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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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RELTEC CORPORATION
(Name of Subject Company)
RELTEC CORPORATION
(Name of Person(s) Filing Statement)
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Common Stock, Par Value $.01 Per Share
(Title of Class of Securities)
759527-10-4
(Cusip Number of Class of Securities)
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VALERIE GENTILE SACHS
Vice President, General Counsel and Secretary
RELTEC Corporation
5900 Landerbrook Drive, Suite 300
Cleveland, Ohio 44124-4019
(440) 460-3600
(Name, Address and Telephone Number of Person Authorized to
Receive Notice and Communications on Behalf of Person(s) Filing Statement)
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Copies to:
PETER F. KERMAN, ESQ.
Latham & Watkins
135 Commonwealth Drive
Menlo Park, California 94025
(650) 328-4600
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ITEM 1. Security and Subject Company.
The name of the subject company is RELTEC Corporation, a Delaware
corporation (the "Company"), and the address of the principal executive
offices of the Company is 5900 Landerbrook Drive, Cleveland, Ohio 44124-4019.
The title of the class of equity securities to which this statement relates is
the Common Stock, par value $.01 per share (the "Common Stock"), of the
Company.
ITEM 2. Tender Offer of the Bidder.
This statement relates to the cash tender offer (the "Offer") disclosed in a
Tender Offer Statement on Schedule 14D-1, dated March 5, 1999 (the "Schedule
14D-1"), of GEC Acquisition Corp., a Delaware corporation (the "Purchaser")
and a wholly owned subsidiary of GEC Incorporated, a Delaware corporation
("Parent"), a wholly owned subsidiary of The General Electric Company, p.l.c.,
a public limited company organized under the laws of England and Wales ("GEC,
p.l.c.") (not affiliated with the U.S. based corporation with a similar name)
to purchase all of the outstanding shares of Common Stock of the Company (the
"Shares") at a price of $29.50 per Share (the "Offer Price"), net to the
seller in cash without interest thereon, subject to certain conditions set
forth therein. The Offer is being made by the Purchaser pursuant to the
Agreement and Plan of Merger, dated as of March 1, 1999 (the "Merger
Agreement"), by and among the Company, Parent and the Purchaser, a copy of
which is filed as Exhibit 1 hereto and incorporated herein by reference.
Subject to certain terms and conditions of the Merger Agreement, the Purchaser
will be merged with and into the Company (the "Merger") as soon as practicable
after the consummation of the Offer, with the Company surviving the Merger
(the "Surviving Corporation") and becoming a wholly owned subsidiary of
Parent. The Schedule 14D-1 states that the address of the principal executive
offices of Parent and the Purchaser is 1500 Mittel Boulevard, Wood Dale,
Illinois 60191-1073 (c/o Videojet Systems International, Inc.). A copy of the
press release issued by the Company and GEC, p.l.c. on March 1, 1999 is filed
as Exhibit 2 hereto and incorporated herein by reference.
ITEM 3. Identity and Background.
(a) The name and business address of the Company, which is the entity filing
this statement, are set forth in Item 1 above.
(b) Except as described or referred to below, there exists on the date
hereof no material contract, agreement, arrangement or understanding and no
actual or potential conflict of interest between the Company or its affiliates
and (i) the Company or its executive officers, directors or affiliates or (ii)
GEC, p.l.c., Parent, the Purchaser or their executive officers, directors or
affiliates. Marconi Communications Limited ("Marconi Communications"), a
company incorporated in the United Kingdom and registered in England and Wales
and a wholly owned subsidiary of GEC, p.l.c., has an ongoing relationship with
RELTEC (UK) Limited ("RELTEC (UK)") (f/k/a Rainford Group Limited), a company
incorporated in the United Kingdom and registered in England and Wales and a
wholly owned subsidiary of the Company, whereby RELTEC (UK) supplies Marconi
Communications with base station cabinet enclosure systems. Pursuant to this
relationship, RELTEC (UK) sold Marconi Communications approximately $10.6,
$17.5 and $32.5 million in equipment during the years ended March 1996, 1997
and 1998, respectively.
Arrangements with Directors, Executive Officers or Affiliates of the Company
Certain contracts, agreements, arrangements and understandings between the
Company and certain of its directors, executive officers and affiliates are
described in the Company's Information Statement in the sections entitled
"Board of Directors--Directors Compensation" and "Certain Relationships,
Transactions and Arrangements" and "Executive Officer Compensation." The
Information Statement is attached hereto as Annex A and incorporated herein by
reference.
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In connection with the transactions contemplated by the Merger, the
following agreements were entered into: the Merger Agreement, the Stockholder
Agreement and Proxy, dated as of March 1, 1999, by and among Parent, the
Purchaser and the stockholders of the Company listed on Annex A thereto (the
"Stockholder Agreement") and the Confidentiality Agreement dated as of
February 4, 1999 between the Company and GEC, p.l.c. (the "Confidentiality
Agreement"). A copy of the Stockholder Agreement is filed as Exhibit 3 hereto
and incorporated herein by reference. A copy of the Confidentiality Agreement
is filed as Exhibit 4 hereto and incorporated herein by reference.
In addition, Parent is a designated borrower under the Euro 6,000,000,000
Syndicated Credit Facility dated March 25, 1998 (the "Credit Facility
Agreement") among GEC, p.l.c., HSBC, p.l.c., HSBC Investment Bank PLC, as
Agent, Marine Midland Bank, as US Swingline Agent, and certain other financial
institutions. Pursuant to a letter dated February 28, 1999 from GEC, p.l.c. to
the Company, GEC, p.l.c. has agreed to cause the availability of the
commitment under the Credit Facility Agreement to be an amount necessary to
complete the acquisition of the Shares upon the terms and conditions set forth
in the Merger Agreement. GEC, p.l.c. otherwise intends to make available,
directly or indirectly, to the Purchaser funds to enable it to complete the
acquisition of all outstanding Shares, upon the terms and conditions set forth
in the Merger Agreement. A copy of the letter is filed as Exhibit 5 hereto and
is incorporated herein by reference.
The Merger Agreement
The following summary is qualified in its entirety by reference to the
complete text of the Merger Agreement which is filed as Exhibit 1 hereto and
incorporated herein by reference. Capitalized terms used but not defined
herein shall have the meanings set forth in the Merger Agreement.
The Merger Agreement provides that following the satisfaction of the
conditions described below under "Conditions to the Merger", the Purchaser
will be merged with and into the Company, and each outstanding Share (other
than Shares held by stockholders who perfect their appraisal rights under
Delaware law, Shares owned by the Company as treasury stock and Shares owned
by Parent or any direct or indirect wholly owned subsidiary of Parent or of
the Company) will be converted into the right to receive $29.50 in cash (the
"Per Share Merger Consideration"), without interest.
Vote Required to Approve the Merger. The Delaware General Corporation Law
("DGCL") requires, among other things, that the adoption of any plan of merger
or consolidation of the Company must be approved by the Board of Directors of
the Company (the "Board") and generally by a majority of
the holders of the Company's outstanding voting securities. The Board has
approved the Offer and the Merger. Consequently, the only additional action of
the Company that may be necessary to effect the Merger is approval by such
stockholders if the "short-form" merger procedure described below is not
available. Under the DGCL, the affirmative vote of holders of a majority of
the outstanding Shares (including any Shares owned by the Purchaser), is
generally required to approve the Merger. If the Purchaser acquires, through
the Offer or otherwise, voting power with respect to at least a majority of
the outstanding Shares (which would be the case if the Minimum Condition were
satisfied and the Purchaser were to accept for payment Shares tendered
pursuant to the Offer), it would have sufficient voting power to effect the
Merger without the vote of any other stockholder of the Company. However, the
DGCL also provides that if a parent company owns at least 90% of each class of
stock of a subsidiary, the parent company can effect a short-form merger with
that subsidiary without the action of the other stockholders of the
subsidiary. Accordingly, if, as a result of the Offer or otherwise, the
Purchaser acquires or controls the voting power of at least 90% of the
outstanding Shares, the Purchaser could, and intends to, effect the Merger
without prior notice to, or any action by, any other stockholder of the
Company.
