provisions of this Section 13.1 may ------------ not be amended or modified without the consent of all of the Banks. SECTION 13.2. Confirmations. Borrower and each holder of a Revolving ------------- Note agree from time to time, upon written request received by it from the other, to confirm to the other in writing the aggregate unpaid principal amount of the Revolving Loans then outstanding under such Revolving Note; and each such holder agrees from time to time, upon written request received by it from Borrower, to make the Revolving Note held by it (including the schedule attached thereto) available for reasonable inspection by Borrower at the office of such holder. Each Bank -48- shall, promptly upon request by Borrower, furnish Borrower with a photocopy of the schedule attached to such Bank's Revolving Note. SECTION 13.3. Notices. Any notice from Borrower to any Bank ------- (including Depositary Bank) under Section 1.2, 1.1.6, 1.1.8 or 5.4 may be (i) ----------- ----- ----- --- telephonic if confirmed, prior to the date for taking (or for the effectiveness of) the action specified in such notice, by a writing received by such Bank or (ii) by facsimile if confirmed, prior to the date for taking (or for the effectiveness of) the action specified in such notice, by telephone. Any other notice hereunder to Borrower or any Bank (or other holder) shall, except as otherwise expressly provided, be in writing and, if mailed shall be deemed to have been given (i) three days after the date when sent by first class mail, postage prepaid, (ii) one day after sent by overnight delivery service and, in each case, addressed to Borrower or such Bank (or other holder) at its address shown below its signature hereto, or at such other address as it may, by written notice received by the other parties to this Agreement, have designated as its address for such purpose. Any Bank or the holder of any Note giving any waiver, consent or notice to, or making any request upon, Borrower hereunder shall promptly notify the Depositary Bank thereof. SECTION 13.4. Accounting Terms and Determinations. Unless otherwise ----------------------------------- specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time ("GAAP"), applied on a basis consistent (except for changes concurred in by the Company's independent public accountants) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Company notifies the -------- Depositary Bank that it wishes to amend any covenant in Article VIII to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant, then compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and Banks holding, in the aggregate, a Percentage of 66 2/3% or more. SECTION 13.5. Participations; Transfers of Notes. A Bank may assign ---------------------------------- or sell participations in all or any part of its Commitment or any Loan to another bank or other entity; provided that an assignment or participation shall -------- be in a minimum aggregate amount of $10,000,000; and provided, further (a) -------- ------- except -49- in the case of assignments of or participations in Market Rate Loans, that the Company shall have consented in writing to the proposed assignment or participation, which consent shall not be unreasonably withheld; and (b) in the case of a participation, no such participation shall in any way affect such Bank's obligations under this Agreement, and provided, that all amounts payable by any Borrower under Article III shall be determined as if such Bank had not ------- --- sold such participation. Upon execution and delivery of an appropriate instrument, payment by any assignee to the transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such assignee, and recordation of such assignment in the Register, such assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with Commitments as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. The Company shall maintain a copy of each instrument of assignment and assumption delivered to it and a register (the "Register") for the recordation of the names and addresses of the Banks and the Commitment of, and principal amount owing to each Bank from time to time and, on the effective date of each instrument of assignment received by it which meets the requirements of this paragraph, the Company shall record such assignment in the Register. Upon the consummation of any assignment pursuant to this Section 13.5, the transferor ------- ---- Bank and the Borrower shall make approriate arrangements so that, if required, a new Note is issued to the assignee. The agreement executed by the Bank in favor of any participant shall not give the participant the right to require such Bank to take or omit to take any action hereunder except action directly relating to (i) the extension of a payment date with respect to any portion of the principal of or interest on any amount outstanding or any fees payable hereunder allocated to such participant, (ii) the reduction of the principal amount of any Loan outstanding hereunder, (iii) the reduction of the rate of interest payable on such amount or any amount of fees payable hereunder to a rate or amount, as the case may be, below that which the participant is entitled to receive under its agreement with such Bank, or (iv) an extension of the Revolver Expiration Date in accordance with the terms hereof. Each Bank may furnish to participants (including prospective participants and prospective assignees) any information in the possession of such Bank from time to time concerning any Borrower; provided, that such Bank -------- shall require any such participant or assignee (prospective or otherwise) to agree in writing to maintain the confidentiality of such information; and --- provided further, that such Bank may not furnish to the participant or assignee - - -------- ------- any information which the Borrower has identified in writing to such Bank to be trade secrets or proprietary information. -50- If, pursuant to this Section 13.5, any interest in this Agreement or ------- ---- any Note is transferred to any assignee which is organized under the laws of any jurisdiction other than the United States or any state thereof, the transferor Bank shall cause such assignee concurrently with the effectiveness of such transfer, (i) to represent to the transferor Bank (for the benefit of the transferor Bank and the Company) that it is either (x) entitled to the benefits of an income tax treaty with the United States which provides for an exemption from United States withholding tax on interest and other payments which may be made by the Company to such Bank pursuant to the terms of this Agreement or any other credit document; or (y) engaged in a trade or business within the United States, (ii) to furnish to the transferor Bank and the Company either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such assignee claims entitlement to complete exemption from U.S. federal withholding tax on all payments hereunder) and (iii) to agree (for the benefit of the transferor Bank and the Company) to provide to the transferor Bank and the Company a new Form 4224 or Form 1001 upon the obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such assignee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption. Notwithstanding anything to the contrary in this Section 13.5, any ------- ---- Bank may pledge and assign its rights hereunder and under the Notes held by it to a Federal Reserve Bank as collateral. SECTION 13.6. Regulation U. Each Bank represents that it is not ------------ relying, either directly or indirectly, upon any margin stock (as such term is defined in Regulation U promulgated by the Board of Governors of the Federal Reserve System) as collateral security for the extension or maintenance by it of any credit provided for in this Agreement. SECTION 13.7. Confidentiality of Information. Each Bank understands ------------------------------ that some of the information furnished pursuant to this Agreement or obtained by such Bank pursuant to any inspection made in accordance with Section 8.2 may, at ----------- the time furnished or obtained, not have been made public, and each Bank agrees to keep confidential all such information and will make no use of such information until it shall have become public except in connection with this Agreement and with such Bank's outside counsel and accountants, subject however to each Bank's obligations under law or pursuant to subpoenas or other process to make information available to governmental agencies and examiners or to others. -51- SECTION 13.8. Limitation on Interest. No provision of this Agreement ---------------------- or any Note shall require the payment or permit the collection of interest in excess of the maximum rate permitted by applicable law. SECTION 13.9. Costs, Expenses and Taxes. The Company shall pay all ------------------------- reasonable out-of-pocket expenses of the Depositary Bank and the Banks (but excluding the fees and disbursements of counsel to the Depositary Bank and the Banks) in connection with the preparation of this Agreement and all instruments and documents relating thereto or necessary to satisfy the conditions to lending hereunder. The Company agrees to pay on demand all out-of-pocket costs and expenses (including reasonable attorneys' fees and legal expenses) incurred by each Bank and the Depositary Bank in connection with the enforcement of this Agreement, the Notes, any such other instruments or documents or any collateral security. In addition, each Borrower agrees (i) to pay, and to save the Depositary Bank and the Banks harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of this Agreement, the borrowings hereunder, or the issuance of the Notes or of any other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith and (ii) to indemnify, exonerate and hold each of the Depositary Bank and the Banks and each of the officers, directors, employees and agents of such Banks (herein called collectively the "Bank Indemnitees") free and harmless from and against any and all actions, causes of action, suits, losses, liabilities, damages and expenses, including, without limitation, reasonable attorneys' fees and disbursements incurred by any Bank Indemnitee as a result of, or arising out of, or relating to any transaction financed with proceeds of any of the Loans or the execution, delivery, performance, enforcement or administration of this Agreement (herein called collectively the "Indemnified Liabilities"), except for any such Indemnified Liabilities arising on account of any such Bank Indemnitee's negligence or willful misconduct, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. SECTION 13.10. Designated Subsidiaries. ----------------------- (i) Designation. The Company may at any time, and from time to time, ----------- by delivery to the Depositary Bank of a Designation Letter duly executed by the Company and the respective Subsidiary, designate such Subsidiary as a "Designated Subsidiary" for purposes of this Agreement and such Subsidiary shall thereupon become a "Designated Subsidiary" for purposes of this Agreement. The Depositary Bank shall promptly notify each -52- Bank of each such designation by the Company and the identity of the respective Subsidiary. (ii) Termination. Upon the payment and performance in full of all of ----------- the Obligations of any Designated Subsidiary then, so long as at the time no request for a Fixed Rate Loan to such Designated Subsidiary is outstanding, such Subsidiary's status as a "Designated Subsidiary" shall terminate upon notice to such effect from the Company to the Depositary Bank (which notice the Depositary Bank shall deliver to each Bank). Thereafter, the Banks shall be under no further obligation to make any Loan hereunder to such Designated Subsidiary. SECTION 13.11. Captions. Captions used in this Agreement are for -------- convenience only and shall not affect the construction of this Agreement. SECTION 13.12. Governing Law; Submission to Jurisdiction. This ----------------------------------------- Agreement and each Note shall be a contract made under and governed by the internal laws of the State of New York. All obligations of Borrower and rights of the Banks and any other holders of the Notes expressed herein or in the Notes shall be in addition to and not in limitation of those provided by applicable law. The Borrowers hereby submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrowers irrevocably waive, to the fullest extent permitted by law, any objection which the may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 13.13. Counterparts. This Agreement may be executed in any ------------ number of counterparts and by the different parties on separate counterparts (provided, however, that each such counterpart shall be executed by the Company) and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. SECTION 13.14. Effectiveness. When counterparts executed by all the ------------- Banks shall have been lodged with the Company and counterparts executed by the Company shall have been lodged with each Bank this Agreement shall become effective as of June 1, 1995. SECTION 13.15. Successors and Assigns. This Agreement shall be ---------------------- binding upon Borrower and the Banks and their respective -53- successors and assigns, and shall inure to the benefit of the Borrower and the Banks and the respective successors and assigns of the Banks, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Banks having, in the aggregate, a Percentage of at least 100%. SECTION 13.16. Duties of Depositary Bank. The Depositary Bank shall ------------------------- have no duties or responsibilities except those expressly set forth in this Agreement and neither the Depositary Bank nor any of its directors, officers, employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them hereunder, or in connection herewith, except for its or their own gross negligence or willful misconduct. In addition, the Banks agree to indemnify the Depositary Bank, ratably in accordance with the aggregate unpaid principal amount of the Loans made by the Banks (or, if no Loans are at the time outstanding, ratably in accordance with their respective Percentages), for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Depositary Bank in any way relating to or arising out of the duties and responsibilities of the Depositary Bank expressly set forth in this Agreement; provided that (i) the Banks shall only be liable to the extent the Borrower fails to indemnify and pay the Depositary Bank pursuant to Section 13.9 ------- ---- hereof, and (ii) no Bank shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Depositary Bank. SECTION 13.17. Severability. In case any one or more of the ------------ provisions contained in this Agreement or the Notes should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. SECTION 13.18. Representation of the Banks. Each Bank represents and --------------------------- warrants to the Borrower that it is (x) a United States person (as defined in Section 7701(a) (30) of the Internal Revenue Code of 1986, as amended (the "Code")); (y) entitled to the benefits of an income tax treaty with the United States which provides for an exemption from United States withholding tax on interest and other payments which may be made by the Borrower to such Bank pursuant to the terms of this Agreement; or (z) engaged in a trade or business within the United States. Each Bank that is organized under the laws of any jurisdiction other than the United States or any State thereof (including the District of Columbia) agrees to furnish to the Borrower, prior to the date of the first interest payment hereunder, two copies of either U.S. -54- Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such Bank claims entitlement to complete exemption from U.S. federal withholding tax on all payments hereunder) and to provide to the Borrower a new Form 4224 or Form 1001 upon the obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such Bank, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemptions. Notwithstanding any other provisions of this Agreement, the representations, warranties and obligations of the Banks set forth in Section 13.5 and this Section 13.18 shall survive the borrowing of ------- ---- ------- ----- the Loans and the assignment, sale, repayment or other disposition of the Loans or any interest therein. SECTION 13.19. Survival. The obligations of the Borrower under -------- Sections 3.1.5, 3.1.7, 4.5 and 13.9 shall survive the termination of this - - -------- ----- ----- --- ---- Agreement and the payment of all Loans. SECTION 13.20. WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY ----------------------- APPLICABLE LAW, THE BORROWER AND EACH OF THE BANKS HEREBY IRREVOCABLY WAIVE ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING HEREUNDER. -55- IN WITNESS WHEREOF, the Company and each Bank have caused this Agreement to be executed, as of the day and year first above written, by one of its officers thereunto duly authorized. GENERAL SIGNAL CORPORATION By: /s/ Julian B. Twombly --------------------- Vice President and Treasurer High Ridge Park Stamford, Connecticut 06904 Attention: Treasurer Telecopier No.: (203) 329-4365 Amount of Commitment - - ---------- $20,000,000 THE CHASE MANHATTAN BANK, N.A. By: /s/ Edward F. McNulty --------------------- Title: Managing Director Lending Office for Loans The Chase Manhattan Bank, N.A. One Chase Plaza, 17th Floor New York, New York 10081 Attn: Edward F. McNulty Telecopy No.: (212) 552-1457 Amount of Commitment - - ---------- $20,000,000 CHEMICAL BANK By: ____________________________ Title: Vice President Lending Office for Loans Chemical Bank 270 Park Avenue New York, New York 10017 Attn: Lorraine Mohan Telecopy No: (212) 270-1403 Amount of Commitment - - ---------- $20,000,000 NATIONSBANK, N.A. (CAROLINAS) (FORMERLY NATIONSBANK OF NORTH CAROLINA, N.A) By: /s/ M.K. Vandenberg ------------------- Title: Senior Vice President Lending Office for Loans NationsBank, N.A. (Carolinas) (Formerly NationsBank of North Carolina, N.A.) NationsBank Plaza Charlotte, North Carolina 28255 Attn: Carole Greene NCI-002-17-21 Telecopy No: (704) 386-8694 cc: Margaret K. Vandenberg NationsBank, N.A. (Carolinas) (Formerly NationsBank of North Carolina, N.A.) 767 Fifth Avenue New York, New York 10153 Telecopy No: (212) 751-6909 Amount of Commitment - - ---------- $20,000,000 WACHOVIA BANK OF GEORGIA, N.A. By: /s/ Samuel Moss _______________________________ Title: Senior Vice President Lending Office for Loans Wachovia Bank of Georgia, N.A. 191 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Jane Castles Deaver Telecopy No: (404) 332-6898 Amount of Commitment - - ---------- $13,750,000 CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ E.L. Gordon --------------- Title: Authorized Signatory Lending Office for Loans Canadian Imperial Bank of Commerce 425 Lexington Avenue New York, New York 10017 Attn: E. Lindsay Gordan Telecopy No: (212) 856-3599 Amount of Commitment - - ---------- $13,750,000 COMMERZBANK A.G. By: /s/ Tom Ausfuhl --------------- Title: Tom Ausfuhl, AVP By: /s/ M. McCarthy --------------- Title: Michael McCarthy, AT Lending Office for Loans CommerzBank A.G. 2 World Financial Center New York, New York 10281-1050 Attn: Michael D. Hintz Telecopy No: (212) 266-7235 Amount of Commitment - - ---------- $13,750,000 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ James W. Peterson --------------------- Title: Vice President Lending Office for Loans The First National Bank of Chicago 153 West 51st Street New York, New York 10019 Attn: James W. Peterson Telecopy No: (212) 373-1388 Amount of Commitment - - ---------- $13,750,000 MARINE MIDLAND BANK By: /s/ William M. Holland ______________________________ Title: Vice President Lending Office for Loans Marine Midland Bank 140 Broadway, 4th Floor New York, New York 10005 Attn: Jeffry S. Dykes Telecopy No: (212) 658-5109 Amount of Commitment - - ---------- $13,750,000 NATIONAL WESTMINSTER BANK Plc By: /s/ Anne Marie Tone ------------------- Title: Vice President Lending Office for Loans National Westminster Bank Plc Corporate and Institutional Finance 175 Water Street New York, New York 10038-4924 Attn: Jordan Fragiacomo Telecopy No: (212) 602-4500 Amount of Commitment - - ---------- $13,750,000 THE NORTHERN TRUST COMPANY By: /s/ J.C. McCall, III -------------------- Title: Second Vice President Lending Office for Loans The Northern Trust Company 50 South LaSalle Street Chicago, Illinois 60675 Attn: J. Chip McCall, III Telecopy No: (312) 444-3508 Amount of Commitment - - ---------- $13,750,000 THE SANWA BANK LIMITED By: /s/ Stephen C. Small -------------------- Title: Vice President Lending Office for Loans The Sanwa Bank Limited New York Branch Park Avenue Plaza 55 East 52nd Street New York, New York 10055 Attn: Stephen C. Small Telecopy No: (212) 754-2368 Amount of Commitment - - ---------- $13,750,000 SHAWMUT BANK CONNECTICUT, N.A. By: /s/ R.M. Surdan, Jr. -------------------- Title: Director Lending Office for Loans Shawmut Bank Connecticut, N.A. One Landmark Square Stamford, Connecticut 06904 Attn: Robert M. Surdan, Jr. Telecopy No: (203) 358-6111 EXHIBIT A REVOLVING NOTE $, 199 The undersigned, for value received, promises to pay to the order of on or before the Revolver Expiration Date, as defined in the 364 Day Credit Agreement referred to below, the principal sum of Dollars or, if less, the aggregate unpaid principal amount of all Revolving Loans made by the payee to the undersigned pursuant to the 364 Day Credit Agreement (as hereinafter defined) as shown on the schedule attached hereto (and any continuation thereof), together, from time to time, with interest on the unpaid principal amount hereof from time to time outstanding as provided in Article III of the 364 Day Credit Agreement hereinafter referred to (but in no event higher than the maximum rate permitted by applicable law). Payments of both principal and interest are to be made in lawful money of the United States of America for the account of the payee at the office of The Chase Manhattan Bank, N.A., at One Chase Manhattan Plaza, New York, New York 10081 in immediately available funds. This Note evidences indebtedness incurred under, and is subject to the terms and provisions of, a 364 Day Credit Agreement dated as of June 1, 1995, (and, all further amendments thereto, if any) among the undersigned and certain banks (including the payee) to which 364 Day Credit Agreement reference is hereby made for a statement of said terms and provisions, including those under which this Note may be paid, or may be declared to be due and payable, prior to its due date. This Note is made under and governed by the internal laws of the State of New York. [BORROWER] By _________________________ Title_________________ -2- Schedule Attached to Revolving Note dated , 199 of [Borrower] payable to the order of LOANS AND PRINCIPAL PAYMENTS Beginning and End Eurodollar or CD Amount of Unpaid Amount of Interest Principal Principal Notation Date Loan Made Period Repaid Balance Made By - - ------ --------- ---------- --------- --------- -------- _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ _____________________________________________________________ EXHIBIT B --------- TERM NOTE $ May 31, 1996 The undersigned, for value received, promises to pay to the order of the principal sum of Dollars payable on May 31, 1997 together, from time to time, with interest on the unpaid principal amount hereof from time to time outstanding as provided in Article III of the 364 Day Credit Agreement hereinafter referred to (but in ------- --- no event higher than the maximum rate permitted by law). Payments of both principal and interest are to be made in lawful money of the United States of America for the account of the payee at the office of The Chase Manhattan Bank, N.A., at One Chase Manhattan Plaza, New York, New York 10081 in immediately available funds. This Note evidences indebtedness incurred under, and is subject to the terms and provisions of, a 364 Day Credit Agreement dated as of June 1, 1995, (and, all further amendments thereto, if any) among the undersigned and certain banks (including the payee), to which 364 Day Credit Agreement reference is hereby made for a statement of said terms and provisions, including those under which this Note may be paid, or may be declared to be due and payable, prior to its due date. This Note is made under and governed by the internal laws of the State of New York. [BORROWER] By___________________________ Title EXHIBIT C Market Rate Promissory Note $, 199 The undersigned, for value received, promises to pay to the order of on or before the Revolver Expiration Date, as defined in the 364 Day Credit Agreement referred to below, the principal sum of Dollars or the equivalent in any Alternate Currency shown on the schedule attached hereto or, if less, the aggregate unpaid principal amount of all Market Rate Loans made by the payee to the undersigned pursuant to the 364 Day Credit Agreement (as hereinafter defined) as shown on the schedule attached hereto (and any continuation thereof), together, from time to time, with interest on the unpaid principal amount hereof from time to time outstanding as provided in Article III of the 364 Day Credit Agreement hereinafter referred to (but in no event higher than the maximum rate permitted by applicable law). Payments of both principal and interest are to be made in lawful money of the United States of America or an Alternate Currency if so specified with respect to any Market Rate Loan on the schedule attached hereto in immediately available funds to, in the case of loans in Dollars the account specified by the payee and, in the case of Alternate Currency Loans, the Alternate Currency Payment Office. This Note evidences indebtedness incurred under, and is subject to the terms and provisions of, a 364 Day Credit Agreement dated as of June 1, 1995, (and, all further amendments thereto, if any) among the undersigned and certain banks (including the payee) to which 364 Day Credit Agreement reference is hereby made for a statement of said terms and provisions, including those under which this Note may be paid, or may be declared to be due and payable, prior to its due date. This Note is made under and governed by the internal laws of the State of New York. [BORROWER] By___________________________ Title______________________ SCHEDULE ATTACHED TO MARKET RATE PROMISSORY NOTE DATED AS OF FROM [BORROWER] TO ____________________ ALTERNATE AMOUNT OF UNPAID AMOUNT CURRENCY MATURITY PRINCIPAL PRINCIPAL DATE OF LOAN (if applicable) DATE RATE REPAID BALANCE - - ------ ------- -------------- -------- ---- --------- --------- ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ EXHIBIT D FORM OF ATTORNEY'S OPINION OF COUNSEL TO BORROWER Per Section 9.1.5 ------------- [Letterhead of Messrs. Cahill Gordon & Reindel] Each of the Commercial Banking Institutions listed on Schedule I hereto Re: General Signal Corporation 364 Day Credit Agreement, Dated as of June 1, 1995 -------------------------------------- Gentlemen: We have acted as counsel to General Signal Corporation, a New York corporation (the "Company"), in connection with the 364 Day Credit Agreement, dated as of June 1, 1995 ("Agreement"), between you and the Company, covering loans by you to Borrower to be evidenced by the Notes. