SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ X ] Preliminary Proxy Statement [ ] Confidential, for Use of the
[ ] Definitive Proxy Statement Commission Only (as Permitted
[ ] Definitive Additional Materials by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant to
240.14a-11(c) or 240.14a-12
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SPX Corporation
(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than Registrant)
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Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i) and 0-11:
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying transaction computed
pursuant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which
the offsetting was paid previously. Identify the previous filing
by registration statement number, or the Form of Schedule and
the date of its filing:
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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[GRAPHIC OMITTED]
700 Terrace Point Drive Phone 616-724-5000
P.O. Box 330 Fax 616-724-5720
Muskegon, MI 49443-3301
[_________], 1998
Fellow Shareholders:
You are cordially invited to attend the 1998 Annual Meeting of
Shareholders on May 20, 1998, at 9:00 a.m. (Eastern Time), at the Company's
headquarters, 700 Terrace Point Drive, Muskegon, Michigan. The items to be
acted upon at the meeting are listed in the Notice of Annual Meeting and
are described in the Proxy Statement.
You may already be aware that the Company has offered to acquire all
of the outstanding shares of Common Stock of Echlin Inc. in exchange for
$12 in cash and 0.4796 share of Common Stock of the Company for each
outstanding Echlin share. One of the proposals to be acted upon at the
meeting is the approval of the issuance of shares of Common Stock of the
Company in this acquisition. To fully understand this proposal and the
acquisition of Echlin, I encourage you to read the Proxy Statement
carefully. Shareholders of record at the close of business on April 10,
1998, are entitled to vote at the Annual Meeting.
I am pleased you have chosen to invest in SPX Corporation, and I look
forward to the opportunity of personally greeting those shareholders who
attend this year's annual meeting. I urge you to vote, sign, date and
return the proxy card in the enclosed postage-paid envelope, even if you
plan to attend the meeting. Your vote is important and voting by proxy will
ensure your representation at the annual meeting even if you cannot attend
in person.
This year we will require admission tickets for shareholders who want
to attend the meeting in person. Two cutout admission tickets are included
on the outside back cover of this Proxy Statement.
Sincerely,
JOHN B. BLYSTONE
Chairman, President and
Chief Executive Officer
[GRAPHIC OMITTED]
700 Terrace Point Drive Muskegon, Michigan 49443-3301
Telephone (616) 724-5000
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1998
To the Shareholders:
The Annual Meeting of Shareholders of SPX Corporation (the "Company")
will be held at the offices of the Company at 700 Terrace Point Drive in
Muskegon, Michigan, on May 20, 1998, at 9:00 a.m. (Eastern Time), for the
purpose of considering and taking action with respect to the following
matters:
1. The election of three directors of the Company;
2. Approval of the issuance of shares of the Company's Common Stock,
par value $10.00 per share (the "SPX Common Stock"), in
connection with the proposed acquisition (the "Proposed Business
Combination ") of all of the outstanding shares of Common Stock,
par value $1.00 per share (each an "Echlin Share" and
collectively the "Echlin Shares"), of Echlin Inc., a Connecticut
corporation ("Echlin"); and
3. Approval of an amendment to the Company's Certificate of
Incorporation to increase the amount of authorized shares of SPX
Common Stock from 50,000,000 to 100,000,000 shares.
4. Such other business as may properly come before the meeting.
According to Echlin's public filings, as of February 17, 1998 there
were 63,248,939 Echlin Shares outstanding and as of December 31, 1997
options to purchase 2,044,284 Echlin Shares had been granted and were
outstanding. Based on such numbers, if the Proposed Business Combination is
consummated in accordance with the terms described herein, the Company will
issue to Echlin shareholders (other than the Company, which owns 1,150,150
Echlin Shares) up to 30,763,018 shares of SPX Common Stock. IF ECHLIN
COMMENCES MERGER NEGOTIATIONS WITH THE COMPANY, OR THE COMPANY OTHERWISE
MODIFIES THE TERMS OF THE PROPOSED BUSINESS COMBINATION, CONSUMMATION OF
THE PROPOSED BUSINESS COMBINATION COULD REQUIRE THE ISSUANCE OF MORE OR
LESS THAN 30,763,018 SHARES OF SPX COMMON STOCK.
The Board of Directors has fixed the close of business on April 10,
1998 as the record date for the determination of shareholders entitled to
notice of and to vote at the Annual Meeting of Shareholders. The transfer
books of the Company will not be closed.
Each shareholder, including any shareholder who expects to attend the
meeting in person, is requested to execute the enclosed proxy and return it
as promptly as possible in the accompanying stamped envelope. The proxy may
be revoked by the shareholder at any time before it is exercised, and
shareholders who are present at the meeting may withdraw their proxies and
vote in person.
This year, shareholders who plan to attend the meeting, will be
required to present an admission ticket. Two cutout admission tickets are
included on the back cover of the enclosed Proxy Statement. To request
additional tickets shareholders should contact the Corporate Secretary.
Shareholders who do not present an admission ticket will be admitted only
upon providing proof of ownership showing they were a Company shareholder
as of April 10, 1998. If a shareholder holds shares through a broker or
other nominee and fails to present an admission ticket, proof of ownership
will be accepted by the Company only if the shareholder brings either a
copy of the voting instruction card provided by the broker or nominee or a
copy of a brokerage statement showing share ownership in the Company as of
April 10, 1998.
A copy of the Company's 1997 Annual Report to Shareholders has been
mailed to each shareholder.
By Order of the Board of Directors,
CHRISTOPHER J. KEARNEY
Vice President, Secretary
and General Counsel
Muskegon, Michigan
__________, 1998
IMPORTANT: PLEASE MAIL YOUR SIGNED PROXY PROMPTLY IN
THE ENCLOSED ENVELOPE PROVIDED FOR THIS PURPOSE WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING
[GRAPHIC OMITTED]
700 Terrace Point Drive Muskegon, Michigan 49443-3301
Telephone (616) 724-5000
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PROXY STATEMENT
FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 20, 1998
This proxy statement is furnished in connection with the solicitation
of proxies to be voted at the 1998 Annual Meeting of Shareholders (the
"Annual Meeting") of SPX Corporation (the "Company") to be held on May 20,
1998.
The enclosed proxy is solicited by the Board of Directors of the
Company and will be voted at the Annual Meeting and any adjournments
thereof. The enclosed proxy may be revoked at any time before it is
exercised. The only business which the Board of Directors intends to
present or knows will be presented is (i) the election of three directors,
(ii) approval of the issuance (the "Stock Issuance") of shares of the
Company's Common Stock, par value $10.00 per share (the "SPX Common
Stock"), in connection with the proposed acquisition by the Company of all
of the outstanding shares of common stock, par value $1.00 per share (each
an "Echlin Share" and collectively the "Echlin Shares"), of Echlin Inc., a
Connecticut corporation ("Echlin"), and (iii) approval of an amendment to
the Company's Certificate of Incorporation to increase the amount of
authorized shares of SPX Common Stock from 50,000,000 to 100,000,000 shares
(the "Charter Amendment").
According to Echlin's public filings, as of February 17, 1998, there
were 63,248,939 Echlin Shares outstanding and as of December 31, 1997,
options to purchase 2,044,284 Echlin Shares had been granted and were
outstanding. Based on such numbers, if the proposed acquisition is
consummated in accordance with the terms described herein, the Company will
issue to Echlin shareholders (other than the Company, which owns 1,150,150
Echlin Shares) up to 30,763,018 shares of SPX Common Stock. IF ECHLIN
COMMENCES MERGER NEGOTIATIONS WITH THE COMPANY, OR THE COMPANY OTHERWISE
MODIFIES THE TERMS OF THE PROPOSED ACQUISITION, CONSUMMATION OF THE
PROPOSED ACQUISITION COULD REQUIRE THE ISSUANCE OF MORE OR LESS THAN
30,763,018 SHARES OF SPX COMMON STOCK.
The enclosed proxy confers discretionary authority upon the persons
named therein, or their substitutes, with respect to any other business
which may properly come before the meeting. Shares represented by a
properly executed proxy in the accompanying form will be voted at the
meeting and, when instructions have been given by the shareholder, will be
voted in accordance with those instructions. If no instructions are given,
such shareholder's shares will be voted according to the recommendations of
the Board of Directors of the Company.
This proxy statement and the proxy are intended to be first mailed to
shareholders on or about _______ ____, 1998.
RECORD DATE AND VOTING AT THE MEETING
The holders of record on April 10, 1998 (the "Record Date") of shares
of SPX Common Stock will be entitled to one vote per share on each matter
submitted to the Annual Meeting. At the close of business on the Record
Date, there were outstanding [ ] shares of SPX Common Stock. No other
voting securities of the Company were outstanding at the close of business
on the Record Date. The holders of one-third of the total shares issued and
outstanding, whether present in person or represented by proxy, will
constitute a quorum for the transaction of business at the Annual Meeting,
other than for purposes of approving the Stock Issuance. Pursuant to the
rules of the New York Stock Exchange, Inc. (the "New York Stock Exchange")
on which the SPX Common Stock is listed, the presence in person or by proxy
of a majority of the shares of SPX Common Stock entitled to vote on the
Stock Issuance is necessary to constitute a quorum for purposes of
approving the Stock Issuance.
The affirmative vote of a majority of the total shares represented in
person or by proxy and entitled to vote at the Annual Meeting is required
for the election of directors, the approval of the Stock Issuance, and
(subject to a greater vote being required by law or the Company's
Certificate of Incorporation or By-Laws) the approval of such other
business as may properly come before the meeting or any adjournment thereof
other than the approval of the Charter Amendment. The affirmative vote of a
majority of the shares of SPX Common Stock outstanding is required to
approve the Charter Amendment.
In accordance with Delaware law, a shareholder entitled to vote on the
election of directors can withhold authority to vote for all nominees for
director or can withhold authority to vote for certain nominees for
director. Likewise, a shareholder entitled to vote on the proposal to
approve the Stock Issuance or the proposal to approve the Charter Amendment
may withhold authority to vote on the proposal. Abstentions from the
proposal to elect directors, abstentions from the proposal to approve the
Stock Issuance and absentions from the proposal to approve the Charter
Amendment will have the same effect as votes against the election of the
directors, against the proposal to approve the Stock Issuance, and against
the proposal to approve the Charter Amendment, respectively. Broker
non-votes are treated as shares as to which voting power has been withheld
by the beneficial holders of those shares and, therefore, as shares not
entitled to vote, which will have no effect on the outcome of the vote on
the election of directors and the proposal to approve the Stock Issuance.
Because approval of the Charter Amendment requires a majority of
outstanding SPX Common Stock, broker non-votes will have the same effect as
votes against the Charter Amendment.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (NOT INCLUDING
EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY
REFERENCE TO SUCH DOCUMENTS) ARE AVAILABLE WITHOUT CHARGE UPON REQUEST TO:
CORPORATE SECRETARY, SPX CORPORATION, 700 TERRACE POINT DRIVE, MUSKEGON, MI
49443. REQUESTS MAY BE DIRECTED TO THE COMPANY'S SECRETARY AT (616)
724-5000. IN ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST
FOR DOCUMENTS SHOULD BE SUBMITTED NO LATER THAN FIVE BUSINESS DAYS PRIOR TO
THE ANNUAL MEETING.
The following documents filed with the Securities and Exchange
Commission (the "Commission") by the Company (File No. 1-6948) are
incorporated herein by reference:
(i) the Company's Annual Report on Form 10-K for the year ended
December 31, 1997 (the "Company's 1997 Form 10-K");
(ii) the Company's Definitive Solicitation Statement on Schedule 14A,
dated March 6, 1998, to the shareholders of Echlin and all subsequent
filings of solicitation materials in connection with the solicitation of
written demands to call a special meeting of the shareholders of Echlin;
(iii) the Company's Quarterly Report on Form 10-Q for the nine months
ended September 30, 1997; and
(iv) the Company's Current Report on Form 8-K filed February 21, 1997.
The following documents filed with the Commission by Echlin (File No.
1-4651) are incorporated herein by reference:
(i) Echlin's Annual Report on Form 10-K for the fiscal year ended
August 31, 1997 ("Echlin's 1997 Form 10-K") (except for the report of
Echlin's independent accountants contained therein which is not
incorporated herein by reference because the consent of Echlin's
independent accountants has not yet been obtained);
(ii) Echlin's Proxy Statement for the Annual Meeting of Shareholders
held on December 17, 1997;
(iii) Echlin's Quarterly Report on Form 10-Q for the period ended
November 30, 1997 ("Echlin's 1998 First Quarter Form 10-Q"); and
(iv) Echlin's Definitive Revocation Solicitation Statement on Schedule
14A, dated March 13, 1998 and all subsequent filings of solicitation
materials in connection with the solicitation of revocations of written
demands to call a special meeting of the shareholders of Echlin.
All documents filed by either the Company or Echlin pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), subsequent to or contemporaneous with the
date hereof and prior to the date of the Annual Meeting shall be deemed to
be incorporated herein by reference and to be a part hereof from the date
of such filing. Any statement contained herein or in a document
incorporated or deemed to be incorporated herein by reference shall be
deemed to be modified or superseded for purposes hereof to the extent that
a statement contained herein or in any other subsequently filed document
which also is, or is deemed to be, incorporated herein by reference
modifies or supersedes such statement. Any such statement so modified shall
not be deemed to constitute a part hereof, except as so modified, and any
statement so superseded shall not be deemed to constitute a part hereof.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this Proxy Statement or incorporated
herein by reference that are not statements of historical facts are
"forward-looking" statements and are thus prospective. Such forward-looking
statements include, without limitation, statements regarding the Company's
or Echlin's future financial position, results of operations, business
strategy (including future dispositions of assets and restructuring of
operations), budgets, expected cost savings, plans as to dividends, and
plans and objectives of management for future operations. Such
forward-looking statements are subject to risks, uncertainties and other
factors which could cause actual results to differ materially from future
results expressed or implied by such forward-looking statements. Important
factors that could cause actual results to differ materially from the
information set forth in any forward-looking statements are disclosed under
"Risk Factors" ("Cautionary Statements"). All subsequent written and oral
forward-looking statements attributable to the Company or to persons acting
on its behalf are expressly qualified in their entirety by the Cautionary
Statements. The Company was not involved in the preparation of any
forward-looking statements relating to Echlin incorporated by reference in
this Proxy Statement and is not in a position to verify such statements and
takes no responsibility therefor.
PROPOSAL I
ELECTION OF DIRECTORS
As of the Annual Meeting, the Board of Directors will consist of eight
members, divided into three classes. At the Annual Meeting, three nominees
are to be elected to serve for a term of three years and until their
respective successors are elected and qualified. The remaining five
directors will continue to serve as set forth below, with three directors
having terms expiring at the Annual Meeting in 1999 and two directors
having terms expiring at the Annual Meeting in 2000. Each of the nominees
is now a director of the Company and has agreed to serve if elected. The
proxy holders will vote the proxies received by them for the three
nominees, or in the event of a contingency not presently foreseen, for
different persons as substitutes therefor.
The following sets forth with respect to each nominee and each
director continuing to serve, his or her name, age, principal occupation,
the year in which he or she first became a director of the Company,
committee assignments and directorships in other business corporations.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A THREE-YEAR TERM EXPIRING AT THE ANNUAL MEETING IN 2001
SARAH R. COFFIN
Ms. Coffin, 45, is the Vice President, Specialty Group of
H.B. Fuller Company, a manufacturer of adhesives, sealants,
coatings, paints and other specialty chemicals. She joined
the Company Board in 1995 and is a member of the
Compensation Committee and the Retirement Funds Committee.
CHARLES E. JOHNSON, II
Mr. Johnson, 62, is a private investor and former President
and Chief Operating Officer of the Company. From July
through December 1995 he served as Chairman and Chief
Executive Officer of the Company. He joined the Company
Board in 1976 and is Chairman of the Audit Committee and a
member of the Executive Committee and the Governance
Committee. He is a director of Hackley Hospital and Muskegon
Commerce Bank.
DAVID P. WILLIAMS
Mr. Williams, 63, is President and Chief Operating Officer
of The Budd Company, a manufacturer of automobile and truck
body components, castings, stampings, chassis frame
components, air bag components, automotive heating
accessories and cold weather starting aids. He joined the
Company Board in 1992, is Chairman of the Governance
Committee and is a member of the Compensation Committee, and
the Executive Committee. He is a director of The Budd
Company, Budd Canada Inc., Standard Federal Bank, Thyssen
Production Systems, Inc. and Thyssen Budd Automotive.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING
IN OFFICE WHOSE TERMS EXPIRE AT THE ANNUAL MEETING IN 1999
J. KERMIT CAMPBELL
Mr. Campbell, 59, is the Chief Executive Officer of The
Prince Group, a supplier of products and services to
manufacturing firms, including die cast machines. He was
formerly President and Chief Executive Officer of Herman
Miller, Inc., a manufacturer of furniture and other products
for offices and other work environments. He joined the
Company Board in 1993 and is a member of the Audit Committee
and the Compensation Committee. He is Chairman and a
principal of Cellar Masters of America and a director of The
Prince Group and Bering Truck Corporation.
RONALD L. KERBER
Mr. Kerber, 54, is the Executive Vice President and Chief
Technology Officer of Whirlpool Corporation, a manufacturer
of major home appliances. He joined the Company Board in
1992 and is a member of the Audit Committee and the
Retirement Funds Committee.
PETER H. MERLIN
Mr. Merlin, 69, is a Partner of Gardner, Carton & Douglas,
Corporate Counsel for the Company. He joined the Company
Board in 1975 and is Chairman of the Retirement Funds
Committee and a member of the Executive Committee. He is a
director of Aldi, Inc. and Lechler, Inc. and a Life Trustee
of Northwestern Memorial Hospital.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING
IN OFFICE WHOSE TERMS EXPIRE AT THE ANNUAL MEETING IN 2000
JOHN B. BLYSTONE
Mr. Blystone, 44, is the Chairman, President and Chief
Executive Officer of the Company. He joined the Company
Board in December 1995, and is Chairman of the Executive
Committee and a member of the Governance Committee. He is a
director of Worthington Industries, Inc., the Stern Stewart
Advisory Board and the community foundation for Muskegon
County.
FRANK A. EHMANN
Mr. Ehmann, 64, is the former President and Chief Operating
Officer of American Hospital Supply Corporation. He joined
the Company Board in 1988 and is Chairman of the
Compensation Committee and a member of the Governance
Committee and Executive Committee. He is a director of
American Health Corp., Inc. and AHA Investment Funds, Inc.