Conditions to the Merger. The respective obligations of Parent, the
Purchaser and the Company to effect the Merger under the Merger Agreement are
subject to the satisfaction at or prior to the effective time of the Merger
(the "Effective Time") of the following conditions, any or all of which may be
waived by Parent, the Purchaser and the Company, in whole or in part, to the
extent permitted by applicable law: (a) if required by the DGCL, the Merger
Agreement and the Merger shall have been approved and adopted by the requisite
vote of the
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stockholders of the Company in accordance with the DGCL; (b) no court or
governmental authority of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive
order, decree, ruling, injunction or other order that prohibits the Merger or
makes the Merger illegal; and (c) any applicable waiting period under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act") shall have expired or been terminated, and the other Governmental
Approvals (as defined herein), the failure of which to obtain would be
reasonably expected to have a Material Adverse Effect (as defined herein) or a
Parent Material Adverse Effect (as defined herein) (collectively the "Required
Approvals") shall have been obtained or satisfied, as the case may be, on
terms satisfactory to Parent in its reasonable discretion; provided that this
condition may not be asserted by the Company with respect to any Required
Approval if the potential penalty for any failure to receive such Required
Approval will be borne only by Parent or the Purchaser; and (d) the Purchaser,
Parent or their affiliates shall have accepted for payment and purchased
Shares pursuant to and subject to the conditions of the Offer or the Principal
Stockholder Shares (as defined herein) upon the exercise of the Option (as
defined herein) pursuant to the Stockholder Agreement.
Termination of the Merger Agreement. The Merger Agreement may be terminated
and the Offer and the Merger may be abandoned at any time (notwithstanding
approval of the Merger by the stockholders of the Company) prior to the
Effective Time: (a) by mutual written consent of Parent, the Purchaser and the
Company; (b) by Parent or the Company if any court of competent jurisdiction
or other Governmental Entity (as defined herein) shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining
or otherwise prohibiting the Merger and such order, decree, ruling or other
action is or shall have become final and nonappealable; (c) by Parent or the
Company, if the Purchaser shall have (i) failed to commence the Offer as
provided in the Merger Agreement, (ii) terminated or withdrawn the Offer
without purchasing any Shares pursuant to the Offer or (iii) failed to pay for
Shares pursuant to the Offer by July 1, 1999 (the "Termination Date");
provided that the right to terminate the Merger Agreement as described in this
subparagraph (c) shall not be available (x) to any party (including the
Purchaser's failure in the case of Parent) whose failure to fulfill any
obligation under the Merger Agreement has been the cause or resulted in one of
the circumstances described in clause (i), (ii) or (iii), (y) to the Company
in the event that the Offer has expired or has otherwise been terminated and
any of CMT Associates, L.P., KKR Partners II, L.P. and KKR Associates, L.P.
(collectively, the "Principal Stockholders") has failed to tender all of its
Shares in accordance with the Stockholder Agreement or has withdrawn any of
its Shares tendered in the Offer prior to such expiration or termination, or a
breach of the Stockholder Agreement by any Principal Stockholder has been the
cause or resulted in one of the circumstances described in clause (i), (ii) or
(iii) or (z) to any party if the Purchaser, Parent or their affiliates shall
have exercised the Option unless such exercise subsequently is voided under
the terms of the Stockholder Agreement; (d) by Parent or the Purchaser, at any
time prior to the purchase by the Purchaser, Parent or their affiliates of
Shares pursuant to and subject to the conditions of the Offer or the purchase
of the Principal Stockholder Shares upon the exercise of the Option pursuant
to the Stockholder Agreement, if (i) any
representation or warranty of the Company contained in the Merger Agreement or
of the Principal Stockholders contained in the Stockholder Agreement that is
qualified as to materiality shall not be true and correct or any
representation or warranty of the Company contained in the Merger Agreement or
of the Principal Stockholders contained in the Stockholder Agreement that are
not so qualified shall not be true and correct in any material respect, (ii)
there shall have been a breach of any covenant or agreement (including the
Company Lock-up Provisions (as defined herein)) of the Company contained in
the Merger Agreement or of the Principal Stockholders contained in the
Stockholder Agreement (including the Stockholder Lock-up Provisions (as
defined herein)) which would materially adversely affect (or materially delay)
the consummation of the Offer or the Merger or the transactions contemplated
by the Stockholder Agreement, which shall not have been cured prior to the
earlier of 10 business days following notice of such breach and two business
days prior to the date the Offer expires; provided, however, the Company will
have no right to cure a breach of the Company Lock-up Provisions; or (e) by
the Company prior to the purchase by the Purchaser, Parent or their affiliates
of Shares pursuant to and subject to the conditions of the Offer or the
purchase of any Principal Stockholder Shares (as defined herein) upon exercise
of the Option pursuant to the Stockholder Agreement, if (i) there shall have
been a material breach of any representation or warranty in the Merger
Agreement or the Stockholder Agreement on the part of Parent or the Purchaser
which adversely affects (or materially delays) the consummation of the Offer
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or (ii) there shall have been a material breach of any covenant or agreement
in the Merger Agreement or the Stockholder Agreement on the part of Parent or
the Purchaser which adversely affects (or materially delays) the consummation
of the Offer which shall not have been cured prior to the earlier of (A) 10
business days following notice of such breach and (B) two business days prior
to the date on which the Offer expires.
Acquisition Proposals. Pursuant to the Merger Agreement, the Company has
agreed to immediately cease any existing discussions or negotiations with any
third parties conducted prior to the date of the Merger Agreement with respect
to any Acquisition Proposal (as defined below). The Company has agreed that it
will not, directly or indirectly, through any officer, director, employee,
representative, agent or affiliates, including any investment banker, attorney
or accountant (collectively, "Representatives") retained by the Company or any
of its subsidiaries, directly or indirectly (a) solicit, initiate, encourage
or otherwise facilitate (including by way of furnishing information) any
inquiries or proposals that constitute, or could reasonably be expected to
lead to, a proposal or offer for a merger, consolidation, business
combination, sale of substantial assets, sale of 15% or more of shares of
capital stock (including, without limitation, by way of a tender offer) or
similar transactions involving the Company or any of its subsidiaries, other
than the transactions contemplated by the Merger Agreement or the Stockholder
Agreement (any of the foregoing inquiries or proposals being referred to as an
"Acquisition Proposal") or (b) engage in negotiations or discussions
concerning, or provide any non-public information to any person or entity
relating to, any Acquisition Proposal.
The Merger Agreement provides further that, except as described below,
neither the Board nor any committee thereof shall (a) subject to the following
paragraph, withdraw or modify, or propose to withdraw or modify, in a manner
adverse to Parent or the Purchaser, the approval or recommendation by the
Board or such committee of the Offer or the Merger Agreement, (b) approve or
recommend, or propose to approve or recommend, any Acquisition Proposal, or
(c) cause or permit the Company to enter into any agreement, including an
agreement in principle or letter of intent (each, an "Acquisition Agreement")
relating to any Acquisition Proposal. In addition, under the Merger Agreement,
the Company has agreed to notify Parent immediately (and no later than 24
hours) after receipt by the Company of any Acquisition Proposal or any request
for non-public information in connection with an Acquisition Proposal or for
access to the properties, books or records of the Company by any person or
entity that informs the Company that it is considering making, or has made, an
Acquisition Proposal. Such notice shall be made orally and in writing and
shall indicate in reasonable detail the identity of the offeror and the terms
and conditions of such proposal, inquiry or contact.
Nothing contained in the Merger Agreement shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rule 14e-
2(a) promulgated under the Exchange Act or from making any legally required
disclosure to the stockholders of the Company. Notwithstanding anything else
to the contrary, neither the Company nor the Board shall take any action that
would (x) prevent, impede or delay the Offer, the stockholder meeting relating
to the Merger or the ability of the stockholders of the Company to hold a
meeting to vote on the Merger or adopt the Merger Agreement, (y) prevent,
impede or delay (i) the ability of the stockholders of the Company (A) to
tender or sell their Shares in the Offer and (B) to approve and adopt the
Merger Agreement, the Merger and the other transactions contemplated by the
Merger Agreement, or (ii) the ability of the Company, Parent or the Purchaser
from effecting the Offer or, after the stockholders of the Company have voted
in favor of the Merger and adopted the Merger Agreement, from effecting the
Merger in accordance with the DGCL or (z) result in the Board not having taken
all Board action required to satisfy all applicable requirements of the DGCL
in connection with the Merger Agreement, the Merger and the other transactions
contemplated thereby. Notwithstanding anything to the contrary, the Company
will duly call, give notice and hold a stockholders meeting, if required by
the DGCL, for the purpose of considering and taking action upon the Merger
Agreement and the Merger whether or not the Board has determined at any time
after the date of the Merger Agreement it is no longer advisable for the
stockholders of the Company to adopt the Merger Agreement. The provisions
described in this and the preceding two paragraphs are referred to herein as
the "Company Lock-up Provisions".
Fees and Expenses. The Merger Agreement provides that each of Parent, the
Purchaser and the Company will bear its own fees and expenses in connection
with the Merger Agreement and the transactions contemplated thereby.