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the 364 Day Credit Agreement. We have examined originals, photocopies or conformed copies of such records of the Company and its subsidiaries and such agreements, certificates of public officials, certificates of officers and representatives of the Company and its subsidiaries and such other documents as we have deemed relevant and necessary as a basis for the opinions hereinafter expressed. In such examinations, we have assumed the genuineness of all signatures on original documents and the conformity to the originals of all copies submitted to us as conformed or photocopies. As to various questions of fact material to the opinions expressed herein, we have relied upon representations, statements or certificates of public officials, officers and representatives of the Company and its subsidiaries and others. We are of the opinion that: (1) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of New York and in good standing in the State of Connecticut. (2) The execution, delivery and performance of the Agreement and the Notes, and the borrowings by the Company pursuant thereto, are within the Company's corporate powers and have been duly authorized by all necessary corporate action. (3) No governmental approval of the actions referred to in (2) above is required. -2- (4) The actions referred to in (2) above do not contravene or conflict with any provision of law, the Articles of Incorporation or By-laws of the Company, or any material agreement, indenture or instrument which is binding on or applicable to the Company of which we have knowledge. (5) The Agreement is, and each of the Notes, when executed and delivered for the consideration as contemplated by the Agreement will be, the legally valid and binding obligation of the Company, enforceable against Borrower in accordance with their respective terms, except that (i) such enforceability may be limited by generally applicable bankruptcy, insolvency, moratorium, fraudulent transfer or conveyance or other similar laws affecting the enforcement of creditors' rights generally and (ii) no opinion has been requested or is being rendered as to the availability of equitable remedies, such as, for example, specific performance or injunctive relief, which are within the discretion of courts of applicable jurisdiction. (6) The Company is not (i) an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended, or (ii) a public utility or a public utility holding company as defined in the Public Utility Holding Company Act of 1935. Our opinion in (4) above is based, in part, upon the accuracy of the representations contained in Section 13.6 of the Agreement. ------------ We are members of the Bar of the State of New York and we express no opinion herein with respect to any law other than the laws of the State of New York and the federal law of the United States. Very truly yours, EXHIBIT E FORM OF DESIGNATION LETTER , 199 To each of the Banks party to the 364 Day Credit Agreement (as defined below) Ladies and Gentlemen: Reference is made to the 364 Day Credit Agreement dated as of June 1, 1995, among General Signal Corporation (the "Company") and the Banks named therein (the "Credit Agreement"). Terms used herein and defined in the Credit Agreement shall have the respective meanings ascribed to such terms in the Credit Agreement. Please be advised that the Company hereby designates its undersigned Subsidiary, ("Designated Subsidiary"), as a "Designated Subsidiary" under and for all purposes of the Credit Agreement. The Designated Subsidiary, in consideration of each Bank's agreement to extend credit to it under and on the terms and conditions set forth in the Credit Agreement, does hereby assume each of the obligations imposed upon a "Designated Subsidiary" and a "Borrower" under the Credit Agreement and agrees to be bound by the terms and conditions of the Credit Agreement. In furtherance of the foregoing, the Designated Subsidiary hereby represents and warrants to each Bank as follows: 1. The Designated Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of . 2. The delivery of this Designation Letter, the borrowings under the Credit Agreement, the execution and delivery of the Notes, and the performance by the Designated Subsidiary of its obligations under the Credit Agreement, the Designation Letter and the Notes, are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required), and do not and will not violate, contravene or conflict in any material respect with any provision of law or of the charter or by- laws of the Designated Subsidiary or of any judgment or any material agreement or indenture binding upon or applicable to the Designated Subsidiary the contravention of or conflict with which would materially adversely affect the -2- consolidated financial condition or continued operations of the Designated Subsidiary as a whole or materially impair the ability of the Designated Subsidiary to perform any of its obligations hereunder. This Designation Letter and the Credit Agreement, and the Notes when duly executed and delivered by the Designated Subsidiary will be, legal, valid and binding obligations of the Designated Subsidiary enforceable against it in accordance with their respective terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of rights of creditors generally. 3. No litigation or arbitration proceedings are pending or, to the knowledge of the Designated Subsidiary, threatened against the Designated Subsidiary as to which there is a reasonable likelihood of an adverse determination and which would reasonably be expected to have a material adverse effect on the ability of the Designated Subsidiary to pay its debts (including the Loans made to it under the Credit Agreement) as the same become due and payable. 4. No authorizations, consents, approvals, licenses, filings or registrations by or with any governmental authority or administrative body are required in connection with the execution, delivery or performance by the Designated Subsidiary of this Designation Letter and the Credit Agreement except for such authorizations, consents, approvals, licenses, filings or registrations as have heretofore been made, obtained or effected and are in full force and effect. 5. The Designated Subsidiary is not, and immediately after the application by the Designated Subsidiary of the proceeds of each Loan will not be, (a) an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or (b) a "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. Very truly yours, GENERAL SIGNAL CORPORATION [THE DESIGNATED SUBSIDIARY] By________________________ By_________________________ Title: Title: EXHIBIT F FORM OF ATTORNEY'S OPINION OF COUNSEL TO A DESIGNATED SUBSIDIARY Each of the Commercial Banking Institutions listed on Schedule I hereto Re: General Signal Corporation 364 Day Credit Agreement Dated as of June 1, 1995 ----------------------------------------- Gentlemen: We have acted as counsel to [Designated Subsidiary], a ____________________ corporation (the "Designated Subsidiary"), in connection with the 364 Day Credit Agreement, dated as of June 1, 1995 ("Agreement"), between you and the Company, covering loans by you to Borrower to be evidenced by the Notes. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Agreement. We have examined originals, photocopies or conformed copies of such records of the Designated Subsidiary and such agreements, certificates of public officials, certificates of officers and representatives of the Designated Subsidiary and its subsidiaries and such other documents as we have deemed relevant and necessary as a basis for the opinions hereinafter expressed. In such examinations, we have assumed the genuineness of all signatures on original documents and the conformity to the originals of all copies submitted to us as conformed or photocopies. As to various questions of fact material to the opinions expressed herein, we have relied upon representations, statements or certificates of public officials, officers and representatives of the Designated Subsidiary and others. We are of the opinion that: (1) The Designated Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of _________________________________. (2) The execution, delivery and performance by the Designated Subsidiary of the Designation Letter, and the Notes to be executed by the Designated Subsidiary, and the borrowings by the Designated Subsidiary pursuant thereto, are within the Designated Subsidiary's corporate powers and have been duly authorized by all necessary corporate action. (3) No governmental approval of the action referred to in (2) above is required. (4) The actions referred to in (2) above to not contravene or conflict with any provision of law, the -2- Charter or By-laws of the Designated Subsidiary, or any material agreement, indenture or instrument which is binding on or applicable to the Designated Subsidiary of which we have knowledge. (5) The Designation Letter is, and each of the Notes to be executed by the Designated Subsidiary, when executed and delivered for the consideration as contemplated by the Agreement will be, the legally valid and binding obligation of the Designated Subsidiary, enforceable against Borrower in accordance with their respective terms, except that (i) such enforceability may be limited by generally applicable bankruptcy, insolvency, moratorium, fraudulent transfer or conveyance or other similar laws affecting the enforcement of creditors' rights generally and (ii) no opinion has been requested or is being rendered as to the availability of equitable remedies, such as, for example, specific performance or injunctive relief, which are within the discretion of courts of applicable jurisdiction. (6) The Company is not (i) an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended, or (ii) a public utility or a public utility holding company has defined in the Public Utility Holding Company Act of 1935. Our opinion in (4) above is based, in part, upon the accuracy of the representations contained in Section 13.6 of the agreement. ------------ Very truly yours, FOUR YEAR CREDIT AGREEMENT THIS FOUR YEAR CREDIT AGREEMENT, dated as of January 12, 1994 (the "Agreement"), among GENERAL SIGNAL CORPORATION, a New York corporation (the "Company"), each other Borrower hereunder and the undersigned commercial banking institutions (herein called collectively "Banks"). W I T N E S S E T H: WHEREAS, the Company desires by this Agreement (such and other capitalized terms being used herein with the meanings respectively ascribed to them in Article XII) to obtain commitments for revolving credit loans to be made in an aggregate outstanding principal amount not to exceed $200,000,000 on or prior to the Revolver Expiration Date and to provide for the making of Market Rate Loans by the several Banks; and WHEREAS, Banks are willing, severally and not jointly, upon the terms and conditions hereinafter set forth, to extend such revolving loan commitments and to make loans pursuant thereto and to make non-committed Market Rate Loans for general working capital and other corporate purposes (including, without limitation, acquisitions and the purchase of securities and assets, including repurchases of the Company's securities); NOW, THEREFORE, in consideration of the agreements herein contained, the parties hereto hereby agree as follows: ARTICLE I COMMITMENTS OF BANKS; BORROWING PROCEDURES AND CONDITIONS SECTION 1.1. Commitments. Subject to the terms and conditions of ----------- this Agreement, each Bank severally agrees to make Revolving Loans hereunder to any Borrower up to the maximum amounts specified in Section 1.1.4 as follows: ------- ----- SECTION 1.1.1. Revolving Loan Commitments. Loans on a revolving -------------------------- basis (i.e., subject to the terms and conditions of this Agreement, Revolving --- Loans may be borrowed, prepaid, repaid and re-borrowed) from time to time on or before the Revolver Expiration Date to any Borrower equal to such Bank's Percentage of the aggregate amount of such Revolving Loan (each herein called a "Revolving Loan") except as each Bank's obligation to -2- make Revolving Loans may be created or modified as provided in this Section 1.1 ------- --- and Section 13.5. ------- ---- SECTION 1.1.2. Term Loan Commitments. A loan (herein called a "Term --------------------- Loan") on the Revolver Expiration Date in such Bank's Percentage of such aggregate amount as Borrower may request from all Banks, such aggregate amount not to exceed the amount of the Credit. SECTION 1.1.3. Domestic and Eurodollar Loan Commitments. Subject to ---------------------------------------- the terms and conditions of this Agreement, each Revolving Loan and each Term Loan shall be either a Domestic Loan or a Eurodollar Loan, as Borrower shall request in the relevant notice of borrowing pursuant to Section 1.2 or 5.4, it ------- --- --- being understood that both Domestic Loans and Eurodollar Loans may be outstanding at the same time. As to any Eurodollar Loan or Domestic Loan, each Bank may, if it so elects (which election shall be made by such Bank in a manner consistent with its undertaking contained in Section 5.7 and otherwise in good ------- --- faith with a view to not increasing unnecessarily the obligations of any Borrower hereunder), fulfill its aforesaid commitment by causing a foreign branch or affiliate of such Bank (such foreign branch or affiliate or any U.S. branch or affiliate from which a Bank funds a Eurodollar Loan herein called such Bank's "Eurodollar Office") to make such Loan, provided that in such event for the purposes of this Agreement such Eurodollar Loan shall be deemed to have been made by such Bank, and the obligation of Borrower to repay such Eurodollar Loan shall nevertheless be to such Bank and shall be deemed held by it, to the extent of such Eurodollar Loan, for the account of such branch or affiliate. SECTION 1.1.4. Commitment Limits. The aggregate principal amount of ----------------- Revolving Loans and Term Loans which any Bank shall be committed to lend to Borrower shall not at any one time exceed such Bank's Commitment; and the aggregate amount of the Credit shall not at any one time exceed $200,000,000 (or such greater or lesser amount as may be determined pursuant to this Section ------- 1.1). Except as may be otherwise required by Section 5.6, no Bank's obligation - - --- ------- --- to make any Revolving Loan or Term Loan shall, the ratability provisions of Section 1.1.3 to the contrary notwithstanding, be affected by any other Bank's - - ------- ----- failure or inability to make any Revolving Loan or Term Loan. -3- SECTION 1.1.5. Mandatory Reduction of the Commitments. On the -------------------------------------- Revolver Expiration Date the Commitment of each Bank shall be reduced to zero; provided that on the Revolver Expiration Date any Borrower may borrow a Term - - -------- Loan pursuant to Section 1.2. The aggregate amount of the Commitments of the ------- --- Banks once reduced pursuant to this Section 1.1.5 may not be reinstated. ------- ----- SECTION 1.1.6. Optional Pro Rata Reduction. The Company shall have --------------------------- the right, at any time or from time to time, upon not less than three Business Days' prior notice to the Depositary Bank (and the Depositary Bank shall promptly notify each Bank of each termination or reduction) to terminate or reduce, in whole or in part, on a pro rata basis the unused portions of the respective Commitments of the Banks, provided that each partial reduction shall -------- be in an aggregate principal amount of $5,000,000 or a multiple thereof. The aggregate amount of the Commitments of the Banks once reduced pursuant to this Section 1.1.6 may not be reinstated, except pursuant to Section 1.1.8. - - ------- ----- ------- ----- SECTION 1.1.7. Optional Non-Pro Rata Reduction. The Company shall ------------------------------- have the right, upon not less than five Business Days' prior notice to a Bank (with a copy to the Depositary Bank), to terminate in whole such Bank's Commitment; provided, that at the time such notice of termination is given (A) -------- no Credit Suspension Event has occurred and is continuing and (B) either (i) the Public Debt Rating of the Company is A-/A3 or higher or (ii) concurrently with the termination of such Bank's Commitment a Commitment Increase becomes effective pursuant to Section 1.1.8 in an amount not less than the Commitments ------- ----- concurrently being terminated pursuant to this Section 1.1.7. Such termination ------- ----- shall be effective, (A) with respect to such Bank's unused Commitment, on the date set forth in such notice, provided, however, that such date shall be no -------- ------- earlier than ten Business Days after receipt of such notice and (B) with respect to each Loan outstanding to such Bank, on the last day of the then current Interest Period relating to such Loan. Upon termination of a Bank's Commitment under this Section 1.1.7, the Company will pay or cause to be paid all principal ------- ----- of, and interest accrued to the date of such payment on Loans owing to such Bank and pay any facility fees or other fees payable to such Bank pursuant to Section ------- 3.2, and all other amounts payable to such Bank hereunder; and upon such - - --- payments, the obligations of such Bank hereunder shall, by the provisions hereof, be released and discharged. The aggregate amount of the Commitments of the -4- Banks once reduced pursuant to this Section 1.1.7, may not be reinstated, except ------- ----- pursuant to Section 1.1.8. ------- ----- SECTION 1.1.8. Increase in Commitments. The Company may at any time, ----------------------- by notice to the Depositary Bank, propose that the aggregate of the Commitments be increased in excess of the aggregate of the Commitments then in effect (a "Commitment Increase"), effective as of a date prior to the Revolver Expiration Date (the "Increase Date") as to which agreement is to be reached by an earlier date specified in such notice (the "Commitment Date"); provided, however, that -------- ------- (A) the minimum proposed Commitment Increase per notice shall be in an amount no less than $5,000,000, (B) no Event of Default has occurred and is continuing and (C) the warranties of the Company in Article VII shall be true and correct in ------- --- all material respects with the same effect as if made on such Increase Date. The Depositary Bank shall notify the Banks thereof promptly upon its receipt of any such notice. If agreement is reached on or prior to the Commitment Date with one or more Banks and Assuming Banks, if any, as to a Commitment Increase (which may be less than specified in the applicable notice from the Company), such agreement to be evidenced by a notice in reasonable detail from the Company to the Depositary Bank on or prior to the Commitment Date, the Assuming Banks, if any, shall become Banks hereunder as of the Increase Date and the Commitments of such Banks and such Assuming Banks shall become or be, as the case may be, as of the Increase Date the amounts specified in such notice (and the Depositary Bank shall give notice thereof to the Banks (including such Assuming Banks)); provided, however, that: - - -------- ------- (a) the Depositary Bank shall have received (with copies for each Bank, including each Assuming Bank), on or prior to the Increase Date, an opinion of counsel for the Company in substantially the form of Exhibit D ------- - hereto and an opinion of counsel for each other Borrower substantially in the form of Exhibit F hereto, dated such Increase Date, together with a ------- - copy, certified on the Increase Date by the Secretary or an Assistant Secretary of the pertinent Borrower, of the resolutions adopted by the Board of Directors of the Company and each such other Borrower authorizing such Commitment Increase; (b) each such Assuming Bank shall have delivered, on or prior to the Increase Date, to the Depositary Bank an appropriate Assumption Agreement; and -5- (c) each Bank which proposes to increase its Commitment in connection with such Commitment Increase shall have delivered, on or prior to the Increase Date, confirmation in writing satisfactory to the Depositary Bank as to its increased Commitment. In the event that the Depositary Bank shall not have received notice from the Company as to such agreement on or prior to the Commitment Date or the Company shall, by notice to the Depositary Bank prior to the Increase Date, withdraw such proposal or any of the actions provided for above in clauses (a) through --- (c) of this Section 1.1.8. shall not have occurred by the Increase Date, such - - --- ------- ------ proposal by the Company shall be deemed not to have been made. In such event, the actions theretofore taken under clauses (a) through (c) of this Section --- --- ------- 1.1.8., shall be deemed to be of no effect and all the rights and obligations of - - ------ the parties shall continue as if no such proposal had been made. Following any Commitment Increase, the Borrower shall be deemed to repay and reborrow each Revolving Loan having an Interest Period commencing prior to such Increase Date on the date of the continuation or conversion of any Revolving Loan that is a Fixed Rate Loan or the next Interest Date for any Revolving Loan that is a Prime Rate Loan. SECTION 1.2. Borrowing Procedures. Borrower shall provide The Chase -------------------- Manhattan Bank, N.A. (herein called "Depositary Bank"), with notice (of which Depositary Bank shall give prompt notice to each other Bank), by 10:00 a.m. New York City time on the day of a proposed borrowing of Prime Rate Loans, at least two Business Days prior to each proposed borrowing of CD Loans or at least three Eurodollar Days prior to each proposed borrowing of Eurodollar Loans, as the case may be, of the date and amount of such borrowing (except that if the Term Loan borrowing shall comprise both Domestic and Eurodollar Loans, there shall be a single notice at least three Eurodollar Days prior to such proposed borrowing), the interest rate applicable thereto and, in the case of a Eurodollar Loan or CD Loan, the duration of the initial Interest Period. Each Bank shall provide Depositary Bank at its address set forth below its signature hereto, by