SDSU “Intervention in the Boardroom”

1. SDSU • “Intervention in the Boardroom” • Lessons Learned from Relational Investors Founder David Batchelder • June 27, 2013 Relational does not seek to obtain material non-public information from our communications with the company. Representatives of the company are obligated to comply with Regulation FD and, in the event material non-public information is disclosed to us, the company shall make the necessary disclosures and filings.

2. Introduction • Relational formed in 1996 • First activist investor with institutional monies • Started with $200 Million – now $5 Billion • Over 100 Projects • Principals have been on 24 public company boards including Home Depot, Waste Management, Mattel, HP and Intuit • When not on the board, working behind the scenes with management and the board at companies like Pepsi, ITW, Deere and SPX

3. Introduction con’t. • Clients are large public pension funds – generally indexed • Historically passive • 1996 – KKR founded, leading to an era of LBO’s • Sell low/buy high • Institutional S/H’s – Largely passive, largely indexed needed a way to “fix” companies while remaining public • 1987 – CalPERS starts focus list • 1994 – CalPERS effect shows outperformance • 1996 – CalPERS funds first activist fund – Relational Investors

4. Characteristics of an Active Investor • Concentrated portfolio – generally less than 20 stocks • Invests with an agenda designed to correct undervaluation • Galvanizes support of institutional shareholder base around agenda • Prepared to seek board representation using short slate rule (1992) if necessary

5. 3 Most Common Failures of Public Company Boards • Capital allocation – balancing growth versus returns • Compensation structure • Succession planning

6. Temptation to Chase Growth Valuation vs. Growth 60x 50x 40x P/E Multiple 30x 20x 10x 0 .5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5 Perpetual Growth Rate (%) Note: Assumes 9% cost of equity and 20% ROE.

7. Growth at Lower Returns Will Be Value Destructive Valuation vs. Returns 25x 20x 15x P/E Multiple 10x 5x 0x 30 28 26 24 22 20 18 16 14 12 10 8 6 4 2 Return on Equity (%) Note: Assumes 9% cost of equity and 5% growth.

8. Home Depot Chases Growth • Opened another 500 stores – most with returns below their cost of capital • Expanded into the wholesale business, acquiring their way in with returns of about 8%. Again, below their cost of capital • Squeezed profitability from their retail stores by – • Reducing staffing • Under – investing in distribution and IT

9. Growth at Lower Returns Will be Value Destructive Valuation vs. Returns 16x Core Retail Business 14x 12x HD Supply Business 10x Implied P/E Multiple 8x New Stores 6x 4x 2x 0 25 23 21 19 17 15 13 11 9 7 5 3 1 Return on Equity (%) Note: Assumes 9% cost of equity and 3% growth.

10. Capital Allocation Best Practice Forecast Long-term Growth and Return Targets Establish Valuation Based on Business Plan STEP 1 Establish Credit Characteristics and Liquidity Objectives, and Adjust Debt/Cash as Indicated F STEP 2 Fund Maintenance Capex, Pension and Benefit Plans, and Regular Dividend STEP 3 Allocate Excess Capital to Highest Risk-adjusted Return Alternative that Exceeds WACC STEP 4 STEP 5 Repurchase Shares Increase Regular Dividend or Pay Special Organic Growth Initiatives Acquisitions Allocate capital to the most accretive alternative using share repurchase as a benchmark

11. Components of Executive Compensation • Base salary • Annual cash bonus – short-term (1 year) metrics • Long-term incentive plan – • Stock options – time vested • Restricted stock – effectively time vested • Performance units – payable in cash and/or restricted stock – metrics range from 1 to 3 years; performance measured by growth in revenue, operating income, EPS, ROIC and/or TSR.