Each of the nominees and directors of the Company has had the
principal occupation set forth above or has been an executive officer or
partner with the respective organization for the past five years, except
for Mr. Blystone, who, prior to joining the Company in December 1995, was,
from 1991 to 1994, with General Electric Company as Vice President and
General Manager of GE Superabrasives and from 1994 to 1995 as President and
Chief Executive Officer of Nuovo Pignone and GE Power Systems Europe; Mr.
Campbell, who was with Herman Miller, Inc. from 1992 to 1995; and Ms.
Coffin, who prior to joining H.B. Fuller Company in 1994, held executive
positions with G.E. Plastics, a business unit of General Electric Company,
for more than five years.
The law firm of Gardner, Carton & Douglas, where Mr. Merlin is a
partner, has been retained by the Company to represent it on various legal
matters.
BOARD OF DIRECTORS AND ITS COMMITTEES
There were six meetings of the Board of Directors of the Company in
1997 and each director attended at least 75% of the aggregate of the total
number of Board meetings and meetings of Committees of which he or she was
a member.
The Board of Directors has established committees that deal with
certain areas of the Board's responsibility. These committees are the Audit
Committee, Compensation Committee, Governance Committee, Executive
Committee and Retirement Funds Committee.
The Audit Committee, which held three meetings in 1997, has the
primary responsibility of ensuring the integrity of the financial
information reported by the Company. Its functions are: (i) to make
recommendations on the selection of independent auditors; (ii) to review
the scope of the annual audit to be performed by the independent auditors
and the audits conducted by the internal audit staff; (iii) to review the
results of those audits; (iv) to meet periodically with management, the
independent public accountants and the internal audit staff to review
financial, accounting and internal control matters; and (v) to meet
periodically with both the independent public accountants and the internal
audit staff, and without management being present, to discuss the results
of their audit work and their opinions as to the adequacy of internal
accounting controls and the quality of financial reporting.
The Compensation Committee, which held two meetings in 1997, is
responsible for considering and approving the Company's compensation
program for senior management, including executive employment agreements,
the grant of stock options and other awards under the Company's Stock
Compensation Plan and awards under the EVA Incentive Compensation Plan.
The Governance Committee, which held one meeting during 1997, (i)
conducts a continuing study of the size, structure and composition of the
Board; (ii) makes recommendations to the Board on changes in compensation
of directors; (iii) seeks out and interviews possible candidates for Board
membership and reports its recommendations to the Board; and (iv)
determines the criteria for selection and retention of Board members.
Although the Committee has its own procedures for selecting nominees for
Board membership, it will give due consideration to nominees recommended by
shareholders. A shareholder desiring to recommend a person for nomination
to the Board must provide written notice to the Secretary of the Company no
later than 120 days prior to the first anniversary of the Annual Meeting in
compliance with the requirements set forth in the Company's By-Laws. In
addition, the nominating shareholder should submit a complete resume of the
proposed nominee's qualifications and background together with a statement
setting forth the reasons why such person should be considered for
directorship.
The Executive Committee, which did not meet in 1997, has authority to
act on most matters during the intervals between Board meetings.
The Retirement Funds Committee, which held three meetings in 1997,
reviews the investment performance, actuarial assumptions and funding
practices for the Company's pension, healthcare and defined contribution
plans.
PROPOSAL II
ISSUANCE OF COMMON STOCK IN CONNECTION WITH THE PROPOSED
BUSINESS COMBINATION
GENERAL
On February 17, 1998, the Company delivered a letter to the Board of
Directors of Echlin containing a proposal for a strategic business
combination of Echlin with the Company (the "Proposed Business
Combination"), in which shareholders of Echlin would receive for each of
their Echlin Shares (together with the associated preferred stock purchase
rights (the "Rights") issued pursuant to a Rights Agreement dated as of
June 21, 1989, as amended, between Echlin and The Connecticut Bank and
Trust Company, N.A., as rights agent ("The Rights Agreement")), the amount
of $12.00 in cash and 0.4796 share of SPX Common Stock (the
"Consideration"). See "Background of the Proposed Business Combination."
Unless the context otherwise requires, all references to Echlin Shares
include the associated Rights. All references to Rights include all
benefits that may inure to holders of the Rights pursuant to the Rights
Agreement.
If the Proposed Business Combination is consummated in accordance with
the terms described herein, the Company will issue to Echlin shareholders
(other than the Company which owns 1,150,150 Echlin Shares) up to
30,763,018 shares of SPX Common Stock (based on the 63,248,939 Echlin
Shares outstanding as of February 17, 1998 and the 2,044,284 options to
purchase Echlin Shares outstanding on December 31, 1997, each as reported
in Echlin's public filings). IF ECHLIN COMMENCES MERGER NEGOTIATIONS WITH
THE COMPANY, OR THE COMPANY MODIFIES THE TERMS OF THE PROPOSED BUSINESS
COMBINATION, CONSUMMATION OF THE PROPOSED BUSINESS COMBINATION COULD
REQUIRE THE ISSUANCE OF MORE OR LESS THAN 30,763,018 SHARES OF SPX COMMON
STOCK. Because the number of shares of SPX Common Stock to be issued in the
Proposed Business Combination exceeds 20% of the outstanding shares of SPX
Common Stock, under the rules of the New York Stock Exchange, the issuance
of the shares must be approved by the shareholders of SPX.
THE BOARD OF DIRECTORS HAS DETERMINED THAT THE PROPOSED BUSINESS
COMBINATION IS FAIR TO AND IN THE BEST INTEREST OF THE COMPANY AND ITS
SHAREHOLDERS, HAS UNANIMOUSLY APPROVED THE STOCK ISSUANCE AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE STOCK ISSUANCE
BACKGROUND OF THE PROPOSED BUSINESS COMBINATION
In February 1997, John B. Blystone, Chairman and Chief Executive
Officer of the Company, met with Trevor O. Jones, then Chairman and interim
President and Chief Executive Officer of Echlin, to propose that the two
companies explore a business combination. Mr. Jones did not follow up on
this meeting. In November 1997, Mr. Blystone met for several hours with
Larry W. McCurdy, who had succeeded Mr. Jones as President and Chief
Executive Officer, to discuss a strategic merger between the two companies,
and on November 24, 1997, Patrick J. O'Leary, the Company's Chief Financial
Officer, met with Robert F. Tobey, Echlin's Senior Vice President -
Corporate Development. These discussions were not fruitful, and the Company
was informed that Echlin had no interest in a business combination with the
Company.
On December 12, 1997, Mr. Blystone wrote a letter to Mr. McCurdy
setting out the strategic rationale of a business combination of the two
companies and the benefits to Echlin's shareholders of the transaction.
Although the letter stated that the Company anticipated a price in the
$40's range, Mr. Blystone advised Mr. McCurdy that the Company would be
willing to revise its thinking if Echlin could identify greater value in
the transaction. Mr. Blystone, in his letter, further suggested that the
letter be shared with Echlin's Board of Directors and offered to meet with
and make a presentation to the Board about any and all aspects of the
proposed transaction.
On December 17, 1997, Mr. Blystone received a letter from Mr. McCurdy
stating that Mr. McCurdy had shared Mr. Blystone's views with Echlin's
Board of Directors, and that Echlin's and the Board's position remained
that Echlin had no interest in further discussions with the Company.
On December 18, 1997, Mr. Blystone sent a letter to each member of
Echlin's Board enclosing a copy of his December 12 letter and reiterating
the merits of a strategic combination. Mr. Blystone once again offered to
meet personally with and make a presentation to Echlin's Board of
Directors.
On December 23, 1997, Mr. Blystone received a letter from Mr. McCurdy
advising that Echlin's Board of Directors was of the unanimous view that
Echlin did not have an interest in pursuing discussions with the Company.
On January 6, 1998, the Company notified Echlin that it was that day
making an HSR Filing under the HSR Act seeking to acquire up to 100% of the
voting securities of Echlin.
On January 8, 1998, Mr. McCurdy wrote to Mr. Blystone acknowledging
receipt of notice of the HSR Filing and advising the Company that Echlin
and its advisors stood ready to aggressively defend its shareholders'
interests.
On February 17, 1998, the Company sent the Board of Directors of
Echlin a letter setting forth the proposal for the Proposed Business
Combination and its merits and reaffirming its desire to enter into a
negotiated transaction. With its letter to the Board, the Company delivered
a proposed merger agreement to Echlin (the "Proposed Merger Agreement") in
contemplation of arriving at a negotiated transaction. That agreement
provides for a single-step "cash election" merger of Echlin into a
subsidiary of the Company in which each outstanding Echlin Share would be
converted into the right to receive the Consideration of $12.00 in cash and
0.4796 share of SPX Common Stock (with shareholders of Echlin able,
instead, to elect to receive all cash, in the amount of $48.00 per Echlin
Share, or all stock, in the amount of 0.6395 share of SPX Common Stock per
Echlin Share, subject to proration) in a partially tax-free reorganization.
The Company on that date also filed a registration statement with the
Commission so that, if Echlin declined to negotiate and enter into the
Proposed Merger Agreement, the Company could effect the Proposed Business
Combination by means of (i) an exchange offer in which the Company would
pay the Consideration of $12.00 in cash and 0.4796 share of SPX Common
Stock in exchange for each Echlin Share validly tendered and not properly
withdrawn (the "Exchange Offer"), and (ii) a subsequent merger of a
subsidiary of the Company into Echlin (the "Merger") in which each Echlin
Share not purchased in the Exchange Offer would be converted into the right
to receive the Consideration. Because Echlin had declined to enter into
negotiations regarding the Proposed Business Combination, the Company
commenced the Exchange Offer on [ ], 1998.
On March 6, 1998, the Company also commenced its solicitation of
written demands to call a special meeting of the shareholders of Echlin
(the "Special Meeting") for the purpose of, among other things, voting to
remove the current members of the Board of Directors of Echlin and
replacing them with five nominees of the Company (the "SPX Nominees"). On
March 25, 1998, the Company delivered to Echlin written demands by holders
of an aggregate of 28,253,762 Echlin Shares, representing (together with
the Echlin Shares owned by the Company with respect to which a written
demand had previously been delivered) approximately 45.8% of the
outstanding Echlin Shares, which action the Company believes satisfies
those provisions of the Connecticut Business Corporation Act (the
"Connecticut Business Act") and Echlin's By-Laws setting forth the
requirements for shareholders to call the Special Meeting. At various times
through March 31, 1998, the Company delivered to Echlin written demands by
holders of an aggregate of 2,842,943 additional Echlin Shares totaling
(together with the Echlin Shares with respect to which a written Demand had
previously been delivered) approximately 50.2% of the outstanding Echlin
Shares. Under the Connecticut Business Act and Echlin's By-Laws, the
Special Meeting must be called by April 24, 1998 and must be held by June
23, 1998.
On March 27, 1998, the Company announced that its Annual Meeting of
Shareholders would be held on May 20, 1998, and that, at that meeting, the
Company's shareholders would vote on approving the Stock Issuance in
connection with the Proposed Business Combination.
On April 6, 1998 Echlin's Secretary and General Counsel, John P.
Leckerling, delivered a letter to Mr. Blystone alleging that the written
demands which the Company had delivered on March 25, 1998 were invalid and
that Echlin did not intend to call the Special Meeting. The letter also
stated that Echlin had that day filed an action in the Connecticut federal
court alleging violations, by the Company of the federal securities laws.
The Company believes that the written Demands are valid, that the lawsuit
is frivolous, and intends to vigorously oppose the lawsuit and Echlin's
refusal to call the Special Meeting. See "Litigation."
REASONS FOR THE PROPOSED BUSINESS COMBINATION
The Board of Directors of the Company believes that both the
shareholders of the Company and the shareholders of Echlin would benefit
from the combination of SPX and Echlin for the following reasons:
COMBINING THE COMPANY AND ECHLIN WOULD CREATE A COMPANY WITH THE SCALE AND
CAPABILITIES TO EXCEL IN THE RAPIDLY CONSOLIDATING $350 BILLION VEHICLE
SERVICE INDUSTRY.
. The Proposed Business Combination would allow the combined
company to provide products and services that would integrate the
entire vehicle life cycle: from original equipment vehicle
components to specialty repair tools and services to replacement
parts.
. Integration of the vehicle service life cycle would provide the
combined company with information in one product or service area
that would help improve products or services in another area.
This process, called the data feedback loop, would give the
combined company a competitive advantage in providing vehicle
service solutions.
. The portfolio of products and services at the two companies are
complementary, and would bring together Echlin's market-leading
position in brake and engine systems with the Company's strength
in transmission and steering components.
. All of the foregoing would enable the combined company to better
serve customers and to compete more effectively, given the
blurring lines between original equipment and aftermarket, the
expansion of mega-dealerships and national parts retailers, the
growing importance of repair shop chains and the increasing
technological complexity of vehicles.
THE PROPOSED BUSINESS COMBINATION WOULD PROVIDE THE COMPANY'S MANAGEMENT
TEAM A LARGER PLATFORM UPON WHICH TO EMPLOY ITS MANAGEMENT TECHNIQUES AND
EXPERIENCE.
. Since John Blystone joined the Company in late December 1995, the
Company has experienced improved performance based upon several
key performance measures. As a result, the Company's shareholders
have experienced more than a quadrupling of the price of their
shares. The Proposed Business Combination would result in the
Company's shareholders owning shares in a much larger company
with increased value-creation opportunities.
. The Company believes that Echlin is a valuable business that is
underperforming. The Company intends to employ an aggressive
shareholder-focused EVA(R) ("EVA") agenda to Echlin similar to
that utilized at the Company, focusing on cost structure, use of
capital, productivity enhancements, selective divestitures and
compensation based on EVA. EVA, or Economic Value Added, is a
performance measure calculated as net operating profit after tax
minus a charge for the cost of capital.
. The Company believes that it could achieve annual cost savings of
$125 million following the first full year after the acquisition
and $175 million by the second full year after the acquisition,
by eliminating duplicative corporate costs, realizing
manufacturing and distribution efficiencies, streamlining
Echlin's organizational structure and saving on material costs
through improved sourcing. This would entail a headcount
reduction of approximately 3,000 positions throughout Echlin's
operations.
In reaching its conclusion that the Proposed Business Combination is
fair to and in the best interests of the Company and its shareholders, the
Company's Board of Directors, in consultation with the Company's
management, financial advisors and legal advisors, considered the
advantages of the Proposed Business Consideration to the Company set forth
above, as well as the risks of the Proposed Business Combination discussed
below under "Risk Factors." The Board also reviewed the results of
operations and financial condition of the Company and of Echlin, both
historical and projected, and considered management's belief that the
transaction would be accretive to the Company's earnings per share in the
first full year following the acquisition. The Board considered the
relative trading prices of the SPX Common Stock and the Echlin Shares, the
23% premium which the Consideration represented on February 17, 1998 over
the closing price of an Echlin Share on February 13, 1998, and the 32%
premium which the Consideration represented on February 17, 1998 over the
average trading price of an Echlin Share for the 30 trading days preceding
February 17, 1998. The Board further considered the 25% cash/75% stock
structure of the Proposed Business Combination, the fact that, immediately
following the acquisition, shareholders of Echlin would own approximately
70% of the SPX Common Stock then outstanding, and the fact that the
Proposed Business Combination would result in shareholders of the Company
owning shares in a much larger company with increased value-creation
opportunities.
The foregoing discussion of the information and factors considered by
the Board of Directors in determining that the Proposed Business
Combination is fair to and in the best interests of the shareholders of the
Company is not intended to be exhaustive, but is believed to include the
material factors considered by the Board of Directors in connection with
its evaluation of the Proposed Business Combination. In view of the wide
variety of factors considered and the complexity of such matters, the Board
of Directors did not attempt to quantify, rank or otherwise assign relative
weights to the specific factors it considered in making its determination.
RISK FACTORS
In addition to the other information in this proxy statement, the
following are certain factors that should be considered by holders of SPX
Common Stock in evaluating the proposed Stock Issuance.
Dilution of Existing Shareholders. The exchange of Echlin Shares for
shares of SPX Common Stock will result in substantial dilution to the
voting power and interests of current Company shareholders. Based upon the
[ ] shares of SPX Common Stock outstanding as of the Record Date,
under the current terms of the Proposed Business Combination, immediately
following consummation of the Exchange Offer and the Merger or a merger
pursuant to the Proposed Merger Agreement, and after giving effect to the
Stock Issuance, the Echlin shareholders (other than the Company) would own
approximately 70% of the then outstanding shares of SPX Common Stock.
Leverage. After consummation of the Proposed Business Combination, the
Company will be more highly leveraged than is either the Company or Echlin,
or both of the companies combined, at present, with substantial debt
service obligations, including principal and interest obligations, with
respect to indebtedness of as much as $2.4 billion. As such, the Company
may be particularly susceptible to adverse changes in its industry, the
economy and the financial markets generally. Moreover, the Company's
conduct of its business may be more circumscribed, and its ability to incur
additional debt may be more limited, than at present by any restrictive
covenants which may be contained in the agreements evidencing the
financing. In particular, any debt incurrence restrictions may limit SPX's
ability to service its existing debt obligations through additional debt
financing if cash flow from operations is insufficient to service such
obligations. The financing will bear interest at floating rates, and an
increase in interest rates could adversely affect the Company's ability to
service its debt obligations.
Uncertainties in Integrating Business Operations and Achieving Cost
Savings. The success of the Proposed Business Combination will in large
part be dependent on the ability of the Company, following the consummation
of the Proposed Business Combination, to realize cost savings and, to a
lesser extent, to consolidate operations and integrate processes. The
businesses are strategically complementary but largely operate in diverse
markets with different distribution systems. While the Company believes
that it can obtain cost savings of at least $125.0 million in the first
full year following the acquisition, the realization of savings is
dependent to a large extent on the planned reduction of headcount at
Echlin. There can be no assurance that the timing and magnitude of
headcount reductions will occur as planned. The integration of businesses,
moreover, involves a number of risks, including the diversion of
management's attention to the assimilation of the operations from other
business concerns, delays or difficulties in the actual integration of
operations or systems, and challenges in retaining customers and key
personnel of the acquired company. There can be no assurance that future
consolidated results will improve as a result of the Proposed Business
Combination, or of the extent to which cost savings and efficiencies
anticipated by the Company will be achieved. The pro forma financial
statements contained in this Proxy Statement do not include the impact,
positive or negative, of any cost savings or efficiencies related to
anticipated future actions. The anticipated cost savings have been
developed solely by the management of the Company and are based on the
Company's best judgments and knowledge of Echlin's operations derived from
publicly available information, and in reliance on that information being
accurate and complete, together with the Company's knowledge and experience
in the vehicle components industry.