not later than 12:30 p.m., New York City time, on the date of a proposed borrowing, with immediately available funds covering such Bank's Percentage of the borrowing (or, in the case of the Term Loan borrowing, of any excess of the aggregate Term Loan borrowing over the aggregate principal amount of the Revolving Loans then outstanding plus accrued interest unpaid at the Revolver -6- Expiration Date), and Depositary Bank shall pay over such immediately available funds to Borrower upon each Bank's (including, without limitation, Depositary Bank's) receipt of the documents required under Article IX with respect to such ------- -- borrowing. Each borrowing hereunder shall be in an aggregate amount that is an integral multiple of $1,000,000 and at least $5,000,000. SECTION 1.3. Market Rate Loans. (a) Notwithstanding any provisions ----------------- of this Agreement to the contrary, any Bank may, from time to time, make Market Rate Loans denominated in Dollars or in any Alternate Currency to any Borrower bearing interest at such rate (hereinafter called such Bank's "Market Rate") of interest as may be agreed upon by the Borrower and such Bank. Each Bank may in its sole discretion negotiate with any Borrower concerning the offering of Loans at a Market Rate (hereinafter called "Market Rate Loans"); provided, that -------- nothing contained in this Agreement shall be deemed to require any Bank to offer Market Rate Loans to any Borrower. In the event that any Borrower and any Bank agree to the making of a Market Rate Loan, such Market Rate Loan shall be made severally by such Bank directly to such Borrower without participation in such Market Rate Loan by any other Bank. Such Market Rate Loan may be on such further terms and conditions, including the right of the Borrower to prepay such Market Rate Loan, as may be agreed upon by the Borrower and such Bank. (b) Notwithstanding anything to the contrary contained in this Agreement, all payments or prepayments made in respect of Market Rate Loans made by a Bank pursuant to Section 1.3(a) shall be made directly to such Bank, and ------- ------ such Bank shall not be subject to the provisions of Section 6.3 or 6.4 in ------- --- --- respect of any such payments so received. (c) Upon the making of, or any repayment of principal of, any Market Rate Loan, Borrower shall give the Depositary Bank prompt written, facsimile or telephonic notice of such Market Rate Loan or repayment, which notice shall state the Borrower, the principal amount of such Market Rate Loan or the amount of such repayment, the maturity date of such Market Rate Loan (if applicable) and, if such Market Rate Loan is an Alternate Currency Loan, the Alternate Currency, the Dollar equivalent of the principal amount thereof and the Alternate Currency Payment Office. -7- (d) Market Rate Loans shall not be subject to the limitations on the aggregate amount of the Credit as provided in Section 1.1.4 and shall not reduce ------- ----- the amount of any Bank's unused Commitment. (e) The Company shall designate for each Alternate Currency in which any Borrower proposes to borrow an Alternate Currency Loan an office of a bank at which the proceeds of Alternate Currency Loans denominated in such Alternate Currency will be made available to Borrower and payments in such Alternate Currency will be made (an "Alternate Currency Payment Office") by written notice to Depositary Bank. Any Borrower and any Bank making a Market Rate Loan that is an Alternate Currency Loan may agree upon a different Alternate Currency Payment Office with respect to such Market Rate Loan. The Company or Borrower shall provide the Depositary Bank with written notice of any such designation. SECTION 1.4. Conditions to Each Loan. Notwithstanding any other ----------------------- provision of this Agreement, no Revolving Loan or Term Loan shall be required to be made hereunder if the conditions precedent to the making of such Loan specified in Article IX have not been satisfied. ARTICLE II NOTES EVIDENCING LOANS SECTION 2.1. Revolving Notes. The Revolving Loans of each Bank shall --------------- be evidenced by a promissory note (herein called a "Revolving Note") substantially in the form set forth in Exhibit A, with appropriate insertions, ------- - payable to the order of such Bank on the Revolver Expiration Date in the principal amount equal to the amount of such Bank's Commitment or in the aggregate unpaid principal amount of all of its Revolving Loans, whichever is less. The date and amount of each Revolving Loan made by such Bank and of each repayment of principal thereof received by such Bank, and, in the case of each Eurodollar Loan or CD Loan, the dates on which each Interest Period as to such Loan shall begin and end, shall be recorded by such Bank on the schedule attached to the Revolving Note issued to such Bank, and the aggregate unpaid principal amount shown on such schedule shall be conclusive evidence absent demonstrable error of the principal amount owing and unpaid on such Revolving Note. The failure to record any such amount on such schedule shall not, however, limit or otherwise affect the obligations of Borrower hereunder or -8- under any Note to repay the principal amount of the Loans together with all interest accruing thereon or any other amount owing hereunder. Each Revolving Loan shall be repaid on the Revolver Expiration Date, subject to the right of Borrower to prepay such Revolving Loan and, prior to the Revolver Expiration Date, to reborrow hereunder, in accordance with the provisions of this Agreement. SECTION 2.2. Term Notes. The Term Loan of each Bank shall be ---------- evidenced by a promissory note (herein called a "Term Note") substantially in the form set forth in Exhibit B, with appropriate insertions, dated the Revolver ------- - Expiration Date, payable to the order of such Bank in the original principal amount of such Term Loan on the date which is one year after the Revolver Expiration Date. SECTION 2.3. Market Rate Notes. A Market Rate Loan made by any Bank ----------------- to Borrower shall be evidenced by a promissory note (herein called a "Market Rate Note") substantially in the form set forth in Exhibit C, with appropriate ------- - insertions, and containing such other terms as the Borrower and such Bank may agree. ARTICLE III INTEREST AND FEES SECTION 3.1. Interest. Subject to the provisions of Section 4.4, (i) -------- ------- --- interest prior to maturity (whether by acceleration or otherwise) on each Prime Rate Loan shall be payable in arrears on the last day of each March, June, September and December and on the Revolver Expiration Date (herein, subject to the requirements of Section 3.4, and including the final maturities, by ------- --- acceleration or otherwise, of all of the Revolving Loans, called a "Prime Rate Interest Date"), and (ii) interest prior to maturity on each Eurodollar Loan and CD Loan shall be payable on the last day of the Interest Period for such Loan (herein called a "Fixed Rate Interest Date"). Interest from and after maturity (whether by acceleration or otherwise) on all Loans shall be payable on demand. Interest on each Loan shall accrue from and including the Borrowing Date thereof but shall not accrue on any principal amount of such Loan for the day on which such principal amount is paid. For purposes of the foregoing computations, a conversion of Eurodollar Loans to Domestic Loans or of Domestic Loans to Eurodollar Loans, or a -9- conversion of CD Loans to Prime Rate Loans or of Prime Rate Loans to CD Loans, or a continuation of Eurodollar Loans or CD Loans, pursuant to Article V shall ------- - be deemed to comprise a payment of principal together with the making of a concurrent Loan. SECTION 3.1.1. Interest on Domestic Loans. Interest on the unpaid -------------------------- portion of the principal amount of Domestic Loans shall accrue until paid with respect to each Bank at the following rates per annum: SECTION 3.1.1.1. Revolving Loans and Term Loans. (i) Prior to ------------------------------ maturity, at a rate equal to the Prime Rate, from time to time in effect, or the CD Rate, as the Borrower has specified in its notice of borrowing pursuant to Section 1.2 hereof; and (ii) after maturity, whether by acceleration or - - ------- --- otherwise, until paid, at a rate equal to the sum of the Prime Rate, in effect from time to time, plus 1%. SECTION 3.1.1.2. Changes in Prime Rate. The applicable interest rate --------------------- on Prime Rate Loans shall change simultaneously with the effectiveness of each change in the Prime Rate. SECTION 3.1.2. Interest on Eurodollar Loans. Interest on the unpaid ---------------------------- principal amount of each Eurodollar Loan shall accrue at a rate per annum (herein called the "Eurodollar Interest Rate") calculated for each Eurodollar Period as follows: SECTION 3.1.2.1. Revolving Loans and Term Loans. The Eurodollar ------------------------------ Interest Rate for each Eurodollar Period shall be a rate per annum which is equal to the sum of the Eurodollar Margin in effect on the first day of the applicable Eurodollar Period plus the rate obtained by dividing (i) the arithmetic average (rounded to the nearest whole multiple of 1/16 of 1%) of the rates per annum calculated by Depositary Bank on the basis of notification from the Reference Banks at which Dollar deposits are offered to each Reference Bank by prime banks in the London Interbank Eurodollar market in immediately available funds at 11:00 a.m., London time, two Eurodollar Days before the beginning of such Eurodollar Period for a period comparable to such Eurodollar Period and in a principal amount comparable to the Eurodollar Loan of such Reference Bank for such Eurodollar Period divided (and rounded to the nearest whole multiple of 1/16 of 1%) by (ii) a percentage equal to 100% minus the then stated maximum rate of all reserve requirements (including without limitation any marginal, emergency, supplemental, special or other reserves) -10- applicable to any member bank of the Federal Reserve System in respect of Eurocurrency liabilities as defined in Regulation D of the Board of Governors of the Federal Reserve System (herein called "Regulation D") or any successor category of liabilities under Regulation D. SECTION 3.1.2.2. After Maturity. In the event of default by any -------------- Borrower in the payment when due (whether by acceleration or otherwise) of part or all of the principal amount of any Eurodollar Loan, such Borrower shall pay interest on such unpaid amount from the date such amount shall have become due to the date of actual payment, accruing on a daily basis, at a rate per annum (i) in the event such default shall occur prior to the scheduled expiration of the Eurodollar Period for such Loan, then during the remaining portion of such Eurodollar Period, equal to 1% plus the Eurodollar Interest Rate for such Eurodollar Period of such Loan during which such default occurred and (ii) after the expiration of the Eurodollar Period for such Loan (or expiring concurrently with such default) equal to the Prime Rate, from time to time in effect, plus 1%. SECTION 3.1.3. Notice of CD Rate or Eurodollar Interest Rate. The CD ------------------------------- ------------- Rate for each CD Interest Period and the Eurodollar Interest Rate for each Eurodollar Period shall be determined by Depositary Bank as provided herein and notice thereof (including a calculation in reasonable detail) shall be given by Depositary Bank promptly to each Bank and to the Company. SECTION 3.1.4. Rate Determination Conclusive. Each calculation of ----------------------------- the Eurodollar Interest Rate or the CD Rate, furnished to the Banks and to the Company by Depositary Bank pursuant to Section 3.1.3 shall, unless objected to ------- ----- by any Bank or the Company within 30 days thereafter, be conclusive and binding upon the parties hereto, in the absence of demonstrable error. If any one or more of the Reference Banks is unable or for any reason fails to notify Depositary Bank of the applicable interest rate on the day specified in Section ------- 3.1.2.1, in the case of a Eurodollar Loan, or in the definition of "CD Rate", in - - ------- the case of a CD Loan, by 9:00 p.m., London time in the case of a Eurodollar Loan and 4:00 p.m., New York City time in the case of a CD Loan, the applicable Eurodollar Interest Rate or CD Rate, as the case may be, shall be determined on the basis of the rate or rates of which Depositary Bank is given notice by the remaining Reference Bank or Banks by such time. If none of the Reference Banks is able to notify Depositary Bank of such a rate, -11- the provisions of clauses (a), (b) and (c) of Section 5.5 shall apply. ------- --- --- --- ------- --- SECTION 3.1.5. Increased Cost of Fixed Rate Loans. Borrower agrees ---------------------------------- to pay directly to each Bank additional amounts as will compensate such Bank for (i.e., make such Bank whole against, but only to the extent and for the duration --- of) (i) any increase in the cost to such Bank of making or maintaining any Eurodollar Loan or CD Loan hereunder, or of its obligation to make or maintain any Eurodollar Loans or CD Loans hereunder, or (ii) any reduction in the amount of any sum receivable by such Bank hereunder in respect of any Eurodollar Loan or CD Loan, from time to time, by reason of: (a) any reserve, special deposit, or similar requirements against assets of, deposits with or for the account of or credit extended by, such Bank which are imposed on, or deemed applicable by, such Bank, under or pursuant to any law, treaty, rule, regulation (including, without limitation, Regulation D) or requirement in effect on or after the date hereof, any change therein, or any interpretation thereof by any governmental authority charged with administration thereof or by any central bank or other fiscal, monetary or other authority having jurisdiction over the CD Loans, the Eurodollar Loans, such Bank, or a Eurodollar Office which is a foreign branch or affiliate of such Bank, or any requirement imposed by any central bank or such other authority, whether or not having the force of law; or (b) any change in (including the introduction of any new) applicable law, treaty, rule, regulation or requirement or in the interpretation thereof by any official authority, or the imposition of any requirement of any central bank, whether or not having the force of law, which shall subject such Bank or Borrower to any tax (other than taxes on net income or net worth or franchise taxes), levy, impost, charge, fee, duty, deduction or withholding of any kind whatsoever or change the taxation of a Eurodollar Office which is a foreign branch or affiliate of such Bank with respect to any Eurodollar Loan of such Bank hereunder and the interest thereon (other than any change which affects, and to the extent that it affects, the taxation of net income); -12- provided, however, that no Bank shall seek compensation for any such increase in - - -------- ------- cost, or for any such reduction in the amount of any sum receivable, for any period when any Eurodollar Loan or CD Loan shall be outstanding if such Bank shall, on or prior to the date of making such Eurodollar Loan or CD Loan, have notified the Borrower that it will not seek compensation therefor and will not give notice thereof in accordance with the following paragraph of this Section; provided, further, that the Borrower shall not be required to pay any additional - - -------- ------- amount on account of any taxes imposed by the United States pursuant to this Section 3.1.5. to any Bank which (i) is not entitled, on the date hereof (or, in - - ------- ------ the case of an assignee of a Bank, on the date on which the assignment to it became effective), to submit Form 1001 or Form 4224 (or any successor forms) so as to meet its obligations to submit such a form pursuant to Section 13.18 or ------- ----- Section 13.5, or (ii) shall have failed to submit any form or other - - ------- ---- certification which it was required to file pursuant to Section 13.18 or Section ------- ----- ------- 13.5 and entitled to file under applicable law, or (iii) shall have filed any - - ---- such form which is incorrect or incomplete in any material respect. In any such event, each Bank so affected shall promptly notify Borrower and Depositary Bank (which shall give prompt notice thereof to each other Bank) thereof by telephone, confirmed in writing, stating the reasons therefor and the additional amounts required fully to compensate such Bank for such increased cost or reduced amount. Such additional amounts shall be payable on the Fixed Rate Interest Date of each Eurodollar Loan and CD Loan so affected, and upon demand if such notice is not given to Borrower prior to such Fixed Rate Interest Date or if there are no Eurodollar Loans or CD Loans outstanding when such notice is given, provided that such compensation will cover a period beginning -------- not more than 90 days prior to such notice. A certificate as to any such increased cost or reduced amount (including calculations, in reasonable detail, showing how such Bank computed such cost or reduction) shall be submitted by each affected Bank to Borrower and Depositary Bank (which shall promptly furnish copies thereof to each other Bank) and shall, in the absence of demonstrable error, be conclusive and binding. SECTION 3.1.6. Interest on Market Rate Loans. The applicable ----------------------------- interest rate, and the time of payment therefor, for each Market Rate Loan shall be as agreed upon by Borrower and the Bank making such Market Rate Loan. -13- SECTION 3.1.7. Additional Costs. Without limiting the effect of the ---------------- foregoing provisions of Section 3.1.5 (but without duplication), the Borrower ------- ----- shall pay directly to each Bank from time to time on demand such amounts as such Bank may determine to be necessary to compensate such Bank for any costs which such Bank determines are attributable to any Revolving Loan outstanding hereunder or to its obligation to make any Revolving Loans hereunder and to other loans or commitments of this type in respect of any amount of capital maintained by such Bank or any of its affiliates pursuant to any law or regulation of any jurisdiction, or any change therein, or any interpretation, guidelines, directive or request (whether or not having the force of law) of any court or governmental or monetary authority, whether in effect on the date of this Agreement or thereafter. Without limiting the foregoing, such compensation shall include an amount equal to any reduction in return on assets or return on equity to a level below that which such Bank could have achieved but for such law, regulation, change, interpretation, directive or request; provided, -------- however, that no Bank shall seek compensation for any such increase in cost, or - - ------- for any such reduction in the amount of any sum receivable, in respect of any Revolving Loan outstanding hereunder for any period when any Revolving Loan shall be outstanding if such Bank shall, on or prior to the date of making such Revolving Loan, have notified the Borrower that it will not seek compensation therefor and will not give notice thereof in accordance with the following paragraph of this Section. In any such event, each Bank so affected shall promptly notify the Company and Depositary Bank (which shall give prompt notice thereof to each other Bank) thereof by telephone, confirmed in writing, stating the reasons therefor and the additional amounts required fully to compensate such Bank for such increased cost or reduced amount. Such additional amounts shall be payable on the next Interest Date, or upon demand if there are no Loans outstanding when such notice is given, provided that such compensation will cover a period beginning not more -------- than 90 days prior to such notice. A certificate as to any such increased cost or reduced amount (including calculations, in reasonable detail, showing how such Bank computed such cost or reduction) shall be submitted by each affected Bank to Borrower and Depositary Bank (which shall promptly furnish copies thereof to each other Bank) and shall, in the absence of demonstrable error, be conclusive and binding. -14- SECTION 3.1.8. Applicable Margin. The "Eurodollar Margin" or "CD ----------------- Margin" means, as of any date, with respect to any Eurodollar Loan or CD Loan, respectively, the applicable percentage set opposite the Public Debt Rating in effect on such date: Public Debt Rating Eurodollar Margin CD Margin ------------------ ----------------- ---------- Level 1: AA-/Aa3 or higher 0.1875% 0.3125% Level 2: A-/A3 or higher, but less than Level 1 0.25% 0.375% Level 3: BBB-/Baa3 or higher, but less than Level 2 0.40% 0.525% Level 4: Less than BBB-/Baa3 0.75% 0.875% Any adjustment to the Eurodollar Margin or CD Margin pursuant to this Section 3.1.8 shall become effective for Interest Periods commencing after a - - ------- ----- public announcement of a change in debt rating which requires an adjustment to be made hereunder. SECTION 3.2. Facility Fee. Borrower agrees to pay the Banks a ------------ facility fee for the period from and including January 12, 1994 to the Revolver Expiration Date equal to the percentage per annum set forth for the applicable Public Debt Rating in the table below on the daily average amount of the Credit; provided that no facility fee shall be payable to any Bank on that portion of - - -------- the Credit then borrowed as Prime Rate Loans as a result of a conversion of any Fixed Rate Loan pursuant to Section 4.2, 5.5, 5.6 or 5.7. ------- --- --- --- --- Public Debt Rating Facility Fee Percentage ------------------ ----------------------- Level 1: AA-/Aa3 or higher 0.1250% -15- Public Debt Rating Facility Fee Percentage ------------------ ----------------------- Level 1: AA-/Aa3 or higher 0.1250% Level 2: A-/A3 or higher, 0.15% but less than Level 1 Level 3: BBB-/Baa3 or higher, 0.25% but less than Level 2 Level 4: Less than BBB-/Baa3 0.40% If Term Loans are borrowed on the Revolver Expiration Date, Borrower agrees to pay the Banks a Facility Fee from and including the Revolver Expiration Date to the date all Term Loans are repaid in full equal to 0.125% on the average daily principal balance of the Term Loans; provided that no Facility Fee shall be payable to any Bank on that portion of the Term Loans that are Prime Rate Loans as a result of a conversion of any Fixed Rate Loan pursuant to Section 4.2, 5.5, 5.6 or 5.7. - - ------- --- --- --- --- Such facility fee shall be payable on the last day of March, June, September and December for the period then ending for which such facility fee shall not have been theretofore paid (the first such payment to be made on March 31, 1994) and on the earlier of the Revolver Expiration Date or the date of termination of the Credit for any period then ending for which such facility fee shall not have been theretofore paid. SECTION 3.3. Basis of Computation. Interest on Prime Rate Loans and -------------------- the facility fee shall be computed for the actual number of days elapsed on the basis of a year consisting of 365 or, if applicable, 366 days. Interest on Fixed Rate Loans shall be computed for the actual number of days elapsed on the basis of a year consisting of 360 days. Interest on each Market Rate Loan shall be computed on the same basis as Fixed Rate Loans unless otherwise agreed upon by Borrower and the Bank making such Market Rate Loan. SECTION 3.4. Extension of Due Date. If any payment of principal of, --------------------- or interest on, any Domestic Loan or any payment of a facility fee falls due on a day which is not a Business Day, then such due date shall be extended to the next following Business Day. If any payment of principal of, or interest on, any Eurodollar Loan falls due on a day which is not a Eurodollar -16- Day, then such due date shall be extended to the next Eurodollar Day, unless such Eurodollar Day falls in another calendar month, in which case the date for payment thereof shall be the preceding Eurodollar Day. If the date for any payment of principal is extended pursuant to this Section 3.4, additional ------- --- interest shall accrue and be payable for the period of such extension. SECTION 3.5. Interest Rate Determination. Each Reference Bank agrees --------------------------- to furnish to the Depositary Bank timely information for the purpose of determining each Prime Rate, CD Rate or Eurodollar Rate, as applicable. If any one or more of the Reference Banks shall not furnish such timely information to the Depositary Bank for determination of any such interest rate, the Depositary Bank shall determine such interest rate on the basis of timely information furnished by the remaining