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Conduct of Business of the Company. Pursuant to the Merger Agreement, the
Company has agreed that, prior to the Effective Time, unless otherwise
expressly contemplated by the Merger Agreement or consented to in writing by
Parent, it will and its subsidiaries will each: (a) conduct its operations
according to its ordinary course of business; (b) use its reasonable best
efforts to preserve intact its business organization, to keep available the
services of its officers and employees and to maintain existing relationships
with licensors, licensees, suppliers, bankers, insurers, contractors,
distributors, customers and others having business relationships with it.
Prohibited Actions by the Company. Under the Merger Agreement, the Company
has agreed that, except as expressly contemplated by the Merger Agreement or
otherwise consented to in writing by Parent, from the date of the Merger
Agreement until the Effective Time, neither the Company nor any of its
subsidiaries will do any of the following:
(a) amend or propose to amend its certificate or articles of
incorporation or bylaws or equivalent organizational documents;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities or equity
equivalents (including, without limitation, stock appreciation rights and
indebtedness that has or may have voting rights), except as required by
options agreements as in effect as of the date hereof, or except as
contemplated by the Merger Agreement, amend any of the terms of any such
securities or agreements outstanding as of the date hereof;
(c) effect any reorganization or recapitalization or split, combine or
reclassify any shares of its capital stock, declare, set aside or pay any
dividend or other distribution (whether in cash, stock or property or any
combination thereof) in respect of its capital stock or redeem, repurchase
or otherwise acquire any of its securities or any securities of its
subsidiaries;
(d) (i) incur any indebtedness for borrowed money (except for short term
indebtedness incurred in the ordinary course of business pursuant to
existing lines of credit) or issue any debt securities or, except in the
ordinary course of business, assume, guarantee or endorse the obligations
of any other person, except for intercompany indebtedness between the
Company and its wholly owned subsidiaries or between any of the Company's
wholly owned subsidiaries; (ii) make any loans, advances or capital
contributions to, or investments in, any other person (other than to wholly
owned subsidiaries of the Company) except in the ordinary course of
business; (iii) pledge or otherwise encumber shares of capital stock of the
Company or any of its subsidiaries except in the ordinary course of
business; (iv) enter into or invest in any derivative financial instruments
except in the ordinary course of business consistent with the Company's
current investment and risk management policies (it being understood that
the Company shall continue its current
investment and risk management policies); or (v) mortgage or pledge any of
its assets, tangible or intangible, or except in the ordinary course of
business, create or suffer to exist any lien thereupon, provided that,
notwithstanding anything to the contrary and without limiting the
generality of the foregoing, no transaction described in clauses (iv) and
(v) shall be permitted without Parent's consent for any such transaction
(or series of related transactions) the value of which is in excess of $20
million;
(e) enter into, adopt or (except as may be required by law) amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee, or (except, in the case of employees who are
not officers or directors, for normal compensation increases in the
ordinary course of business that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the Company)
increase in any manner the compensation or benefits of any director,
officer or employee or pay any benefit not required by any plan or
arrangement as in effect as of the date of the Merger Agreement (including,
without limitation, the granting of stock options, restricted stock, stock
appreciation rights, "phantom" stock rights or performance units);
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(f) sell, lease or otherwise dispose of, or grant any lien with respect
to any assets or properties of the Company and its subsidiaries, or enter
into any contract, agreement, commitment or transaction with respect to the
foregoing that are, individually or in the aggregate, material to any of
the Company and its subsidiaries, taken as a whole, except for dispositions
of excess or obsolete assets and sales of inventories in the ordinary
course of business;
(g) change any of the accounting principles used by it, except as may be
required as a result of a change in law, SEC guidelines or generally
accepted accounting principles;
(h) (i) acquire (by merger, consolidation, acquisition of stock or assets
(including technology assets) or otherwise) any corporation, partnership or
other business organization or division thereof, (ii) authorize any new
capital expenditure or expenditures which, individually, is in excess of
$2,500,000 or, in the aggregate, are in excess of $10,000,000; (iv) settle
any litigation for amounts in excess of the greater of $200,000,
individually, or $1,000,000, in the aggregate, or, with respect to any
litigation as to which reserves have been recorded on the books of the
Company, the amount reserved for such litigation; or (v) enter into or
amend any contract, agreement, commitment or arrangement with respect to
any of the foregoing;
(i) make any tax election or settle or compromise any tax liability,
other than in the ordinary course of business;
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction of claims, liabilities or
obligations in the ordinary course of business or in accordance with their
terms, or reflected or reserved against in the consolidated financial
statements (or the notes thereto) of the Company and its consolidated
subsidiaries or incurred in the ordinary course of business;
(k) (i) terminate, modify, amend or waive compliance with any material
provision of any of its significant agreements, or fail to take any
reasonable action necessary to preserve the material benefits of any
significant agreement to the Company or any of its subsidiaries or (ii)
enter into any agreement which, if such agreement is entered into, would be
a significant agreement;
(l) enter into any new agreements with, or commitments to, insurance
brokers or advisers extending beyond one year or extend any insurance
policy beyond one year (including, for the avoidance of doubt, the
directors' and officers' liability insurance policies referred to below);
or
(m) take, or agree in writing or otherwise to take, any of the foregoing
actions.
Directors. The Merger Agreement provides that promptly upon the purchase by
the Purchaser of a majority of the outstanding Shares pursuant to the Offer or
the purchase by the Purchaser of the Principal Stockholder Shares (as defined
herein) upon exercise of the Option (as defined herein) pursuant to the
Stockholder Agreement, and from time to time thereafter, the Purchaser shall
be entitled to designate up to such number of directors, rounded up to the
next whole number, on the Board that equals the product of (i) the total
number of directors on the Board (giving effect to the election of any
additional directors pursuant to this provision) multiplied by (ii) the
percentage that the number of Shares owned by the Purchaser and its affiliates
(including any Shares purchased pursuant to the Offer and the Stockholder
Agreement) bears to the total number of outstanding Shares; provided, however,
that until the Effective Time there shall be at least two Continuing Directors
(as defined herein); and the Company shall, upon request by the Purchaser,
promptly either increase the size of the Board or use its best efforts to
secure the resignation of such number of directors as is necessary to enable
the Purchaser's designees to be elected to the Board and shall cause the
Purchaser's designees to be so elected. Promptly upon request by the
Purchaser, the Company will use its best efforts to cause persons designated
by the Purchaser to constitute the same percentage as is on the Board of (i)
each committee of the Board, (ii) each board of directors of each subsidiary
of the Company designated by the Purchaser and (iii) each committee of each
such board. Notwithstanding the foregoing, until the time the Purchaser
purchases Shares representing a majority of the Company's voting power on a
fully-diluted basis, the Company shall use its best efforts to ensure that all
of the members of the Board and such boards and committees as of the date of
the
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Merger Agreement who are not employees of the Company or affiliates of the
Principal Stockholders shall remain members of the Board and such boards and
committees until the Effective Time.
The Company's obligations to appoint designees to the Board shall be subject
to Section 14(f) of the Exchange Act, and Rule 14f-1 promulgated thereunder.
The Company shall promptly take all actions required pursuant to Section 14(f)
and Rule 14f-1 in order to fulfill its obligations under the foregoing
provisions of the Merger Agreement and shall include in the Schedule 14D-9
such information with respect to the Company and its officers and directors as
is required under Section 14(f) and Rule 14f-1. Parent or the Purchaser will
supply to the Company in writing and be solely responsible for any information
with respect to either of them and their nominees, officers, directors and
affiliates required by Section 14(f) and Rule 14f-1.
After the time that the Purchaser's designees constitute at least a majority
of the Board and until the Effective Time, any action by the Company with
respect to the Merger Agreement and the transactions contemplated hereby which
materially and adversely affects the interests of the stockholders of the
Company other than Parent and its affiliates, shall require the approval of a
majority of the then serving directors, if any, who are directors as of the
date hereof (the "Continuing Directors"). If there is more than one Continuing
Director and, prior to the Effective Time, the number of Continuing Directors
is reduced for any reason, the remaining Continuing Director shall be entitled
to designate a person to fill such vacancies, who shall be deemed a Continuing
Director for purposes of the Merger Agreement. In the event there is only one
Continuing Director and he or she resigns or is removed or if all Continuing
Directors resign or are removed, he, she or they, as applicable, shall be
entitled to designate his, her or their successors, as the case may be, each
of whom shall be deemed a Continuing Director for purposes of the Merger
Agreement. The Board shall not delegate any of the foregoing matters to any
committee of the Board.