12. Intuit Example

13. Home Depot Example

14. Conference Board Succession Plan Recommendations • Assign responsibility to a standing board committee of independent directors • Make succession planning continuous and integral to business strategy and culture • Integrate succession planning into the top-executive compensation policy • Integrate succession planning into risk management • Make succession planning transparent, internally and externally

15. Your Responsibility As Managers • Capital allocation • Compensation structure • Succession planning

16. SPX Corporation (SPW) Meeting with Christopher J. Kearney Chairman, President, and Chief Executive Officer J. Kermit Campbell Lead Director and Chairman of Compensation Committee Emerson U. Fullwood Chairman of Governance Committee Michael J. Manusco Chairman of Audit Committee May 14, 2013 Relational does not seek to obtain material non-public information from our communications with the company. Representatives of the company are obligated to comply with Regulation FD and, in the event material non-public information is disclosed to us, the company shall make the necessary disclosures and filings.

17. Relational Investors: Overview • Privately owned asset manager • Founded in 1996 • $5 billion in assets under management • Registered investment adviser, regulated by the SEC • Ninety-nine percent of our assets under management are from large public and corporate pension funds • Manage a concentrated portfolio • Major projects involve a 2-5 year investment horizon

18. Relational Investors: Experience • Advised boards and executives and/or served as principals of 120 investments involving strategic planning, capital allocation, business solution optimization and/or corporate governance challenges • Served on boards of 24 public companies • Served as Chairman of four public companies, including one Fortune 100 and two Fortune 500 companies • Chaired and served on all major committees • Chaired and/or served on multiple special committees involving change of control, executive searches, internal investigations

19. Relational Investors: Areas of Expertise

20. Why We Invested in SPX • Leader in high value-added flow equipment for oil & gas, industrial, and food & beverage sectors • Considerable operational and share price underperformance • Trades at a discount to fair value based on sum-of-the-parts and free cash flow generation • Opportunity to create significant shareholder value by: • Improving margins in flow and transformers businesses through restructuring, improved execution, aftermarket penetration, and end market demand • Divesting thermal and non-transformers industrial businesses • Implementing capital allocation discipline and ensuring effective deployment of excess cash • Aligning management compensation to improvements in profitability and proper capital allocation • Communicating to the Street that SPX will continue to rationalize its portfolio around flow business and improve margins

21. 1-Year Share Price Underperformance of 54% Note: Peer group is based on companies specified in 2013 proxy: ITT, ROK, CMI, CR, TKR, FLS, PH, DOV, TXT, IR, CSL, DHR, ROP, HSC, PNR, PLL, SNA, ETN, and GLW.

22. 3-Year Share Price Underperformance of 47% Note: Peer group is based on companies specified in 2013 proxy: ITT, ROK, CMI, CR, TKR, FLS, PH, DOV, TXT, IR, CSL, DHR, ROP, HSC, PNR, PLL, SNA, ETN, and GLW.

23. 5-Year Share Price Underperformance of 85% Note: Peer group is based on companies specified in 2013 proxy: ITT, ROK, CMI, CR, TKR, FLS, PH, DOV, TXT, IR, CSL, DHR, ROP, HSC, PNR, PLL, SNA, ETN, and GLW.

24. Chasing Growth at the Expense of Returns Over 90% of SPX’s portfolio is generating returns below its cost of capital Total Segment ROA: 6.4% Cost of Capital: 9.3% Dotted line represents ROA before adjusting for goodwill & intangibles Thermal ROA Management Long Term Target = 8.5% ~$2B Spent on Acquisitions Even if Thermal Equipment achieves Management’s long-term margin targets, it will still earn a below cost of capital return Note: Return on Assets = Operating Income*(1-Tax Rate)/Segment Assets adjusted for goodwill & intangibles Total Segment ROA = Segment Operating Income*(1-Tax Rate)/ Segment Assets

25. SPX’s Returns and Margins are Significantly Below Peers 2012 Return on Invested Capital Returns explain ~70% of SPX’s valuation 2012 Operating Margin Margin improvement is 5x more valuable than revenue growth Note: Peer group is based on companies specified in 2013 proxy. Operating Income is adjusted for nonrecurring impairment charges Return on Invested Capital (ROIC) = Operating Income*(1-Tax Rate)/(Equity + Net Debt)