Reference Banks. The Depositary Bank shall give prompt notice to the Borrower and, if different, the Company and the Banks of the applicable interest rate determined by the Depositary Bank and of the applicable rate, if any, furnished by each Reference Bank for determining the applicable interest rate under Section 3.1. ------- --- SECTION 3.6. Currency Equivalents. For purposes of the provisions of -------------------- Articles I, II, III, IV and V, (i) the equivalent in Dollars of any Alternate - - -------- - -- --- -- - Currency shall be determined by using the quoted spot rate at which the principal office in New York City of the pertinent Bank or the principal office in New York City of any affiliate of such Bank offers to exchange Dollars for such Alternate Currency in New York City at 11:00 a.m. (New York City time), two Business Days prior to the date on which such equivalent is to be determined, (ii) the equivalent in any Alternate Currency of any other Alternate Currency shall be determined by using the quoted spot rate at which such Bank's principal office in New York City or the principal office in New York City of any affiliate of such Bank offers to exchange such Alternate Currency for the equivalent in Dollars of such other Alternate Currency in New York City at 11:00 a.m. (New York City time), two Business Days prior to the date on which such equivalent is to be determined, and (iii) the equivalent in any Alternate Currency of Dollars shall be determined by using the quoted spot rate at which such Bank's principal office in New York City or the principal office in New York City of any affiliate of such Bank offers to exchange such Alternate Currency for Dollars in New York City at 11:00 a.m. (New York City time), two Business Days prior to the date on which such equivalent is to be determined. -17- ARTICLE IV PREPAYMENTS SECTION 4.1. Prepayment upon Reduction or Termination of the Credit. ------------------------------------------------------ On the effective date of any reduction of the Commitments pursuant to Section ------- 1.1.6 Borrower shall prepay the amount, if any, by which the aggregate unpaid - - ----- principal amount of all Revolving Notes exceeds the then reduced amount of the Credit; provided, that on the later of the termination of the Commitments in -------- their entirety or the maturity of the Term Loan, if made, each Borrower shall pay in full all of its obligations hereunder and under the Notes accrued or payable through such date (all such obligations being herein collectively called the "Liabilities"). SECTION 4.2. Change in Law Rendering Fixed Rate Loans Unlawful. In ---------------------------------------- -------- the event that any change in (including the introduction of any new) applicable laws or regulations, or in the interpretation thereof by any governmental or other regulatory authority charged with the administration thereof, shall make it unlawful for any Bank to make or continue any Eurodollar Loan or CD Loan to be made or continued by it hereunder, the obligation of such Bank pursuant to which such Eurodollar Loan or CD Loan would otherwise be made shall, upon the happening of such event, forthwith terminate and such Bank shall, by telephonic notice confirmed in writing to Borrower (with a copy to Depositary Bank, which shall give prompt notice thereof to each other Bank), declare that such obligation has so terminated. If any such change shall make it unlawful for any Bank to maintain any Eurodollar Loan or CD Loan made by it hereunder, such Bank shall, upon the happening of such event, notify Borrower thereof by telephone, confirmed in writing (with a copy to Depositary Bank, which shall give prompt notice thereof to each other Bank), stating the reasons therefor and Borrower shall, at such time as required by law and no later than at the end of the Interest Period of such Loan, convert such Eurodollar Loan or CD Loan into a Prime Rate Loan by such Bank pursuant to the provisions (other than as to prior notice, to the extent that compliance therewith would violate applicable law) of Article V. If prior to the Revolver Expiration Date circumstances subsequently - - ------- - change so that any such Bank shall no longer be so affected, such Bank shall reinstate its Commitment to make Eurodollar Loans or CD Loans upon written notice to Borrower thereof (with a copy to Depositary Bank, which shall give prompt notice thereof to each other Bank). -18- SECTION 4.3. Optional Prepayment. Borrower may from time to time, ------------------- upon at least three Eurodollar Days' prior written notice to each Bank, prepay the Loans in whole or in part, subject to the provisions of Sections 6.1 and -------- --- 6.3, without premium or penalty other than as provided in Section 4.5; provided - - --- ------- --- -------- however, that such optional prepayment shall, if it occurs before the Revolver - - ------- Expiration Date, not reduce the Credit and any partial prepayment shall be in an aggregate principal amount of at least $5,000,000 and an integral multiple of $1,000,000. SECTION 4.4. Interest on Principal Prepaid. Any prepayment of ----------------------------- principal of the Loans shall include accrued interest to the date of prepayment on the principal amount being prepaid. Upon any conversion of a Fixed Rate Loan pursuant to Section 4.2, 5.6 or 5.7, Borrower shall on the date of such ------- --- --- --- conversion pay accrued interest on such Fixed Rate Loan to such date. Payments of interest on account of a conversion pursuant to Section 4.2, 5.6 or 5.7 shall ------- --- --- --- be made directly to each Bank so affected. SECTION 4.5. Prepayment Compensation. If (i) any optional or ----------------------- mandatory payment or prepayment of a Eurodollar Loan or CD Loan (including, without limitation, on account of a reduction or termination of the Credit) or any conversion of a Eurodollar Loan or CD Loan pursuant to Article V or Section ------- - ------- 4.2 is made on a day which is not the originally scheduled last day (designated - - --- in Borrower's notice pursuant to Section 1.2 or 5.4) of an Interest Period of ------- --- --- such Loan, or (ii) the Borrower fails to borrow, continue, or convert another Loan into, a Eurodollar Loan or CD Loan on the date for such borrowing, continuation, or conversion specified in the Borrower's notice pursuant to Section 1.2 or 5.4, Borrower shall pay directly to the Bank having made such - - ------- --- --- Loan or which would have made such Loan such amount or amounts as will fully compensate such Bank for any net losses and expenses incurred by it (or any branch or affiliate thereof) in connection with its repayment or reinvestment in respect of funds borrowed by it or deposited with it for the purpose of making or maintaining such Loan, it being understood that the amount of any such -- ----- ---------- loss shall be determined with reference only to reduced earnings derived by such Bank on, and shall not include any loss of, any principal amount of such funds as the result of such Bank's reinvestment thereof. Any such payment by Borrower to any Bank shall be payable on demand made by such Bank (accompanied by a calculation in reasonable detail of such -19- payment which, in the absence of demonstrable error, shall be conclusive and binding as to the amount thereof). ARTICLE V SPECIAL PROVISIONS WITH RESPECT TO CONTINUATION OF FIXED RATE LOANS AND CONVERSION OF LOANS BETWEEN EURODOLLARS AND DOMESTIC DOLLARS SECTION 5.1. Continuation of Eurodollar Loans. Borrower may elect to -------------------------------- continue a group of Eurodollar Loans from any Eurodollar Period into a subsequent Eurodollar Period, provided that such continuation shall take place -------- on the last day of the prior Eurodollar Period (herein, in such case, called a "Continuation Date"). Such election shall be subject to the notice requirements of Section 5.4. If no such election is made in compliance with the requirements ------- --- hereof and Borrower does not pay in full the outstanding principal amount of any Eurodollar Loan on the last day of the Eurodollar Period thereof, such Eurodollar Loan shall automatically, without any notice from or to Borrower, be converted into a Prime Rate Loan in accordance with the other provisions of this Article V (other than as to prior notice) at the end of such Eurodollar Period. - - ------- - SECTION 5.1.1. Continuation of CD Loans. Borrower may elect to ------------------------ continue a group of CD Loans from any CD Interest Period into a subsequent CD Interest Period, provided that such continuation shall take place on the last -------- day of the prior CD Interest Period (herein, in such case, called a "Continuation Date"). Such election shall be subject to the notice requirements of Section 5.4. If no such election is made in compliance with the requirements ------- --- hereof and Borrower does not pay in full the outstanding principal amount of any CD Loan on the last day of the CD Interest Period thereof, such CD Loan shall automatically, without any notice from or to Borrower, be converted into a Prime Rate Loan in accordance with the other provisions of this Article V (other than ------- - as to prior notice) at the end of such CD Interest Period. SECTION 5.2. Conversion. Borrower may elect (i) on any Eurodollar ---------- Day to convert any outstanding Domestic Loans into Eurodollar Loans or any outstanding Eurodollar Loans into Domestic Loans and (ii) on any Business Day to convert any outstanding CD Loans into Prime Rate Loans or any outstanding Prime Rate Loans into CD Loans (herein, in such case, called a -20- "Conversion Date"), it being understood that any such conversion of a Eurodollar -- ----- ---------- Loan or CD Loan into another type of Loan on a day other than the last day of the Eurodollar Period or CD Interest Period, as the case may be, of such Loan shall be subject to the applicable provisions of Section 4.5. Such election ------- --- shall be subject to the notice requirements of Section 5.4. ------- --- SECTION 5.3. Restrictions on Borrower's Continuation and Conversion --------------------------------------- -------------- Rights. Notwithstanding any other provisions of this Article V, Banks shall not - - ------ ------- - be obligated to effect (i) any continuation or conversion under this Article V, ------- - so long as any Event of Default or Credit Suspension Event has occurred and remains continuing or (ii) any continuation of any type of Loan outstanding or any conversion of any outstanding type of Loan into another type of Loan so long as any of the circumstances described in Sections 4.2, 5.5, 5.6 and 5.7 -------- --- --- --- --- affecting such continuation or conversion have occurred and remain continuing. SECTION 5.4. Notice of Continuations and Conversions. Except as --------------------------------------- otherwise provided in this Agreement, Borrower shall, at least three Eurodollar Days prior to any Continuation Date or Conversion Date involving a Eurodollar Loan, or at least two Business Days prior to any Continuation Date involving a CD Loan or conversion of a CD Loan into a Prime Rate Loan or Prime Rate Loan into a CD Loan, give notice to Depositary Bank (which shall give prompt notice thereof to each other Bank) of such proposed continuation or conversion, and in the case of any Eurodollar Loans or CD Loans to be continued or to be made by conversion on such date, as the case may be, the duration of the subsequent Eurodollar Period or CD Interest Period thereof. SECTION 5.5. Interest Rates Unascertainable. In the event that, ------------------------------ prior to any Borrowing Date of any group of Eurodollar Loans or CD Loans, Banks having, in the aggregate, a Percentage of 66 2/3% or more shall have determined (which determination shall be conclusive and binding on all parties hereto) that (i) with respect to Eurodollar Loans and CD Loans, the circumstances described in the third sentence of Section 3.1.4 have occurred, or that, (ii) by reason of ----- -------- ------------- other circumstances affecting the London interbank eurodollar market or certificate of deposit market, adequate and reasonable means do not exist for ascertaining the Eurodollar Interest Rate or CD Rate applicable to such group of Eurodollar Loans or CD Loans, (a) such Banks shall give notice of such determination promptly (and in any event within three Eurodollar Days after making such -21- determination with respect to Eurodollar Loans and within two Business Days after making such determination with respect to CD Loans) to the other parties hereto and, (b) with respect to any new Eurodollar Loans or CD Loans, as the case may be, Borrower's request for Eurodollar Loans or CD Loans, as the case may be, shall be deemed a request for Prime Rate Loans and (c) with respect to outstanding Eurodollar Loans or CD Loans, as the case may be, to be continued on such Borrowing Date, such Loans shall be converted into Prime Rate Loans in accordance with the provisions of this Article V on such Borrowing Date, ------- - notwithstanding any failure of Borrower to comply with the notice provisions of Section 1.2 or 5.4, as the case may be. - - ------- --- --- SECTION 5.6. Bank Unable to Make Eurodollar Loan. In the event that, ----------------------------------- prior to any Borrowing Date of any Eurodollar Loan as Borrower shall request in its relevant notice of borrowing pursuant to Section 1.2 or 5.4, any Bank ------- --- --- requested to make or continue such Eurodollar Loan shall (i) have determined (which determination if made in good faith shall be conclusive and binding on all parties hereto) that Dollar deposits in the relevant amount and for the relevant Eurodollar Period for such Eurodollar Loan are not available to such Bank in the London interbank eurodollar market by reason of law or otherwise, or (ii) learn of any change in (including the introduction of any new) applicable laws or regulations, or in the interpretation thereof by any governmental or other regulatory authority charged with the administration thereof, which shall make it unlawful for such Bank to make or continue such Eurodollar Loan for the proposed duration thereof, such Bank shall promptly give notice of such determination to Borrower (with a copy to Depositary Bank, which shall give prompt notice thereof to each other Bank) and (a) with respect to any new Eurodollar Loan, Borrower's request for such Loan shall be deemed a request for a Prime Rate Loan, and (b) with respect to any outstanding Eurodollar Loan to be continued on such Borrowing Date, such Loan shall be converted into a Prime Rate Loan in accordance with the provisions of this Article V on such Borrowing ------- - Date, notwithstanding any failure of Borrower to comply with the notice provisions of Section 1.2 or 5.4, as the case may be. ------- --- --- SECTION 5.7. Conversions Affecting Some Banks. Within ten days of -------------------------------- notification by any Bank that any of the circumstances described in Section ------- 3.1.5 or 3.1.7 shall have occurred and remain continuing with respect to any - - ----- ----- outstanding Eurodollar Loan or CD Loan made by such Bank, Borrower may elect to convert such Eurodollar Loan or CD Loan to a Prime Rate Loan. -22- Borrower shall, at least three Eurodollar Days prior to the proposed Conversion Date in respect of such Eurodollar Loan or two Business Days prior to the proposed Conversion Date in respect of such CD Loan, give notice of such conversion to Depositary Bank (which shall give prompt notice to each other Bank). The exemption from the ratability provisions of Section 1.1.3 shall ------- ----- apply to all Banks or Loans affected by conversions made pursuant to this Section or Section 4.2 or 5.6 and so long as any of the circumstances which - - ------- ------- --- --- permitted or required such conversion shall remain continuing. Any Bank so affected shall use all commercially reasonable efforts to cease being so affected, it being understood that such obligation shall in no way reduce the -- ----- ---------- rights of Banks hereunder nor require any Bank to take any action which would have a material adverse effect on such Bank, to make any Eurodollar Loan at any office located in the United States or to fund any Eurodollar Loan in domestic Dollars. ARTICLE VI MAKING AND PRORATION OF PAYMENTS; OFFSET SECTION 6.1. Making of Payments. All payments made by Borrower ------------------ hereunder shall be in immediately available funds and, except for payments pursuant to Sections 1.3(b), 3.1.5, 3.1.7 and 4.5 and as otherwise indicated in -------- ------ ----- ----- --- Sections 3.2 and 4.4, shall be made to Depositary Bank at its address set forth - - -------- --- --- below its signature hereto not later than 12:30 p.m., New York City time, on the date due; funds received after that hour shall be deemed to have been received by Depositary Bank on the next Eurodollar Day or Business Day, as the case may be. Depositary Bank shall remit in immediately available funds to each Bank or other holder its share of all such payments received by Depositary Bank for the account of such Bank or holder, as determined pursuant to Section 6.3, promptly ------- --- (and, in the event of any payment received prior to 12:30 p.m., New York City time, on any Business Day, on such Business Day). SECTION 6.2. Payment on Revolver Expiration Date. Any Borrower may ----------------------------------- effect payment of all or part of the Revolving Loans, together with accrued interest thereon, on the Revolver Expiration Date by directing Depositary Bank, in Borrower's notice of its proposed borrowing of the Term Loans pursuant to Section 1.2, to apply the proceeds of the Term Loans to the extent necessary to - - ------- --- the concurrent payment of principal of and -23- interest on the Revolving Loans; provided, that the aggregate principal amount -------- of the Term Loan shall not exceed the amount of the Credit. SECTION 6.3. Allocation of Payments. All payments of principal of ---------------------- the Revolving Notes and Term Notes by Borrower shall be for the account of the holders of the Revolving Notes and Term Notes pro rata according to the respective unpaid principal amounts of the Revolving Notes and Term Notes held by them, and shall be applied by each such holder (except as Borrower may, in a manner not inconsistent with other terms and provisions hereof, otherwise elect in a notice, furnished on or prior to the date of such payment, to Depositary Bank, which shall give prompt notice thereof to each other Bank) first to its then outstanding Domestic Loans other than Loans made by conversions pursuant to Section 4.2, 5.6 or 5.7 (herein called an "Equivalent Domestic Loan"), second to - - ------- --- --- --- any then outstanding Equivalent Domestic Loans, and finally to its then outstanding Eurodollar Loans. (For purposes of this Section, any Equivalent Domestic Loan shall be deemed an ordinary Domestic Loan to the extent that the Eurodollar Loan from which such Equivalent Domestic Loan was converted would otherwise have been converted to any ordinary Domestic Loan.) All payments of interest on Domestic Loans hereunder, except Equivalent Domestic Loans made by an affected Bank pursuant to Section 4.2, 5.6 or 5.7, shall be for ------- --- --- --- the account of the holders of the Revolving Notes and Term Notes pro rata according to the respective unpaid principal amounts of Domestic Loans evidenced by the Revolving Notes and Term Notes held by them; all payments of interest on Equivalent Domestic Loans made by an affected Bank pursuant to Section 4.2, 5.6 ------- --- --- or 5.7 shall be for the account of the holders of the Revolving Notes and Term --- Notes pro rata according to the respective unpaid principal amounts of Equivalent Domestic Loans evidenced by the Revolving Notes and Term Notes held by them; and all payments of interest on Eurodollar Loans hereunder, except those pursuant to Section 4.4 on account of a conversion pursuant to Section ------- --- ------- 4.2, 5.6 or 5.7, shall be for the account of the holders of the Revolving Notes - - --- --- --- and Term Notes pro rata according to the respective unpaid principal amounts of Eurodollar Loans evidenced by the Revolving Notes and Term Notes held by them. All payments of facility fees shall be for the account of all Banks pro rata according to the daily average amount of each Bank's Commitment, provided that any reduction of facility fees -24- in respect of Equivalent Domestic Loans that are Prime Rate Loans shall be borne pro rata by each affected Bank under Section 4.2, 5.5, 5.6 or 5.7. ------- --- --- --- --- Notwithstanding any other provision of this Section 6.3 payments of ------- --- principal, interest, facility fees and other obligations hereunder to any Bank upon termination of its Commitment pursuant to Section 1.1 or pursuant to ------- --- Section 3.1.7 shall be solely for the account of such Bank. - - ------- ----- SECTION 6.4. Proration of Other Recoveries. If any Bank or other ----------------------------- holder of a Revolving Note or Term Note shall obtain any payment or other recovery (whether voluntary, involuntary, by application of offset or otherwise), other than a prepayment compensation pursuant to Section 4.5, on ------- --- account of principal of or interest on any Revolving Note or Term Note, or facility fees, in excess of its pro rata share, as determined pursuant to Section 6.3, of payments and other recoveries obtained by all Banks or other - - ------- --- holders on account of principal of and interest on Revolving Notes or Term Notes then held by them, or facility fees, such Bank or other holder shall purchase from the other Banks or holders such participation in the Revolving Notes or Term Notes held by them, or shall make such other payments, as shall be necessary to cause such purchasing Bank or other holder to share the excess payment or other recovery ratably with each of them; provided, however, that if -------- ------- all or any portion of the excess payment or other recovery is thereafter recovered from such purchasing holder, the purchase shall be rescinded and the purchase price restored to the extent of such recovery, but without interest. SECTION 6.5. Offset. In addition to and not in limitation of all ------ rights of offset that any Bank or other holder of a Note may have under applicable law, each Bank or other holder of a Note shall, upon the occurrence of any Event of Default described in Section 10.1.3 or any Credit Suspension ------- ------ Event which would constitute such an Event of Default described in Section ------- 10.1.3, have the right, subject to Section 6.4, to appropriate and apply to the - - ------ ------- --- payment of such Note any and all balances, credits, deposits, accounts or moneys of Borrower then or thereafter with such Bank or other holder. If, in the aggregate, the recovery by the Banks by offset, under applicable law, or otherwise shall exceed the obligations of Borrower under the Notes and hereunder, any Bank receiving such an excess agrees to promptly restore the same to Borrower. -25- ARTICLE VII WARRANTIES To induce Banks to grant the Credit and to make Loans hereunder, the Company warrants to Banks that: SECTION 7.1. Organization, etc. The Company is a corporation duly ----------------- existing and in good standing under the laws of the State of New York; and each Significant Subsidiary is a corporation duly existing and in good standing under the laws of the jurisdiction of its respective incorporation. SECTION 7.2. Authorization; No Conflict. The execution and delivery -------------------------- of this Agreement, the borrowings hereunder, the execution and delivery of the Notes, and the performance by the Company of its obligations under this Agreement and the Notes, are within the Company's corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required), and do not and will not violate, contravene or conflict in any material respect with any provision of law or of the charter or by-laws of the Company or of any judgment or any material agreement or indenture binding upon or applicable to the Company the contravention of or conflict with which would materially adversely effect the consolidated financial condition or continued operations of the Company and its Subsidiaries as a whole or materially impair the ability of the Company to perform any of its obligations hereunder. SECTION 7.3. Validity and Binding Nature. This Agreement is, and the --------------------------- Notes when duly executed and delivered will be, legal, valid and binding obligations of the Company enforceable against it in accordance with their respective terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of rights of creditors generally. SECTION 