Modifications to the Proposed Business Combination. Although the
Company presently intends to consummate the Proposed Business Combination
in accordance with the terms described below, the Board of Directors of the
Company may, prior to the Stock Issuance, modify the terms of the Exchange
Offer or enter into merger negotiations with Echlin. Among other things,
the Company may modify the terms of the Exchange Offer to cause the Stock
Issuance to be more or less than 30,763,018 shares of SPX Common Stock, or
enter into a merger agreement requiring the issuance of more or less than
30,763,018 shares of SPX Common Stock, without obtaining further
authorization from the Company shareholders.
THE EXCHANGE OFFER
General. The Company has offered, upon the terms and subject to the
conditions set forth in a Prospectus and in the related Letter of
Transmittal dated [ ], 1998, to exchange the Consideration, in the amount
of $12.00 net in cash and 0.4796 share of SPX Common Stock, for each Echlin
Share validly tendered and not properly withdrawn.
On February 13, 1998, the last trading date preceding the date of the
public announcement of the Proposed Business Combination, the closing price
of an Echlin Share on the New York Stock Exchange Composite Tape (the "NYSE
Composite Tape") was $38-7/8. Based on the closing price of a share of SPX
Common Stock on the NYSE Composite Tape on the same date ($75-1/16), the
value of the SPX Common Stock being offered pursuant to the Exchange Offer
was $36.00 per Echlin Share and the total Consideration had a value of
$48.00 per Echlin Share. Based upon the closing price of a share of SPX
Common Stock on the NYSE Composite Tape on the NYSE on [ ], 1998, the last
trading date preceding the date of this Proxy Statement ($_____), the value
of the SPX Common Stock being offered pursuant to the Exchange Offer was $[
] per Echlin Share and the total Consideration had a value of [$ ] per
Echlin Share. At the time the Exchange Offer is consummated, the
Consideration may have a market value that is greater or lesser than either
of those two amounts depending upon the market price of a share of SPX
Common Stock at such time. Cash will be paid in lieu of fractional shares
of SPX Common Stock.
Conditions To Exchange Offer. The Company's obligation to exchange
shares of SPX Common Stock for Echlin Shares is conditioned upon, among
other things, (a) there being validly tendered prior to the expiration of
the Exchange Offer and not withdrawn a number of Echlin Shares which will
constitute at least 66-2/3% of the total outstanding Echlin Shares on a
fully diluted basis as of the date the Echlin Shares are accepted for
exchange by the Company (the "Minimum Tender Condition"); (b) approval by
the shareholders of the Company of the Stock Issuance (the "Company
Shareholder Approval Condition"); (c) the redemption of the Rights by the
Board of Directors of Echlin or the Company being otherwise satisfied that
the Rights will not be applicable to the acquisition of the Echlin Shares
pursuant to the Exchange Offer or the Merger (the "Rights Plan Condition");
(d) the Company being satisfied that Sections 841 and 844 of the
Connecticut Business Act will not be applicable to the Exchange Offer and
the Merger (the "Business Combination Statutes Condition"); and (e) the
Company having obtained sufficient financing for the consummation of the
Exchange Offer and the Merger (the "Financing Condition"). The Minimum
Tender Condition, the Company Shareholder Approval Condition, the Rights
Plan Condition, the Business Combination Statutes Condition, the Financing
Condition and the other Exchange Offer conditions are referred to herein
collectively as the "Exchange Offer Conditions."
Description Of The Merger. If the Exchange Offer is successful and the
Exchange Offer Conditions are satisfied, the Company and its affiliates
will own at least two-thirds of the outstanding Echlin Shares, and will
have sufficient voting power to approve the Merger independently of the
votes of any other Echlin shareholders. If the Exchange Offer is
successful, the Company presently intends to propose and seek to have
Echlin effect the Merger in which a wholly owned subsidiary of the Company
is to be merged into Echlin (the "Merger") pursuant to the provisions of
the Connecticut Business Act and the General Corporation Law of the State
of Delaware (the "DGCL") and each Echlin Share then outstanding (other than
the Echlin Shares owned by the Company) would be converted into the right
to receive the Consideration.
Consummation of the Merger or the merger pursuant to the Proposed
Merger Agreement described below does not require approval by the
shareholders of the Company, and other than approval of the Stock Issuance
as requested in this Proxy Statement, the Company does not intend to seek
shareholder approval of the Merger or the merger pursuant to the Proposed
Merger Agreement. Shareholders of the Company would not be entitled to any
appraisal rights as a result of the Stock Issuance or the Proposed Business
Combination.
The Proposed Merger Agreement. In contrast to the Exchange Offer, the
Proposed Merger Agreement provides for a single-step "cash election" merger
of Echlin into a subsidiary of the Company in which each outstanding Echlin
Share would be converted into the right to receive the Consideration (with
shareholders able to elect to receive instead all cash, in the amount of
$48.00 per Share, or all stock, in the amount of 0.6395 share of SPX Common
Stock per Echlin Share, subject to proration) in a partially tax-free
reorganization.
SOURCE AND AMOUNT OF FUNDS
The Company estimates that the total amount of funds that will be
required to pay the cash component of the Consideration in the Proposed
Business Combination, to refinance outstanding debt of the Company and of
Echlin, to pay fees and expenses related to the Proposed Business
Combination and to provide working capital will be approximately $2.4
billion. The Company plans to obtain the necessary financing pursuant to
credit facilities to be arranged by Canadian Imperial Bank of Commerce
("CIBC') and CIBC Oppenheimer Corp. ("CIBC Oppenheimer"). The Company has
received a letter from those two entities, dated February 13, 1998, in
which CIBC and CIBC Oppenheimer have stated that they are highly confident
of their ability to raise the financing, subject to certain conditions set
forth therein.
RELATIONSHIPS WITH ECHLIN
Except as set forth below, neither the Company nor to the best of its
knowledge, any of the persons or entities referred to above, nor any
director, executive officer or subsidiary of any of the foregoing, has
effected any transaction in equity securities of Echlin during the last 60
days.
Number of Weighted Daily Average
Shareholder Transaction Date Shares Acquired Price per Share
- ----------- ---------------- --------------- ---------------
The Company 02/06/98 76,200 37.1443
The Company 02/09/98 160,700 37.8080
The Company 02/10/98 7,400 38.9730
The Company 02/11/98 146,500 38.4826
The Company 02/12/98 87,250 38.8041
The Company 02/13/98 202,300 38.9359
Except as described in this Proxy Statement, neither the Company nor,
to the best of its knowledge, any of its directors or executive officers
has (i) any contract, arrangement, understanding or relationship with any
other person with respect to any securities of Echlin, including, but not
limited to, any contract, arrangement, understanding or relationship
concerning the transfer or the voting of any such securities, joint
ventures, loan or option arrangements, puts or calls, guaranties of loans,
guaranties against loss or the giving or withholding of proxies; (ii) had
any contacts or negotiations with Echlin or its affiliates concerning a
merger, consolidation or acquisition, a tender offer or other acquisition
of securities, an election of directors, or a sale or other transfer of a
material amount of assets; or (iii) has had any transaction with Echlin or
any of its executive officers, directors or affiliates that would require
disclosure under the rules and regulations of the Commission applicable to
this Proxy Statement.
ACCOUNTING TREATMENT
The Proposed Business Combination will be accounted for as a reverse
acquisition as the shareholders of Echlin will own a majority of the shares
of the Company upon completion of the Merger. Accordingly, for accounting
purposes, the Company is treated as the acquired company and Echlin is
considered to be the acquiring company. The purchase price will be
allocated to the assets and liabilities assumed of the Company based on
their estimated fair market values at the acquisition date. Under reverse
acquisition accounting, the purchase price is based on the market value of
the SPX Common Stock at the date of acquisition. The cash portion of the
Consideration will be accounted for as a dividend by the combined company.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The Stock Issuance will have no federal income tax consequences to
either the Company or the shareholders of the Company
LITIGATION
On April 6, 1998, Echlin commenced an action against the Company in
the United States District Court for the District of Connecticut. The
action, entitled ECHLIN INC. V. SPX CORPORATION, alleges in a complaint
that the Company has made misleading statements in public announcements and
filings regarding its solicitation and delivery of written demands for the
Special Meeting. In the complaint, Echlin seeks (i) a declaratory judgment
that certain of the Company's public statements in connection with its
solicitations of demands are false and misleading; (ii) a declaratory
judgment that the Company's conduct has corrupted the proxy contest for
demands from shareholders of Echlin and to enjoin the Company from
continuing its proxy solicitation for demands; and (iii) to recover certain
costs. The Company believes that this litigation is without merit and
intends to vigorously oppose the litigation.
MARKET PRICES AND DIVIDENDS
SPX Common Stock is listed and principally traded on the NYSE (under
the symbol "SPW") and is also listed on the PE. The Shares are listed and
principally traded on the NYSE (under the symbol "ECH"), the PE and the
International Stock Exchange in London. The following table sets forth, for
the periods indicated, the high and low sale prices per share of SPX Common
Stock and per Share as reported on the NYSE Composite Tape.
SPX COMMON STOCK ECHLIN SHARES
--------------------------------------------- ----------------------------------------
High Low Dividends High Low Dividends
---- --- --------- ---- --- ---------
1995
First Quarter.................. $17-3/8 $14-1/4 $.10 $38-1/2 $29-7/8 $0.190
Second Quarter................. 15-1/8 10-3/4 .10 38-3/4 34 0.205
Third Quarter.................. 16 11-1/8 .10 39-5/8 33-7/8 0.205
Fourth Quarter................. 17 14-1/8 .10 39-1/2 33-7/8 0.205
1996
First Quarter.................. 18-1/8 13-5/8 .10 38-3/4 32-5/8 0.205
Second Quarter................. 27-1/8 18 .10 37-7/8 33-3/8 0.220
Third Quarter.................. 31-5/8 21-5/8 .10 37-5/8 29-3/4 0.220
Fourth Quarter................. 40-1/2 26-7/8 .10 34-1/4 30-1/4 0.220
1997
First Quarter.................. 49-3/4 37-3/8 .10 35-1/4 29-1/2 0.220
Second Quarter................. 70-5/8 41-7/8 - 36-1/2 31-1/8 0.225
Third Quarter.................. 65-3/4 49 - 38-9/16 33-5/8 0.225
Fourth Quarter................. 70-3/8 58-7/16 - 36-5/8 29-13/16 0.225
1998
First Quarter.................. 79-1/4 65-3/16 - 52-3/4 34-1/2 0.225
Second Quarter
(through April [ ], 1998).... [ ] [ ] - [ ] - 0.225
On February 13, 1998, the last full trading day prior to the first
public announcement by SPX of the Proposed Business Combination, the
reported high and low sale prices and closing price per share of SPX Common
Stock and per Echlin Share on the NYSE Composite Tape and the per Echlin
Share on an equivalent share basis based on the Consideration of $12.00 in
cash and 0.4796 share of SPX Common Stock were as follows:
Per share Per equivalent share
----------------------------------- --------------------------------------
High Low Close High Low Close
---- --- ----- ---- --- -----
The Company........................ 75-5/8 74-3/4 75-1/16
Echlin............................. 39-1/4 38-1/2 38-7/8 48-1/4 47-13/16 48
On April [ ],1998, the last full trading day prior to the date of this
Proxy Statement, the reported high and low sale prices and closing price
per share of SPX Common Stock and per Echlin Share on the NYSE Composite
Tape and per Echlin Share on an equivalent share basis based on the
Consideration of $12.00 in Echlin cash and 0.4976 share of SPX Common Stock
were as follows:
Per share Per equivalent share
----------------------------------- --------------------------------------
High Low Close High Low Close
---- --- ----- ---- --- -----
The Company........................ [ ] [ ] [ ] [ ] [ ] [ ]
Echlin............................. [ ] [ ] [ ] [ ] [ ] [ ]
STOCKHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR SHARES
OF SPX COMMON STOCK AND FOR THE ECHLIN SHARES.
[Rider 2]
COMPARATIVE PER SHARE DATA
(unaudited)
The following table presents historical per share data of The Company,
historical per share data of Echlin and pro forma combined per share data
as if the Proposed Business Combination had occurred as of September 1,
1996, assuming an Exchange Ratio of 0.4796. The table also presents
Echlin's pro forma equivalent per share data. See "Selected Historical
Financial Data of The Company," "Selected Historical Financial Data of
Echlin," and "Pro Forma Condensed Combined Financial Data of The Company
and Echlin" included elsewhere herein for additional information regarding
this pro forma information. The pro forma combined per share data is
intended for information purposes, and does not purport to represent what
the combined entity's results of continuing operations would actually have
been had the transaction in fact occurred at an earlier date, or project
the results for any future date or period. Upon consummation of the
Proposed Business Combination, the actual financial position and results of
operations of the combined company will differ, perhaps significantly, from
the pro forma amounts reflected herein due to a variety of factors,
including changes in operating results between the date of the pro forma
financial information and the date on which the Proposed Business
Combination is consummated and thereafter, as well as the factors discussed
under "Risk Factors."
The pro forma condensed combined financial data does not give effect
to any integration or restructuring costs that could result from the
combination of the companies. Any integration and rationalization of the
operations of Echlin may include certain costs that in turn would result in
a charge to earnings of the combined company. Such a charge, which cannot
now be quantified fully, may be material and would be recognized in the
period in which such a restructuring occurs. These costs may include
severance and related employee benefit costs, costs to consolidate
manufacturing and distribution facilities, facility rearrangement costs,
relocation and moving costs, training costs, debt extinguishment costs, and
costs associated with change of control agreements, among others. To date,
The Company's access to information related to Echlin has been limited to
publicly available information. In addition, publicly available information
does not contain sufficient details related to Echlin's severance plans,
employee benefit agreements, change of control costs or debt extinguishment
provisions to enable The Company to quantify the costs associated with
business integration and rationalization actions that may be considered by
The Company. Nonetheless, based on assumptions related to headcount
reductions and average annual salaries used to compute the annualized
expense savings and assuming a severance policy that would result in an
average severance term of six months, the estimated pre-tax costs of the
severance (excluding any change in control costs) would be approximately
$60.0 million.
The pro forma condensed combined financial data also does not give
effect to any costs savings that could result from the combination of the
companies. The Company's management estimates that the combined company can
achieve approximately $125.0 million of annualized cost savings in the
first full year following the acquisition, and $175.0 million of annualized
cost savings in the second full year following the acquisition. These costs
savings include three categories of estimated annual savings in the second
full year; savings associated with headcount reductions of $120.0 million,
reduction in duplicative corporate costs of $20.0 million, and
manufacturing, distribution and sourcing rationization of $35.0 million.
These savings estimates are based upon assumptions made by The Company's
management using available public information of Echlin, certain
comparative peer group information of The Company, and The Company's own
internal information.
Echlin
The Echlin Pro forma Pro forma
Company (a) Historical Combined (b) Equivalent (c)
----------- ---------- ------------ --------------
Income (loss) per
common share from
continuing operations
(primary) (d)(e):
Three months ended
November 30, 1997 $ (5.02) $ 0.52 $ (1.11) $(0.54)
Year ended August 31, 1997 (3.22) (0.75) (3.81) (1.83)
Dividends per common share (f):
Three months ended
November 30, 1997 -- 0.225 -- --
Year ended August 31, 1997 0.20 0.89 0.20 0.10
Book value per common share:
November 30, 1997 (3.63) 14.84 27.40 13.14
August 31, 1997 1.09 14.60 25.96 12.45
(a) The three-month and twelve-month information for The Company
represents the Company's historical information as of and for the
three months ended September 30, 1997 and the Company's pro forma
adjusted historical information as of and for the twelve months ended
December 31, 1997, respectively, but is presented as of November 30,
1997 and August 31, 1997, respectively, to conform to Echlin's
reporting. See "Pro Forma Adjusted Historical Financial Data of the
Company."
(b) See "Pro Forma Condensed Combined Financial Data of the Company and
Echlin."
(c) Echlin's pro forma equivalent per share information represents the pro
forma combined per share information multiplied by 0.4796.
(d) The pro forma condensed combined financial data do not give effect to
any integration or restructuring costs, nor to any cost savings, that
could result from the combination of the companies.
The comparative per share data has been affected by various special
charges and gains recorded by the Company and Echlin during the
periods presented.
The pro forma condensed combined financial data of the Company and
Echlin for the three months ended November 30, 1997 include special
charges of $110.0 million recorded by the Company primarily to combine
two divisions and to recognize the reduced carrying value of certain
assets resulting from the decision to combine the divisions and exit
certain product lines. See "Selected Historical Financial Data of the
Company."
The pro forma condensed combined financial data of the Company and
Echlin for the year ended August 31, 1997 include special charges and
gains of $304.0 million. The special charges and gains included a $4.2
million special charge recorded by the Company related to the
combination of five divisions into two divisions, a $6.5 million
special charge recorded by the Company of anticipated future legal
costs associated with the ongoing litigation with Snap-on
Incorporated, a $67.8 million write-off of goodwill recorded by the
Company related to the acquisitions of Bear Automotive and Allen
Testproducts, $254.1 million of repositioning and other special
charges recorded by the Company related to facility realignments and
rationalizations and other actions, and $28.6 million of gains from
the sale of two divisions by Echlin. See "Selected Historical
Financial Data of the Company" and "Selected Historical Financial Data
of Echlin."
(e) FAS 128, "Earnings per Share," is a new pronouncement which was issued
in February 1997, but not effective until after December 15, 1997. The
new pronouncement established revised standards for calculating and
reporting earnings per share. On a pro forma basis, if this standard
was adopted for all of the periods presented, both basic and diluted
income (loss) per share would have been equal to the primary per share
data, except that diluted income per share for Echlin for the three
months ended November 30, 1997 would have been $0.51.
(f) In April of 1997, the Company eliminated its quarterly cash dividend
and stated that future distributions to shareholders would be in the
form of open market purchases of SPX Common Stock when deemed
appropriate by management.
SELECTED HISTORICAL FINANCIAL DATA OF SPX
(in millions, except per share data)
The following table presents the selected historical statement of
income and other financial data of the Company. The financial data as of
and for the fiscal years ended December 31 have been derived from the
audited financial statements of the Company. The Company's selected
historical financial data should be read in conjunction with, and are
qualified in their entirety by reference to, the historical financial
statements (and related notes) of the Company which are incorporated by
reference herein. See "Incorporation of Documents by Reference."