Stock Options and Warrants. (a) Each unvested, outstanding option to
purchase Shares (including any time options or performance options) ("Employee
Options") issued pursuant to the Amended and Restated 1995 Stock Purchase and
Option Plan for Employees of RELTEC Holdings, Inc. (the "1995 Plan") and its
Subsidiaries and the 1998 Equity Participation Plan of the Company
(collectively, the "Company Stock Plans") may be accelerated in connection
with any change of control (as defined in the applicable Company Stock Plans)
that results from the Offer or the Merger, except for the following:
(i) Employee Options issued under the 1995 Plan to former employees of
Rainford Group, plc that vest based on performance will not be accelerated
but shall be converted as of the Effective Time into options that vest in
equal installments over the performance measurement period remaining after
the Effective Time;
(ii) Employee Options issued to former employees of Positron Fiber
Systems Corporation that by their current terms terminate upon a change of
control will terminate; and
(iii) Employee Options issued since the Company's initial public offering
in March 1998 will not be accelerated (other than so-called "Stock in the
Future" options which will accelerate).
(b) At the Effective Time, each outstanding vested Employee Option
(including any such option which has vested as a result of acceleration as set
forth in paragraph (a) above) shall, subject to paragraph (d) below, be
canceled by the Company, and each holder of any such canceled vested Employee
Option shall be entitled to receive from the Company or, at Parent's option,
any subsidiary of the Company (in each case, with funds provided, directly or
indirectly, by GEC, p.l.c. (or any successor to the non-defense business)) in
consideration for cancelation an amount in cash (less applicable withholding
taxes) equal to the product of (i) the number of Shares subject to such vested
Employee Option multiplied by (ii) the excess, if any, of the Per Share Merger
Consideration over the exercise price per Share previously subject to such
vested Employee Option.
(c) At the Effective Time, each outstanding unvested Employee Option (other
than options that by their terms are canceled or terminated) shall not be
canceled or exercised but shall be amended and converted into phantom stock
units equivalent to a number of ordinary shares of GEC, p.l.c. ("GEC Shares")
(rounded down to the nearest whole share) determined by multiplying the number
of Shares subject to such unvested Employee
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Option by the Conversion Ratio (as defined below), at a price per GEC Share
equivalent (rounded up to the nearest whole penny) equal to (A) the exercise
price for the Shares previously purchasable pursuant to such unvested Employee
Option converted into pounds sterling at the Noon Buying Rate (as defined
below) divided by (B) the Conversion Ratio (each, as so adjusted, a
"Substitute Phantom Unit"). The value of each Substitute Phantom Unit will be
payable upon exercise (less applicable withholding taxes), at Parent's
election, in cash or GEC Shares (provided that such GEC Shares are publicly
traded on the London Stock Exchange or a U.S. stock exchange) valued at the
closing sales price for a GEC Share on the London Stock Exchange (the "LSE")
on the date of exercise and shall have other terms and conditions comparable
to those of the unvested Employee Option replaced by such Substitute Phantom
Unit. The "Conversion Ratio" shall be equal to the Per Share Merger
Consideration converted into pounds sterling at the noon buying rate in New
York City for cable transfers in pounds sterling as certified for customs
purposes by the Federal Reserve Bank of New York on the date of the Effective
Time (the "Noon Buying Rate") divided by an amount equal to the average of the
closing price for a GEC Share on the LSE for the twenty trading days preceding
the Effective Time and weighted for trading volumes of GEC Shares on each such
day. In the event another company becomes the successor ultimate parent of
Parent, the shares of such successor will be substituted for GEC Shares on an
equitable basis.
(d) Subject to the need to comply with applicable legal requirements, Parent
shall provide to each holder of a vested Employee Option that is to be
canceled at the Effective Time in lieu of the positive cash payment pursuant
to paragraph (b) above, an alternative of converting such vested Employee
Option into Substitute Phantom Units on the same basis described in paragraph
(c) above.
Indemnification of Directors and Officers. In the Merger Agreement, Parent
and the Purchaser have agreed that, from and after the Effective Time, Parent
and the Purchaser shall indemnify and hold harmless each person who is, or has
been at any time prior to the date hereof or who becomes prior to the
Effective Time, an officer, director or employee of the Company or any of its
subsidiaries (collectively, the "Indemnified Parties" and individually, the
"Indemnified Party") against all losses, liabilities, expenses, claims or
damages in connection with any claim, suit, action, proceeding or
investigation based in whole or in part on the fact that such Indemnified
Party is or was a director, officer or employee of the Company or any of its
subsidiaries or as trustees or fiduciaries of any plan for the benefit of
employees and arising out of acts or omissions occurring prior to and
including the Effective Time (including but not limited to the transactions
contemplated by the Merger Agreement) to the fullest extent permitted by
applicable law, for a period of not less than six years following the
Effective Time; provided that in the event any claim or claims are asserted or
made within such six-year period, all rights to indemnification in respect of
any such claim or claims shall continue until final disposition of any and all
such claims.
Parent has also agreed to cause the certificate of incorporation and by-laws
of the Surviving Corporation and its subsidiaries to include provisions for
the limitation of liability of directors and indemnification of the
Indemnified Parties to the fullest extent permitted under the DGCL and not to
permit the amendment of such provisions in any manner adverse to the
Indemnified Parties, as the case may be, without the prior written consent of
such persons, for a period of six years from and after the date of the Merger
Agreement.
For six years after the Effective Time, the Surviving Corporation shall
cause to be maintained the current policies of directors' and officers'
liability insurance maintained by the Company (provided that the Surviving
Corporation may substitute therefor policies of at least the same coverage
containing terms and conditions which are substantially equivalent) with
respect to matters occurring prior to the Effective Time, to the extent such
policies are available; provided that in no event shall the Surviving
Corporation be required to expend, in order to maintain or procure such
insurance coverage, any amount per annum greater than 150% of the current
annual premiums paid by the Company for such insurance (which the Company
represented and warranted in the Merger Agreement to be not more than
$305,375).
Reasonable Best Efforts. The Merger Agreement provides that, subject to the
terms of the Merger Agreement, each of the parties has agreed to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things reasonably necessary, proper or advisable on
their part under
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the Merger Agreement or applicable laws and regulations to consummate and make
effective the transactions contemplated by the Merger Agreement and the
Stockholder Agreement. Without limiting the generality of the foregoing,
Parent, the Purchaser, Principal Stockholders and the Company agreed to
cooperate with one another (i) in the preparation and filing of the Offer
Documents, the Schedule 14D-9, the Proxy Statement and any required filings in
connection with the Required Approvals and any other applicable laws; (ii) in
determining whether action by or in respect of, or filing with, any
Governmental Entity is required, proper or advisable or any actions, consents,
waivers or approvals are required to be obtained from parties to any
contracts, in connection with the transactions contemplated by this Agreement
and the Stockholder Agreement; (iii) in taking all action reasonably
necessary, proper or advisable to secure any necessary consents, approvals or
waivers from third parties, including under existing debt obligations of the
Company and its subsidiaries or to amend the notes, indentures or agreements
relating to such existing debt obligations to the extent required by such
notes, indentures or agreements, or to redeem or repurchase such debt
obligations; (iv) in contesting any pending legal proceeding, whether judicial
or administrative, relating to the Offer or the Merger including seeking to
have any stay or temporary restraining order entered by any court or other
Governmental Entity vacated or reversed; (v) executing any additional
instruments necessary to consummate the transactions contemplated hereby; and
(vi) in seeking timely to obtain any such actions, consents and waivers and to
make any such filings. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party hereto shall take
all such necessary action.
Directors and Officers. The directors of the Purchaser at the Effective Time
shall be the initial directors of the Surviving Corporation, each to hold
office in accordance with the certificate of incorporation and bylaws of the
Surviving Corporation and until his or her successor is duly elected and
qualified. The officers of the Purchaser at the Effective Time, and/or any
individuals designated by Parent, shall be the initial officers of the
Surviving Corporation, each to hold office in accordance with the certificate
of incorporation and bylaws of the Surviving Corporation and until his or her
successor is duly appointed and qualified.
Employee Matters. For a period of at least two years after the Effective
Time, Parent shall cause the Surviving Corporation to provide benefit plans
(other than any stock-based plans, programs or arrangements) that are in the
aggregate substantially as favorable as the Company's existing compensation,
welfare and pension benefit plans, programs and arrangements for the benefit
of current and former employees and directors of the Company (subject to such
modification as may be required by applicable law).
If any employee of the Company or any of its subsidiaries becomes a
participant in any employee benefit or compensation plan, arrangement,
practice or policy of Parent or any affiliate of Parent, such employee shall
be given credit for eligibility and vesting under such plan, arrangement,
practice or policy for all service prior to the Effective Time with the
Company, any of its subsidiaries, affiliates or any predecessors for which the
employee would have been credited in the Company's plans immediately prior to
the Effective Time.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties.
Procedure for Amendment, Extension or Waiver. Subject to the third paragraph
under "Directors and Officers" above, the Merger Agreement may be amended by
action taken by the Company, Parent and the Purchaser at any time before or
after adoption of the Merger by the stockholders of the Company (if required
by applicable law) but, after any such approval, no amendment shall be made
that requires the approval by the Company's stockholders without obtaining
such approval. The Merger Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties thereto.