7.4. Financial Statements. The Company's audited -------------------- consolidated financial statements as at December 31, 1992 and unaudited consolidated financial statements as at September 30, 1993, copies of which have been furnished to each Bank, have been prepared in conformity with GAAP applied on a basis consistent with that of the preceding fiscal year or nine-month period, as the case may be, and fairly present the financial condition of the Company and its Consolidated -26- Subsidiaries as at such date and the results of their operations for the period covered by such statements subject, in the case of any unaudited interim financial statements, to changes resulting from normal year-end adjustments. SECTION 7.5. Litigation. No litigation or arbitration proceedings ---------- are pending or, to the knowledge of the Company, threatened against the Company or any Significant Subsidiary as to which there is a reasonable likelihood of an adverse determination and which would reasonably be expected to have a material adverse effect on the consolidated financial condition or continued operations of the Company and its Subsidiaries as a whole or materially impair the ability of the Company to perform any of its obligations hereunder. SECTION 7.6. Liens. None of the assets of the Company is subject to ----- any mortgage, pledge, title retention lien, or other lien, encumbrance or security interest which is not permitted by Section 8.6. ------- --- SECTION 7.7. ERISA. Neither the Company nor any Significant ----- Subsidiary has incurred any liability to the Pension Benefit Guaranty Corporation in connection with any employee benefit plan which could reasonably be expected to materially adversely affect the consolidated financial condition or continued operations of the Company and its Subsidiaries as a whole or materially impair the ability of the Company to perform any of its obligations hereunder. SECTION 7.8. Investment Company Act. The Company is not an ---------------------- "investment company," or a company "controlled" by or "controlling" an "investment company," within the meaning of the Investment Company Act of 1940, as amended. SECTION 7.9. Public Utility Holding Company Act. Neither the Company ---------------------------------- nor any of its Subsidiaries is a "holding company," or a "subsidiary company" of a "holding company," or an "affiliate" of a "holding company" or of a "subsidiary company" of a "holding company," within the meaning of the Public Utility Holding Company Act of 1935, as amended. SECTION 7.10. Regulations G, U, and X. The Company will not use the ----------------------- proceeds of the Loans in violation of Regulations G, U, and X of the Board of Governors of the Federal Reserve System. -27- ARTICLE VIII COVENANTS Until the expiration or termination of the Credit and thereafter until all Liabilities are paid in full, the Company agrees that, unless at any time Banks having, in the aggregate, a Percentage of 66 2/3% or more shall otherwise expressly consent in writing, it will: SECTION 8.1. Reports, Certificates and Other Information. ------------------------------- ----------- Furnish to each Bank: SECTION 8.1.1. Audit Report. Within 120 days after each fiscal year ------------ of the Company, a copy of an annual audit report of the Company and its Subsidiaries prepared on a consolidated basis and in conformity with GAAP, duly certified by, and containing an opinion of, Ernst & Young or other independent certified public accountants of recognized national standing selected by the Company, which opinion shall be unqualified (excepting any qualification relating to any change in the application of GAAP concurred in by such accountants). The requirements of this Section (other than the requirement that any opinion shall be unqualified as aforesaid) shall be satisfied by the Company's furnishing each Bank with a copy of its annual report on Form 10-K filed with the Securities and Exchange Commission in accordance with the instructions therefor. SECTION 8.1.2. Interim Reports. Within 60 days after each quarter --------------- (except the last quarter) of each fiscal year of the Company, a copy of an unaudited financial statement of the Company and its Subsidiaries prepared on a consolidated basis and in conformity with GAAP applied on a basis consistent with the most recent audit report referred to in Section 8.1.1, signed by a ------- ----- proper accounting officer of the Company and consisting of at least a balance sheet as at the close of such quarter, a statement of earnings for such quarter and for the period from the beginning of such fiscal year to the close of such quarter and a statement of cash flows for the period from the beginning of such fiscal year to the close of such quarter. The requirements of this Section shall be satisfied by the Company's furnishing each Bank with a copy of its quarterly report on Form 10-Q filed with the Securities and Exchange Commission in accordance with the instructions therefor. -28- SECTION 8.1.3. Certificates. Contemporaneously with the furnishing ------------ of a copy of each annual audit report and of each quarterly statement provided for in Section 8.1.1 or 8.1.2, a certificate dated the date of such annual ------- ----- ----- report or such quarterly statement and signed by the Chairman of the Board, any Senior Vice President, the chief financial officer or the Treasurer of Borrower to the effect that no Event of Default or Credit Suspension Event has occurred and is continuing or, if there is any such event, describing it and the steps, if any, being taken to cure it. SECTION 8.1.4. Reports to SEC and to Shareholders. Copies of each ---------------------------------- report on Form 10-K, 10-Q or 8-K (excluding exhibits thereto) made by any Borrower with the Securities and Exchange Commission, and of each annual report, quarterly report, special report or proxy statement from the Company to its shareholders generally, promptly after the filing or making thereof. SECTION 8.1.5. Notice of Default or Litigation. Forthwith upon ------------------------------- learning of the occurrence of an Event of Default, or a Credit Suspension Event, or of the institution of, or any adverse determination in, any litigation or arbitration proceeding as to which there is a reasonable likelihood of an adverse determination and which would reasonably be expected to have a material adverse effect on the consolidated financial condition or continued operations of the Company and its Subsidiaries as a whole or materially impair the ability of the Company to perform any of its obligations hereunder, written notice thereof describing the same and the steps being taken by the Company or the Subsidiary affected with respect thereto. SECTION 8.1.6. ERISA. As soon as practicable after the occurrence of ----- any Reportable Event (as defined in the Employee Retirement Income Security Act of 1974), which is material to the Company and its Significant Subsidiaries taken as a whole, in connection with any employee pension benefit plan maintained by the Company or any Significant Subsidiary, written notice thereof describing the same. SECTION 8.1.7. Other Information. From time to time such other ----------------- information concerning the Company and its Subsidiaries as any Bank may reasonably request. SECTION 8.2. Books, Records and Inspections. Maintain, and cause ------------------------------ each Subsidiary to maintain, proper books and -29- records in the form customarily employed by them; permit, and cause each Subsidiary to permit, upon reasonable notice and during normal business hours, access by any Bank to the books and records of the Company and of any Subsidiary; and permit, and cause each Subsidiary to permit, any Bank to inspect upon reasonable notice and during normal business hours the properties and operations of the Company and of any Subsidiary. SECTION 8.3. Insurance. Maintain, and cause each Significant --------- Subsidiary to maintain, such insurance as may be required by law and such other insurance to such extent and against such hazards and liabilities, as is customarily maintained by companies similarly situated. SECTION 8.4. Taxes and Liabilities. Pay, and cause each Significant --------------------- Subsidiary to pay, when due all taxes, assessments and other liabilities except as contested in good faith and by appropriate proceedings. SECTION 8.5. Purchase or Redemption of the Company's Securities; --------------------------------------- ----------- Dividend Restrictions. Not purchase, prepay or redeem, or permit any Subsidiary - - --------------------- to purchase, any shares of the capital stock of the Company, not declare or pay any dividends thereon (other than stock dividends), not make any distribution to shareholders or set aside any funds for any such purpose, not prepay, and not permit any Subsidiary to purchase or prepay, any subordinated indebtedness for borrowed money of the Company if, after giving effect thereto, any Event of Default or Credit Suspension Event shall have occurred and be continuing; provided that the foregoing shall not prevent the payment of any dividend or - - -------- distribution within 60 days of the declaration thereof if, on the date of such declaration, such dividend or distribution would have complied with this Section ------- 8.5. - - --- SECTION 8.6. Liens. If the ratio of Consolidated Debt to ----- Consolidated Capitalization of the Company is more than 0.35:1, not create, incur, assume or suffer to exist any mortgage, pledge, lien or other encumbrance of any kind (including the charge upon property purchased under conditional sales or other title retention agreements) upon, or any security interest in, any of its property or assets, whether now owned or hereafter acquired, except (i) liens for taxes, assessments and governmental charges not delinquent or being contested in good faith or by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, (ii) existing liens securing indebtedness, including mortgage -30- debt, as reflected in the Company's consolidated balance sheet as of September 30, 1993, (iii) liens arising in favor of the United States Government, any state or local government or any subdivision or agency thereof in the ordinary course of the Company's business with any of the foregoing for advances, progress payments or partial prepayments, (iv) liens in connection with workers' compensation, unemployment insurance or social security obligations, (v) liens or deposits or pledges to secure bids, tenders, contracts (other than contracts for repayment of borrowed money), leases, statutory obligations, surety and appeal bonds, indemnity, performance and similar bonds and other obligations of like nature arising in the ordinary course of business, (vi) mechanics', workmen's, materialmen's, carriers', warehousemen's or other like liens arising in the ordinary course of business with respect to obligations which are not due or which are being contested in good faith or by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP, (vii) liens arising out of judgments or awards with respect to which appeals are being prosecuted, levy of execution pending such appeal having been stayed, (viii) rights-of-way, easements, water rights, sewage and drainage rights, zoning or use regulations or similar defects in title which do not materially impair the use of any property for the purposes for which held, (ix) the lien or any right or privilege reserved in leases for rent to secure compliance with the terms of any lease, but not including any lien arising from a violation of any lease provision other than one relating to conditional assignment of rents, (x) liens of attachment not exceeding in the aggregate $15,000,000 outstanding at any one time, (xi) liens of attachment exceeding in the aggregate $15,000,000 (but not exceeding in the aggregate $150,000,000) outstanding at any one time, provided, however, that any such liens shall be released, discharged or vacated by bonding or otherwise within 30 days, (xii) deposits to obtain releases of liens imposed by law and permitted hereunder, (xiii) any mortgage, encumbrance or other lien upon, or security interest in, any property or asset (whether real, personal or mixed) hereafter acquired created contemporaneously with or within 365 days after such acquisition to secure or provide for the payment or financing of any part of the purchase price thereof, or the assumption of any mortgage, encumbrance or lien upon, or security interest in, any such property or asset hereafter acquired existing at the time of such acquisition, or the acquisition of any such property or asset subject to any mortgage, encumbrance or other lien or security interest without the assumption thereof (provided, at any one time -------- that each such mortgage, encumbrance, -31- lien or security interest shall attach only to the property or asset so acquired and improvements thereon), (xiv) other liens which do not, in the aggregate, relate to or secure obligations exceeding 5% of Consolidated Capitalization, (xv) any encumbrance or lien upon margin stock and (xvi) any renewal, modification, extension, refinancing or replacement of any mortgage, encumbrance, lien or security interest permitted under clause (ii), (xiii) or (xiv), provided that the amount of indebtedness secured thereby is not increased and that any such mortgage, encumbrance, lien, or security interest is limited to all or part of the same property and any fixed improvement thereon; provided, -------- that nothing in this Section 8.6 shall be construed as prohibiting (x) ------- --- conveyances of property to a political subdivision pursuant to an industrial revenue or pollution control bond financing whereby equitable title to such property remains in the Company (provided, however, any mortgage, deed of trust or other security interest in the facility in connection therewith shall not be so excluded), or (y) the deposit of property or money with a trustee or other entity, or the establishment of an escrow, trust or similar account, for the purpose of defeasing indebtedness of the Company. SECTION 8.7. Mergers and Consolidations. Not be a party to any -------------------------- merger or consolidation unless (i) after giving effect to such merger or consolidation, no Event of Default and no Credit Suspension Event shall have occurred and be continuing, (ii) the corporation resulting from or surviving such merger or consolidation (if other than the Company) shall expressly assume in writing (in a form reasonably acceptable to Banks having, in the aggregate, a Percentage of 66 2/3% or more) and agree to perform all the Company's obligations under this Agreement and (iii) immediately after giving effect to such merger or consolidation the surviving corporation shall have a Consolidated Net Worth at least equal to the Consolidated Net Worth of the Company immediately preceding such merger or consolidation; provided, that nothing in -------- this Agreement shall prevent the merger of any Subsidiary with and into the Company or into another Subsidiary or the liquidation of any Subsidiary. SECTION 8.8. Sale or Other Disposition of Assets. Not, and not ----------------------------------- permit any Subsidiary to, sell or otherwise dispose of, whether by merger or otherwise, all or any substantial portion of its assets, except (i) to or with any other Subsidiary or the Company, (ii) in the ordinary course of business, (iii) all of the assets of, or the ownership interest in, any Subsidiary which is not a Significant Subsidiary or (iv) on such -32- other terms and conditions as shall have been approved by the Company's Board of Directors but, in the case of any transfer made pursuant to clause (iii) or ------ ----- (iv), only if, after giving effect thereto, no Event of Default or Credit - - ---- Suspension Event shall have occurred and be continuing. SECTION 8.9. Interest Coverage and Consolidated Debt to Consolidated ------------------------------------------------------- Capitalization Ratio. Not permit, as of the end of any fiscal quarter, both (A) - - -------------------- the ratio of Consolidated EBDIT to Consolidated Cash Interest Expense for the twelve month period including such fiscal quarter and the three immediately preceding fiscal quarters to be less than 2.50 to 1.0 and (B) the ratio of Consolidated Debt to Consolidated Capitalization at the end of such fiscal quarter to be more than .60 to 1.0. ARTICLE IX CONDITIONS OF LENDING SECTION 9.1. Initial Revolving Loans. The obligation of each Bank to ----------------------- make its initial Revolving Loan hereunder is subject to the receipt by such Bank of all of the following, each duly executed: SECTION 9.1.1. Revolving Note. The Revolving Note of the -------------- Company payable to the order of such Bank. SECTION 9.1.2. Resolutions. Copies of resolutions of the Board of ----------- Directors of the Company authorizing or ratifying the execution, delivery and performance, respectively, of this Agreement, the Notes, and other documents provided for in this Agreement, certified by the Secretary or an Assistant Secretary of the Company. SECTION 9.1.3. Consents, etc. Copies of all documents evidencing any ------------- necessary corporate action, consents and governmental approvals (if any) with respect to this Agreement and the Notes, certified by the Secretary or an Assistant Secretary of the Company. SECTION 9.1.4. Incumbency and Signatures. A Certificate of the ------------------------- Secretary or an Assistant Secretary of the Company certifying the names of the officer or officers of the Company authorized to sign this Agreement and the Notes and other documents provided for in this Agreement, together with a sample of the true signature of each such officer. -33- SECTION 9.1.5. Opinion of Counsel to Borrower. The opinion of ------------------------------ Messrs. Cahill Gordon & Reindel, counsel for the Company, addressed to Banks, substantially in the form of Exhibit D. SECTION 9.1.6. Other. Such other documents as any Bank may ----- reasonably request. SECTION 9.2. All Revolving Loans. The obligation of each Bank to ------------------- make each Revolving Loan (including, without limitation, its initial Revolving Loan but excluding, however, any Loan made by a continuation or conversion pursuant to Article V and any repayment and reborrowing deemed to have been ------- -- made pursuant to Section 1.1.8) is subject to the following further conditions ------- ----- precedent that: SECTION 9.2.1. No Default. After giving effect to all Loans then ---------- being made (a) no Event of Default, or Credit Suspension Event, shall have occurred and be continuing, (b) the warranties of the Company contained in Sections 7.1, 7.2, 7.3, 7.6, 7.7, 7.8, 7.9 and 7.10 shall be true and correct in - - -------- --- --- --- --- --- --- --- ---- all material respects with the same effect as though made on such date and (c) if the Borrower of such Loan is a Designated Subsidiary, the warranties of such Borrower in its Designation Letter shall be true and correct in all material respects with the same effect as though made on such date. SECTION 9.2.2. Confirmatory Certificate. Depositary Bank shall have ------------------------ received (in sufficient number of signed counterparts to provide, and Depositary Bank shall provide, one to each Bank) a certificate dated the date of such requested Loan and signed by the Chairman of the Board, any Senior Vice President, the Chief Financial Officer or the Treasurer of the Company as to the matters set out in Sections 9.2.1 and 9.2.3. -------- ----- ----- SECTION 9.2.3. Litigation. No litigation, arbitration proceedings or ---------- governmental investigation or proceedings not disclosed in writing by the Company to Banks prior to the date of the immediately preceding Revolving Loan hereunder (or in the case of the initial Revolving Loan, prior to the date of execution and delivery of this Agreement) is pending or known to be threatened against the Company or any Subsidiary and no material development not so disclosed has occurred in any litigation, arbitration proceeding or governmental proceeding so disclosed, which in the opinion of Banks having, in the aggregate, a Percentage of 66 2/3% or more, is likely to materially adversely affect the consolidated financial condition or continued operations of the Company and its Subsidiaries as a -34- whole or materially impair the ability of the Company to perform its obligations hereunder. SECTION 9.3. Initial Loan to Any Designated Subsidiary. The ----------------------------------------- obligation of each Bank to make the initial Loan to each Designated Subsidiary hereunder is subject to the further conditions precedent that such Bank shall have received: SECTION 9.3.1. Basic Documents. The Revolving Note of such --------------- Designated Subsidiary payable to the order of the Bank and, with respect to such Designated Subsidiary the documents contemplated by Sections 9.1.2, 9.1.3 and -------- ----- ----- 9.1.4. - - ----- SECTION 9.3.2. Designation. The Designation Letter of such ----------- Designated Subsidiary, substantially in the form of Exhibit E. SECTION 9.3.3. Opinion of Counsel. A signed copy of an opinion of ------------------ counsel to such Designated Subsidiary, substantially in the form of Exhibit F. ------- - SECTION 9.4. Term Loans. The obligation of each Bank to make Term ---------- Loans is subject to the conditions precedent (i) that such Bank shall have received the Term Note of Borrower payable to the order of such Bank, duly executed and dated the date of such Term Loan, and that the principal of and accrued interest on all Revolving Notes shall have been or be paid in full prior to or concurrently with the making of such Term Loan and (ii) that, if the original principal amount of such Bank's Term Notes exceeds the principal amount of its Revolving Notes outstanding immediately prior thereto, each of the conditions precedent set forth in Sections 9.2.1 through 9.2.3 shall have been -------- ----- ----- satisfied as if such Term Loan were a Revolving Loan. ARTICLE X GUARANTEE SECTION 10.1. Unconditional Guarantee. For valuable consideration, ----------------------- receipt whereof is hereby acknowledged, and to induce each Bank to make Loans to the Designated Subsidiaries, the Company, as principal and not merely as surety, hereby unconditionally and irrevocably guarantees to each Bank that: (i) the principal of and interest on each Loan to each Designated Subsidiary shall be promptly paid in full when due (whether at stated maturity, by acceleration or otherwise) in accordance with the terms hereof, and, in case of any extension of time of -35- payment, in whole or in part, of such Loan, that all such sums shall be promptly paid when due (whether at stated maturity, by acceleration or otherwise) in accordance with the terms of such extension; and (ii) all other amounts payable hereunder by any Designated Subsidiary to any Bank shall be promptly paid in full when due in accordance with the terms hereof (the obligations of the Designated Subsidiaries under these subsections (i) and (ii) of this Section ------- 10.1 being the "Obligations"). - - ---- In addition, the Company hereby unconditionally and irrevocably agrees that upon default in the payment when due (whether at stated maturity, by acceleration or otherwise) of any principal of, or interest on, any Loan to any Designated Subsidiary or such other amounts payable by any Designated Subsidiary to any Bank, the Company will forthwith pay the same, without further notice or demand. SECTION 10.2. Guarantee Absolute. The Company guarantees that the ------------------ Obligations will be paid strictly in accordance with the terms of this Agreement, regardless of any law, regulation or order now or hereafter in effect in any jurisdiction affecting any of such terms or the rights of any Bank with respect thereto. The liability of the Company under this guarantee shall be absolute and unconditional irrespective of: (i) any lack of validity or enforceability of this Agreement or any other agreement or instrument relating thereto; (ii) any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations,or any other amendment or waiver of or any consent to departure from this Agreement (including, without limitation, any extension of the Revolver Expiration Date or any Commitment Increase); (iii) any release or amendment or waiver of or consent to departure from any other guaranty, for all or any of the Obligations; or (iv) any other circumstance which might otherwise constitute a defense available to, or a discharge of, the Company, any Borrower or a guarantor. The guarantee shall continue to be effective or be reinstated, as the case may be, if at any time any payment