As of and for the year ended December 31,
--------------------------------------------------------------------
1997(a) 1996(b) 1995 1994(c) 1993(d,e)
------------ ------------ ------------ ------------ ------------
Statement of
income data:
- --------------
Revenues $ 922.3 $ 1,109.4 $ 1,098.1 $ 1,079.9 $ 747.2
Cost of
products sold 669.0 850.1 853.5 821.5 508.0
Selling,
general and
administrative 175.3 186.5 194.5 198.0 204.1
Other
operating
expenses,
net (f) 3.9 1.9 8.3 2.9 53.4(c)
Special
charges (g) 116.5(h) 87.9(i) 10.7(i) --- 27.5(j)
------------ ------------ ------------ ------------ ------------
Operating
income (loss) (42.4) (17.0) 31.1 57.5 (45.8)
Other expense
(income), net (74.2)(a) (0.7) (3.0) 0.1 (102.9)(e)
Interest
expense, net 13.9 31.8 35.7 35.2 15.9
------------ ------------ ------------ ------------ ------------
Income (loss)
before income
taxes 17.9 (48.1) (1.6) 22.2 41.2
Income taxes 2.3 7.6 (0.2) 9.1 28.1
------------ ------------ ------------ ------------ ------------
Income (loss)
from
continuing
operations (3.4) (55.7) (1.4) 13.1 13.1
Discontinued
operation (k) --- (2.8) 1.0 2.1
Cumulative
effect of
accounting
changes (l) --- --- --- (31.8)
Extraordinary
items, net of
taxes (m) (10.3) (6.6) (1.1) --- (24.0)
------------ ------------ ------------ ------------ ------------
Net income
(loss) $ (13.7) $ (62.3) $ (5.3) $ 14.1 $ (40.6)
============ ============ ============ ============ ============
Income (loss)
per share
from continuing
operations:
Basic $ (0.27) $ (4.04) $ (0.10) $ 1.02 $ 1.04
Diluted (0.27) (4.04) (0.10) 1.02 1.04
Weighted
average
number of
common shares
outstanding:
Basic 12.754(n) 13.785 13.173 12.805 12.604
Diluted 12.754(n) 13.785 13.173 12.805 12.604
Dividends per
share $ 0.10(n) $ 0.40 $ 0.40 $ 0.40 $ 0.40
Other financial
data:
- ---------------
Total assets $ 583.8 $ 616.0 $ 831.4 $ 929.0 $1,024.4
Total debt 205.3 229.3 319.8 415.2 430.2
Shareholders'
equity (deficit) (43.4) 105.9 162.2 158.7 145.4
Capital
expenditures 22.6 20.2 31.0 48.5 15.1
Depreciation
and amortization 25.0 40.8 43.5 38.5 24.4
Note: The accompanying notes are an integral part of the selected
historical financial data.
NOTES TO SELECTED HISTORICAL FINANCIAL DATA OF THE COMPANY
(in millions, except per share data)
(a) During 1997, the Company sold its Sealed Power division for $223.0 in
gross cash proceeds. The Company recorded a pretax gain of $71.9, or
$31.2 after-tax. Annual 1996 revenues of this division were
approximately $230.0. See "Pro Forma Adjusted Historical Financial
Data of the Company."
(b) During 1996, the Company sold its Hy-Lift division for approximately
$15.0. Annual 1995 revenues of this division were approximately $45.0.
See "Pro Forma Adjusted Historical Financial Data of the Company."
(c) Effective December 31, 1993, the Company acquired the balance of
Sealed Power Technologies ("SPT") for $39.0. The Company previously
owned 49% of SPT and accounted for its investment using the equity
method. SPT's 1993 revenues were $392.0. As a result of this
acquisition, the Company was required to recognize its share of SPT's
losses, $26.9, in 1993. Also, in 1993, the Company initiated
consolidation of Sealed Power Europe Limited Partnership which
required recognition of cumulative losses of the partnership since its
inception, resulting in a charge of $21.5. These charges have been
included in other operating expenses, net.
(d) During 1993, the Company acquired Allen Testproducts and its related
leasing company for $102.0. Annual 1992 revenues of this acquisition
were approximately $83.0.
(e) During 1993, the Company divested its Sealed Power Replacement and
Truth divisions for a gain of $105.4 ($64.2 after-tax). Annual 1992
revenues of these divisions were approximately $247.0.
(f) Other operating expenses, net, include goodwill/intangible
amortization, minority interest, and earnings from equity interests.
(g) Special charges include certain legal costs, restructuring charges,
and write-off of goodwill.
(h) These charges included a $99.0 restructuring charge, a $4.1 charge for
five corporate executive staff reductions, and $13.4 of costs
associated with various legal matters, including $6.5 of anticipated
future legal costs associated with the ongoing litigation with Snap-on
Incorporated, legal costs associated with a settled case in
California, and certain other matters.
The Company recorded the $99.0 restructuring charge to combine two
divisions within the Service Solution segment and to recognize reduced
carrying value of certain assets resulting from the decision to
combine the divisions and exit certain manufactured diagnostic
equipment product lines. The restructuring of the two Service
Solutions businesses was in response to changing market dynamics and
changing needs of customers. The Company decided to combine its OE
Tool and Equipment business with its Aftermarket Tool and Equipment
business to provide a single business focused on the combined market
and customer needs. Additionally, the Company decided to exit certain
products to focus upon new generation products that will better meet
customer needs. The decision results in a reduction of workforce and
closing of certain facilities. The components of the charge have been
computed based on management's estimate of the realizable value of the
affected tangible and intangible assets and estimated exit costs
including severance and other employee benefits based on existing
severance policies and local laws.
The $99.0 charge included $63.7 of restructuring costs, $25.8 of
reduced inventory value and $9.5 of reduced value of other tangible
and intangible assets related to exiting certain product lines. These
restructuring costs included $13.7 of severance related costs for
approximately 800 people, $20.3 for incremental repossession and
distribution exit costs (including the termination of lease financing
and distributor agreements), $21.2 for incremental service and
software update obligations resulting from the decision to exit these
product lines, and $8.5 of costs associated with idled facilities. The
implementation of this restructuring is expected to be substantially
complete by the end of 1998.
Of the total special charges of $116.5 million, the components of the
charge that will require the future payment of cash are $80.9 million.
Cash payments in 1997 related to the special charges were $1.5
million. The expected future cash payments include an estimated $49.0
million in 1998 with the remainder over the following two years. As
there is some uncertainty associated with the timing of the cash
payments, the remaining accrual at December 31, 1997 of $79.4 million
has been classified in other current accrued liabilities. Management
estimates that savings from the restructuring will increase operating
income by $3.0 million in 1998 and $10.0 million in 1999.
(i) During the fourth quarter of 1995, management authorized and committed
the Company to undertake two significant restructuring plans. The
first plan consolidated five Service Solutions divisions into two
divisions. The second plan closed Sealed Power division's German
foundry operation and transferred certain piston ring operations to
other facilities. In 1996, three additional restructuring actions were
initiated including an early retirement program at the Service
Solutions divisions, a cost reduction initiative at several Service
Solutions international locations, and an early retirement program at
the Sealed Power division. A summary of these restructurings follows:
1996 1995
--------- ---------
Service Solutions - Five divisions
consolidated into two divisions $11.2 $ 7.0
Service Solutions - Early retirement 1.1 -
Service Solutions - International 3.5 -
SPD - Closing foundry at SP Europe - 3.7
SPD early retirement 4.2 -
------ -----
Total $20.0 $10.7
===== =====
Service Solutions Restructuring - In order to improve customer
service, reduce costs and improve productivity and asset utilization, the
Company decided to consolidate five existing Service Solutions divisions
into two. This restructuring plan involved closing two Company owned
manufacturing facilities, a Company owned distribution facility, several
leased service centers and a leased sales facility in France. The plan also
included combining sales, engineering and administrative functions, and was
completed at the end of 1996. The plan included the termination of
approximately 570 employees resulting in a net reduction of approximately
310 employee positions after considering staffing requirements at remaining
facilities.
The Company recorded a $7.0 charge in 1995 and an $11.2 charge in 1996
to complete this restructuring. These charges recognized severance and
benefits for employees to be terminated, holding costs of vacated
facilities, the adjustment to fair market value of one manufacturing
facility to be closed, and other costs to complete the consolidation of the
divisions. The distribution facility was sold during the fourth quarter of
1996 and the manufacturing facilities were sold during 1997.
Service Solutions - Early Retirement - Closely associated with the
consolidation of five divisions into two, an early retirement program was
accepted by approximately 60 people and the Company recorded a $1.1 charge
in the first quarter of 1996.
Service Solutions - International - During the second quarter of 1996,
the Company recorded a $3.5 restructuring charge principally to recognize
severance associated with the termination of 113 international employees
and related operating downsizing costs.
SPD - Closing Foundry at SP Europe - The Company closed its
unprofitable foundry operations at SP Europe and transferred certain piston
ring operations to other facilities. This closing resulted in the
elimination of approximately 200 positions and was completed at the end of
the third quarter of 1996. In 1995, the Company recorded a $3.7
restructuring charge to accrue severance that was paid to these employees.
Sealed Power Division Early Retirement - During the second quarter of
1996, the Company recorded a $4.2 restructuring charge for the early
retirement of 94 employees at the Sealed Power division.
The actual savings associated with the 1995 and 1996 restructuring
actions relate primarily to the Service Solutions restructuring actions.
The actual savings achieved in 1996 and 1997 have been consistent with the
estimated full year savings of $23.0 million by the year 1998. The actions
increased operating income by an estimated $7.0 million in 1996 and an
estimated $12.0 million in 1997.
These charges were recorded in the appropriate periods in accordance
with the requirements of Emerging Issues Task Force Pronouncement 94-3.
Certain costs incurred in connection with management's planned actions not
qualifying for accrual in 1995 were recorded in 1996, based on employee
acceptance of voluntary termination benefits and the satisfaction of other
requirements to recognize these costs. At December 31, 1997, the
restructuring actions initiated in 1995 and 1996 were complete and the
actual costs to implement the actions did not differ materially from the
estimates used to record these accruals.
Also during 1996, the Company recognized a $67.8 goodwill write-off,
with no related tax benefit. The goodwill was related to the 1998 and 1993
acquisitions of Bear Automative Company and of Allen Testproducts,
respectively.
(j) During 1993, the Company recognized a $27.5 ($18.5 after-tax) special
charge to combine its Bear Automotive operation with Allen
Testproducts.
(k) During 1995, the Company sold SPX Credit Corporation and recorded a
pretax loss of $4.8 ($3.0 after-tax). The financial results of this
operation are included as a discontinued operation through the date of
divestiture.
(l) During 1993, the Company adopted a new accounting methodology for its
ESOP and reflected its 49% share of SPT's adoption of SFAS No. 106
regarding accounting for postretirement benefits other than pensions.
(m) During 1997, the Company tendered for substantially all ($126.7) of
its outstanding 11 3/4% senior subordinated notes. SPX recorded an
extraordinary item, net of taxes, of $10.3 for the costs to purchase
the notes. During 1996, the Company purchased $99.9 of these notes and
recorded an extraordinary item, net of taxes, of $6.6 for the costs to
purchase the notes. During 1995, the Company purchased $31.7 of these
notes and recorded an extraordinary item, net of taxes, of $1.1 for
the costs to purchase the notes. During 1993, the Company recorded the
costs associated with prepayment of certain SPX and SPT indebtedness
totaling $24.0, net of taxes, as an extraordinary item.
(n) During 1997, the Company purchased 2.147 shares of SPX Common Stock
through a Dutch Auction self-tender offer for $56.00 per share. As of
December 31, 1997, the Company had purchased an additional 0.390
shares through open market purchases. Also, concurrent with the Dutch
Auction, the Company announced the elimination of quarterly cash
dividends and stated that future distributions to shareholders would
be in the form of open market purchases of common stock, when deemed
appropriate by management.
SELECTED HISTORICAL FINANCIAL DATA OF ECHLIN
(in millions, except per share data)
The following table presents selected historical statement of income
and other financial data of Echlin. The financial data as of and for the
three months ended November 30, 1997 and November 30, 1996 have been
derived from the unaudited financial statements of Echlin contained in
Echlin's 1998 First Quarter Form 10-Q. The financial data as of and for the
fiscal years ended August 31, have been derived from the audited
financial statements of and selected financial data contained in Echlin's
1997 Form 10-K. The operating results for the three months ending November
30, 1997 are not necessarily indicative of the results that may be expected
for the year ended August 31, 1998. Echlin's selected historical financial
data should be read in conjunction with, and are qualified in their
entirety by reference to, the historical financial statements (and related
notes) of Echlin which are contained herein (except for the report of
Echlin's independent accountants contained in the Company's 1997 Annual
Report on Form 10-K which is not incorporated herein by reference because
the consent of Echlin's independent accountants has not yet been obtained).
See "Incorporation of Documents by Reference."
As of and
for three
months ended
November 30, As of and for the fiscal year ended August 31,
----------------------- ---------------------------------------------------------
1997 1996 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
Statement of income data:
- -------------------------
Net sales $ 889.5 $ 850.9 $ 3,568.6 $ 3,128.7 $ 2,717.9 $ 2,229.5 $ 1,944.5
Cost of goods sold 671.1 635.0 2,707.1 2,309.0 1,932.5 1,571.3 1,378.0
Selling and administrative expenses 159.2 149.2 640.1 574.6 531.3 468.5 420.4
Repositioning and other special charges (a) - - 254.1 - - - -
Gain on sales of businesses (b) - - (28.6) - - - -
-------- -------- --------- --------- --------- --------- ---------
Income (loss) from operations 59.2 66.7 (4.1) 245.1 254.1 189.7 146.1
Interest expense, net 9.8 8.0 40.6 32.9 23.6 11.7 8.5
-------- -------- --------- --------- --------- --------- ---------
Income (loss) before taxes 49.4 58.7 (44.7) 212.2 230.5 178.0 137.6
Provision for taxes 16.8 20.6 2.2 70.0 76.1 56.9 44.0
-------- -------- --------- --------- --------- --------- ---------
Income (loss) before cumulative
effect of accounting change 32.6 38.1 (46.9) 142.2 154.4 121.1 93.6
Cumulative effect of accounting change (c) - - - - - 2.6 -
-------- -------- --------- --------- --------- --------- ---------
Net income (loss) $ 32.6 $ 38.1 $ (46.9) $ 142.2 $ 154.4 $ 123.7 $ 93.6
======== ======== ========== ========= ======== ======== =========
Average shares outstanding 63.132 62.347 62.601 61.919 59.476 58.996 58.560
Primary net income (loss) per share (d) $ 0.52 $ 0.61 $ (0.75) $ 2.30 $ 2.60 $ 2.10 $ 1.60
Dividends per share $ 0.225 $ 0.22 $ 0.89 $ 0.85 $ 0.79 $ 0.73 $ 0.70
Other financial data:
- --------------------
Total assets 2,365.5 2,453.8 2,374.2 2,130.8 1,961.0 1,577.4 1,263.3
Total debt 761.4 769.9 757.9 495.9 507.1 308.3 164.2
Shareholders' equity 937.0 1,039.5 913.7 1,008.9 909.3 799.0 713.8
Capital expenditures 31.5 28.1 149.2 104.4 103.9 73.8 41.5
Depreciation and amortization 29.7 27.2 113.9 90.9 76.6 64.2 59.7
Note: The accompanying notes are an integral part of the
selected historical financial data.
NOTES TO SELECTED HISTORICAL FINANCIAL DATA OF ECHLIN
(in millions, except per share data)
(a) During fiscal 1997, Echlin recorded repositioning and other special
charges of $254.1, pretax. The repositioning charge included expenses
related to facility realignments and rationalizations, and the
write-down to net realizable value of businesses to be disposed. In
addition, goodwill associated with brand names no longer in use was
written off, inventory related to discontinued and rationalized
product lines was written down, property, plant and equipment idled by
facility closures and product line rationalizations were reduced, and
other investments and deferred customer acquisition costs were written
off.
(b) During fiscal 1997, Echlin sold two divisions for gross proceeds of
$75.9. Echlin reported a pretax gain of $28.6.
(c) During fiscal 1994, Echlin adopted a new accounting methodology for
income taxes.
(d) Echlin indicates that pro forma diluted loss per share under FAS 128
would have been less than the reported loss per share for the year
ended August 31, 1997 and pro forma diluted earnings per share would
have been $0.51 for the quarter ended November 30, 1997.
PRO FORMA CONDENSED COMBINED FINANCIAL DATA
OF THE COMPANY AND ECHLIN
(unaudited)
(in millions, except per share data)
The following information is presented as if the Proposed Business
Combination of the Company and Echlin occurred on September 1, 1996 for
statement of income and related data and on November 30, 1997 for balance
sheet and related data. This pro forma data assumes that the Proposed
Business Combination is effected by the exchange of shares of SPX Common
Stock and cash for Echlin Shares. The pro forma data assumes the Company
will exchange 0.4796 share of SPX Common Stock and $12.00 cash for each
Echlin share, whereby 30.532 million shares of SPX Common Stock and $763.9
of cash are issued in exchange for all outstanding Echlin Shares and
equivalent Echlin Shares. The Proposed Business Combination will be
accounted for as a reverse acquisition as the shareholders of Echlin will
own a majority of the outstanding shares of SPX Common Stock upon
completion of the transaction. Accordingly, for accounting purposes, the
Company is treated as the acquired company and Echlin is considered to be
the acquiring company. The purchase price will be allocated to the assets
and liabilities assumed of the Company based on their estimated fair market
values at the acquisition date. Under reverse acquisition accounting, the
purchase price of the Company is based on the fair market value of SPX
Common Stock at the date of acquisition. The cash portion of the
Consideration will be accounted for as a dividend by the combined company.
The Company's financial position and results of operations will not be
included in Echlin's consolidated financial statements prior to the date
the Merger is consummated.
Under reverse acquisition accounting, the purchase price of the
Company is based on the fair market value of SPX Common Stock. For purposes
of this pro forma information, the fair market value of SPX Common Stock is
assumed to be $76-5/16 per share, which reflects the closing price of SPX
Common Stock as of March 31, 1998. The Consideration includes 0.4796 share
of SPX Common Stock. This is a fixed exchange ratio and will not be
adjusted in the event of any increase or decrease in the market price of
SPX Common Stock. Consequently, changes in the market price of SPX Common
Stock will not impact these pro forma financial statements other than to
increase or decrease the purchase price of the Company and the related
amount of goodwill and amortization thereof.
The pro forma condensed combined financial data are intended for
information purposes, and do not purport to represent what the combined
entity's results of continuing operations or financial position would
actually have been had the transaction in fact occurred at an earlier date,
or project the results for any future date or period. Upon consummation of
the Proposed Business Combination, the actual financial position and
results of operations of the combined company will differ, perhaps
significantly, from the pro forma amounts reflected herein due to a variety
of factors, including changes in operating results between the date of the
pro forma condensed combined financial data and the date on which the Offer
is consummated and thereafter, as well as the factors discussed under "Risk
Factors."