26. SPX’s Flow Operating Metrics are Well Below Peers 2012 Operating Margin 2012 Asset Turns 2012 Return on Assets Flow Margin and Asset Turns Improvement Will Drive Returns and Multiple Note: Peer operating metrics use Flow segment operating income, identifiable assets, and sales as provided in 2012 Annual Filings Return on Assets = Segment Operating Income*(1-Tax Rate)/Segment Assets. See Appendix A for detailed comparison of SPX with specific Flow Peers

27. Clyde Union Performance Has Been Significantly Below Management Expectations Note: Estimates of Clyde Union performance are based on public filings and transcripts of SPX earnings calls and investor presentations.

28. Failed Execution on Clyde Union “What we anticipated with respect to Clyde Union is what we got.” – Chris Kearney, 1Q12 Earnings Call What SPX Management Anticipated What SPX Management Got This year [2011], Clyde Union is expecting revenue to grow about 50% to approximately $650 million, primarily driven by organic volume growth. Next year…we are projecting revenue to grow by at least 10% or more on an organic basis… Clyde Union’s 2011 operating margin is expected to be between 10% and 11%.” “We expect this acquisition to be accretive to earnings per share by $0.30 to $0.40 next year.” “Clyde Union is a well-managed organization with an outstanding leadership team and employee base. As such, we do not expect to incur any meaningful restructuring charges or working capital investments.” “The difference here is that this business is very well-established and run, and has really an outstanding management team with a great track record…this doesn't require the kind of heavy lifting that we've had to do in the past in terms of some of the acquisitions that we've done.” “For the full year [2012], Clyde Union reported $571 million of revenue at a 5% margin.” -4Q12 Earnings Call “And for the full year, we now expect Clyde Union's aggregate impact to be neutral to earnings per share.” -3Q12 Earnings Call “We took aggressive actions to address the operational execution challenges that ClydeUnion faced prior to our acquisition of this business...As part of this process, we made a significant working capital investment in the business to accelerate component supply.” -1Q12 Earnings Call “In Q1, we recorded $5 million of incremental charges on legacy contracts that were part of the acquired backlog.” -1Q13 Earnings Call We are on track, it's never easy; it's a lot of hard work. But I think the things that we're doing are the right things and I think the business [Clyde Union] is showing very steady sequential improvement and we expect that to carry into 2013…I guess the people who are actually doing it…would not like me to characterize things as heavy lifting being over. They view that as a challenge every day. -3Q12 Earnings Call

29. Achieving Management’s Long-term Margin Targets Creates Significant Value Hitting the midpoint of management’s margin targets by 2015 drives 50% increase in value With no margin improvement, SPX stock is fairly valued in the $80’s A 20% improvement in returns creates 5.6x more value than a 20% improvement in growth

30. Significant Improvement in Returns Implied by SPX’s Long-term Operating Targets 150 % Improvement SPX underperformed proxy peers by 77% SPX outperformed proxy peers by 222% Margin and Asset Turn Improvements Drive Return on Invested Capital From 9% to 22% Note: Pre-Tax ROIC is calculated as Operating Income/(Equity + Net Debt). Operating income excludes one-time impairment charges. SPX performance vs. proxy peers is for the following periods – 9/8/2004 to 6/13/2008 and 6/13/2008 to 12/13/2012

31. SPX Will Generate Significant Discretionary Cash Flow Projected Discretionary Cash Flow* SPX will generate 51% of its market cap over next 5 years * Discretionary cash flow defined as operating cash flow before changes in working capital less capex. Projections assume SPX returns $200m to shareholders through repurchases during 2013 and grow its dividends at 7%.