of any of the Obligations is rescinded or must otherwise be returned by any of the Banks upon the insolvency, bankruptcy or reorganization of the Company or any Borrower or otherwise, all as though such payment had not been made. SECTION 10.3. Waivers. The Company hereby expressly waives ------- diligence, notice of acceptance of this guarantee, presentment, demand for payment, protest, any requirement that any right or power be exhausted or any action be taken against any Designated Subsidiary or against any other guarantor of all -36- or any portion of the Loans, and all other notices and demands whatsoever. The Company irrevocably waives any and all rights to which it may be entitled, by operation of law or otherwise, upon the making of any payment under the guarantee contained in this Article X to be subrogated to the rights of the ------- - payee against any Designated Subsidiary with respect to such payment or to otherwise be reimbursed, indemnified or exonerated by a Designated Subsidiary in respect thereof. SECTION 10.4. Remedies. Each of the Banks may pursue its respective -------- rights and remedies under this Article X and shall be entitled to payment ------- - hereunder notwithstanding any other guarantee of all or any part of the Loans to the Designated Subsidiaries, and notwithstanding any action taken by any such Bank to enforce any of its rights or remedies under such other guarantee, or any payment received thereunder. The Company hereby irrevocably waives any claim or other rights that it may now or hereafter acquire against the Designated Subsidiary that arise from the existence, payment, performance or enforcement of the Company's obligations under this Article X, including, without limitation, ------- - any right of subrogation, reimbursement, exoneration, contribution or indemnification and any right to participate in any claim or remedy of the Banks against the Designated Subsidiary, whether or not such claim, remedy or right arises in equity or under contract, statute or common law, including, without limitation, the right to take or receive from the Designated Subsidiary, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim, remedy or right. If any amount shall be paid to the Company in violation of the preceding sentence at any time when all the Obligations shall not have been paid in full, such amount shall be held in trust for the benefit of the Banks and shall forthwith be paid to the Depositary Bank for the accounts of the respective Banks to be credited and applied to the Obligations, whether matured or unmatured, in accordance with the terms of this Agreement, or to be held as collateral for any Obligations or other amounts payable under this Agreement thereafter arising. The Company acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by this Agreement and that the waiver set forth in this section is knowingly made in contemplation of such benefits. SECTION 10.5. Survival. This guarantee is a continuing guarantee and -------- shall (i) remain in full force and effect until payment in full after the Termination Date of the Obligations and all other amounts payable under this guarantee, -37- (ii) be binding upon the Company, its successors and assigns, (iii) inure to the benefit of and be enforceable by each Bank and its successors, transferees and assigns and (iv) be reinstated if at any time any payment to a Bank hereunder is required to be restored by such Bank. ARTICLE XI EVENTS OF DEFAULT AND THEIR EFFECT SECTION 11.1. Events of Default. Each of the ----------------- following shall constitute an Event of Default under this Agreement: SECTION 11.1.1. Non-Payment of Notes, etc. Default, and continuance ------------------------- thereof for five days after the due date thereof, in the payment when due of any interest on any Note or any facility fee, or default in the payment when due of any principal of any Note or other amounts payable by any Borrower hereunder (excluding, however, to the extent disputed by Borrower in good faith, amounts payable pursuant to Section 3.1.5, 3.1.7 or 4.5 in an aggregate amount not ------- ----- ----- --- exceeding $1,000,000 for all Banks). SECTION 11.1.2. Non-Payment of Other Indebtedness. Default in the --------------------------------- payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any other indebtedness for borrowed money or other obligations evidenced by a note, debenture, or similar instrument (including capitalized lease obligations) in an aggregate principal amount exceeding $50,000,000 of, or guaranteed by, the Company or any Significant Subsidiary or default in the performance or observance of any obligation or condition with respect to any such other indebtedness if the effect of such default in the performance or observance is to accelerate the maturity of any such indebtedness or to permit the holder or holders thereof, or any trustee or agent for such holders, to cause such indebtedness to become due and payable prior to its expressed maturity. SECTION 11.1.3. Bankruptcy, Insolvency, etc. The Company or any --------------------------- Significant Subsidiary becomes insolvent or admits in writing its inability to pay its debts or fails to pay its debts, generally as they become due; or the Company or any Significant Subsidiary applies for, consents to, or acquiesces in the appointment of, a trustee, custodian or receiver for the Company or such Significant Subsidiary or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or acquiescence, a trustee, custodian or receiver is appointed for the Company or -38- any Significant Subsidiary or for a substantial part of the property of any thereof and is not discharged within 60 days; or any bankruptcy, reorganization, debt arrangement, or other proceeding or case under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding (except the voluntary dissolution, not under any bankruptcy or insolvency law, of a Significant Subsidiary), is commenced in respect of the Company or any Significant Subsidiary, and if such proceeding is not commenced by the Company or Significant Subsidiary, it is consented to or acquiesced in by the Company or Significant Subsidiary or remains for 60 days undismissed; or any corporate action is taken by the shareholder(s) or board of directors of the Company or any Significant Subsidiary to authorize or further any of the actions described in this Section 11.1.3. ------- ------ SECTION 11.1.4. Non-Compliance with This Agreement. Failure by the ---------------------------------- Company to comply with or to perform any provision of this Agreement (and not constituting an Event of Default under any of the preceding provisions of this Article XI) and continuance of such failure for 30 days, after notice thereof to - - ------- -- the Company from any Bank or the holder of any Note stating that such Bank or holder is of the opinion that such failure is material; provided, that, any failure by the Company to comply with any provision of this Agreement solely as a result of a change in GAAP shall not constitute an Event of Default. SECTION 11.1.5. Warranties. Any warranty made by the Company herein ---------- is breached in any material respect, or any schedule, certificate, financial statement or report furnished by the Company to any Bank is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified. SECTION 11.1.6. ERISA. The Company or any Significant Subsidiary ----- incurs any liability to the Pension Benefit Guaranty Corporation or any successor thereto in excess of $50,000,000. SECTION 11.2. Effect of Event of Default. If any Event of Default -------------------------- described in Section 11.1.3 shall occur, the Credit (if it has not theretofore ------- ------ terminated) shall immediately terminate and all Notes and all other amounts payable hereunder shall become immediately due and payable, all without presentment or notice of any kind, all of which are hereby waived; and, in the case of any other Event of Default which shall have occurred and remain continuing, Banks having, in the aggregate, a Percentage of 66 2/3% or more may, by the giving of notice in writing to the Company, declare the Credit (if it has not theretofore terminated) to be terminated and/or all Notes and all other amounts payable hereunder to be immediately due and -39- payable, whereupon the Credit shall immediately terminate and/or all Notes and all other amounts payable hereunder shall become immediately due and payable, all without presentment or notice of any kind, all of which are hereby waived. Notwithstanding the foregoing, the effect as an Event of Default of any event described in Section 11.1.1 or Section 11.1.3 may be waived by the written ------- ------ ------- ------ concurrence of Banks having, in the aggregate, a Percentage of 100%, and the effect as an Event of Default of any other event described in Section 11.1 may ------- ---- be waived by the written concurrence of Banks having, in the aggregate, a Percentage of 66 2/3% or more. SECTION 11.3. Defaults by Designated Subsidiaries. If any of the ----------------------------------- following defaults with respect to any Designated Subsidiary have occurred and are continuing then Section 11.4 shall apply: SECTION 11.3.1. Warranties. Any warranty made by such Designated ---------- Subsidiary herein or in the Designation Letter pursuant to which it is designated as a Borrower hereunder is breached in any material respect or any schedule, certificate, financial statement or report furnished by such Designated Subsidiary to any Bank is false or misleading in any material respect on the date as of which the facts therein set forth are stated or certified. SECTION 11.3.2. Non-Payment of Other Indebtedness. Default in the --------------------------------- payment when due (subject to any applicable grace period), whether by acceleration or otherwise, of any other indebtedness for borrowed money or other obligations evidenced by a note, debenture, or similar instrument (including capitalized lease obligations) in a principal amount exceeding $50,000,000 of, or guaranteed by, a Designated Subsidiary or default in the performance or observance of any obligation or condition with respect to any such other indebtedness if the effect of such default in the performance or observance is to accelerate the maturity of any such indebtedness or to permit the holder or holders thereof, or any trustee or agent for such holders, to cause such indebtedness to become due and payable prior to its expressed maturity. SECTION 11.3.3. Bankruptcy, Insolvency, etc. A Designated Subsidiary --------------------------- becomes insolvent or admits in writing its inability to pay its debts or fails to pay its debts, generally as they become due; or the Designated Subsidiary applies for, consents to, or acquiesces in the appointment of, a trustee, custodian or receiver for such Designated Subsidiary or any property thereof, or makes a general assignment for the benefit of creditors; or, in the absence of such application, consent or -40- acquiescence, a trustee, custodian or receiver is appointed for any Designated Subsidiary or for a substantial part of the property of any thereof and is not discharged within 60 days; or any bankruptcy, reorganization, debt arrangement, or other proceeding or case under any bankruptcy or insolvency law, or any dissolution or liquidation proceeding is commenced in respect of the Company or any Significant Subsidiary, and if such proceeding is not commenced by such Designated Subsidiary, it is consented to or acquiesced in by such Designated Subsidiary or remains for 60 days undismissed; or any corporate action is taken by the shareholder(s) or board of directors of any Designated Subsidiary to authorize or further any of the actions described in this Section 11.3.3. ------- ------ SECTION 11.3.4. Non-Compliance with This Agreement. Failure by ---------------------------------- Designated Subsidiary to comply with or to perform any provision of this Agreement (and not constituting an Event of Default under any of the preceding provisions of this Section 11.3) and continuance of such failure for 30 days, ------- ---- after notice thereof to the Company and the Designated Subsidiary from any Bank or the holder of any Note stating that such Bank or holder is of the opinion that such failure is material. SECTION 11.4. Effect of Default by Designated Subsidiary. If any ------------------------------------------ default described in Section 11.3.2 or 11.3.3 shall occur, without any action by ------- ------ ------ the Bank, the Banks shall have no obligation to make Loans to such Designated Subsidiary under this Agreement and all Loans under this Agreement to such Designated Subsidiary and all other amounts payable hereunder by such Designated Subsidiary shall become immediately due and payable, all without presentment or notice of any kind; and, in the case of any other default described in Section ------- 11.3 which shall have occurred and remain continuing, Banks having, in the - - ---- aggregate, a Percentage of 66 2/3% or more may, by the giving of notice in writing to the Company, decline to make further Loans to such Designated Subsidiary and/or declare all Loans under this Agreement to such Designated Subsidiary and all other amounts payable hereunder by such Designated Subsidiary to be immediately due and payable, without presentment or notice of any kind. Notwithstanding the foregoing, the effect of any event described in Section 11.3 ------- ---- may be waived by the written concurrence of Banks having, in the aggregate, a Percentage of 66 2/3% or more. -41- ARTICLE XII CERTAIN DEFINITIONS When used herein, the following terms shall have the following meanings (which shall be equally applicable to the singular and plural forms thereof): "Alternate Currency" means any currency other than Dollars which is ------------------ freely transferable and convertible into Dollars. "Alternate Currency Loan" see the definition below of "Loan." ----------------------- "Alternate Currency Payment Office" has the meaning specified --------------------------------- in Section 1.3(e). ------- ------ "Alternate Rating Agency" shall mean (i) Fitch Investors Service, ----------------------- Inc., (ii) Duff & Phelps Credit Rating Co. or (iii) another nationally recognized rating agency selected by the Borrower to rate its senior debt securities, which, in the case of clause (iii), shall be approved by Banks having, in the aggregate, a Percentage of at least 66 2/3%. "Assuming Bank" shall mean, at any time, a Person which proposes ------------- to become a Bank hereunder pursuant to Section 1.1.8. ------- ----- "Assumption Agreement" shall mean an agreement by which an institution -------------------- agrees to become a Bank party to this Agreement pursuant to Section 1.1.8. ------- ----- "Bank" shall mean the Banks listed on the signature pages hereof and ---- each institution that becomes a party hereto pursuant to Section 1.1.8 or 13.5. ------- ----- ---- "Bank Indemnitees" -- see Section 13.9. ---------------- ------------ "Borrower" shall mean the Company or any Designated Subsidiary, -------- as the context may require. "Borrowing Date" shall mean, with respect to each Loan, the date upon -------------- which a Bank makes such Loan hereunder to Borrower. "Business Day" shall mean a day on which banks are not authorized or ------------ required by law to close for business in New York City. -42- "CD Interest Period" shall mean as to each CD Loan, the period which ------------------ shall begin on (and include) the most recent Borrowing Date with respect to such Loan and shall end, as Borrower shall elect in its notice pursuant to Section ------- 1.2 or 5.4, as the case may be, on (and include) the day 30, 60, 90 or 180 days - - --- --- thereafter, as selected by Borrower; provided that no CD Interest Period -------- commencing prior to the Revolver Expiration Date or the final maturity, by acceleration or otherwise, of all of the Term Loans shall end later than such Revolver Expiration Date or date of maturity of the Term Loans, as the case may be, and further provided that any CD Interest Period which would otherwise end ------- -------- on a day which is not a Business Day shall be extended to the next succeeding Business Day. "CD Loan" -- see definition below of "Loan". ------- "CD Margin" -- see Section 3.1.8. --------- ------- ----- "CD Rate" shall mean for each CD Interest Period a rate per annum ------- which is equal to the CD Margin as of the first day of the applicable Interest Period plus the sum (rounded if necessary to the nearest 1/20 of 1%) of (i) the rate obtained by dividing (x) the arithmetic mean as calculated by the Depositary Bank of the respective rates per annum (rounded if necessary to the nearest 1/20 of 1%) of the Reference Banks, in each such case determined by each Reference Bank to be the average of the bid rates quoted to it at its principal office at approximately 10:00 a.m. New York City time (or as soon thereafter as practicable) on the first day of the CD Interest Period for such Loan by New York certificate of deposit dealers of recognized standing selected by such Reference Bank for the purchase at face value in the secondary certificate of deposit market of certificates of deposit of such Reference Bank for a period, and in an amount, comparable to such CD Interest Period and the principal amount of the CD Loan which shall be made by such Reference Bank and outstanding during such CD Interest Period, provided, that, if such quotations from such dealers are not available to any Reference Bank, such Reference Bank shall determine a reasonably equivalent rate on the basis of another source or sources selected by it, by (y) a percentage equal to 100% minus the stated maximum rate of all reserve requirements as specified in Regulation D (including, without limitation, any marginal, emergency, supplemental, special or other reserves) applicable on the first day of such CD Interest Period to a negotiable certificate of deposit in excess of $100,000 with a maturity equal to such CD Interest Period of any member bank of the Federal Reserve System, plus (ii) the daily net annual assessment rate as estimated by the Depositary Bank on the first day of such CD Interest Period for determining the current annual assessment -43- payable by the Depositary Bank to the Federal Deposit Insurance Corporation for insuring such certificates of deposit. "Commitment" shall mean the amount set forth opposite each Bank's ---------- 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. -------- ----- ----- ----- ------- ---- "Commitment Increase" has the meaning specified in Section 1.1.8. ------------------- ------- ----- "Consolidated Capitalization" shall mean the sum of Consolidated Debt --------------------------- and Consolidated Net Worth. "Consolidated Cash Interest Expense" means, with respect to the ---------------------------------- Company for any period, total interest expense deducted in calculating Consolidated Net Income (including that attributable to capitalized lease liabilities of the Company and Consolidated Subsidiaries in accordance with GAAP, but excluding interest expense not payable in cash (including amortization of discount)), with respect to all outstanding Consolidated Debt, as determined on a consolidated basis for the Company and Consolidated Subsidiaries in conformity with GAAP. "Consolidated Debt" shall mean the sum of all indebtedness for ----------------- borrowed money of the Company and Consolidated Subsidiaries, all indebtedness secured by assets of (and whether or not assumed by) the Company or any Consolidated Subsidiary (which indebtedness shall be valued at the lesser of the outstanding principal amount thereof or the book value of such assets), all capitalized lease liabilities of the Company and Consolidated Subsidiaries and all outstanding obligations under guarantees and similar undertakings with respect to any such indebtedness or liabilities of Persons other than the Company and Consolidated Subsidiaries which is required to be reflected on the Company's balance sheet (excluding any notes thereto) in accordance with GAAP; provided, that there shall be excluded from Consolidated Debt any such - - -------- indebtedness which by its terms is presently convertible into or exchangeable for capital stock of the Company at a price per share at least 15 percent below the Current Market Price per share of such capital stock. "Consolidated EBDIT" shall mean, without duplication, with respect to ------------------ the Company and Consolidated Subsidiaries for any period, the sum of the amounts for such period of (i) Consolidated Net Income, (ii) provision for taxes based on income, (iii) depreciation expense, (iv) amortization expense, (v) total interest expense deducted in calculating Consolidated Net Income, and (vi) other non-cash items reducing Consolidated -44- Net Income all as determined on a consolidated basis for the Company and Consolidated Subsidiaries in conformity with GAAP. "Consolidated Net Income" shall mean with respect to the Company for ----------------------- any period, the net income (or loss) of the Company and Consolidated Subsidiaries on a consolidated basis for such period taken as a single accounting period determined in conformity with GAAP; provided that there shall -------- be excluded (i) the income (or loss) of any Person (other than a Subsidiary of the Company) in which any other Person (other than the Company or any of its Subsidiaries) has a joint interest, except to the extent of the amount of dividends or other distributions actually paid to the Company or any of its Subsidiaries by such Person during such period and (ii) the income (or loss) of any Person accrued prior to the date it becomes a Subsidiary of the Company or is merged into or consolidated with any of the Company's Subsidiaries or that Person's assets are acquired by the Company or any of its Subsidiaries. "Consolidated Net Worth" shall mean the par value (or value stated on ---------------------- the books of the Company) of the capital stock of all classes of the Company and Consolidated Subsidiaries issued and outstanding, plus (or minus in the case of a surplus deficit), the amount of the consolidated surplus, whether capital or earned, of the Company and its Subsidiaries plus the principal amount of any indebtedness of the Company and the Consolidated Subsidiaries which by its terms is presently convertible into or exchangeable for capital stock of the Company at a price per share at least 15 percent below the Current Market Price per share of such capital stock. "Consolidated Subsidiary" shall mean any Subsidiary the accounts of ----------------------- which are consolidated with those of the Company in accordance with GAAP. "Continuation Date" -- see Section 5.1. ----------------- ------- --- "Conversion Date" -- see Section 5.2. --------------- ------- --- "Credit" shall mean the sum of (i) the aggregate unused Commitments of ------ all Banks hereunder to make Revolving Loans or Term Loans plus (ii) the aggregate principal amount of Revolving Loans or Term Loans outstanding hereunder. "Credit Suspension Event" shall mean any event which if it continues ----------------------- uncured will, with lapse of time or notice or lapse of time and notice, constitute an Event of Default. -45- "Current Market Price" shall mean for any class of capital stock of -------------------- the Company the average for any 20 consecutive Stock Trading Days ending within 30 days of the date of determination of the average of the high and low sale prices per share, or if no sales are reported, the average of the bid and ask prices per share or, if more than one in either case, the average of the average bid and average ask prices per share) for each Stock Trading Day in such 20 consecutive Stock Trading Day period, as reported in the composite transactions for the New York Stock Exchange, or if such capital stock is not listed or admitted to trading on such exchange, as reported in the composite transactions for the principal national or regional United States securities exchange on which such capital stock is listed or admitted to trading or, if such capital stock is not listed or admitted to trading on a United States national or regional securities exchange, as reported by the National Association of Securities Dealers Automated Quotation System ("NASDAQ") or by the National Quotation Bureau Incorporated. A "Stock Trading Day" means each day on which the securities exchange or quotation system which is used to determine the Current Market Price is open for trading or quotation. "Depositary Bank" -- see Section 1.2. --------------- ------- --- "Designated Subsidiary" shall mean any corporate Subsidiary of the --------------------- Company designated