The pro forma condensed combined financial data does not give effect
to any restructuring costs, nor to any cost savings that could result from
the combination of the companies. Any integration and rationalization of
the operations of Echlin may include certain costs which may in turn result
in a charge to earnings. Such a charge, which cannot now be quantified
fully, may be material and would be recognized in the period in which such
a restructuring occurs. These costs may include severance and related
employee benefit costs, costs to consolidate manufacturing and distribution
facilities, facility rearrangement costs, relocation and moving costs,
training costs, debt extinguishment costs, and costs associated with change
of control agreements, among others. To date, the Company's access to
information related to Echlin has been limited to publicly available
information. In addition, publicly available information does not contain
sufficient details related to Echlin's severance plans, employee benefit
agreements, change of control costs or debt extinguishment provisions to
enable the Company to quantify the costs associated with business
integration and rationalization actions that may be considered by the
Company. Nonetheless, based on assumptions related to headcount reductions
and average annual salaries used to compute the annualized expense savings
and assuming a severance policy that would result in an average severance
term of six months, the estimated pre-tax costs of the severance (excluding
any change in control costs) would be approximately $60.0 million.
The pro forma condensed combined financial data also does not give
effect to any costs savings that could result from the combination of the
companies. The Company's management estimates that the combined company can
achieve approximately $125.0 million of annualized cost savings in the
first full year following the acquisition, and $175.0 million of annualized
cost savings in the second full year following the acquisition. These costs
savings include three categories of estimated annual savings in the second
full year; savings associated with headcount reductions of $120.0 million;
reduction in duplicative corporate costs of $20.0 million, and
manufacturing, distribution and sourcing rationization of $35.0 million.
These savings estimates are based upon assumptions made by the Company's
management using available public information of Echlin, certain
comparative peer group information of Echlin, and the Company's own
internal information.
In the pro forma condensed combined financial data, Echlin's
information was derived from Echlin's 1997 Form 10-K, and Echlin's 1998
First Quarter Form 10-Q. For the Company's pro forma adjusted historical
financial data, see "Pro Forma Adjusted Historical Financial Data of the
Company," presented elsewhere herein.
The pro forma condensed combined financial data should be read in
conjunction with the financial statements and notes thereto included in the
Company's 1997 Form 10-K, the Company's 1997 Third Quarter Form 10-Q,
Echlin's 1997 Form 10-K and Echlin's 1998 First Quarter Form 10-Q.
PRO FORMA CONDENSED COMBINED FINANCIAL DATA
OF THE COMPANY AND ECHLIN
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1997
(unaudited)
(in millions, except per share data)
The Company Echlin Pro forma
Historical (a) Historical (a) Adjustments Pro forma
---------- ---------- ----------- ---------
Statement of income data:
- -------------------------
Revenues $ 241.7 $ 889.5 $ - $ 1,131.2
Cost of products sold 176.5 671.1 0.8 (d) 848.4
Selling, general and
administrative expense 45.6 159.2 0.8 (d) 205.6
Other operating expenses, net 1.0 - 5.6 (d) 6.7
Special charges(1) 110.0 - - 110.0
---------- ------------ ------------- ----------
Operating income (loss) (91.4) 59.2 (7.2)(d) (39.4)
Other expense (income), net (1.1) - - (1.1)
Interest expense, net 3.4 9.8 20.6 (f) 33.8
---------- ------------ ------------- ----------
Income (loss) before income taxes (93.7) 49.4 (27.8) (72.1)
Provision (benefit) for income
taxes (33.7) 16.8 (8.4)(g) (25.3)
---------- ------------ ------------- ----------
Income (loss) (m) $ (60.0) $ 32.6 $ (19.5) $ (46.9)
========== ============ ============= ==========
Primary income (loss) per share (n) $ (5.02) $ (1.11)
Weighted average number of
common shares outstanding 11.943 30.079 (h) 42.022
Dividends per share (m) $ - $ -
Other financial data:
- ---------------------
Capital expenditures $ 7.0 $ 31.5 $ - $ 38.5
Depreciation and amortization 5.7 29.7 6.9 42.3
Note: The accompanying notes are an integral part of the pro forma
condensed combined financial data.
PRO FORMA CONDENSED COMBINED FINANCIAL DATA
OF THE COMPANY AND ECHLIN
FOR THE YEAR ENDED AUGUST 31, 1997
(unaudited)
(in millions, except per share data)
The Company
Pro forma Pro
Adjusted Echlin forma
Historical (b) Historical (b) Adjustments Pro forma
---------- ---------- ----------- ---------
Statement of income data:
- -------------------------
Revenues $ 848.2 $ 3,568.6 $ - $ 4,416.8
Cost of products sold 612.9 2,707.1 3.3 (d) 3,323.3
Selling, general and
administrative expense 169.6 640.1 3.3 (d) 813.0
Other operating
expenses, net 3.6 - 22.3 (d) 25.9
Special charges and
gains (k,l) 78.5 225.5 - 304.0
--------- --------- ----------- ---------
Operating income (loss) (16.4) (4.1) (28.9)(d) (49.4)
Other expense (income),
net (2.4) - (2.4)
Interest expense, net 14.9 40.6 77.9 (f) 133.4
--------- --------- ----------- ---------
Income (loss) before
income taxes (28.9) (44.7) (106.8) (180.4)
Provision (benefit) for
income taxes 14.1 2.2 (32.1)(g) (15.8)
--------- --------- ----------- ---------
Income (loss) (c) $ (43.0) $ (46.9) $ (74.7) $ (164.6)
========= ========= =========== =========
Primary income (loss)
per share (n) $ (3.22) $ (3.81)
Weighted average number
of common shares
outstanding 13.359 29.825 (h) 43.184
Dividends per share (m) $ 0.20 $ 0.20
Other financial data:
- ---------------------
Capital expenditures $ 20.0 $ 149.2 $ - $ 169.2
Depreciation and amortization 24.1 113.9 27.3 165.3
Note: The accompanying notes are an integral part of the pro forma
condensed combined financial data.
PRO FORMA CONDENSED COMBINED BALANCE SHEET
OF THE COMPANY AND ECHLIN
AS OF NOVEMBER 30, 1997
(unaudited)
(in millions)
The Company Echlin
Historical(a) Historical(a) Pro forma
Dec.31,1997 Nov.30,1997 Adjustments Pro forma
---------- ----------- ----------- ---------
Assets:
Current assets $ 383.5 $ 1,198.5 $ 10.3 (i) $1,577.4
(14.9) (i)
Property, plant and
equipment, net 122.1 726.0 40.0 (i) 888.1
Marketable securities - 81.3 - 81.3
Intangible assets - 318.1 - 318.1
Goodwill 60.2 - (60.2) (i) 1,010.1
1,010.1 (i)
Other assets 18.0 41.6 37.5 (e) 183.6
87.3 (i)
(0.8) (i)
---------- ---------- --------- ---------
Total assets $ 583.8 $ 2,365.5 $1,109.3 $ 4,058.6
========== ========== ========= =========
Liabilities and
Shareholders' Equity
Notes payable and current
maturities of long-term
debt $ 2.8 $ 58.7 $ - $ 61.5
Other current liabilities 283.8 590.0 - 873.8
Total long-term
liabilities 138.1 77.0 (19.4) (i) 250.4
54.7 (i)
Long-term debt 202.5 702.8 816.4 (e) 1,721.7
Total shareholders' equity
(deficit) (43.4) 937.0 1,003.0 (j) 1,151.2
(763.9) (j)
(14.9) (i)
43.4 (j)
(10.0) (i)
---------- ---------- --------- ---------
Total liabilities and
shareholders' equity $ 583.8 $ 2,365.5 $1,109.3 $ 4,058.6
========== ========== ========= =========
Note: The accompanying notes are an integral part of the pro forma
condensed combined balance sheet.
NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL DATA
OF THE COMPANY AND ECHLIN
(unaudited)
(in millions, except per share data)
(a) Pro forma information as of and for the three months ended November
30, 1997 includes the actual historical results of the Company as of
and for the three months ended December 31, 1997 (the most current
fiscal quarter end of the Company within 93 days of November 30, 1997)
and the actual historical results of Echlin as of and for the three
months ended November 30, 1997.
(b) Pro forma information for the year ended August 31, 1997 includes the
pro forma adjusted historical results of the Company for the twelve
months ended September 30, 1997 (the most current fiscal twelve month
period of the Company within 93 days of August 31, 1997) and the
actual historical results of Echlin for the year ended August 31,
1997. The pro forma adjusted historical results of the Company for the
twelve months ended September 30, 1997 reflect the Company's February
1997 disposition of the Sealed Power division and its November 1996
disposition of the Hy-Lift division, as if such dispositions occurred
on October 1, 1996. See "Pro Forma Adjusted Historical Financial Data
of the Company," presented elsewhere herein.
(c) The pro forma condensed combined financial data reflect only results
from continuing operations. The Company recorded a $15.8 extraordinary
item, net of taxes, in the twelve months ended September 30, 1997. The
extraordinary item related to the Company's purchase of its 11 3/4%
senior subordinated notes.
(d) These pro forma adjustments reflect the impact of the allocation of
the purchase price to the assets and liabilities of the Company on the
pro forma condensed combined statement of income and other financial
data. The ultimate allocation of the purchase price to the net assets
acquired, goodwill and other intangible assets, liabilities assumed
and incomplete technology of the Company is subject to final
determination of their respective fair values, and as a result, these
adjustments could change. The following table reflects the pro forma
condensed combined statement of income impact of the purchase
accounting adjustments:
Cost of Selling, Other
products general operating
sold & admin. expenses Total
-------- -------- --------- -------
Additional depreciation $ 2.5 $ 2.5 $ - $ 5.0
Pension expense adjustment 0.3 0.3 - 0.6
Amortization of previously
recorded goodwill - - (3.0) (3.0)
Goodwill and intangible
amortization on
transaction - - 25.3 25.3
Postretirement expense
adjustment 0.5 0.5 - 1.0
-------- -------- --------- -------
Year ended August 31, 1997 $ 3.3 $ 3.3 $ 22.3 $ 28.9
======== ======== ========= =======
Three months ended
November 30, 1997 $ 0.8 $ 0.8 $ 5.6 $ 7.2
======== ======== ========= =======
Upon consummation of the transaction, an estimated $10.0 charge for
incomplete technology will occur, however, this charge is not
reflected in the pro forma data as the charge is non-recurring and has
no continuing impact.
(e) This pro forma adjustment reflects the borrowings for the cash portion
of the Consideration, debt issuance costs for new financing, and other
estimated transaction fees of $15.0. The cash portion of the
Consideration is $763.9, which represents $12.00 per Echlin Share
multiplied by 63.661 Echlin Shares and Echlin Share equivalents
outstanding. The outstanding and equivalent Echlin Shares include
Echlin Shares outstanding at November 5, 1997 and Echlin Shares
issuable (treasury stock method) upon exercise of Echlin's options,
less 0.416 Echlin Shares held by SPX as of December 31, 1997. The debt
issuance costs are estimated at $37.5 to obtain a new seven year
$2,400 financing to effect the Proposed Business Combination, to
refinance existing debt of both the Company and Echlin and provide
working capital.
(f) These pro forma adjustments reflect the interest expense associated
with the incremental borrowings ($816.4) to effect the Proposed
Business Combination, as if the incremental borrowings had occurred at
September 1, 1996. The pro forma interest expense adjustment also
reflects the refinancing of existing debt under a new seven year
$2,400 financing as of September 1, 1996. The interest expense has
been computed on an assumption that borrowings under the new credit
facility will bear interest at a rate of LIBOR plus 2 1/4% (8% was
used in these pro forma financial statements) and that debt issuance
costs are amortized over seven years. If the interest rate used in the
pro forma financial data were assumed to increase by 1/8%, the impact
would be to increase net loss by $3.4 ($0.08 per share) and by $13.9
($0.32 per share) for the three months ended November 30, 1997 and for
the year ended August 31, 1997, respectively. Average historical
outstanding debt of the Company and Echlin, as used in this pro forma
presentation, was $965.5 and $973.5 for the three months ended
November 30, 1997 and for the year ended August 31, 1997,
respectively.
(g) These adjustments represent the estimated income tax effect of the pro
forma adjustments, excluding goodwill expense which will not be
deductible for tax purposes, using an effective income tax rate of
38%.
(h) These pro forma adjustments reflect the additional shares of SPX
Common Stock to be issued in the transaction. The additional shares to
be issued are calculated assuming that the stock component of the
Consideration is 0.4796 share of SPX Common Stock, which converts
weighted average outstanding Echlin Shares to weighted average
outstanding shares of SPX Common Stock. The Echlin Shares used in
these calculations include reported weighted average outstanding
Echlin Shares, less 0.416 Shares held by the Company as of December
31, 1997.
(i) These pro forma adjustments reflect the allocation to the assets and
liabilities of the Company of the difference between the market value
of the Company and the Company's book value (the "excess purchase
price"). The market value of the Company is assumed to be the sum of
the fair market value of the outstanding SPX Common Stock (less
unallocated SPX Common Stock held by the Company's KSOP and restricted
SPX Common Stock) and the fair value of the Company's outstanding
options. The Company's book value is assumed to be its shareholders'
deficit adjusted by estimated transaction fees of $15.0 which are
assumed to have been incurred by the Company prior to the combination.
Market Value the Company:
Shares of Common Stock outstanding 12.531
Unallocated SPX Common Stock held in
KSOP and Restricted SPX Common Stock $ (0.658)
----------
Adjusted SPX Common Stock outstanding 11.873
Market price per share of
SPX Common Stock $ 76.3125
-----------
Market value of SPX Common
Stock outstanding $ 906.0
Market value of outstanding options 97.0
---------
Market value of the Company $ 1,003.0
the Company's Book Value:
December 31, 1997 Shareholders' deficit $ (43.4)
Assumed transaction fees (15.0)
the Company's Book Value $ (58.4)
---------
Excess Purchase Price $ 1,061.4
=========
This excess purchase price has been allocated to the assets and
liabilities of the Company as follows:
Inventory $ 10.3
Property, plant & equipment 40.0
Prepaid pension (other assets) 87.3
Deferred financing fees (other assets) (0.8)
Goodwill - previously recorded (60.2)
Goodwill and intangible assets 1,026.5
Incomplete technology 10.0
Postretirement health and life insurance
liability 19.4
Deferred tax liability (54.7)
-----
$1,077.8
========
The preliminary allocations of the excess purchase price are based
upon current estimates and information available to the Company. Property,
plant and equipment reflect the adjustment to estimated fair market values
of these assets. Prepaid pension reflects the adjustment to the fair market
value of the plan assets less the projected benefit obligation. Goodwill,
previously recorded, reflects the elimination of goodwill that is included
in the Company's historical balance sheet. Goodwill and intangible assets
reflects the amount of excess purchase price remaining after allocations to
all other assets and liabilities. Incomplete technology represents the
estimated fair market value of in process product development costs.
Postretirement health and life insurance liability reflects the adjustment
of the liability to the accumulated benefit obligation. The deferred tax
liability reflects the deferred tax liabilities related to these
allocations.
The goodwill recorded as a result of these allocations will be
amortized over a 40 year life. In determining the estimated useful life,
management considered the nature, competitive position, life cycle
position, and historical and expected future operating income of the
Company, as well as the Company management's commitment to support SPX
through continued investment in capital expenditures, operational
improvements, and research and development. After the transaction, the
combined company will continually review whether subsequent events and
circumstances have occurred that indicate the remaining estimated useful
life of goodwill may warrant revision or that the remaining balance of
goodwill may not be recoverable. If events and circumstances indicate that
goodwill related to a particular business should be reviewed for possible
impairment, the combined company will use projections to assess whether
future operating income on a non-discounted basis (before goodwill
amortization) of the unit is likely to exceed the goodwill amortization
over the remaining life of the goodwill, to determine whether a write-down
of goodwill to recoverable value is appropriate.
The ultimate allocation of the purchase price to the net assets
acquired, goodwill, other intangible assets, liabilities assumed and
incomplete technology is subject to final determination of their respective
fair values. This final allocation will be based upon the results of a
professional appraisal that will be performed upon the consummation of the
transaction. The Company's management believes the above preliminary
allocations of the purchase price are reasonable and will not materially
change upon completion of the appraisal.
The pro forma adjustments include the elimination of the Company's
$14.9 investment in the 0.416 shares of Echlin (included in current
assets). As of November 30, 1997, there were no other intercorporate
transactions that required elimination.
(j) These pro forma adjustments reflect the effect of reverse acquisition
accounting by adding the market value of the Company ($1,003.0),
subtracting the Company's December 31, 1997 shareholder deficit
($43.4), and subtracting the cash payout ($763.9) which is treated as
a dividend by the combined company.
(k) Reflects a reclassification to special charges of $6.5 of legal costs
that were previously classified as other expense (income), net in
the Company's 1997 Third Quarter Form 10-Q.
(l) The pro forma condensed combined financial data do not give effect to
any integration or restructuring costs, nor to any cost savings, that
could result from the combination of the companies.
The pro forma condensed combined financial data of the Company and
Echlin for the three months ended November 30, 1997 include special
charges of $110.0 recorded by the Company primarily to combine two
divisions and to recognize reduced carrying value of certain assets
resulting from the decision to combine the divisions and exit certain
product lines. See "Selected Historical Financial Data of the
Company."
The pro forma condensed combined financial data of the Company and
Echlin for the year ended August 31, 1997 include special charges and
gains of $304.0. The special charges and gains included a $4.2 special
charge recorded by the Company related to the combination of five
divisions into two divisions, a $6.5 special charge recorded by the
Company of anticipated future legal costs associated with the ongoing
litigation with Snap-on Incorporated, a $67.8 write-off of goodwill
recorded by the Company related to the acquisitions of Bear Automotive
and Allen Testproducts, $254.1 of repositioning and other special
charges recorded by the Company related to facility realignments and
rationalizations and other actions, and $28.6 of gains from the sale
of two divisions by the Company. See "Selected Historical Financial
Data of the Company" and "Selected Historical Financial Data of
Echlin."
(m) Represents the historical quarterly cash dividend per share of the
Company for the periods presented. In April 1997, the Company
eliminated its quarterly cash dividend and stated that future share
repurchases would be used, when appropriate, for distributions to
shareholders.
(n) FAS 128, "Earnings per Share," is a new pronouncement which was issued
in February 1997, but not effective until after December 15, 1997. The
new pronouncement established revised standards for calculating and
reporting earnings per share. On a pro forma basis, if this standard
were adopted for the periods presented, both basic and diluted income
(loss) per share would have been equal to primary income (loss) per
share.
PRO FORMA ADJUSTED HISTORICAL FINANCIAL DATA OF THE COMPANY
(unaudited)
(in millions, except per share data)
On February 7, 1997, the Company completed the sale of substantially
all of the assets and rights used in the manufacture and distribution of
piston rings and cylinder liners, known as the Sealed Power division
("SPD"). The gross cash sales proceeds were $223.0. Additionally, effective
November 1, 1996, SPX sold its Hy-Lift division to W.A. Thomas Company.