Subject to the third paragraph under "Directors and Officers" above, the
Company, on the one hand, and Parent and the Purchaser, on the other hand, may
(i) extend the time for the performance of any of the obligation or other acts
of the other party, (ii) waive any inaccuracies in the representations and
warranties of the other party contained in the Merger Agreement or in any
document, certificate or writing delivered pursuant thereto, or (iii) waive
compliance by the other party with any of the agreements or conditions
contained in the Merger
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Agreement. Any agreement on the part of any party to the Merger Agreement to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party.
Assignment. The Merger Agreement provides that the Purchaser may assign its
rights and obligations (including the right to purchase Shares in the Offer),
in whole or in part, to any direct or indirect subsidiary of GEC, p.l.c. (or
the successor to the non-defense business of GEC, p.l.c.) so long as the
transferee agrees in writing to be bound by the Merger Agreement, but no such
assignment shall relieve Parent or the Purchaser of its obligations under the
Merger Agreement if such transferee does not perform such obligations.
Stockholder Agreement
The following summary is qualified in its entirety by reference to the
complete text of the Stockholder Agreement which is filed as Exhibit 3 hereto
and incorporated herein by reference.
Pursuant to the Stockholder Agreement, each of the Principal Stockholders
has unconditionally agreed to tender into the Offer, and not to withdraw
therefrom prior to the termination, withdrawal or expiration date of the Offer
(or any extension thereof), all of the Shares beneficially owned by such
Principal Stockholder (the "Principal Stockholders Shares"). Each Principal
Stockholder also agreed pursuant to the Stockholder Agreement (i) promptly to
exercise any "drag-along" or other rights that permit it to require any other
person to sell its Shares upon a sale by such Principal Stockholder of its
Shares ("Drag-Along Rights") to cause the person subject to such Drag-Along
Rights to tender in the Offer, and not withdraw, any Shares held by such
person and (ii) promptly to use its reasonable best efforts to cause each of
its affiliates to exercise any Drag-Along Rights held by such affiliate to
cause the person subject to such Drag-Along Rights to tender in the Offer, and
not withdraw, any Shares held by such person.
Each Principal Stockholder will receive the Offer Price with respect to the
Shares tendered by it in the Offer. On the business day after the date the
Shares are accepted for payment and purchased by the Purchaser pursuant to the
Offer, the Purchaser or Parent, as the case may be, shall make payment by wire
transfer of immediately available funds to each Principal Stockholder of the
purchase price for such Principal Stockholder's Shares to an account
designated by such Principal Stockholder.
In addition, each Principal Stockholder has granted to the Purchaser an
irrevocable option (collectively, with respect to all the Principal
Stockholders' Shares, the "Option") to purchase all, but not less than all,
such Principal Stockholder's Shares, subject to the following two paragraphs.
The exercise price for each Principal Stockholder's Share shall be the Offer
Price. In the event of any change in the number or kind of such Principal
Stockholder's Shares by reason of stock dividends, stock splits,
recapitalizations, combinations, reclassifications, exchanges or changes of
shares, then the exercise price for such Principal Stockholder's Shares shall
be adjusted appropriately so that the total amount to be paid upon exercise in
whole of the Option with respect to such Principal Stockholder's Shares would
remain unchanged.
The Option may be exercised prior to the termination of the Stockholder
Agreement in the event that the Offer has expired or has otherwise been
terminated and any Principal Stockholder has failed to tender all of its
Shares or has withdrawn any of its Shares tendered in the Offer prior to such
expiration or termination. Parent and the Purchaser agree that, in the event
that the Option is exercised, the Purchaser will agree to purchase from any
holder of Shares with tag-along or similar rights granted by any Principal
Stockholder that wishes to sell its shares of Common Stock to the Purchaser of
all shares of Common Stock of such holder on the same terms of the purchase
pursuant to the exercise of the Option.
The obligations of each Principal Stockholder to deliver, and the Purchaser
to purchase and pay for, such Principal Stockholder's Shares, or any portion
thereof, upon exercise of the Option are subject to the conditions that (i) no
preliminary or permanent injunction or other order prohibiting the delivery of
such Principal Stockholder's Shares issued by a court of competent
jurisdiction shall be in effect and (ii) any waiting period applicable to the
Merger under the HSR Act shall have terminated or expired and the other
Required Approvals,
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shall have been obtained or satisfied, as the case may be, on terms
satisfactory to Parent in its reasonable discretion; provided that this
condition may not be asserted by any Principal Stockholder with respect to any
Required Approval if the potential penalty for any failure to receive such
Required Approval will be borne only by Parent or the Purchaser. In the event
that any of the aforesaid conditions have not been satisfied at or prior to
the scheduled time of closing in respect of the Option, the closing shall be
delayed for such period as shall be necessary in order for such conditions to
be satisfied, but in no event shall the closing be delayed by more than 60
days. If the closing does not occur within such period, the Option and the
exercise of the Option shall terminate and be void. Termination of the
Stockholder Agreement after a notice has been properly delivered thereunder
will not terminate or otherwise affect the parties' obligations thereunder as
to the exercise of the Option pursuant to such notice.
The obligation of the Purchaser to purchase and pay for such Principal
Stockholder's Shares, or any portion thereof, upon exercise of the Option is
also subject to the fulfillment, or waiver by the Purchaser, of the conditions
(which may be waived by the Purchaser in its sole discretion) that (i) such
Principal Stockholder's representations and warranties contained in this
Agreement, and the Company's representations and warranties contained in the
Merger Agreement shall be true and correct on and as of the date of the
closing, as though such representations and warranties were made on such date,
(ii) such Principal Stockholder shall have performed in all material respects
all of its covenants and agreements under the Stockholder Agreement required
to be performed at or prior to the closing or the Company shall have performed
in all material respects all of its covenants and agreements under the Merger
Agreement required to be performed at or prior to the closing hereunder, and
(iii) such Principal Stockholder shall have delivered to Parent and the
Purchaser on the date of the closing a certificate to such effect, and the
Company shall have delivered to Parent and the Purchaser on the date of the
closing a certificate to such effect executed by the Chief Executive Officer
of the Company.
Except pursuant to the Stockholder Agreement, no Principal Stockholder
shall, without the prior written consent of Parent, directly or indirectly (i)
during the term of the Stockholder Agreement grant any proxies or enter into
any voting trust, power of attorney or other agreement or arrangement with
respect to the voting of such Principal Stockholder's Shares, (ii) acquire,
sell, assign, transfer, encumber or otherwise dispose of, or enter into any
contract, option or other arrangement or understanding with respect to the
direct or indirect acquisition or sale, assignment, transfer, encumbrance or
other disposition of any of such Principal Stockholder's Shares during the
term of the Stockholder Agreement or (iii) take any other action that would in
any way restrict, limit or interfere with the performance of its obligations
hereunder or the transactions contemplated hereby. Each Principal Stockholder
agrees not to seek or solicit any such acquisition or sale, assignment,
transfer, encumbrance or other disposition or any such contract, option or
other arrangement or assignment or understanding and agrees to notify Parent
promptly and to provide all details requested by Parent if such Principal
Stockholder shall be approached or solicited, directly or indirectly, by any
person with respect to any of the foregoing. Each Principal Stockholder agrees
to use its reasonable best endeavours to cause the Company to perform its
obligations under the Merger Agreement. The provisions set forth in this
paragraph are referred to herein as the "Stockholder Lock-up Provisions".
Under the Stockholder Agreement, each Principal Stockholder agreed, to the
extent such Principal Stockholder continues to own, or have legal rights in
respect of, its Shares, that (i) at any meeting of stockholders of the Company
called to vote upon the Merger, the Merger Agreement or the other transactions
contemplated by the Merger Agreement or upon which a vote, consent or other
approval with respect to the Merger, the Merger Agreement or the other
transactions contemplated by the Merger Agreement is sought, such Principal
Stockholder shall vote (or cause to be voted) or shall consent, execute a
consent or cause to be executed a consent in respect of such Principal
Stockholder's Shares in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval of the terms thereof and each
of the other transactions contemplated by the Merger Agreement; and (ii) at
any meeting of stockholders of the Company or at any adjournment thereof or in
any other circumstances upon which their vote, consent or other approval is
sought, such Principal Stockholder shall vote (or cause to be voted) such
Principal Stockholder's Shares against (x) any Acquisition Proposal or any
action which is a component of any Acquisition Proposal or would be a
component
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of an Acquisition Proposal if it were contained in a proposal, (y) any merger
agreement or merger (other than the Merger Agreement and the Merger),
reorganization, recapitalization, dissolution, liquidation or winding up of or
by the Company or (z) any amendment of the Company's Certificate of
Incorporation or By-laws which amendment would in any manner partially or
wholly prevent or materially impede, interfere with or delay the Merger, the
Merger Agreement or any of the other transactions contemplated by the Merger
Agreement (each of the foregoing in clause (x), (y) or (z) above, a "Competing
Transaction").