for borrowing privileges under this Agreement pursuant to Section 13.10 hereof. - - ------- ----- "Designation Letter" shall mean, in respect of any Designated ------------------ Subsidiary, a letter in the form of Exhibit E hereto signed by such Designated ------- - Subsidiary and the Company. "Dollars" and the sign "$" shall mean lawful money of the United ------- States of America. "Domestic Loan" -- see definition below of "Loan." ------------- "Equivalent Domestic Loan" -- see Section 6.3. ------------------------ ------- --- "Eurodollar Day" shall mean a day on which dealings are carried on in -------------- the London Interbank market in Dollars and on which banks are not authorized or required by law to close for business in New York City. "Eurodollar Interest Rate" -- see Section 3.1.2. ------------------------ ------- ----- -46- "Eurodollar Loan" -- see definition below of "Loan." --------------- "Eurodollar Margin" -- see Section 3.1.8. ----------------- ------- ----- "Eurodollar Office" -- see Section 1.1.3. ----------------- ------- ----- "Eurodollar Period" shall mean, as to each Eurodollar Loan, the ----------------- period which shall begin on (and include) the most recent Borrowing Date with respect to such Loan and shall end, as Borrower shall elect in its notice pursuant to Section 1.2 or 5.4, as the case may be, on (and include) the day one, two, three - - ------- --- --- or six months thereafter, as selected by Borrower; provided that no Eurodollar -------- Period commencing prior to the Revolver Expiration Date or the final maturity, by acceleration or otherwise, of all of the Revolving Loans or Term Loans shall end later than such Revolver Expiration Date or date of maturity, as the case may be. Subject to the proviso in the preceding sentence, any Eurodollar Period which would otherwise end on a day which would not be a Eurodollar Day shall instead continue to and end on the next succeeding Eurodollar Day, unless such next succeeding Eurodollar Day would be the first Eurodollar Day in a calendar month, in which case such Eurodollar Period shall instead end on the next preceding Eurodollar Day, and any Eurodollar Period which begins on the last Eurodollar Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Eurodollar Period) shall end on the last Eurodollar Day of a calendar month. "Event of Default" shall mean any of the events described ---------------- in Section 11.1. ------- ---- "Federal Funds Rate" shall mean for any period, a fluctuating interest ------------------ rate equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for each day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the Depositary Bank from three Federal Funds brokers of recognized standing selected by the Depositary Bank. "Fixed Rate Interest Date" -- see Section 3.1. ------------------------ ------- --- "Fixed Rate Loan" -- see definition below of "Loan". --------------- -47- "GAAP" shall mean generally accepted accounting principles set forth ---- in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession, which are applicable to the circumstances as of the date of determination. "Increase Date" has the meaning assigned to that term in ------------- Section 1.1.8. - - ------- ----- "Indemnified Liabilities" -- see Section 13.9. ----------------------- ------- ---- "Interest Date" shall mean Fixed Rate Interest Date and/or Prime Rate ------------- Interest Date, as the case may be. "Interest Period" shall mean a CD Interest Period or a Eurodollar --------------- Period, as the context requires, or both. "Liabilities" -- see Section 4.1. ----------- ------- --- "Loan" shall mean each lending by any Bank ---- hereunder. Particular types of Loans are as follows: (i) "Alternate Currency Loan" shall mean any Loan denominated in an ----------------------- Alternate Currency; (ii) "CD Loan" shall mean any Loan which bears interest at the CD ------- Rate; (iii) "Domestic Loan" shall mean any Loan which is a Prime ------------- Rate Loan or a CD Loan; (iv) "Eurodollar Loan" shall mean any Loan which bears interest at --------------- the Eurodollar Interest Rate; (v) "Fixed Rate Loan" shall mean a CD Loan or a Eurodollar Loan; --------------- (vi) "Market Rate Loan" -- see Section 1.3; ---------------- ------- --- (vii) "Prime Rate Loan" shall mean any Loan bearing interest --------------- at the Prime Rate; -48- (viii) "Revolving Loan" shall mean any Loan made pursuant to the -------------- unused Commitments contained in Section 1.1.1 but shall exclude any Market Rate ------- ----- Loan; and (ix) "Term Loan" shall mean any Loan made pursuant to the --------- commitments contained in Section 1.1.2. ------- ----- "Market Rate" -- see Section 1.3(a). ----------- ------- ------ "Market Rate Loan" -- see definition above of "Loan." ---------------- "Market Rate Note" -- see Section 2.3. ---------------- ------- --- "Notes" shall mean the Revolving Notes, Market Rate Notes and Term ----- Notes, or any of them. "Obligations" see Section 10.1. ----------- ------- ---- "Percentage" with respect to any Bank shall mean at any time the ---------- percentage of the Credit represented by such Bank's Commitment. "Person" shall mean any corporation, partnership, association, ------ trust, individual or other entity. "Prime Rate" shall mean the greater of: (a) the average of the rates ---------- per annum from time to time announced by each of the Reference Banks at the address set forth below its signature hereto as such Bank's prime commercial lending rate and (b) the effective Federal Funds Rate for overnight funds plus 1/2 of 1% per annum. "Prime Rate Interest Date" -- see Section 3.1. ------------------------ ------- --- "Prime Rate Loan" -- see definition of "Loan" above. --------------- "Public Debt Rating" means, as of any date, the highest rating that ------------------ has been most recently announced by either Moody's Investors Service, Inc. ("Moody's") or Standard & Poor's Corporation ("S&P") or an Alternate Rating Agency in substitution for Moody's or S&P (but not both), for any class of long- term unsecured senior debt issued by the Company; provided, that if the ratings -------- determined by Moody's or S&P (or an Alternate Rating Agency) differ by more than one rating category the Public Debt Rating shall be the average of the two ratings. For purposes of the foregoing, (a) if an Alternate Rating Agency is used, the -49- ratings provided by such Alternate Rating Agency shall be converted into an equivalent of Moody's or S&P, as nearly as practicable, for purposes of determining the Eurodollar Margin or CD Margin; and (b) if any rating established or deemed to have been established by Moody's or S&P shall be changed (other than as a result of a change in the rating system of either Moody's or S&P), such change shall be effective as of the date on which such change is first announced publicly by the rating agency making such change. Any change in the Eurodollar Margin or CD Margin due to a change in the Public Debt Rating shall be effective for Interest Periods commencing after the public announcement of the change in debt rating. If the rating system of either Moody's or S&P shall change, the Company and the Banks shall negotiate in good faith to amend the references to specific ratings in this definition to reflect such changed rating system. "Reference Banks" shall mean Chemical Bank, NationsBank of North --------------- Carolina N.A. and The Chase Manhattan Bank, N.A. or, with respect to Eurodollar Loans, the Eurodollar Office of any of them. "Regulation D" -- see Section 3.1.2.1. ------------ ------- ------- "Revolver Expiration Date" means the earlier of January 11, 1998 or ------------------------ the date of termination in whole of the Commitments. "Revolving Loan" -- see definition above of "Loan." -------------- "Revolving Note" -- see Section 2.1. -------------- ------- --- "Significant Subsidiary" shall have the meaning assigned to such term ---------------------- in Regulation C (S) 230.405 promulgated by the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, as such definition is in effect as of the date of this Agreement. "Subsidiary" shall mean a corporation of which the Company and its ---------- other Subsidiaries own directly or indirectly more than 50% of the ordinary voting power for the election of directors. -50- "Term Loan" -- see definition above of "Loan." --------- "Term Note" -- see Section 2.2. --------- ------- --- ARTICLE XIII GENERAL SECTION 13.1. Waiver; Amendments. No delay on the part of any Bank ------------------ or the holder of any Note in the exercise of any right, power or remedy shall operate as a waiver thereof, nor shall any single or partial exercise by any of them of any right, power or remedy preclude other or further exercise thereof, or the exercise of any other right, power or remedy. No amendment, modification or waiver of, or consent with respect to, any provision of this Agreement or the Notes shall in any event be effective unless the same shall be in writing (including telegram or telex) and signed and delivered by the Company and Banks having an aggregate Percentage of not less than the Percentage expressly designated herein with respect thereto or, in the absence of such designation as to any provision of this Agreement or the Notes, by Banks having, in the aggregate, a Percentage of 66 2/3% or more, and then any such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which given. No amendment, modification, waiver or consent (i) shall extend or increase the amount of the Credit, the scheduled maturity of the Notes, or the scheduled date for the payment of interest or fees, or reduce the fees or the rate of interest payable with respect to the Notes or modify the provisions of Section 3.1.5, 3.1.7, 4.5, 6.3, ------- ----- ----- --- --- 6.4, or 13.9 or modify the provisions of Article X in a manner adverse to the - - --- ---- ------- - Banks or impose an additional obligation on any of the Banks or reduce the aggregate Percentage required to effect an amendment, modification, waiver or consent without the consent of all of the Banks or (ii) shall extend the scheduled maturity of, or the scheduled date for the payment of interest or fees on, or reduce the principal amount of, or rate of interest on, any Note without the consent of the holder of such Note. The provisions of this Section 13.1 may ------- ---- not be amended or modified without the consent of all of the Banks. SECTION 13.2. Confirmations. Borrower and each holder of a Revolving ------------- Note agree from time to time, upon written request received by it from the other, to confirm to the other in writing the aggregate unpaid principal amount of the Revolving -51- Loans then outstanding under such Revolving Note; and each such holder agrees from time to time, upon written request received by it from Borrower, to make the Revolving Note held by it (including the schedule attached thereto) available for reasonable inspection by Borrower at the office of such holder. Each Bank shall, promptly upon request by Borrower, furnish Borrower with a photocopy of the schedule attached to such Bank's Revolving Note. SECTION 13.3. Notices. Any notice from Borrower to any Bank ------- (including Depositary Bank) under Section 1.2, 1.1.6, 1.1.8 or 5.4 may be (i) ------- --- ----- ----- --- telephonic if confirmed, prior to the date for taking (or for the effectiveness of) the action specified in such notice, by a writing received by such Bank or (ii) by facsimile if confirmed, prior to the date for taking (or for the effectiveness of) the action specified in such notice, by telephone. Any other notice hereunder to Borrower or any Bank (or other holder) shall, except as otherwise expressly provided, be in writing and, if mailed shall be deemed to have been given (i) three days after the date when sent by first class mail, postage prepaid, (ii) one day after sent by overnight delivery service and, in each case, addressed to Borrower or such Bank (or other holder) at its address shown below its signature hereto, or at such other address as it may, by written notice received by the other parties to this Agreement, have designated as its address for such purpose. Any Bank or the holder of any Note giving any waiver, consent or notice to, or making any request upon, Borrower hereunder shall promptly notify the Depositary Bank thereof. SECTION 13.4. Accounting Terms and Determinations. Unless otherwise ----------------------------------- specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with generally accepted accounting principles as in effect from time to time ("GAAP"), applied on a basis consistent (except for changes concurred in by the Company's independent public accountants) with the most recent audited consolidated financial statements of the Company and its Consolidated Subsidiaries delivered to the Banks; provided that, if the Company notifies the -------- Depositary Bank that it wishes to amend any covenant in Article VIII to eliminate the effect of any change in generally accepted accounting principles on the operation of such covenant, then compliance with such covenant shall be determined on the basis of generally accepted accounting principles in effect -52- immediately before the relevant change in generally accepted accounting principles became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Company and Banks holding, in the aggregate, a Percentage of 66 2/3% or more. SECTION 13.5. Participations; Transfers of Notes. A Bank may assign ---------------------------------- or sell participations in all or any part of its Commitment or any Loan to another bank or other entity; provided that an assignment or participation shall -------- be in a minimum aggregate amount of $10,000,000; and provided, further, (a) -------- ------- except in the case of assignments of or participations in Market Rate Loans, that the Company shall have consented in writing to the proposed assignment or participation, which consent shall not be unreasonably withheld; and (b) in the case of a participation, no such participation shall in any way affect such Bank's obligations under this Agreement, and provided, that all amounts payable by any Borrower under Article III shall be determined as if such Bank had not ------- --- sold such participation. Upon execution and delivery of an approriate instrument and payment by any assignee to the transferor Bank of an amount equal to the purchase price agreed between such transferor Bank and such assignee, such assignee shall be a Bank party to this Agreement and shall have all the rights and obligations of a Bank with Commitments as set forth in such instrument of assumption, and the transferor Bank shall be released from its obligations hereunder to a corresponding extent, and no further consent or action by any party shall be required. Upon the consummation of any assignment pursuant to this Section 13.5, the transferor Bank and the Borrower shall make ------- ---- appropriate arrangements so that, if required, a new Note is issued to the assignee. The agreement executed by the Bank in favor of any participant shall not give the participant the right to require such Bank to take or omit to take any action hereunder except action directly relating to (i) the extension of a payment date with respect to any portion of the principal of or interest on any amount outstanding or any fees payable hereunder allocated to such participant, (ii) the reduction of the principal amount of any Loan outstanding hereunder, (iii) the reduction of the rate of interest payable on such amount or any amount of fees payable hereunder to a rate or amount, as the case may be, below that which the participant is entitled to receive under its agreement with such Bank, or (iv) an extension of the Revolver Expiration Date in accordance with the terms hereof. Each Bank may furnish to participants (including prospective participants and -53- prospective assignees) any information in the possession of such Bank from time to time concerning any Borrower; provided, that such Bank shall require any such -------- participant or assignee (prospective or otherwise) to agree in writing to maintain the confidentiality of such information; and provided, further, that --- -------- ------- such Bank may not furnish to the participant or assignee any information which the Borrower has identified in writing to such Bank to be trade secrets or proprietary information. If, pursuant to this Section 13.5, any interest in this Agreement or ------- ---- any Note is transferred to any assignee which is organized under the laws of any jurisdiction other than the United States or any state thereof, the transferor Bank shall cause such assignee concurrently with the effectiveness of such transfer, (i) to represent to the transferor Bank (for the benefit of the transferor Bank and the Company) that it is either (x) entitled to the benefits of an income tax treaty with the United States which provides for an exemption from United States withholding tax on interest and other payments which may be made by the Company to such Bank pursuant to the terms of this Agreement or any other credit document; or (y) engaged in a trade or business within the United States, (ii) to furnish to the transferor Bank and the Company either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such assignee claims entitlement to complete exemption from U.S. federal withholding tax on all payments hereunder) and (iii) to agree (for the benefit of the transferor Bank and the Company) to provide to the transferor Bank and the Company a new Form 4224 or Form 1001 upon the obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such assignee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption. Notwithstanding anything to the contrary in this Section 13.5, any ------- ---- Bank may pledge and assign its rights hereunder and under the Notes held by it to a Federal Reserve Bank as collateral. SECTION 13.6. Regulation U. Each Bank represents that it is not ------------ relying, either directly or indirectly, upon any margin stock (as such term is defined in Regulation U promulgated by the Board of Governors of the Federal Reserve System) as collateral security for the extension or maintenance by it of any credit provided for in this Agreement. -54- SECTION 13.7. Confidentiality of Information. Each Bank understands ------------------------------ that some of the information furnished pursuant to this Agreement or obtained by such Bank pursuant to any inspection made in accordance with Section 8.2 may, at ------- --- the time furnished or obtained, not have been made public, and each Bank agrees to keep confidential all such information and will make no use of such information until it shall have become public except in connection with this Agreement and with such Bank's outside counsel and accountants, subject however to each Bank's obligations under law or pursuant to subpoenas or other process to make information available to governmental agencies and examiners or to others. SECTION 13.8. Limitation on Interest. No provision of this Agreement ---------------------- or any Note shall require the payment or permit the collection of interest in excess of the maximum rate permitted by applicable law. SECTION 13.9. Costs, Expenses and Taxes. The Company shall pay all ------------------------- reasonable out-of-pocket expenses of the Depositary Bank and the Banks (but excluding the fees and disbursements of counsel to the Depositary Bank and the Banks) in connection with the preparation of this Agreement and all instruments and documents relating thereto or necessary to satisfy the conditions to lending hereunder. The Company agrees to pay on demand all out-of-pocket costs and expenses (including reasonable attorneys' fees and legal expenses) incurred by each Bank and the Depositary Bank in connection with the enforcement of this Agreement, the Notes, any such other instruments or documents or any collateral security. In addition, each Borrower agrees (i) to pay, and to save the Depositary Bank and the Banks harmless from all liability for, any stamp or other taxes which may be payable in connection with the execution or delivery of this Agreement, the borrowings hereunder, or the issuance of the Notes or of any other instruments or documents provided for herein or delivered or to be delivered hereunder or in connection herewith and (ii) to indemnify, exonerate and hold each of the Depositary Bank and the Banks and each of the officers, directors, employees and agents of such Banks (herein called collectively the "Bank Indemnitees") free and harmless from and against any and all actions, causes of action, suits, losses, liabilities, damages and expenses, including, without limitation, reasonable attorneys' fees and disbursements incurred by any Bank Indemnitee as a result of, or arising out of, or relating to any transaction financed with proceeds of any of the Loans or the execution, delivery, performance, enforcement or administration -55- of this Agreement (herein called collectively the "Indemnified Liabilities"), except for any such Indemnified Liabilities arising on account of any such Bank Indemnitee's negligence or willful misconduct, and if and to the extent that the foregoing undertaking may be unenforceable for any reason, Borrower hereby agrees to make the maximum contribution to the payment and satisfaction of each of the Indemnified Liabilities which is permissible under applicable law. SECTION 13.10. Designated Subsidiaries. (i) Designation. The ----------------------- ----------- Company may at any time, and from time to time, by delivery to the Depositary Bank of a Designation Letter duly executed by the Company and the respective Subsidiary, designate such Subsidiary as a "Designated Subsidiary" for purposes of this Agreement and such Subsidiary shall thereupon become a "Designated Subsidiary" for purposes of this Agreement. The Depositary Bank shall promptly notify each Bank of each such designation by the Company and the identity of the respective Subsidiary. (ii) Termination. Upon the payment and performance in full of all of ----------- the Obligations of any Designated Subsidiary then, so long as at the time no request for a Fixed Rate Loan to such Designated Subsidiary is outstanding, such Subsidiary's status as a "Designated Subsidiary" shall terminate upon notice to such effect from the Company to the Depositary Bank (which notice the Depositary Bank shall deliver to each Bank). Thereafter, the Banks shall be under no further obligation to make any Loan hereunder to such Designated Subsidiary. SECTION 13.11. Captions. Captions used in this Agreement are for -------- convenience only and shall not affect the construction of this Agreement. SECTION 13.12. Governing Law; Submission to Jurisdiction. This ----------------------------------------- Agreement and each Note shall be a contract made under and governed by the internal laws of the State of New York. All obligations of Borrower and rights of the Banks and any other holders of the Notes expressed herein or in the Notes shall be in addition to and not in limitation of those provided by applicable law. The Borrowers hereby submit to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York and of any New York State court sitting in New York City for purposes of all legal proceedings arising out of or relating to this Agreement or the transactions contemplated hereby. The Borrowers irrevocably waive, to the fullest extent permitted by law, any objection which they may now or hereafter have to the laying of the venue of any such -56- proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 13.13. Counterparts. This Agreement may be executed in any ------------ number of counterparts and by the different parties on separate counterparts (provided, however, that each such counterpart shall be executed by the Company) and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. SECTION 13.14. Effectiveness. When counterparts executed by all the ------------- Banks shall have been lodged with the Company and counterparts executed by the Company shall have been lodged with each Bank this Agreement shall become effective as of January 12, 1994. SECTION 13.15. Successors and Assigns. This Agreement shall be ---------------------- binding upon Borrower and the Banks and their respective successors and assigns, and shall inure to the benefit of the Borrower and the Banks and the respective successors and assigns of the Banks, except that the Company may not assign or transfer any of its rights or obligations under this Agreement without the prior written consent of Banks having, in the aggregate, a Percentage of at least 100%. SECTION 13.16. Duties of Depositary Bank. The Depositary Bank shall ------------------------- have no duties or responsibilities