Hy-Lift manufactures and distributes engine valve train components to both
the original equipment market and the aftermarket. The gross cash sales
proceeds were $15.0.
The following historical financial data include the results of SPD
through February 7, 1997, and the results of Hy-Lift through November 1,
1996, their dates of disposition. The following unaudited pro forma
adjusted historical financial data for the twelve months ended September
30, 1997 reflects the disposition of these divisions as if they had
occurred as of October 1, 1996. The pro forma adjusted historical financial
data does not purport to represent what the Company's results of continuing
operations would actually have been had the transactions in fact occurred
as of October 1, 1996, or project the results for any future period.
The pro forma adjusted historical financial data should be read in
conjunction with the financial statements and notes thereto included in the
Company's 1997 Form 10-K, the Company's Current Report on Form 8-K dated
February 21, 1997, and the Company's 1997 Third Quarter Form 10-Q.
PRO FORMA ADJUSTED HISTORICAL FINANCIAL DATA OF THE COMPANY
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1997
(unaudited)
(in millions, except per share data)
Pro forma Adjustments
---------------------
Historical Divest(a) Other Pro forma
---------- --------- ----- ---------
Statement of income data:
- -------------------------
Revenues $ 932.1 $ (83.9) $ 848.2
Cost of products sold 686.9 (74.0) 612.9
Selling, general &
administrative 173.3 (3.7) 169.6
Other operating expenses, net 3.3 0.3 3.6
Special charges (e) 78.5 - 78.5
-------- --------- ---------
Operating income (loss) $ (9.9) $ (6.5) $ (16.4)
Other (income) expense (74.3) - 71.9 (b) (2.4)
Interest expense, net 17.5 - (2.6)(c) 14.9
-------- --------- ------ ---------
Income (loss) before
income taxes $ 46.9 $ (6.5) $(69.3) $ (28.9)
Provision for income taxes 56.2 (2.3) (39.8)(d) 14.1
-------- --------- ------ ---------
Income (loss) (f) $ (9.3) $ (4.2) $(29.5) $ (43.0)
======== ========= ====== =========
Primary income (loss)
per share (g) $ (0.70) $ (3.22)
Weighted average number
of shares 13.359 13.359
Other financial data:
- ---------------------
Capital expenditures $ 23.8 (3.8) $ 20.0
Depreciation and amortization 28.3 (4.2) 24.1
(a) This column reflects the operating results of SPD and Hy-Lift through
their dates of disposition, February 7, 1997 and November 1, 1996,
respectively.
(b) Adjustment to exclude the gain on the sale of SPD. The Company's gain
on the sale of Hy-Lift was immaterial.
(c) Adjustment to interest expense, net, assuming the use of net proceeds
to reduce revolving credit and other debt.
(d) Adjustment to income tax expense to reflect the tax effect of the
adjustments.
(e) Reflects a reclassification to special charges of $6.5 of legal costs
to special charges that were previously classified as other expense
(income), net in the Company's 1997 Third Quarter Form 10-Q.
(f) Income excludes extraordinary item of $15.8, net of taxes.
(g) FAS 128, "Earnings per Share," is a new pronouncement which was issued
in February 1997, but not effective until after December 15, 1997. The
new pronouncement established revised standards for calculating and
reporting earnings per share. On a pro forma basis, if this standard
was adopted for the period presented, both basic and diluted income
(loss) per share would have been equal to primary income (loss) per
share.
PROPOSAL TO AMEND THE COMPANY'S CERTIFICATE OF INCORPORATION
TO INCREASE THE AMOUNT OF AUTHORIZED SPX COMMON STOCK
The Company's Board of Directors has proposed that the Company's
Restated Certificate of Incorporation be amended to increase the number of
shares of authorized SPX Common Stock from 50,000,000 to 100,000,000.
Specifically, the Board of Directors has proposed that the first paragraph
of Article Fourth of the Restated Certificate of Incorporation be amended
to read as follows:
1. Authorized Shares. The total number of authorized
shares of the stock of all classes which the Corporation
shall have authority to issue is one hundred three million
(103,000,000), of which three million (3,000,000) shall be
shares of Preferred Stock without par value and one hundred
million (100,000,000) shall be shares of Common Stock of the
par value of $10 per share.
As of the Record Date, there were [ ] shares of SPX Common Stock
outstanding. If the Proposed Business Combination is consummated pursuant
to its current terms, the Company would have approximately 43,000,000
shares of SPX Common Stock outstanding. When added together with the [ ]
shares of SPX Common Stock that would be reserved for issuance upon
exercise of outstanding options (including both options granted by the
Company and options that had been granted by Echlin and which would become
exercisable for SPX Common Stock), the Company would have only
approximately [ ] shares of SPX Common Stock authorized and available for
future issuance.
Although the Company has no present plans to issue shares of SPX
Common Stock (or other securities or rights) other than in connection with
the Proposed Business Combination and upon exercise of outstanding options,
the Board of Directors believes that it is advisable to have additional
shares of SPX Common Stock available for issuance for a number of purposes,
including raising capital through the sale of SPX Common Stock, future
acquisitions, and other corporate purposes such as stock splits and
stock-based compensation. The authorization of such shares at this time
would allow the Company to act expeditiously if additional needs or
opportunities arose requiring the issuance of such shares.
If the Companys shareholders approve the Charter Amendment, it will be
adopted regardless of whether the Proposed Business Combination is
consummated.
The Board of Directors will authorize the issuance of additional
shares of SPX Common Stock only when it believes that such issuance will be
in the best interests of the Company and its shareholders. However, the
issuance of additional shares of SPX Common Stock may, among other things,
have a dilutive effect on the earnings per share of SPX Common Stock and on
the equity and voting rights of holders of shares of SPX Common Stock, and
consequently may also adversely affect the market price of SPX Common
Stock. The increase in the availability for issuance of additional shares
of SPX Common Stock pursuant to the Charter Amendment also may be perceived
as having anti-takeover effects by enabling the Board of Directors to issue
shares in transactions that would make a change in the control of the
Company more difficult or costly and therefore less likely. The Board of
Directors is not presenting the proposal to approve the Charter Amendment
for anti-takeover purposes, has no present intention to use the increased
shares for anti-takeover purposes and is not aware of any efforts to obtain
control of the Company. Notwithstanding shareholder approval of the Charter
Amendment, under the rules of the New York Stock Exchange, any proposed
issuance of shares of SPX Common Stock in excess of 20% of the then
outstanding shares of SPX Common Stock, will require approval from the
prior shareholders of the Company.
The newly authorized shares of SPX Common Stock for which
authorization is sought would have the same rights and privileges as the
shares of SPX Common Stock presently outstanding. See "Description of
Company Capital Stock." The Company's shareholders do not have preemptive
rights to subscribe for, purchase or receive shares of the authorized
capital stock of the Company.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF
THE AMENDMENT TO THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF SHARES OF AUTHORIZED SPX COMMON STOCK.
POSSIBLE ADJOURNMENTS OF THE ANNUAL MEETING PROPOSED
BY THE BOARD OF DIRECTORS
It is the Company's present expectation that, at the Annual Meeting,
votes will be taken and the polls closed on all proposals submitted to the
Company shareholders. It is likely that the Annual Meeting will then be
adjourned to allow the inspectors of election to count and report on the
votes cast. It is possible, however, that the Board of Directors may
propose one or more adjournments of the Annual Meeting, without closing the
polls on the Stock Issuance proposal and/or the Charter Amendment Proposal,
in order to permit further solicitation of proxies with respect to either
or both of such proposals.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT COMPANY
SHAREHOLDERS VOTE "FOR" SUCH ADJOURNMENTS.
If proxies are returned properly signed but otherwise unmarked, the
shares represented by such proxies will be voted at the Annual Meeting for
any such adjournment that the Board of Directors might propose but will not
be considered a direction to vote for any adjournment proposed by others.
If any adjournment is properly presented at the Annual Meeting for action
by any person or persons other than the Board of Directors, the persons
named as proxies, acting in such capacity, will have discretion to vote on
such matters in accordance with their best judgment.
STOCK OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the number of shares of SPX Common
Stock beneficially owned as of March 16, 1998, or as to which there was a
right to acquire beneficial ownership within 60 days of such date, by each
director, each executive officer named in the Summary Compensation Table
and all directors and executive officers as a group.
VESTED
OPTIONS
NUMBER OF EXERCISABLE
SHARES WITHIN
BENEFICIALLY 60 PERCENT OF
OWNED(FN1)(FN2) DAYS TOTAL CLASS
--------- ---- ----- -----
John B. Blystone ................... 201,611(FN3) 0 201,611 1.6%
J. Kermit Campbell ................. 1,617 6,400 8,017 *
Sarah R. Coffin .................... 1,196 5,100 6,296 *
Frank A. Ehmann .................... 2,658 10,700 13,358 *
Edward D. Hopkins .................. 2,817 10,700 13,517 *
Charles E. Johnson II .............. 62,659(FN4) 8,900 71,559 *
Christopher J. Kearney ............. 2,292 0 2,292 *
Ronald L. Kerber ................... 1,813 4,900 6,713 *
Stephen A. Lison ................... 16,941(FN5) 41,050 57,991 *
Peter H. Merlin .................... 4,236 9,100 13,336 *
Patrick J. O'Leary ................. 17,167 5,000 22,167 *
Thomas J. Riordan .................. 8,278 5,000 13,278 *
James M. Sheridan .................. 31,341(FN5) 80,000 111,341 *
David P. Williams .................. 1,500 7,800 9,300 *
All directors and executive officers
as a group (19 persons)
including the above named ....... 366,854 217,100 583,954 4.6%
- -----------
* Less than 1%
[FN]
1) Included for Messrs. Blystone, Kearney, O'Leary, Riordan and Sheridan
and all executive officers as a group are their respective allocated
shares held in the SPX Corporation Retirement Savings and Stock
Ownership Plan.
2) Except as otherwise indicated, each director and executive officer has
sole voting and investment power over the shares he or she
beneficially owns.
3) Includes 75,000 shares of restricted stock granted to Mr. Blystone as
part of his initial employment contract with the Company that have not
yet vested. These shares vest ratably based on continued employment to
the vesting date at the rate of 25,000 shares per year beginning
December 1, 1998. Mr. Blystone will receive all dividends on, and has
the right to vote, these shares. Does not include 250 shares held by
The Blystone Foundation of which Mr. Blystone and his wife along with
Messrs. Kearney and Sheridan are directors and as to which Mr.
Blystone disclaims any beneficial interest.
4) Includes 20,548 shares owned by Mr. Johnson's wife.
5) Includes 200 shares held by Mr. Sheridan as custodian for his
children.
OTHER PRINCIPAL SHAREHOLDERS
The Company is not aware of any person or group who beneficially owns
more than 5% of SPX Common Stock except the following, based on information
filed on Schedule 13D or Schedule 13G:
AMOUNT OF PERCENT
BENEFICIAL OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS
------------------------------------ --------- -----
Harris Associates L.P. 1,590,200(FN1) 12.66%
Two North LaSalle Street, Suite 500
Chicago, IL 60602
FMR Corp. (Fidelity Investments) 1,304,200 (FN2) 10.38%
82 Devonshire Street
Boston, MA 02109
Merrill Lynch Asset Management 1,249,004 (FN3) 9.9%
800 Sudders Mill Road
Plainsboro, NJ 08536
Fidelity Management Trust Company _________ (FN4) _____%
82 Devonshire Street
Boston, MA 02109
- -----------------
[FN]
1) Harris Associates L.P. serves as investment advisor to Harris
Associates Investment Trust (the "Trust"). The Trust reported that The
Oakmark Fund, The Oakmark Small Cap Fund and The Oakmark Select Fund
beneficially own 967,900, 500,000 and 40,000 shares of SPX Common
Stock, respectively.
2) Fidelity Management & Research Company, a wholly-owned subsidiary of
FMR Corp. and an investment advisor registered under Section 203 of
the Investment Advisors Act of 1940, is the beneficial owner of
1,304,200 shares of SPX Common Stock.
3) Merrill Lynch & Company, Inc. and its subsidiaries, Princeton
Services, Inc., Merrill Lynch Asset Management LP and Merrill Lynch
Capital Fund, Inc. pursuant to a filing on Schedule 13G dated January
28, 1998, reported that Princeton Services, Inc. and Merrill Lynch
Asset Management L.P. share voting and dispositive powers with respect
to 1,249,004 shares and this includes 750,000 shares beneficially
owned by Merrill Lynch Capital Fund which also shares voting and
dispositive powers with respect to such shares.
4) Fidelity Management Trust Company is the Trustee of the Company's
Retirement Savings and Stock Ownership Plan and as of February ___,
1998, owned such number of shares pursuant to the Plan.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors,
executive officers and holders of more than 10% of SPX Common Stock to file
with the Commission initial reports of ownership and reports of changes in
ownership of SPX Common Stock and other equity securities of the Company.
The Company believes that during the fiscal year ended December 31, 1997,
its officers, directors and holders of more than 10% of SPX Common Stock
complied with all Section 16(a) filing requirements. In making this
statement, the Company has relied solely upon the written representations
of its directors and officers.
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes compensation received by the Company's
Chief Executive Officer and the four other most highly paid executive
officers for the three fiscal years ended December 31, 1997. None of the
five named officers is employed under contract or employment agreement
except for Mr. Blystone.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------ ---------------------------------------
AWARDS PAYOUTS
--------------------------- ---------
NUMBER OF
OTHER RESTRICTED SECURITIES
NAME ANNUAL STOCK UNDERLYING LTIP ALL OTHER
AND SALARY BONUS COMPENSATION AWARD(S) OPTIONS PAYOUTS COMPENSA-
PRINCIPAL POSITION YEAR ($) ($) ($)(FN1) ($) (#) ($)(FN2) TION($)(FN3)
------------------ ---- ------ -------- ------------ ---------- ----------- -------- ------------
John B. Blystone
- ----------------
Chairman, President and 1997 650,000 1,356,237 1,065,000 0 72,614
Chief Executive Officer 1996 450,000 947,396 0 (FN4) 0 20,250
(12/18/95 to present) 1995 17,308 0 1,968,750(FN5) 125,000 420,779(FN6)
Patrick J. O'Leary
- ------------------
Vice President, Finance, 1997 275,000 352,445 235,000 0 17,979
Treasurer and Chief Financial 1996 68,751 147,705(FN7) 50,000 0 1,428
Officer (10/14/96 to present) 1995 -- -- -- -- --
James M. Sheridan
- -----------------
Vice President, Secretary and 1997 228,500 407,921 25,000 160,200 547,392 (FN8)
General Counsel to 2/26/97, 1996 228,500 325,049 21,000 154,104 11,519
Counsel to CEO to retirement 1995 213,500 27,468 0 0 15,377
(retired 1/31/98)
Christopher J. Kearney
- ----------------------
Vice President, General 1997 212,314 325,437(FN9) 25,000 0 5,267
Counsel and Corporate 1996 -- -- -- -- --
Secretary (2/26/97 to 1995 -- -- -- -- --
present)
Thomas J. Riordan
- -----------------
Vice President and President 1997 225,000 239,487 115,000 0 21,468
Service Solutions 1996 205,000 236,328 10,000 0 6,209
(2/26/96 to present) 1995 -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
[FN]
1) No other Annual Compensation is reported since perquisites and other
personal benefits are below threshold reporting requirements.
2) Amounts in this column represent payments made pursuant to the
Company's Performance Unit Plan, which is described on page ____ of
this Proxy Statement.
3) Except as otherwise noted in the footnotes to this table, the amounts
reported in this column include only the Company's contribution to the
executive officers' accounts in its qualified and non-qualified
defined contribution plans.
4) In lieu of a stock option award for 1996, the Company granted Mr.
Blystone a five-year non-interest bearing loan of $368,000 to fund the
purchase by Mr. Blystone of shares of SPX Common Stock on the open
market. It is the intention of the Company to forgive this loan if Mr.
Blystone remains with the Company for the five-year term of the loan
or if certain other conditions are met.
5) An award of 125,000 shares of Restricted Stock was made to Mr.
Blystone on November 24, 1995, as part of his initial employment
contract. The value of the award was $1,984,375 based on the December
29, 1995 closing price of the shares of $15.875. These shares vest
ratably over 5 years at 25,000 shares per year beginning December 1,
1996. Mr. Blystone receives dividends on and has the right to vote all
the shares, vested and nonvested. On December 31, 1997, Mr. Blystone
owned 75,000 shares of Restricted Stock, which had not yet vested and
which had a value of $5,175,000 based on the closing price of the SPX
Common Stock on that date.
6) Includes a $420,000 cash payment made to Mr. Blystone upon joining the
Company as part of his initial employment contract. The balance of the
amount reported is the Company contributions to Mr. Blystone's
accounts in the Company's qualified and non-qualified defined
contribution plans.
7) This amount includes a bonus under the Company's EVA Incentive
Compensation Plan for the part of the year 1996 during which Mr.
O'Leary was a participant plus a $50,000 bonus payable upon his
acceptance of employment with the Company.
8) Includes $521,751 payable to Mr. Sheridan upon his retirement which is
the balance in his bonus bank under the EVA Incentive Compensation
Plan after payment of the amount shown in the bonus column and $25,641
being Company contributions to his defined contribution plan accounts.
9) This amount includes a bonus under the Company's EVA Incentive
Compensation Plan for the year 1997 plus a $50,000 bonus payable to
Mr. Kearney paid upon his acceptance of employment with the Company.