Under the Stockholder Agreement, each Principal Stockholder has irrevocably
granted to, and appointed, Patricia Hoffman and Thomas Edeus and any other
individual who is designated by Parent, until the termination of the
Stockholder Agreement, an irrevocable proxy, coupled with an interest, and
attorney-in-fact (with full power of substitution), for and in the name, place
and stead of such Principal Stockholder, with respect to all such Principal
Stockholder's Shares, to vote such Principal Stockholder's Shares, or grant or
execute a consent or approval, in the complete discretion of Parent or the
Purchaser, as the case may be, at any meeting of stockholders of the Company
or at any adjournment thereof or in any other circumstances upon which their
vote, consent or other approval is sought (i) in favor of the Merger and any
transactions contemplated by, or necessary or desirable to consummate the
transactions contemplated by, the Merger Agreement and the adoption of the
Merger Agreement and (ii) against any Competing Transaction. Such irrevocable
proxy is executed and intended to be irrevocable in accordance with the
provisions of Section 212(e) of the DGCL.
Confidentiality Agreement
The following summary is qualified in its entirety by reference to the
complete text of the Confidentiality Agreement which is filed as Exhibit 4
hereto and incorporated herein by reference.
Pursuant to a Confidentiality Agreement, GEC, p.l.c. and the Company agreed
to keep confidential certain information exchanged between such parties. The
Confidentiality Agreement also contains customary non-solicitation and
standstill provisions. The Merger Agreement provides that the provisions of
the Confidentiality Agreement shall remain binding and in full force and
effect and that the parties shall comply with, and shall cause their
respective Representatives to comply with, all of their respective obligations
under the Confidentiality Agreement until the Purchaser purchases a majority
of the outstanding Shares pursuant to the Offer.
ITEM 4. The Solicitation or Recommendation.
(a) Recommendation. The Board, at a special meeting held on February 28,
1999, unanimously (i) determined that the Merger Agreement and the
transactions contemplated thereby, including the Offer and the Merger, are
fair to and in the best interests of the stockholders of the Company, (ii)
approved the Merger Agreement and the transactions contemplated thereby,
including the Offer and the Merger and the transactions contemplated by the
Stockholder Agreement and (iii) recommended that the stockholders of the
Company accept the Offer and tender their Shares thereunder. A copy of the
Company's letter to stockholders, dated as of March 5, 1999, is filed hereto
as Exhibit 6 and incorporated herein by reference.
(b) Background; Reasons for the Board's Conclusions. Recently, the
telecommunications equipment and data communication systems industry has
undergone increasing consolidation. The reasons for this trend have included
the convergence of voice and data communications systems, data communications
and telecommunications equipment customers' desire to have suppliers with
expanded product offerings and broad geographic reach and the increased
capital resources necessary to compete effectively. In response to these
trends, management of the Company has for some time been investigating the
Company's commercial and strategic alternatives.
During 1998, the Company had discussions with several large, highly
capitalized companies in the data and voice communications equipment industry,
including GEC, p.l.c and Marconi Communications, concerning
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potential commercial or strategic transactions. Discussions with one company
continued for several months and involved a number of meetings and telephone
discussions. While a potential sale of the Company or portion of the Company
were explored with this company, no agreement on price or structure of a
transaction was reached and discussions ended in November, 1998.
In late December, 1998, management again approached the Board and
recommended that the Company consider a transaction with a strategic partner
to enable the Company to better realize the potential of its current product
offerings. Based upon this recommendation, the Board authorized management to
engage Morgan Stanley & Co. Incorporated ("Morgan Stanley") and Salomon Smith
Barney Inc. ("Salomon Smith Barney") (collectively, the "Financial Advisors")
to assist the Company in identifying and evaluating its potential strategic
partners and strategic alternatives. Beginning on February 1, 1999, seven
large, highly capitalized companies in the data and voice communications
equipment industry, including GEC, p.l.c., were contacted that were believed,
based upon, among other things, size and market position, to be most likely
interested in, and capable of successfully consummating, a potential
transaction with the Company. These seven companies included three that had
previously contacted the Company regarding such a possible transaction, one of
which was engaged in discussions with the Company at the beginning of
February, 1999.
In response to a call from a representative of the Financial Advisors, on
February 3, 1999 Mr. Mayo, Finance Director of GEC, p.l.c., called Alexander
Navab, Jr., a director of the Company and a director of Kohlberg Kravis
Roberts & Co., L.P. ("KKR"), to discuss the possibility of a strategic
transaction with the Company. On February 4 and February 5, Mr. Mayo and Mr.
Navab had several conversations concerning the possibility of such a
transaction. Subsequent to those conversations, on February 8, Henry R.
Kravis, a director of the Company and a founding partner of KKR, called Lord
Simpson, the Chief Executive Officer of GEC, p.l.c., to discuss a potential
sale of the Company and GEC, p.l.c.'s interest in the Company. On February 10,
1999, GEC, p.l.c. entered into a confidentiality agreement with the Company.
On February 12, 1999, representatives of GEC, p.l.c., including Mr. Mayo,
met in Cleveland, Ohio with representatives of the Company, including Mr.
Navab and Dudley P. Sheffler, President, Chief Executive Officer and a
director of the Company. During such meeting, representatives of the Company
made presentations about the business of the Company, including certain
financial information, and representatives of GEC, p.l.c. made a presentation
on its business and technology.
On February 16 and 17, 1999, representatives of the Company and GEC, p.l.c.
met at the Company's Montreal, Quebec facilities to discuss and review some of
the Company's current product offerings and new product developments. On
February 17, 1999, representatives of GEC, p.l.c., including Mr. Mayo and
representatives of the Company, including Mr. Navab and Mr. Sheffler,
participated in a video conference to discuss the strategic alternatives of
the Company and the scope and timing of GEC, p.l.c.'s due diligence and to
review certain financial, tax and legal matters. Counsel to Parent also
received a draft of a proposed merger agreement prepared by counsel to the
Company on this date.
On February 18, 1999, the Company received a proposal from GEC, p.l.c. to
acquire the Company on terms which were not acceptable to the Company. From
February 15, 1999, through February 24, 1999, negotiations between
representatives from GEC, p.l.c., Credit Suisse First Boston Corporation
("CSFB"), the Company, the Financial Advisors and KKR took place concerning
the purchase price for the Company and the willingness of the Principal
Stockholders, owning approximately 81.2% of the Company's outstanding Shares,
to agree to sell GEC, p.l.c. their Shares pursuant to the terms of a
stockholder agreement.
On February 24, 1999, Parent's counsel transmitted a proposed merger
agreement and stockholder agreement to the Company setting forth the basis
upon which Parent was prepared to proceed with a transaction to acquire the
Company.
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On February 25, 1999, Mr. Mayo and counsel to GEC, p.l.c. met in New York
with Mr. Kravis, Mr. Navab and James H. Greene, Jr., a director of the Company
and a partner of KKR, to negotiate the terms of a possible transaction,
including the purchase price. At the end of this meeting, the parties
preliminarily agreed that GEC, p.l.c. or one of its United States affiliates
would acquire all outstanding Shares at a purchase price of $29.50 per Share,
subject to additional due diligence, the terms and conditions of a definitive
agreement to be negotiated, approval by the Board of Directors of the Company
and the Board of Directors of GEC, p.l.c. and certain regulatory approvals.
Mr. Mayo indicated that it was a condition of GEC, p.l.c.'s willingness to
have Parent and the Purchaser enter into the Merger Agreement that the
Principal Stockholders enter into the Stockholder Agreement.
On February 26, 1999, the Board held a special telephonic meeting to discuss
the proposal made by GEC, p.l.c. At the meeting Mr. Navab gave an overview of
the negotiations that had taken place with GEC, p.l.c. with respect to the
transaction. As part of this overview, Mr. Navab informed the Board that GEC,
p.l.c. was prepared to enter into a transaction to purchase all of the shares
of the Company for $29.50 per Share only if the Principal Stockholders
committed to sell GEC, p.l.c. their Shares pursuant to the terms of the
Stockholder Agreement. Counsel for the Company discussed with the Board its
fiduciary duties under Delaware Law in connection with the proposed
transaction. The Financial Advisors then reviewed with the Board the structure
and financial terms of the transaction proposed by GEC, p.l.c., the Company's
strategic alternatives, the status of discussions with other potential
purchasers, the financial analyses performed by the Financial Advisors in
connection with their evaluation of the proposed consideration of $29.50 per
Share and their views of the telecommunications equipment industry generally.