except those expressly set forth in this Agreement and neither the Depositary Bank nor any of its directors, officers, employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them hereunder, or in connection herewith, except for its or their own gross negligence or willful misconduct. In addition, the Banks agree to indemnify the Depositary Bank, ratably in accordance with the aggregate unpaid principal amount of the Loans made by the Banks (or, if no Loans are at the time outstanding, ratably in accordance with their respective Percentages), for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Depositary Bank in any way relating to or arising out of the duties and responsibilities of the Depositary Bank expressly set forth in this Agreement; provided that (i) the Banks shall only be liable to the extent the Borrower fails to -57- indemnify and pay the Depositary Bank pursuant to Section 13.9 hereof, and (ii) ------- ---- no Bank shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the Depositary Bank. SECTION 13.17. Severability. In case any one or more of the ------------ provisions contained in this Agreement or the Notes should be invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained herein and therein shall not in any way be affected or impaired thereby. SECTION 13.18. Representation of the Banks. Each Bank represents and --------------------------- warrants to the Borrower that it is (x) a United States person (as defined in Section 7701(a) (30) of the Internal Revenue Code of 1986, as amended (the "Code")); (y) entitled to the benefits of an income tax treaty with the United States which provides for an exemption from United States withholding tax on interest and other payments which may be made by the Borrower to such Bank pursuant to the terms of this Agreement; or (z) engaged in a trade or business within the United States. Each Bank that is organized under the laws of any jurisdiction other than the United States or any State thereof (including the District of Columbia) agrees to furnish to the Borrower, prior to the date of the first interest payment hereunder, two copies of either U.S. Internal Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein such Bank claims entitlement to complete exemption from U.S. federal withholding tax on all payments hereunder) and to provide to the Borrower a new Form 4224 or Form 1001 upon the obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such Bank, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemptions. Notwithstanding any other provisions of this Agreement, the representations, warranties and obligations of the Banks set forth in Section 13.5 and this Section 13.18 shall survive the borrowing of the ------- ---- ------- ----- Loans and the assignment, sale, repayment or other disposition of the Loans or any interest therein. SECTION 13.19. Survival. The obligations of the Borrower under -------- Sections 3.1.5, 3.1.7, 4.5 and 13.9 shall survive the termination of this - - -------- ----- ----- --- ---- Agreement and the payment of all Loans. -58- SECTION 13.20. WAIVER OF TRIAL BY JURY. TO THE EXTENT PERMITTED BY ----------------------- APPLICABLE LAW, THE BORROWER AND EACH OF THE BANKS HEREBY IRREVOCABLY WAIVE ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING HEREUNDER. -59- IN WITNESS WHEREOF, the Company and each Bank have caused this Agreement to be executed, as of the day and year first above written, by one of its officers thereunto duly authorized. GENERAL SIGNAL CORPORATION By /s/ Julian B. Twombly ---------------------------- Vice President and Treasurer High Ridge Park Stamford, Connecticut 06904 Attention: Treasurer Telecopier No.: (203) 329-4365 Amount of Commitment - - ---------- $22,222,222 THE CHASE MANHATTAN BANK, N.A. By: /s/ Edward F. McNulty ------------------------------- Title: Vice President Lending Office for Loans The Chase Manhattan Bank, N.A. One Chase Plaza, 17th Floor New York, New York 10081 Attn: Edward F. McNulty Telecopy No.: (212) 552-1457 Amount of Commitment - - ---------- $22,222,222 CHEMICAL BANK By: /s/ Robert C. Kennedy ------------------------------ Title: Vice President Lending Office for Loans Chemical Bank 270 Park Avenue New York, New York 10017 Attn: Robert C. Kennedy Telecopy No: (212) 270-7138 Amount of Commitment - - ---------- $22,222,222 NATIONSBANK OF NORTH CAROLINA, N.A By: /s/ Margaret K. Vandenberg ------------------------------ Title: Vice President Lending Office for Loans NationsBank of North Carolina, N.A. NationsBank Plaza Charlotte, North Carolina 28255 Attn: Lisa McClelland, NCI-002-17-21 Telecopy No: (704) 386-8694 cc: Margaret K. Vandenberg NationsBank of North Carolina, N.A. 767 Fifth Avenue New York, New York 10153 Telecopy No: (212) 593-1083 Amount of Commitment - - ---------- $22,222,222 WACHOVIA BANK OF GEORGIA, N.A. By: /s/ Linda M. Harris ------------------------------ Title: Senior Vice President Lending Office for Loans Wachovia Bank of Georgia, N.A. 191 Peachtree Street, N.E. Atlanta, Georgia 30303 Attn: Walter R. Gillikin Telecopy No: (404) 332-6898 Amount of Commitment - - ---------- $13,888,889 CANADIAN IMPERIAL BANK OF COMMERCE By: /s/ Brian E. O'Callahan ------------------------------ Title: Senior Vice President Lending Office for Loans Canadian Imperial Bank of Commerce 425 Lexington Avenue New York, New York 10017 Attn: Brian E. O'Callahan Telecopy No: (212) 856-3991 Amount of Commitment - - ---------- $13,888,889 COMMERZBANK A.G. By: /s/ Juergen Boysen ------------------------------ Title: Senior Vice President By: /s/ Christian Jagenberg ------------------------------ Title: Vice President Lending Office for Loans CommerzBank A.G. 2 World Financial Center New York, New York 10281-1050 Attn: J.F. Christian Jagenberg Telecopy No: (212) 266-7235 Amount of Commitment - - ---------- $13,888,889 THE FIRST NATIONAL BANK OF CHICAGO By: /s/ James W. Petersen ------------------------------ Title: Vice President Lending Office for Loans The First National Bank of Chicago 153 West 51st Street New York, New York 10019 Attn: James W. Peterson Telecopy No: (212) 373-1388 Amount of Commitment - - ---------- $13,888,889 THE HONG KONG & SHANGHAI BANKING CORPORATION By: /s/ Jeffry S. Dykes ------------------------------ Title: Vice President Lending Office for Loans The Hong Kong & Shanghai Banking Corporation 140 Broadway, 4th Floor New York, New York 10015 Attn: Jeffry S. Dykes Telecopy No: (212) 658-5109 Amount of Commitment - - ---------- $13,888,889 NATIONAL WESTMINSTER BANK Plc By: /s/ Anthony G. Muller ------------------------------ Title: Vice President Lending Office for Loans National Westminster Bank Plc Corporate and Institutional Finance 175 Water Street New York, New York 10038-4924 Attn: Anthony G. Muller Telecopy No: (212) 602-4500 Amount of Commitment - - ---------- $13,888,889 THE NORTHERN TRUST COMPANY By: /s/ Gregory Werd ------------------------------ Title: Vice President Lending Office for Loans The Northern Trust Company 50 South LaSalle Street Chicago, Illinois 60675 Attn: Gregory F. Werd, Jr. Telecopy No: (312) 444-3508 Amount of Commitment - - ---------- $13,888,889 THE SANWA BANK LIMITED By: /s/ Stephen C. Small ------------------------------ Title: Vice President Lending Office for Loans The Sanwa Bank Limited New York Branch Park Avenue Plaza 55 East 52nd Street New York, New York 10055 Attn: Stephen C. Small Telecopy No: (212) 754-1304 Amount of Commitment - - ---------- $13,888,889 SHAWMUT BANK By: /s/ John F. Wood ------------------------------ Title: Senior Vice President Lending Office for Loans Shawmut Bank 777 Main Street MSN 203 Hartford, Connecticut 06115 Attn: Christopher Mango Telecopy No: (203) 722-9378 EXHIBIT A REVOLVING NOTE $ ,199 The undersigned, for value received, promises to pay to the order of on or before the Revolver Expiration Date, as defined in the Four Year Credit Agreement referred to below, the principal sum of Dollars or, if less, the aggregate unpaid principal amount of all Revolving Loans made by the payee to the undersigned pursuant to the Four Year Credit Agreement (as hereinafter defined) as shown on the schedule attached hereto (and any continuation thereof), together, from time to time, with interest on the unpaid principal amount hereof from time to time outstanding as provided in Article III of the Four Year Credit Agreement hereinafter referred to (but in no event higher than the maximum rate permitted by applicable law). Payments of both principal and interest are to be made in lawful money of the United States of America for the account of the payee at the office of The Chase Manhattan Bank, N.A., at One Chase Manhattan Plaza, New York, New York 10081 in immediately available funds. This Note evidences indebtedness incurred under, and is subject to the terms and provisions of, a Four Year Credit Agreement dated as of January 12, 1994, (and, all further amendments thereto, if any) among the undersigned and certain banks (including the payee) to which Four Year Credit Agreement reference is hereby made for a statement of said terms and provisions, including those under which this Note may be paid, or may be declared to be due and payable, prior to its due date. This Note is made under and governed by the internal laws of the State of New York. [BORROWER] By__________________________________________ Title____________________________________ Schedule Attached to Revolving Note dated , 199 of [Borrower] payable to the order of LOANS AND PRINCIPAL PAYMENTS Beginning and End Eurodollar or CD Amount of Unpaid Amount of Interest Principal Principal Notation Date Loan Made Period Repaid Balance Made By - - ---- --------- ---------- --------- --------- ------- ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ ______________________________________________________________________ EXHIBIT B --------- TERM NOTE $ , 199 The undersigned, for value received, promises to pay to the order of the principal sum of the Dollars payable on January 11, 1998 together, from time to time, with interest on the unpaid principal amount hereof from time to time outstanding as provided in Article III of the Four Year Credit Agreement hereinafter referred to - - ------- --- (but in no event higher than the maximum rate permitted by law). Payments of both principal and interest are to be made in lawful money of the United States of America for the account of the payee at the office of The Chase Manhattan Bank, N.A., at One Chase Manhattan Plaza, New York, New York 10081 in immediately available funds. This Note evidences indebtedness incurred under, and is subject to the terms and provisions of, a Four Year Credit Agreement dated as of January 12, 1994, (and, all further amendments thereto, if any) among the undersigned and certain banks (including the payee), to which Four Year Credit Agreement reference is hereby made for a statement of said terms and provisions, including those under which this Note may be paid, or may be declared to be due and payable, prior to its due date. This Note is made under and governed by the internal laws of the State of New York. [BORROWER] By____________________________________ Title EXHIBIT C Market Rate Promissory Note $ , 199 The undersigned, for value received, promises to pay to the order of on or before the Revolver Expiration Date, as defined in the Four Year Credit Agreement referred to below, the principal sum of Dollars or the equivalent in any Alternate Currency shown on the schedule attached hereto or, if less, the aggregate unpaid principal amount of all Market Rate Loans made by the payee to the undersigned pursuant to the Four Year Credit Agreement (as hereinafter defined) as shown on the schedule attached hereto (and any continuation thereof), together, from time to time, with interest on the unpaid principal amount hereof from time to time outstanding as provided in Article III of the Four Year Credit Agreement hereinafter referred to (but in no event higher than the maximum rate permitted by applicable law). Payments of both principal and interest are to be made in lawful money of the United States of America or an Alternate Currency if so specified with respect to any Market Rate Loan on the schedule attached hereto in immediately available funds to, in the case of loans in Dollars the account specified by the payee and, in the case of Alternate Currency Loans, the Alternate Currency Payment Office. This Note evidences indebtedness incurred under, and is subject to the terms and provisions of, a Four Year Credit Agreement dated as of January 12, 1994, (and, all further amendments thereto, if any) among the undersigned and certain banks (including the payee) to which Four Year Credit Agreement reference is hereby made for a statement of said terms and provisions, including those under which this Note may be paid, or may be declared to be due and payable, prior to its due date. This Note is made under and governed by the internal laws of the State of New York. [BORROWER] By__________________________________ Title____________________________ SCHEDULE ATTACHED TO MARKET RATE PROMISSORY NOTE DATED AS OF FROM [BORROWER] TO ____________________ ALTERNATE AMOUNT OF UNPAID AMOUNT CURRENCY MATURITY PRINCIPAL PRINCIPAL DATE OF LOAN (if applicable) DATE RATE REPAID BALANCE - - ---- --------- -------------- --------- ---- ------ ------- _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ _____________________________________________________________________________ EXHIBIT D --------- FORM OF ATTORNEY'S OPINION OF COUNSEL TO BORROWER Per Section 9.1.5 ------------- [Letterhead of Messrs. Cahill Gordon & Reindel] Each of the Commercial Banking Institutions listed on Schedule I hereto Re: General Signal Corporation Four Year Credit Agreement, Dated as of January 12, 1994 ------------------------------------------- Gentlemen: We have acted as counsel to General Signal Corporation, a New York corporation (the "Company"), in connection with the Four Year Credit Agreement, dated as of January 12, 1994 ("Agreement"), between you and the Company, covering loans by you to Borrower to be evidenced by the Notes. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Four Year Credit Agreement. We have examined originals, photocopies or conformed copies of such records of the Company and its subsidiaries and such agreements, certificates of public officials, certificates of officers and representatives of the Company and its subsidiaries and such other documents as we have deemed relevant and necessary as a basis for the opinions hereinafter expressed. In such examinations, we have assumed the genuineness of all signatures on original documents and the conformity to the originals of all copies submitted to us as conformed or photocopies. As to various questions of fact material to the opinions expressed herein, we have relied upon representations, statements or certificates of public officials, officers and representatives of the Company and its subsidiaries and others. We are of the opinion that: (1) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of New York and in good standing in the State of Connecticut. (2) The execution, delivery and performance of the Agreement and the Notes, and the borrowings by the Company -2- pursuant thereto, are within the Company's corporate powers and have been duly authorized by all necessary corporate action. (3) No governmental approval of the actions referred to in (2) above is required. (4) The actions referred to in (2) above do not contravene or conflict with any provision of law, the Articles of Incorporation or By- laws of the Company, or any material agreement, indenture or instrument which is binding on or applicable to the Company of which we have knowledge. (5) The Agreement is, and each of the Notes, when executed and delivered for the consideration as contemplated by the Agreement will be, the legally valid and binding obligation of the Company, enforceable against Borrower in accordance with their respective terms, except that (i) such enforceability may be limited by generally applicable bankruptcy, insolvency, moratorium, fraudulent transfer or conveyance or other similar laws affecting the enforcement of creditors' rights generally and (ii) no opinion has been requested or is being rendered as to the availability of equitable remedies, such as, for example, specific performance or injunctive relief, which are within the discretion of courts of applicable jurisdiction. (6) The Company is not (i) an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended, or (ii) a public utility or a public utility holding company as defined in the Public Utility Holding Company Act of 1935. Our opinion in (4) above is based, in part, upon the accuracy of the representations contained in Section 13.6 of the Agreement. ------------ We are members of the Bar of the State of New York and we express no opinion herein with respect to any law other than the laws of the State of New York and the federal law of the United States. Very truly yours, EXHIBIT E FORM OF DESIGNATION LETTER , 199 To each of the Banks party to the Four Year Credit Agreement (as defined below) Ladies and Gentlemen: Reference is made to the Credit Agreement dated as of January 12, 1994, among General Signal Corporation (the "Company") and the Banks named therein (the "Credit Agreement"). Terms used herein and defined in the Credit Agreement shall have the respective meanings ascribed to such terms in the Credit Agreement. Please be advised that the Company hereby designates its undersigned Subsidiary, ("Designated Subsidiary"), as a "Designated Subsidiary" under and for all purposes of the Credit Agreement. The Designated Subsidiary, in consideration of each Bank's agreement to extend credit to it under and on the terms and conditions set forth in the Credit Agreement, does hereby assume each of the obligations imposed upon a "Designated Subsidiary" and a "Borrower" under the Credit Agreement and agrees to be bound by the terms and conditions of the Credit Agreement. In furtherance of the foregoing, the Designated Subsidiary hereby represents and warrants to each Bank as follows: 1. The Designated Subsidiary is a corporation duly incorporated, validly existing and in good standing under the laws of . 2. The delivery of this Designation Letter, the borrowings under the Credit Agreement, the execution and delivery of the Notes, and the performance by the Designated Subsidiary of its obligations under the Credit Agreement, the Designation Letter and the Notes, are within the Borrower's corporate powers, have been duly authorized by all necessary corporate action, have received all necessary governmental approval (if any shall be required), and do not and will not violate, contravene -2- or conflict in any material respect with any provision of law or of the charter or by-laws of the Designated Subsidiary or of any judgment or any material agreement or indenture binding upon or applicable to the Designated Subsidiary the contravention of or conflict with which would materially adversely affect the consolidated financial condition or continued operations of the Designated Subsidiary as a whole or materially impair the ability of the Designated Subsidiary to perform any of its obligations hereunder. This Designation Letter and the Credit Agreement, and the Notes when duly executed and delivered by the Designated Subsidiary will be, legal, valid and binding obligations of the Designated Subsidiary enforceable against it in accordance with their respective terms, subject only to bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforceability of rights of creditors generally. 3. No litigation or arbitration proceedings are pending or, to the knowledge of the Designated Subsidiary, threatened against the Designated Subsidiary as to which there is a reasonable likelihood of an adverse determination and which would reasonably be expected to have a material adverse effect on the ability of the Designated Subsidiary to pay its debts (including the Loans made to it under the Credit Agreement) as the same become due and payable. 4. No authorizations, consents, approvals, licenses, filings or registrations by or with any governmental authority or administrative body are required in connection with the execution, delivery or performance by the Designated Subsidiary of this Designation Letter and the Credit Agreement except for such authorizations, consents, approvals, licenses, filings or registrations as have heretofore been made, obtained or effected and are in full force and effect. 5. The Designated Subsidiary is not, and immediately after the application by the Designated Subsidiary of the proceeds of each Loan will not be, (a) an "investment company" within the meaning of the Investment Company Act of 1940, as amended, or (b) a -3- "holding company" within the meaning of the Public Utility Holding Company Act of 1935, as amended. Very truly yours, GENERAL SIGNAL CORPORATION [THE DESIGNATED SUBSIDIARY] By________________________ By_________________________ Title: Title: EXHIBIT F FORM OF ATTORNEY'S OPINION OF COUNSEL TO A DESIGNATED SUBSIDIARY Each of the Commercial Banking Institutions listed on Schedule I hereto Re: General Signal Corporation Four Year Credit Agreement Dated as of January 12, 1994 ------------------------------------------- Gentlemen: We have acted as counsel to [Designated Subsidiary], a _____________________ corporation (the "Designated Subsidiary"), in connection with the Four Year Credit Agreement, dated as of January 12, 1994 ("Agreement"), betweenbppppppppa you and the Company, covering loans by you to Borrower to be evidenced by the Notes. Capitalized terms used herein and not otherwise defined herein shall have the meanings assigned to them in the Agreement. We have examined originals, photocopies or conformed copies of such records of the Designated Subsidiary and such agreements, certificates of public officials, certificates of officers and representatives of the Designated Subsidiary and its subsidiaries and such other documents as we have deemed relevant and necessary as a basis for the opinions hereinafter expressed. In such examinations, we have assumed the genuineness of all signatures on original documents and the conformity to the originals of all copies submitted to us as conformed or photocopies. As to various questions of fact material to the opinions expressed herein, we have relied upon representations, statements or certificates of public officials, officers and representatives of the Designated Subsidiary and others. We are of the opinion that: (1) The Designated Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of _________________________________. (2) The execution, delivery and performance by the Designated Subsidiary of the Designation Letter, and the Notes to be executed by the Designated Subsidiary, and the borrowings by the Designated Subsidiary pursuant thereto, are within the Designated Subsidiary's corporate powers -2- and have been duly authorized by all necessary corporate action. (3) No governmental approval of the action referred to in (2) above is required. (4) The actions referred to in (2) above to not contravene or conflict with any provision of law, the Charter or By-laws of the Designated Subsidiary, or any material agreement, indenture or instrument which is binding on or applicable to the Designated Subsidiary of which we have knowledge. (5) The Designation Letter is, and each of the Notes to be executed by the Designated Subsidiary, when executed and delivered for the consideration as contemplated by the Agreement will be, the legally valid and binding obligation of the Designated Subsidiary, enforceable against Borrower in accordance with their respective terms, except that (i) such enforceability may be limited by generally applicable bankruptcy, insolvency, moratorium, fraudulent transfer or conveyance or other similar laws affecting the enforcement of creditors' rights generally and (ii) no opinion has been requested or is being rendered as to the availability of equitable remedies, such as, for example, specific performance or injunctive relief, which are within the discretion of courts of applicable jurisdiction. (6) The Company is not (i) an "investment company," or a company "controlled" by an "investment company," within the meaning of the Investment Company Act of 1940, as amended, or (ii) a public utility or a public utility holding company has defined in the Public Utility Holding Company Act of 1935. Our opinion in (4) above is based, in part, upon the accuracy of the representations contained in Section 13.6 of the agreement. ------------ Very truly yours, EX-27 14 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-31-1996 DEC-31-1996 17,700 90,000 368,300 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 0
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