OPTION GRANTS IN LAST FISCAL YEAR
- -------------------------- ------------- ------------- ----------- ----------- -------------- ------------- --------------
NUMBER OF
SECURITIES % OF TOTAL VESTING DATE
UNDERLYING OPTIONS WHEN
OPTIONS GRANTED TO DATE OF EXERCISE OPTION GRANT DATE
GRANTED EMPLOYEES IN GRANT PRICE FIRST EXPIRATION PRESENT VALUE
NAME (#) 1997 (FN1)(FN2) $/SHARE) EXERCISABLE DATE $ (FN3)
- -------------------------- ------------- ------------- ----------- ----------- -------------- ------------- --------------
John B. Blystone 32,500 2.0% 1/14/97 $41.875 1/14/99 1/13/07 $582,725
32,500 2.0% 1/14/97 $41.875 1/14/00 1/13/07 $582,725
250,000 15.5% 2/26/97 $45.750 1/1/02 2/25/07 $4,895,000
250,000 15.5% 2/26/97 $60.000 1/1/02 2/25/07 $3,735,000
250,000 15.5% 2/26/97 $75.000 1/1/02 2/25/07 $2,840,000
250,000 15.5% 2/26/97 $90.000 1/1/02 2/25/07 $2,185,000
- -------------------------- ------------- ------------- ----------- ----------- -------------- ------------- --------------
Patrick J. O'Leary 70,000 4.3% 4/22/97 $60.000 4/22/02 4/21/07 $1,394,400
65,000 4.0% 4/22/97 $75.000 4/22/02 4/21/07 $1,014,000
65,000 4.0% 4/22/97 $90.000 4/22/02 4/21/07 $801,450
- -------------------------- ------------- ------------- ----------- ----------- -------------- ------------- --------------
James M. Sheridan 25,000 1.5% 1/14/97 $41.875 1/31/98 1/31/00 $448,250
- -------------------------- ------------- ------------- ----------- ----------- -------------- ------------- --------------
Christopher J. Kearney 12,500 0.8% 2/10/97 $43.375 2/10/99 2/9/07 $232,125
12,500 0.8% 2/10/97 $43.375 2/10/00 2/9/07 $232,125
- -------------------------- ------------- ------------- ----------- ----------- -------------- ------------- --------------
Thomas J. Riordan 7,500 0.5% 1/14/97 $41.875 1/14/99 1/13/07 $134,475
7,500 0.5% 1/14/97 $41.875 1/14/00 1/13/07 $134,475
50,000 3.1% 12/10/97 $75.000 12/10/02 12/9/07 $1,397,000
50,000 3.1% 12/10/97 $90.000 12/10/02 12/9/07 $1,159,500
- -------------------------- ------------- ------------- ----------- ----------- -------------- ------------- --------------
1) The options granted on January 14, 1997, and February 10, 1997, were
granted pursuant to the SPX Corporation 1992 Stock Compensation Plan
and in accordance with the fixed shares grant concept underlying the
Company's EVA incentive compensation program. These are ten-year
non-qualified options having an exercise price equal to the fair
market value on the date of grant. Upon exercise the executive has the
option to surrender shares at current value in payment of the exercise
price and his or her withholding tax obligations or to surrender by
attestation already owned mature shares in payment of the exercise
price and/or withholding tax obligations and to receive a reload
option having an exercise price equal to the current market value for
the number of shares so surrendered. The reload option expires at the
same time that the exercised option would have expired. These options
vest 50% two years after the date of grant with the remaining 50%
vesting three years after the date of grant.
2) The options granted to Mr. Blystone on February 26, 1997, in
conjunction with his new employment contract and the options granted
to Mr. O'Leary on April 22, 1997, and to Mr. Riordan on December 10,
1997, are referenced in the Report of the Compensation Committee and
are ten-year non-qualified options issued outside of the 1992 Stock
Compensation Plan. These options do not vest or otherwise become
exercisable until five years after the date of grant except in the
event of a change in control or the death or disability of the
executive and the exercise price is equal to or greater than the
market value of the shares at the date of grant.
3) The estimated grant date present value reflected in the above table is
determined using the Black-Scholes model. The material assumptions and
adjustments incorporated in the Black-Scholes model in estimating the
value of the options reflected in the above table include the
following:
. An option exercise price in the amount set forth in the table
which is equal to or greater than the fair market value of the
underlying stock on the date of grant.
. An option term of ten years and an expected life of six years.
. An interest rate of 6.3%, which represents the interest rate on a
U.S. Treasury security with a maturity date corresponding to that
of the expected option term.
. Volatility of 0.306 calculated using monthly price and dividend
data for the five-year period ending in the grant month.
. Dividend yield of zero.
The above valuation model makes no adjustments for vesting
requirements, non-transferability, or risk of forfeiture.
The ultimate value of the option will depend on the future market
price of the SPX Common Stock, which cannot be forecasted with
reasonable accuracy. The actual value, if any, an optionee will
realize upon exercise of an option will depend on the excess of the
market value of the SPX Common Stock over the exercise price on the
date the option is exercised.
AGGREGATE OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table provides information on option exercises in fiscal 1997 by the named executive
officers and the value of such officers' unexercised options at December 31, 1997.
- ------------------------------ ------------- --------------- ----------------------------- -----------------------------
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES STOCK OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE YEAR END (FN1) FISCAL YEAR END (FN1)
ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
NAME (#) ($) (#) ($)
- ------------------------------ ------------- --------------- ----------------------------- -----------------------------
John B. Blystone 0 0 125,000/1,065,000 $6,656,250/$9,825,625
Patrick J. O'Leary 0 0 25,000/225,000 $971,875/$1,601,875
James M. Sheridan 4,000 $208,000 62,500/46,000 $3,383,900/$1,817,375
Christopher J. Kearney 0 0 0/25,000 0/$631,250
Thomas J. Riordan 0 0 5,000/120,000 $271,875/$678,750
- ------------------------------ ------------- --------------- ----------------------------- -----------------------------
[FN]
1) All exercisable options were exercisable immediately on December
31, 1997, and were in-the-money. Some of the unexercisable
options were not in-the-money at the end of 1997 since their
exercise price exceeds the year-end closing price and these
options are identified in the table of Option Grants in the Last
Fiscal Year. The value of the in-the-money unexercised options is
based upon the difference between the exercise price and the
closing price of SPX Common Stock on December 31, 1997 of $69.00.
No SARs are held by the above named executive officers.
SPX CORPORATION PERFORMANCE UNIT PLAN
The Company has previously sponsored a long-term incentive plan called
the SPX Corporation Performance Unit Plan, which operates on three-year
performance periods. The Plan was phased out with the adoption of the EVA
Incentive Compensation Plan in 1996. At the beginning of each performance
period, a participant was granted a target award based on a percentage of
his or her current salary. The target award is then divided equally between
cash units of $500 each and shares of SPX Common Stock. At the end of the
performance period, depending upon the level of the performance achieved,
the cash units earned will be valued from zero to a maximum of $750 and the
number of shares earned will range from zero to 150% of the target amount.
For the 1995 performance period (January 1, 1995 to December 31,
1997), the corporate goal was expressed in terms of growth in the Company's
share price plus dividends relative to the growth in the S&P 500 Index as
follows:
Company Performance Level of Achievement
------------------- --------------------
Less than 80% of S&P 500 growth No awards earned
80% of S&P 500 growth 50% of target award earned (threshold)
100% of S&P 500 growth 100% of target award earned (target)
150% of S&P 500 growth 150% of target award earned (maximum)
For the 1995 performance period, which ended December 31, 1997, the
Company's share price plus dividends grew at a rate significantly in excess
of 150% of the growth of the S&P 500 Index and the maximum awards were
earned. The Compensation Committee elected to pay the entire earned awards
in cash and the amount paid to Mr. Sheridan is shown in the LTIP column of
the Cash Compensation Table. Messrs. Blystone, O'Leary, Kearney and Riordan
did not participate in this plan.
PENSION PLANS
The annual pension benefits payable to the executives named in the
Summary Compensation Table can be determined from the following table.
- -------------------- ------------------------------------------------------------------------------------------------
YEARS OF CREDITED SERVICE
------------------------------------------------------------------------------------------------
FINAL THREE-YEAR
AVERAGE
COMPENSATION 10 YEARS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS
- -------------------- ------------- --------------- ---------------- ---------------- --------------- ----------------
$200,000 $77,333 $116,000 $116,000 $116,000 $116,000 $123,500
300,000 116,000 174,000 174,000 174,000 174,000 185,250
400,000 154,667 232,000 232,000 232,000 232,000 247,000
500,000 193,334 290,000 290,000 290,000 290,000 308,750
600,000 232,000 348,000 348,000 348,000 348,000 370,500
700,000 270,667 406,000 406,000 406,000 406,000 432,250
800,000 309,333 464,000 464,000 464,000 464,000 494,000
900,000 348,000 522,000 522,000 522,000 522,000 555,750
1,000,000 386,667 580,000 580,000 580,000 580,000 617,500
1,100,000 425,333 638,000 638,000 638,000 638,000 679,250
1,200,000 464,000 696,000 696,000 696,000 696,000 741,000
1,300,000 502,667 754,000 754,000 754,000 754,000 802,750
1,400,000 541,333 812,000 812,000 812,000 812,000 864,500
1,500,000 580,000 870,000 870,000 870,000 870,000 926,250
1,600,000 618,666 928,000 928,000 928,000 928,000 988,000
1,700,000 657,333 986,000 986,000 986,000 986,000 1,049,750
1,800,000 696,000 1,044,000 1,044,000 1,044,000 1,044,000 1,111,500
1,900,000 734,667 1,102,000 1,102,000 1,102,000 1,102,000 1,173,250
2,000,000 773,333 1,160,000 1,160,000 1,160,000 1,160,000 1,235,000
2,100,000 812,000 1,218,000 1,218,000 1,218,000 1,218,000 1,296,750
- ------------------- ------------- --------------- ---------------- ---------------- --------------- ----------------
Covered compensation is based on salary and bonus as shown in the
Summary Compensation Table.
The estimated years of credited service at normal retirement age for
the persons named in the Summary Compensation Table are: Mr. Blystone - 23
years; Mr. O'Leary - 26 years; Mr. Kearney - 23 years; Mr. Riordan - 25
years.
The annual retirement benefits shown in the above table are computed
on the basis of a straight life annuity.
The amounts reported in this Pension Plan Table are payable at the
normal retirement age of 65 and are payable from the Company's qualified
pension plan and Supplemental Retirement Plan for officers and other key
executives. The amounts shown are subject to reduction by the sum of the
executive's primary Social Security benefit and any pension benefits
payable from prior employer plans. A participant may retire as early as age
55, but benefits payable at early retirement are subject to reductions from
age 62 that approximate actuarial values.
DIRECTORS' COMPENSATION
For the first two months of 1997, the non-employee directors of the
Company were compensated on the basis of one-sixth of an annual retainer of
$22,000 plus $1,000 for each meeting of the Board of Directors and each
Committee meeting they attended during those months. Effective February 26,
1997, the Company stopped paying a retainer and meeting attendance fees and
eliminated the Directors' Defined Benefit Retirement Plan. Beginning with
the month of March and continuing thereafter, the non-employee directors
were compensated pursuant to the SPX Corporation 1997 Non-Employee
Directors' Compensation Plan, which was submitted to and approved by the
shareholders of the Company at the Annual Meeting in April 1997.
Under this Plan each non-employee director was granted an option to
purchase 1,500 shares of SPX Common Stock on February 26, 1997 at a price
per share of $45.75, the closing price of a share of SPX Stock on that
date. Further, options to purchase 1,500 shares of SPX Common Stock were
granted to each non-employee director in January 1998 and will be granted
to each non-employee director in January 1999 at a purchase price equal to
the closing price per share on the date of grant. Thereafter, the Board of
Directors may establish subsequent grant dates for options to the extent
there are shares available for issuance under the Plan. An option to
purchase 1,500 shares of SPX Common Stock will also be granted to each new
non-employee director upon his or her election to the Board of Directors.
Director options are fully exercisable six months from the date of grant,
or earlier, upon a change in control, as defined in the Plan. If a
non-employee director ceases to be a director for any reason, his or her
options will remain exercisable for three years thereafter (one year in the
event of death), provided that no director option may be exercised after
ten years from the date of grant. The maximum number of shares of SPX
Common Stock available for grants of options under the Plan is 75,000.
Each non-employee director also receives under the Plan an annual cash
payment of $25,500 ($21,250 for the 10 months of 1997 that the Plan was in
effect) plus an additional cash payment determined by reference to the
Company's performance under the SPX Corporation EVA Incentive Compensation
Plan (the "EVA Plan"). The amount of the additional cash payment, if any,
is equal to $5,000 multiplied by the multiple of target award earned by the
Company's Chief Executive Officer for that year under the EVA Plan. The
additional cash payment will be payable to the non-employee director at the
same time and in the same manner as bonuses are paid under the EVA Plan,
including application of the bonus reserve provisions. A non-employee
director's bonus reserve balance will, however, be payable if he or she
ceases to be a director for any reason. Receipt of the annual cash payment
and the additional cash payment may be deferred at the option of the
individual non-employee director.
For 1997 the bonus multiple was 3.6195 and the amount of the
additional cash payment earned under the Plan was $18,097.50. The amount
payable currently to each non-employee director was $9,366.00 and the
balance of $8,731.50 was credited to his or her bonus reserve account
established under the Plan.
The Company reimburses all non-employee directors for expenses
incurred in carrying out their duties. Directors who are employees of the
Company or a subsidiary do not receive directors' compensation as described
herein.
Under the former Directors' Retirement Plan, which was terminated for
active directors at the end of 1996, any director who retired after ten or
more years of service as a director is entitled to an annual pension,
payable for life, equal to the annual retainer in effect on the retirement
date. Directors who retire with more than five years but less than ten
years of service receive a proration of the ten-year amount. Benefits under
the Plan commence on the later of the retired director's sixty-fifth
birthday or retirement from the Board of Directors. The Directors'
Retirement Plan provides that upon a change-of-control, as defined under
"Change of Control Severance Agreements" below, a director who has less
than five years of service as a director will be deemed to have completed
five years of service, each former director will receive an immediate
lump-sum payment of the actuarial present value of the director's benefit
under the Plan, and each director who does not receive an immediate
lump-sum payment will receive a lump-sum payment which is the actuarial
present value of the director's Plan benefit upon termination of the
directorship or termination of the Plan. The Company also has established a
trust to ensure payment to all directors of these benefits. Current
directors who were covered by the now terminated plan are eligible to
receive benefits upon their retirement based on the actuarial present value
of their vested director's benefits existing at the date the plan was
terminated.
CHANGE OF CONTROL SEVERANCE AGREEMENTS
The Company has entered into change of control severance agreements
with its executive officers. These agreements are with Messrs. Blystone,
O'Leary, Kearney and Riordan, as well as two additional executives. The
agreements provide for the payment of compensation and benefits in the
event of termination of employment following a change-of-control. A
change-of-control is generally defined as (i) the acquisition by a person,
other than the Company, of 20% or more in voting power of the Company's
securities; (ii) a change in the majority of the Board of Directors over a
two-year period; (iii) the sales of all or substantially all the Company's
assets or the merger or consolidation of the Company with any other
corporation, except where the Company's owners continue to hold at least
80% of the voting power in the new or surviving entity's securities; or
(iv) the acquisition by a person, other than the Company, pursuant to an
exchange or tender offer for securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding
securities.
Each severance agreement will remain in effect for at least three
years following the date of its execution. Thereafter, each agreement will
be extended annually unless the Company gives proper notice of its election
not to extend. If a change-of-control occurs during the term of an
agreement, it will remain in effect for three years following the
change-of-control.
An executive whose employment is terminated after a change-of-control
will generally receive additional compensation only if the termination was
by the Company without cause or by the executive because of his election to
terminate after 30 days following a change-of-control or because of a
diminution in salary, benefits or responsibilities or related reasons. An
executive whose termination follows a change-of-control, but not because of
one of the above reasons, will generally receive normal severance pay,
payment of certain accrued vested benefits, a prorated bonus, vacation pay,
deferred compensation and amounts payable under the terms of the EVA Plan.
The severance agreements provide the following additional benefits payable
after a change-of-control to executives who are terminated without cause or
who resign for the reasons described above: (i) three times the sum of the
executive's base salary and annual target bonus; (ii) continued health care
coverage for three years; (iii) continued life insurance coverage for a
period of three years in the amount of twice the executive's base salary
and thereafter at one times base salary for the remainder of his or her
life; (iv) full vesting and three additional years of credit under the
Company's qualified pension plan, excess pension plan and supplemental
retirement plan; (v) a lump-sum payment under the Company's supplemental
retirement savings plan; (vi) a prorated award under the Performance Unit
Plan or the EVA Plan; (vii) the removal of any restrictions placed on
shares of restricted stock; (viii) the payment of any federal excise taxes;
and (ix) the reimbursement of legal and tax audit fees, if any, incurred as
a result of the termination. The Company has established a trust to ensure
payment to all executives whose employment is terminated after a
change-of-control of the compensation and benefits described herein. The
trust is not currently funded.
EMPLOYMENT AGREEMENTS
1995 EMPLOYMENT AGREEMENT WITH JOHN B. BLYSTONE.
Until January 1, 1997, Mr. Blystone served the Company pursuant to an
employment agreement dated as of December 18, 1995 (the "1995 Agreement").
The 1995 Agreement provided for an employment term through January 31,
1998, at a base salary of $450,000. The 1995 Agreement also provided for
participation in the Company's annual EVA Plan, a stock option grant with
respect to 125,000 shares of SPX Common Stock and a restricted stock award
of 125,000 shares. In the event of early termination of Mr. Blystone's
employment by the Company without cause or by him for good reason, the 1995
Agreement provided for lump sum salary and bonus payments, vesting of
options, restricted stock and equity and incentive plan awards and certain
benefit plan continuation substantially similar to the new employment
agreement described below.
NEW EMPLOYMENT AGREEMENT WITH JOHN B. BLYSTONE.
The Company and Mr. Blystone executed a new employment agreement on
February 27, 1997, effective as of January 1, 1997, which provides for Mr.
Blystone's employment through December 31, 2001, with automatic extensions
commencing January 1, 1999, to provide for a continuous three-year term
after that date (subject to earlier termination in certain circumstances as
described below).
The new employment agreement provides for an annual base salary of at
least $650,000. Through 1999, Mr. Blystone is eligible to receive an annual
bonus under the Company's EVA Plan (the terms of which cannot be changed as
to Mr. Blystone without his consent) and thereafter under the Company's
annual bonus plan as then in effect for senior executives, provided that in
all years the annual bonus is to be based on a target award equal to 80% of
his annual base salary midpoint.
In connection with the new employment agreement, the Committee also
granted to Mr. Blystone, on February 26, 1997, a stock option award with
respect to a total of 1,000,000 shares of SPX Common Stock. Of this total,
250,000 shares covered by the award have an exercise price of $45.75, the
fair market value of the SPX Common Stock on February 26, 1997. The
exercise prices for the remainder of the award are in excess of the fair
market value on that date: 250,000 shares have an exercise price of $60.00
(approximately 133% of fair market value); 250,000 shares have an exercise
price of $75.00 (approximately 167% of fair market value); and 250,000
shares have an exercise price of $90.00 (approximately 200% of fair market
value). Other than the occurrence of certain events described below, no
portion of the option award shall vest prior to January 1, 2002. The option
has a ten-year term and was granted in addition to and outside of the 1992
Stock Compensation Plan. Mr. Blystone will continue to receive annual
option awards under the 1992 Stock Compensation Plan in accordance with the
fixed share grant guidelines under the EVA Plan, which is described in the
Compensation Committee Report.