After a discussion concerning the matters presented, the Board authorized
management of the Company to negotiate, subject to final Board approval, the
terms of a definitive agreement to sell the Company to Parent for $29.50 per
Share in cash.
From February 26, 1999 through February 28, 1999, representatives of GEC,
p.l.c., its counsel and CSFB, including Mr. Mayo, conducted due diligence with
management of the Company in Cleveland, Ohio and representatives of GEC,
p.l.c. and CSFB conducted due diligence with management of the Company in
Dallas, Texas. Also during this time, representatives of the Company, Parent,
the Principal Stockholders and their respective counsel negotiated the terms
of the Merger Agreement and the Stockholder Agreement.
On February 28, 1998, the Board held a special telephonic meeting to
consider the final terms and conditions of the Offer, the Merger and the
Merger Agreement and the Stockholder Agreement. At this meeting Mr. Navab
reviewed with the Board the negotiations of the transaction since the last
meeting of the Board. Following Mr. Navab's presentation, each of the
Financial Advisors delivered to the Board an oral opinion (subsequently
confirmed in writing) as to the fairness of the $29.50 per Share consideration
from a financial point of view. Counsel to the Company presented a summary of
the Merger Agreement and the Stockholder Agreement and reviewed with the Board
the material terms of the Merger Agreement and the Stockholder Agreement.
Representatives of the Company discussed with the Board the proposed treatment
of the outstanding employee options in connection with the transactions. Based
upon such discussions, presentations and opinions, the Board unanimously (i)
determined that the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, are fair to and in the best
interests of the stockholders of the Company, (ii) approved the Merger
Agreement and the transactions contemplated thereby, including the Offer and
the Merger and the transactions contemplated by the Stockholder Agreement, and
(iii) recommended in satisfaction of all applicable requirements for Board
action under Section 251 of Delaware Law in order for the Merger to be validly
approved, that the stockholders of the Company accept the Offer, tender their
shares thereunder and, to the extent required by applicable law, approve and
adopt the Merger Agreement and the Merger.
On March 1, 1999, GEC, p.l.c.'s full board of directors met in London and
approved Parent and the Purchaser entering into the Merger Agreement and the
Stockholder Agreement. Following these approvals, the Merger Agreement and the
Stockholder Agreement were executed and the transaction was publicly announced
prior to the opening of the New York Stock Exchange on March 1, 1999. On March
5, 1999, the Purchaser commenced the Offer.
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Reasons for the Board's Conclusions. In reaching the determination described
in paragraph (a) above, the Board considered a number of factors, including
without limitation, the following:
(i) The financial condition, results of operations, business and
strategic objectives of the Company, as well as the risks involved in
achieving those objectives;
(ii) Current conditions and trends in the telecommunications and data
communications equipment industry, and the effect of those trends and
conditions on the Company;
(iii) A review of the possible alternatives to the transactions
contemplated by the Merger Agreement, including the possibilities of
continuing to operate the Company as an independent entity, a strategic
combination with a company other than GEC, p.l.c., a sale or partial sale
of the Company through a merger or by other means, and, in respect of each
alternative, the timing and the likelihood of actually accomplishing such
alternative;
(iv) The results of efforts undertaken by the Financial Advisors at the
direction, and on behalf, of the Company to solicit indications of interest
in the possible acquisition of the Company from third parties other than
GEC, p.l.c.;
(v) The financial presentation of the Financial Advisors to the Board in
connection with the Offer and the Merger, including the written opinion
dated February 28, 1999 of each of Morgan Stanley and Salomon Smith Barney
to the effect that, as of such date and based upon and subject to certain
matters stated in their respective opinions, the $29.50 per Share
consideration to be received in the Offer and the Merger by holders of
Shares (other than Parent and its affiliates) pursuant to the Merger
Agreement was fair, from a financial point of view, to such holders. The
full text of the written opinions dated February 28, 1999 of Morgan Stanley
and Salomon Smith Barney, which set forth the assumptions made, matters
considered and limitations on the review undertaken, are attached hereto as
Exhibits 7 and 8, respectively, and are incorporated herein by reference.
The opinions of the Financial Advisors are directed only to the fairness,
from a financial point of view, of the $29.50 per Share consideration and
are not intended to constitute, and do not constitute, a recommendation as
to whether any stockholder should tender Shares pursuant to the Offer.
Holders of Shares are urged to read such opinions carefully in their
entirety;
(vi) The terms and conditions of the Merger Agreement and the Stockholder
Agreement;
(vii) The likelihood that the Merger would be consummated, including the
experience, reputation and financial condition of GEC, p.l.c. and Parent
and the risks to the Company if the acquisition were not consummated;
(viii) The fact that the holders of approximately 81.2% of the Shares
were prepared to commit to tender their Shares into the Offer pursuant to
the terms of the Stockholder Agreement;
(ix) The fact that the Offer and the Merger are not subject to a
financing condition; and
(x) The availability of dissenters' rights in the Merger under applicable
law.
In view of the wide variety of factors considered in connection with its
evaluation of the Offer and the Merger, the Board did not find it practicable
to, and did not, quantify or otherwise attempt to assign relative weights to
the specific factors considered in reaching its respective determinations.
ITEM 5. Persons Retained, Employed or to be Compensated.
The Company has retained Morgan Stanley and Salomon Smith Barney to act as
its financial advisors in connection with the Offer and the Merger. Pursuant
to the terms of their engagement, the Company has agreed to pay the Financial
Advisors an aggregate fee of $13,333,000 to be divided equally between the
Financial Advisors, payable upon consummation of the Offer. The Company also
has agreed to reimburse the Financial Advisors for reasonable expenses and to
indemnify the Financial Advisors and related parties against certain
liabilities, including liabilities under the federal securities laws, arising
out of their engagement. Each of the
15
<PAGE>
Financial Advisors has in the past provided investment banking services to the
Company and its affiliates and affiliates of Parent unrelated to the Offer and
the Merger, for which services the Financial Advisors have received
compensation. In the ordinary course of business, Morgan Stanley and its
affiliates and Salomon Smith Barney and its affiliates (including Citigroup
Inc. and its affiliates) may actively trade or hold the securities of the
Company and affiliates of the Parent for their own accounts or for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
In consideration of its advisory services to the Company in connection with
the negotiation of the Offer and the Merger, KKR will receive a fee of
$6,667,000, payable upon consummation of the Offer. The directors of the
Company who are not affiliated with KKR unanimously approved the fee to KKR.
Neither the Company nor any person acting on its behalf has employed,
retained or compensated any other person to make solicitations or
recommendations to stockholders on its behalf concerning the Offer or the
Merger.
ITEM 6. Recent Transactions and Intent with Respect to Securities.
(a) Except as set forth below, no transactions in the Shares have been
effected during the past 60 days by the Company or, to the Company's
knowledge, by any executive officer, director, affiliate or subsidiary of the
Company. On February 16, 1999, Dudley P. Sheffler, President, Chief Executive
Officer and director of the Company, made five separate 1,000 share gifts of
the Company's Common Stock to various trusts. Mr. Sheffler remains the
beneficial owner of these shares.
(b) To the best of the Company's knowledge, all of its executive officers,
directors, affiliates or subsidiaries currently intend to tender all Shares
which are held of record or beneficially owned by such persons pursuant to the
Offer, other than Shares, if any, held by such persons which, if tendered,
could cause such person to incur liability under the provisions of Section
16(b) of the Securities Exchange Act of 1934, as amended. Pursuant to the
terms of the Stockholder Agreement, the Principal Stockholders have agreed to
tender into the Offer approximately 81.2% of the shares outstanding.
ITEM 7. Certain Negotiations and Transactions by the Subject Company.
(a) Prior to entering into the Merger Agreement, the Company had preliminary
contacts with other entities that had expressed interest in the Company. Upon
execution of the Merger Agreement, the Company ceased contacts with such other
entities. No discussions are underway or are being undertaken by the Company
in response to the Offer that relate to or would result in (1) an
extraordinary transaction, such as a merger or reorganization, involving the
Company or any of its subsidiaries; (2) a purchase, sale or transfer of a
material amount of assets by the Company or any of its subsidiaries; (3) a
tender offer for or other acquisition of securities by or of the Company; or
(4) any material change in the present capitalization or dividend policy of
the Company.
(b) Except as set forth above, there is no transaction, board resolution,
agreement in principle or signed contract in response to the Offer that
relates to or would result in (1) an extraordinary transaction, such as a
merger or reorganization, involving the Company or any of its subsidiaries;
(2) a purchase, sale or transfer of a material amount of assets by the Company
or any of its subsidiaries; (3) a tender offer for or other acquisition of
securities by or of the Company; or (4) any material change in the present
capitalization or dividend policy of the Company.