32. Returns Drive Valuation • Cash ROI spread is the difference between a company’s projected Cash ROI in the next fiscal year based on consensus EPS forecasts and the company’s specific discount rate. A spread of > 0.0% implies that the company is expected to create economic profits in excess of required returns on capital • Enterprise Value to Total Invested Capital is defined as economic value divided by inflation adjusted net assets and is similar to a “real” market-to-book ratio. An EV / Invested Capital ratio >1.0x implies that the market is expecting future profitable growth from the company. Source: Credit Suisse HOLT.

33. Growth at Lower Returns is Value Destructive Valuation vs. Returns Investing Here Destroys Value 2017E ROE 2012 ROE Note: Assumes 9% cost of equity and 5% growth. 2017 ROE assumes margin improvement and repurchases shown in Appendix C. Return on Equity (ROE) = Net Income/Average Equity. 2012 Net Income is adjusted for non-recurring items.

34. SPX’s Capital Allocation Strategy Creates Low Hurdle for Acquisitions SPX’s current level of return on assets implies that acquisition returns are well below the cost of capital Note: Slide is from 2013 SPX Analyst Day.

35. Capital Allocation Best Practice Forecast Long-term Growth and Return Targets Establish Valuation Based on Business Plan STEP 1 Establish Credit Characteristics and Liquidity Objectives, and Adjust Debt/Cash as Indicated F STEP 2 Fund Maintenance Capex, Pension and Benefit Plans, and Regular Dividend STEP 3 Allocate Excess Capital to Highest Risk-adjusted Return Alternative that Exceeds WACC STEP 4 STEP 5 Repurchase Shares Increase Regular Dividend or Pay Special Organic Growth Initiatives Acquisitions Allocate capital to the most accretive alternative using share repurchase as a benchmark

36. Share Repurchases Represent High Hurdle for Acquisitions Acquisitions must exceed high risk-adjusted hurdle Note: All scenarios assume SPX achieves mid-point of management margin targets by 2015 and P/E multiple remains constant over time. See Appendix B for repurchase details.

37. Selling Thermal Now at a Low Price Will Benefit SPX’s Stock Price Impact on Stock Price of Selling Thermal Now at 4x 2014 EV/EBITDA Note: “Loss on Sale of Thermal” is calculated as the difference in value of 1) selling Thermal today for 4.0x 2014E EBITDA and 2) the present value of selling Note: Thermal on 12/31/2014 for 6.0x 2015E EBITDA assuming 9% 2015E EBIT margin. Both scenarios assume $400m tax basis and 35% tax rate. “Multiple Re-rating” assumes a 1.0x increase in EV/EBITDA multiple for the remaining businesses and assumes 2015E segment margins at the mid-point Note: of management targets.

38. Recommendations • Focus on improving returns and margins to peer levels • Communicate SPX’s discipline for allocating approximately $1.9 billion of discretionary cash flow through 2017 (51% of current market cap) • Benchmark all acquisitions to share repurchases • No large deals • Ensure that compensation plans support management program to improve operating profitability and proper capital allocation • Continue to divest assets and focus on core businesses • Divest Thermal segment given inability to achieve cost of capital returns • Divest Industrial businesses other than Transformers

39. Recommendations on Executive Compensation

40. SPX’s Share Price Has Underperformed by 56% During CEO’s Tenure Note: Peer group is based on companies specified in 2013 proxy: ITT, ROK, CMI, CR, TKR, FLS, PH, DOV, TXT, IR, CSL, DHR, ROP, HSC, PNR, PLL, SNA, ETN, and GLW.