Under the new employment agreement, in the event of Mr. Blystone's
voluntary resignation or the termination of his employment for cause, he
will be entitled to receive the compensation and benefits earned to date,
but shall forfeit any options, restricted stock or other benefits not then
vested. In the event of Mr. Blystone's death or disability, he shall be
entitled to receive compensation and benefits earned, full payment of his
individual bonus reserve balance under the Company's EVA Plan and shall be
fully vested in all options, restricted stock and other equity or incentive
compensation awards. If Mr. Blystone's employment is terminated by the
Company without cause, or if he resigns for good reason, in addition to
payout of his individual bonus reserve and vesting of options, restricted
stock and other equity and incentive compensation, he will be entitled to
receive a pro rata bonus payment for the year of termination, a lump sum
payment equal to three times his then annual salary and target bonus,
continuation of employee benefits and perquisites for the lesser of three
years or until such benefits or perquisites are obtained from a subsequent
employer, vesting of benefits under the Company's supplemental pension plan
with credit for three additional years of service and the salary and bonus
continuation reflected by the lump sum salary and bonus payments,
outplacement services, and a stock depreciation right obligating the
Company to pay to Mr. Blystone the excess, if any, of the average closing
price of the SPX Common Stock during the five trading days prior to his
termination of employment over his actual gross selling price for shares of
SPX Common Stock (including any shares which may be acquired upon exercise
of an option) as to which Mr. Blystone, within 20 days after the
termination of his employment, gives the Company written notice of his
intention to sell. In the event that any amounts or benefits received by
Mr. Blystone are subject to the excise tax imposed under Section 4999 of
the Internal Revenue Code, he would also be entitled to receive an
additional amount (a "gross-up" payment) equal to such excise tax and the
excise, income and other taxes imposed on the gross-up payment.
DEATH BENEFIT PLAN FOR KEY MANAGERS
As part of the total compensation package developed to assist the
Company in attracting and retaining top quality managers, the Company in
1985 adopted a death benefit plan for certain key managers designated as
eligible by the Company's Board of Directors. As of February 1998, 21
active key managers, including the officers named in the Summary
Compensation Table, together with 27 retired managers were participating.
Under this plan, if death occurs before retirement, the participant's
beneficiary will receive a payment that, when adjusted for income taxes,
will equal two times the amount of the individual's base salary as of the
date of death. If death occurs after retirement, the amount paid to the
beneficiary after adjustment for income taxes will equal one times final
base salary. The cost incurred by the Company for this Plan during 1997 was
not significant.
Irrespective of any statement to the contrary included in any Company
filing under the Securities Exchange Act of 1934, as amended, that might
incorporate by reference future filings, including this Proxy Statement, in
whole or in part, the following report of the Compensation Committee and
the Performance Graph on page ___ shall not be incorporated by reference
into any such filings.
COMPENSATION COMMITTEE REPORT ON
EXECUTIVE OFFICERS' COMPENSATION
The Company's Compensation Committee (the "Committee"), which is
comprised of four outside directors of the Company, is responsible for
considering and approving the Company's compensation program for senior
management, including the Company's executive officers. The key objectives
of the Committee in establishing compensation programs for senior
management are: (i) to attract and retain highly qualified executives to
manage the Company and its operating divisions, and (ii) to provide strong
financial incentives, at reasonable cost to the Company's shareholders, for
senior management to maximize the Company's shareholder value.
The Company's executive compensation program consists of three basic
elements - base salary, an annual bonus opportunity under the EVA Incentive
Compensation Plan and stock options.
BASE SALARIES
Each executive officer has a base salary range and midpoint. Midpoints
are determined on the basis of competitive compensation data. Position in
range is determined on the basis of experience and performance.
ANNUAL BONUSES
In 1996, the shareholders approved the SPX Corporation EVA Incentive
Compensation Plan. The new plan provides for awards based on improvements
in Economic Value Added ("EVA"). EVA is a measure of operating profit after
deduction of all costs, including the cost of the Company's capital. The
EVA bonus plan is based on three key concepts: 1) a target bonus, 2) a
fixed share of EVA improvement in excess of expected EVA improvement
("excess EVA improvement") and 3) a bonus bank. The EVA bonus earned is
equal to the sum of the target bonus plus the fixed share of excess EVA
improvement (which may be negative). The bonus eligible to be earned is
credited to the bonus bank, and the bonus available to be paid to the
participant is equal to the amount of the bonus bank balance, up to the
amount of the target bonus, plus 1/3 of the bonus bank balance in excess of
the target bonus. Of the total bonus available to be paid, 80% is paid
automatically and the remaining 20% is contingent upon the achievement of
individual performance goals. No bonus is paid when the bonus bank balance
is negative and negative bonus bank balances are carried forward to offset
future bonuses earned. There is no cap on the bonus awards that can be
achieved for superior levels of excess EVA improvement.
The Committee believes that excess EVA improvement provides the best
operating performance measure of shareholder returns in excess of the cost
of capital. To ensure that the plan provides strong incentives for
management to increase shareholder value and does not reward poor
performance by reducing performance standards or penalize superior
performance by raising performance standards, it is the Committee's
intention that there will be no recalibration of expected EVA improvement
or management's share of excess EVA improvement for a period of at least
four years beginning with 1996.
The Company achieved outstanding performance in 1997. The Company's
EVA improvement was $18.8 million versus an expected EVA improvement of
$4.6 million resulting in a bonus multiple of 3.6195. This performance was
reflected in a gain in the market value of the Company's shares of over
$375 million. The Company's share price performance significantly
outperformed the S&P 500 and the peer groups shown on the Performance Graph
on page ___.
The 1997 target bonuses for the chief executive officer and the four
other executive officers named in the Compensation Table were $1,150,520
and their share of EVA improvement in excess of expected EVA improvement
was $2,673,664 resulting in a declared bonus for them as a group of
$3,824,184. The declared bonus is credited to the individual bonus bank
under the Plan and then an amount equal to the individual target bonus plus
one-third of the balance remaining after deducting the target amount is
available to be paid out, 80% of the available amount is automatically paid
and the remaining 20% is contingent upon achievement of individual
performance goals. The bonus amounts earned and paid to the chief executive
officer and the other named executives are shown in the Summary
Compensation Table. The amount of the declared bonus that is not yet earned
and available to be paid is carried forward in the individual's bonus bank
and payment is contingent on future EVA performance.
STOCK OPTIONS
Consistent with the fixed share concept underlying the EVA incentive
compensation program, the Company, in 1997 and subsequent years, will make
annual stock option grants to executive officers on a "fixed share" basis.
Under the program, executive officers will receive each year an option on a
fixed number of shares of stock without regard to the current price of the
stock. Under the fixed share program, the number of option shares granted
will not be increased to offset a decline in the stock price and will not
decrease to offset an increase in the stock price. In February, the
Committee granted stock options to the executive officers as set forth in
the Summary Compensation Table.
The Company granted extraordinary out-of-the-money options to two key
executives during 1997, in addition to the 1,000,000 share option granted
to Mr. Blystone as described above. Mr. O'Leary was granted a 200,000 share
option in April 1997 and Mr. Riordan was granted a 100,000 share option in
December 1997. These options, which have exercise prices in excess of the
current market value on the grant date and which vest five years after the
grant date, were made to assure the continued retention of these key
executives and to provide them with a strong incentive to promote
significant growth in the Company's share value.
In early 1996 the value of total compensation opportunities for senior
management was slightly below a median competitive level based on the data
from the Hewitt Associates Total Compensation Data Base (Core Group III, a
group of middle market industrial companies). In the future, the Company's
competitive position will depend on Company performance. If the Company
does well, the fixed share concepts underlying the total compensation
program will raise the Company's competitive position above median levels.
If the Company does poorly, the fixed share concepts will cause the
Company's competitive position to fall below median levels. The Committee
believes that the total compensation program provides very strong
incentives to maximize shareholder value with reasonable balance between
the Company's need to retain strong senior management and shareholder cost
objectives.
Internal Revenue Code Section 162(m) limits the deduction a
publicly-held company is allowed for compensation paid to executive
officers, including those named in the table on page ____. Generally,
amounts paid in excess of $1 million to a covered executive, other than
performance-based compensation, cannot be deducted. In order to be
performance-based compensation for purposes of the new tax law, the
performance measures must be approved by the shareholders. The Company's
EVA Plan was approved by its shareholders in 1997. The Committee will
continue to consider ways to maximize the deductibility of executive
compensation, while retaining the discretion the Committee deems necessary
to compensate executive officers in a manner commensurate with performance
and the competitive environment for executive talent.
COMPENSATION OF CHAIRMAN AND CHIEF EXECUTIVE OFFICER
As Chairman and Chief Executive Officer, Mr. Blystone was compensated
during 1997 in accordance with his New Employment Agreement, described on
page _____. Pursuant to the Agreement, he was paid an annual base salary of
$650,000 and earned a declared bonus of $1,911,820 under the EVA Plan, or
3.6195 times his Target Award of $528,200. This amount reflects the 7%
fixed share of Excess EVA Improvement allocated to the CEO and the
determination by the Compensation Committee that Mr. Blystone attained all
of his personal performance goals for the year, which resulted in a paid
bonus of $1,356,237 with the balance carried forward in his bonus bank.
Mr. Blystone's 1995 Agreement provided for a term ending on January
31, 1999. Under the 1995 Agreement, if by October 31, 1998, the Company and
Mr. Blystone failed to reach a mutually satisfactory employment agreement
to commence on February 1, 1999, then Mr. Blystone would have been entitled
to resign and receive the severance and other benefits provided under the
1995 Agreement as if his employment was involuntarily terminated by the
Company. Taking into account Mr. Blystone's performance since joining the
Company, the other opportunities that are likely to be available to Mr.
Blystone in the interim period and the potential economic incentive that
the 1995 Agreement might have created for Mr. Blystone to not reach a
mutually satisfactory replacement agreement, the Committee determined in
early 1997 to develop and offer to Mr. Blystone a new employment agreement
to assure that he would remain with the Company on a long-term basis. The
Committee obtained the recommendations of nationally-known consultants on
executive compensation and designed an aggressive, retention-oriented
compensation package to provide Mr. Blystone with a strong economic
incentive to remain with the Company and to continue to drive significant
growth in the Company's performance and shareholder value. On February 26,
1997, the Compensation Committee and the Board of Directors approved a new
employment agreement for Mr. Blystone, effective as of January 1, 1997.
The Committee believes that the retention-oriented combination of the
size of the option award under the new agreement, its delayed vesting and
premium exercise pricing, provides Mr. Blystone with an appropriately
strong economic incentive to remain with the Company and to drive
significant growth in shareholder value. While the Committee realizes that
if Mr. Blystone is successful in doing so he will earn substantial
compensation, such compensation will necessarily be accompanied by
substantial long-term benefits for the Company's shareholders as well.
The foregoing report has been approved by all members of the
Committee.
The Compensation Committee
Frank A. Ehmann, Chairman
J. Kermit Campbell
Sarah R. Coffin
David P. Williams
PERFORMANCE GRAPH
The following graph compares the cumulative total shareholder return
on the SPX Common Stock for the last five fiscal years with the cumulative
total return on the S&P 500 Composite Index, the S&P Auto Parts & Equipment
Index, and the S&P Hardware & Tools Index over the same period (assuming
the investment of $100 in each of the SPX Common Stock, the S&P 500 Index,
the S&P Auto Parts & Equipment Index, and the S&P Hardware & Tools Index on
December 31, 1992, and reinvestment of all dividends). The companies
included in the S&P Auto Parts & Equipment Index are Cooper Tire & Rubber;
Dana Corporation; Echlin Inc.; Goodyear Tire & Rubber; ITT Industries,
Inc.; Snap-on Inc.; and TRW Inc. The companies included in the S&P Hardware
& Tools Index are Black & Decker Corp. and Stanley Works.
[OBJECT OMITTED]
- --------------------------------- ------------ ------------- ------------- ------------- ------------- -------------
1992 1993 1994 1995 1996 1997
- --------------------------------- ------------ ------------- ------------- ------------- ------------- -------------
SPX Corporation 100.00 101.04 96.99 95.14 236.20 421.50
- --------------------------------- ------------ ------------- ------------- ------------- ------------- -------------
Auto Parts & Equipment 100.00 116.23 101.36 125.32 140.61 175.86
- --------------------------------- ------------ ------------- ------------- ------------- ------------- -------------
S&P 500 100.00 110.08 111.53 153.45 188.68 251.63
- --------------------------------- ------------ ------------- ------------- ------------- ------------- -------------
Hardware & Tools 100.00 113.56 111.11 162.83 152.91 234.52
- --------------------------------- ------------ ------------- ------------- ------------- ------------- -------------
COMPENSATION COMMITTEE
INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1997 were Frank A.
Ehmann (Chairman), J. Kermit Campbell, Sarah R. Coffin and David P.
Williams. All Compensation Committee members are outside directors and no
committee member is or has ever been an officer or employee of the Company.
1999 SHAREHOLDER PROPOSALS AND NOMINATING PROCEDURES
Proposals of shareholders intended for inclusion in the Company's
proxy statement relating to the 1999 Annual Meeting must be received at the
Company's Principal Executive Offices (please address to the attention of
the Corporate Secretary) not later than November 25, 1998. Any such
proposal must comply with Rule 14a-8 of Regulation 14A of the proxy rules
of the Securities and Exchange Commission.
The By-Laws of the Company require that nominations for a director to
be elected at the 1999 Annual Meeting, other than those made by the Board,
be submitted to the Secretary of the Company not later than December 23,
1998. The By-Laws also require that notice of such nominations contain
certain information regarding the nominee and certain information regarding
the nominating shareholder. Any shareholder may obtain a copy of the
applicable bylaw from the Secretary of the Company upon written request.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP, the company's independent auditors since 1952,
has been appointed by the Board of Directors as the Company's independent
auditors for the current year. Representatives of Arthur Andersen LLP are
expected to be present at the Annual Meeting to be available to answer
appropriate questions and to make a statement if they so desire.
GENERAL
The cost of preparing, assembling and mailing this Proxy Statement and
accompanying papers will be borne by the Company. Solicitations will be
made by mail but in some cases may also be made by telephone or personal
call by officers, directors or regular employees of the Company, who will
not be specially compensated for such solicitation. The Company has
retained the Kissel-Blake Organization, Inc. to assist in the solicitation
of proxies for a fee of $7,500 plus expenses. The entire cost of such
solicitation will be borne by the Company, which will include the cost of
supplying necessary additional copies of the solicitation materials for
beneficial owners of shares held of record by brokers, dealers, banks and
voting trustees, and their nominees and, upon request, the reasonable
expenses of such record holders for completing the mailing of the
solicitation materials to those beneficial owners.
By Order of the Board of Directors,
CHRISTOPHER J. KEARNEY
Vice President, Secretary
and General Counsel
Muskegon, Michigan
April __, 1998
BACK PAGE OF PROXY STATEMENT
SPX CORPORATION SPX CORPORATION
ANNUAL MEETING OF SHAREHOLDERS ANNUAL MEETING OF SHAREHOLDERS
COMPANY HEADQUARTERS COMPANY HEADQUARTERS
700 TERRACE POINT DRIVE 700 TERRACE POINT DRIVE
MUSKEGON, MICHIGAN 49440 MUSKEGON, MICHIGAN 49440
MAY 20, 1998 MAY 20, 1998
9:00 A.M. 9:00 A.M.
ADMIT ONE ADMIT ONE
PRELIMINARY COPY - NOT FOR USE
A PROXY WILL BE PROVIDED WHEN A DEFINITIVE PROXY
STATEMENT IS FURNISHED TO SHAREHOLDERS
OF SPX CORPORATION
PROXY
THIS PROXY IS SOLICITED BY SPX CORPORATION
FOR THE ANNUAL MEETING OF STOCKHOLDERS
OF SPX CORPORATION
The undersigned hereby appoints John B. Blystone, Patrick J.
O'Leary and Christopher J. Kearney, and each or any of them, with full
power of substitution, as his or her true and lawful agents and proxies
("Proxies") to represent the undersigned at the Annual Meeting of
Shareholders of SPX Corporation ("SPX") to be held at SPX's headquarters,
700 Terrace Point Drive, Muskegon, Michigan, at 9:00 a.m. (Eastern Time)
on May 20, 1998, and at any adjournments or postponements thereof, and
authorizes said Proxies to vote all shares of SPX shown on the other side
of this card with all the powers the undersigned would possess if
personally thereat.
THE PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED ON THE
REVERSE SIDE. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED "FOR" THE
ELECTION OF THE THREE NOMINEES, "FOR" THE ISSUANCE OF SHARES AND "FOR" ANY
ADJOURNMENTS PROPOSED BY THE BOARD OF DIRECTORS OF SPX. THE UNDERSIGNED
HEREBY ACKNOWLEDGES RECEIPT OF THE PROXY STATEMENT OF SPX DATED [ ]
SOLICITING PROXIES FOR THE ANNUAL MEETING.
All previous proxies given by the undersigned to vote at the Annual
Meeting or at any adjournment or postponement thereof are hereby revoked.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE
Please mark votes
[ X ] as in this example.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR"
ITEMS 1, 2, 3 AND 4.
1. ELECTION OF DIRECTORS: SARAH R. COFFIN, CHARLES E. JOHNSON, II, AND
DAVID P. WILLIAMS.
[__] FOR ALL NOMINEES (EXCEPT AS [__] WITHHELD FOR ALL NOMINEES
MARKED TO THE CONTRARY BELOW)
WITHHELD FOR THE FOLLOWING NOMINEE(S) ONLY: WRITE NAME(S):______________
- ---------------------------------------------------------------------------
2. APPROVAL OF THE STOCK ISSUANCE PROPOSAL (AS DESCRIBED IN THE
ACCOMPANYING PROXY STATEMENT)
[__] FOR [__] AGAINST
3. APPROVAL OF THE AMENDMENT OF THE CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK OF THE
COMPANY.
[__] FOR [__] AGAINST
4. ADJOURNMENTS OF THE ANNUAL MEETING PROPOSED BY THE BOARD OF DIRECTORS
OF SPX.
[__] FOR [__] AGAINST
[__] WILL ATTEND THE ANNUAL MEETING.
PLEASE SIGN EXACTLY AS YOUR
NAME APPEARS HEREIN. WHEN
SIGNING AS ATTORNEY,
ADMINISTRATOR, EXECUTOR,
GUARDIAN OR TRUSTEE, PLEASE
GIVE YOUR FULL TITLE AS SUCH.
IF A CORPORATION, PLEASE SIGN
BY PRESIDENT OR OTHER
AUTHORIZED OFFICER AND INDICATE
TITLE. IF SHARES ARE REGISTERED
IN THE NAMES OF JOINT TENANTS
OR TRUSTEES, EACH TENANT OR
TRUSTEE IS REQUIRED TO SIGN.
SIGNATURE:___________________
DATE:_______________________
SIGNATURE:___________________
DATE:_______________________
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD IN THE ENCLOSED ENVELOPE