41. History of CEO Compensation SPX’s CEO Compensation as % of Market Capitalization is in the 90th Percentile of Proxy Peers While Total Return to Shareholders is in the 33rd Percentile

42. Compensation Plan for NEOs • Eliminate executive annual bonus plan (the 162 (m) plan) and use executive plan as SPX did for 2012 • Thresholds for Operating Margin and Operating Income should not be set below prior year actual results • Equity-based awards should be based (i) 50% on performance versus a rolling 3-year business plan with multiple metrics (margin, operating profit, and ROIC) and (ii) 50% on TSR over a rolling three year period • TSR should be measured against the S&P MidCap 400 Industrials Index • Threshold, target, and maximum payouts should be based on 3-year TSR percentile ranking • Payouts capped at 100% if absolute TSR is negative • Other benefits and perquisites • Eliminate relocation loans for NEOs • Eliminate “single-trigger” treatment following change-of-control • Eliminate 280G tax “gross-ups” • Eliminate incremental match ($30,000) of contribution for NEOs • Eliminate post-retirement key manager life insurance benefit • Eliminate executive retiree medical benefit • Eliminate car allowance, country club dues, financial planning, executive physical, and long-term executive disability plan • Add supplemental executive choice plan to cover miscellaneous perks up to $100,000 for CEO and $75,000 for other NEOs

43. Employment Agreement With Christopher Kearney Effective Date - 11/20/2008 Two Year Evergreen • Cap base salary at $1 million (section 162 (m) deductible amount) • In 4(e), eliminate the second and third sentences restricting reductions in perquisites and providing a special tax and financial planning reimbursement of up to $40,000 per year • Eliminate retiree medical benefits • Eliminate 5(e)(v) in definition of good reason regarding reduction of compensation plans and programs

44. Change-of-Control Agreement With Christopher Kearney Commencement Date - 3/10/1999 Next Expiration - 3/10/2014 Notice Date - 9/10/2013 • Eliminate 280G tax gross-up and cap payments at 280G amount • Eliminate forgiveness of relocation loan and related tax gross-up • Eliminate key manager life insurance program and related tax gross-up • Eliminate additional benefits • Revise definition of “Change-of-Control” • Eliminate 3(d)(v), (vi), and (ix) in definition of “good reason”. This includes single trigger on change-of-control

45. Proposed Change-of-Control Agreement Change in Control.  For purposes of this agreement, “Change in Control” shall mean the occurrence of a change in control of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A under the Securities Exchange Act of 1934 (“1934 Act”) as in effect at the time of such change in control, provided that such a change in control shall be deemed to have occurred at such time as (i) any “person” (as that term is used in Sections 13(d) and 14(d) (2) of the 1934 Act), is or becomes the “beneficial owner,” directly or indirectly, of securities representing 50% or more of the combined voting power for election of directors of the then outstanding securities of the Company or any successor of the Company; (ii) during any period of two (2) consecutive years or less, individuals who at the beginning of such period constituted the Board cease, for any reason, to constitute at least a majority of the Board, unless the election or nomination for election of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period or whose election or nomination for election was so approved; (iii) the consummation of any merger or consolidation, approved by the stockholders of the Company, as a result of which the common stock of the Company shall be changed, converted or exchanged (other than a merger with a wholly owned subsidiary of the Company) or of any sale or other disposition in one or a series of related transactions of 50% or more of the assets or earning power of the Company, or the approval by stockholders of any liquidation of the Company; or (iv) the consummation of any merger or consolidation, approved by the stockholders of the Company, to which the Company is a party as a result of which the persons who were stockholders of the Company immediately prior to the effective date of the merger or consolidation shall have beneficial ownership of less than 50% of the combined voting power for election of directors of the surviving corporation following the effective date of such merger or consolidation. Source: Home Depot 8-K filed 3-6-2013

48. APPENDIX

49. Appendix A: SPX’s Margin Targets Appear Conservative SPX’s margin targets are below peers even after accounting for variance in end market exposures and revenues from aftermarket Note: *2015 Targets are based on management guidance. If management targets are not available, 2015 targets reflect consensus estimates.

50. Appendix B: Repurchase Valuation Details SPX has the balance sheet capacity to repurchase $500m of shares per year Note: Assumes P/E multiple remains constant and SPX hits mid-point of management long-term margin targets by 2015.