ITEM 8. Additional Information to be Furnished.
(a) The Information Statement attached as Annex A hereto is being furnished
in connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Company's Board
other than at a meeting of the Company's stockholders.
16
<PAGE>
(b) As a Delaware corporation, the Company is subject to Section 203
("Section 203") of the DGCL. Under Section 203, certain "business
combinations" between a Delaware corporation whose stock is publicly traded or
held of record by more than 2,000 stockholders and an "interested stockholder"
are prohibited for a three-year period following the date that such a
stockholder became an interested stockholder, unless, among other possible
exemptions, the transaction in which the stockholder became an interested
stockholder or the business combination was approved by the board of directors
of the corporation before such other party to the business combination became
an interested stockholder. The term "business combination" is defined
generally to include mergers or consolidations between a Delaware corporation
and an interested stockholder, transactions with an interested stockholder
involving the assets or stock of the corporation or its majority-owned
subsidiaries and transactions which increase an interested stockholder's
percentage ownership of stock. The term "interested stockholder" is defined
generally as a stockholder who, together with affiliates and associates, owns
(or, within three years prior, did own) 15% or more of a Delaware
corporation's voting stock. An owner includes a person who has the right to
acquire such stock, including upon the exercise of an option.
In accordance with the Merger Agreement and Section 203, at its meeting on
February 28, 1999, the Board unanimously approved the Offer and the Merger and
the Stockholder Agreement and determined to make the restrictions of Section
203 inapplicable to the Offer and the Merger and the Stockholder Agreement.
ITEM 9. Material to be Filed as Exhibits.
Exhibit 1. Agreement and Plan of Merger, dated as of March 1, 1999, by and
among Parent, the Purchaser and the Company.
Exhibit 2. Press Release issued by the Company and GEC, p.l.c. on March 1,
1999. (Incorporated by reference to Exhibit 99.1 to the Company's
Current Report on Form 8-K dated March 4, 1999).
Exhibit 3. Stockholder Agreement and Proxy, dated as of March 1, 1999, by and
among Parent, the Purchaser and the stockholders of the Company listed
on Annex A thereto.
Exhibit 4. Confidentiality Agreement, dated February 4, 1999, between GEC,
p.l.c. and the Company.
Exhibit 5. Letter, dated February 28, 1999 from GEC, p.l.c. to the Company.
Exhibit 6. Letter to Stockholders dated as of March 5, 1999.*
Exhibit 7. Opinion of Morgan Stanley & Co. Incorporated dated as of February
28, 1999.*
Exhibit 8. Opinion of Salomon Smith Barney Inc. dated as of February 28,
1999.*
- --------
* Included in materials being distributed to stockholders of the Company.
17
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
RELTEC CORPORATION
/s/ Dudley P. Sheffler
By: _________________________________
Dated: March 5, 1999
18
<PAGE>
ANNEX A
RELTEC CORPORATION
5900 LANDERBROOK DRIVE, SUITE 300
CLEVELAND, OHIO 44124-4019
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about March 5, 1999, as
part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9"). Capitalized terms used and not otherwise defined
herein shall have the meaning ascribed to them in the Schedule 14D-9. You are
receiving this Information Statement in connection with the possible election
of persons designated by the Purchaser to a majority of the seats on the Board
of Directors of the Company (the "Board"). The Merger Agreement requires the
Company, promptly upon the purchase by the Purchaser of a majority of the
outstanding Shares pursuant to the Offer or by the Purchaser of the Principal
Stockholders Shares pursuant to the Stockholder Agreement, and from time to
time thereafter, to cause the Purchaser's designees (the "Designees") to be
elected to a majority of the seats on the Board as set forth below. This
Information Statement is required by Section 14(f) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and Rule 14f-1 thereunder. You
are urged to read this Information Statement carefully. However, you are not
required to take any action.
Pursuant to the Merger Agreement, on March 5, 1999, Parent and the Purchaser
commenced the Offer. The Offer is scheduled to expire on April 1, 1999.
The information contained in this Information Statement (including
information listed in Schedule I attached hereto) concerning Parent, the
Purchaser and the Designees has been furnished to the Company by Parent and
the Purchaser, and the Company assumes no responsibility for the accuracy or
completeness of such information.
The Common Stock, par value $.01 per share (the "Common Stock"), is the only
class of voting securities of the Company outstanding. Each share of Common
Stock has one vote. As of February 19, 1999, there were 56,420,703 shares of
Common Stock outstanding.
BOARD OF DIRECTORS
General
The Board is currently comprised of six members. Pursuant to the Company's
Bylaws (the "Bylaws"), directors are elected annually. All directors of the
Company hold office until the election and qualification of their successors.
Designees
Pursuant to the Merger Agreement, promptly upon the acceptance for payment
of, and payment by the Purchaser of a majority of the outstanding Shares
pursuant to the Offer or by the Purchaser of the Principal Stockholders Shares
pursuant to the Stockholder Agreement, and from time to time thereafter, the
Purchaser is entitled to designate such number of members of the Board,
rounded up to the next whole number, equal to that number of directors which
equals the product of (i) the total number of directors on the Board (giving
effect to the election of any additional directors pursuant to this provision)
multiplied by (ii) the percentage that such number of Shares owned by the
Purchaser and its affiliates (including any Shares purchased pursuant to the
Offer and the Stockholder Agreement) bears to the number of Shares
outstanding; provided, however, that until the Effective Time, there shall be
at least two directors who are directors as of the date hereof. Upon the
request of the Purchaser, the Company shall promptly (i) either increase the
size of the Board or use its best efforts to secure the resignation of such
number of its incumbent directors as is necessary to enable the Designees to
be so elected to the Board and (ii) cause the Designees to be so elected.
A-1
<PAGE>
The Purchaser has informed the Company that it will choose the Designees
from the directors and executive officers of GEC, p.l.c. and its affiliates
listed in Schedule I attached hereto. The Purchaser has informed the Company
that each of the individuals listed in Schedule I has consented to act as a
director, if so designated. The business address of Parent and the Purchaser
is 1500 Mittel Boulevard, Wood Dale, Illinois 60191-1073 (c/o Videojet Systems
International, Inc.).
It is expected that the Designees may assume office at any time following
the purchase by the Purchaser pursuant to the Offer of such number of Shares
representing not less than a majority of the outstanding shares of Common
Stock on a fully diluted basis, which purchase cannot be earlier than April 1,
1999, and that upon assuming office, the Designees will thereafter constitute
at least a majority of the Board.
Directors and Executive Officers of the Company
The names, ages and principal occupation for the past five years and
directorships of the Company's directors and executive officers are as
follows:
Directors
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
President, Chief Executive Officer and
Dudley P. Sheffler..... 54 Director
James H. Greene, Jr. .. 48 Director
R.C. Johnstone, Jr. ... 54 Director
Henry R. Kravis........ 55 Director
Alexander Navab, Jr. .. 33 Director
George R. Roberts...... 55 Director
</TABLE>
Dudley P. Sheffler has been President and CEO of the Company and a director
of the Company since August 1995. He has served as President of the Company
and its predecessor since 1981. Mr. Sheffler was a director of Reliance
Electric Company from 1993 to 1995 and held a number of management positions
in finance, operations and engineering at Reliance since 1970. Mr. Sheffler is
a director of the Telecommunication Industry Association.
James H. Greene, Jr. has been a director of the Company since June 1995 and
is a member of the limited liability company which serves as the general
partner of KKR and a general partner of KKR Associates, L.P. ("KKR
Associates"). He is also a director of Accuride Corporation, Bruno's, Inc.,
Owens-Illinois, Inc., Randall's Food Markets, Inc. and Safeway Inc.
R.C. Johnstone, Jr. was appointed to the Board in June 1998. Mr. Johnstone
was with the Bechtel Group, Inc. from 1972 to 1997, during which time Mr.
Johnstone served as President of Bechtel Systems and Infrastructure, Bechtel
National, Bechtel Telecommunications and Bechtel Industrial. Mr. Johnstone was
responsible for the restructuring and turn around of Bechtel Systems and
Infrastructure and Bechtel National and coordinated the start-up of Bechtel
Telecommunications and Bechtel Industrial. He was Chief Financial Officer of
Bechtel Group, Inc. from 1990 to 1992 and was a member of the Board of
Directors of Bechtel Group, Inc. and a number of its subsidiaries from 1992 to
1997.
Henry R. Kravis has been a director of the Company since August 1995. He is
a managing member of the limited liability company which serves as the general
partner of KKR and a general partner of KKR Associates. He is also a director
of Accuride Corporation, Amphenol Corporation, Borden, Inc., The Boyds
Collection Ltd., Bruno's, Inc., Evenflo Company Inc., The Gillette Company,
IDEX Corporation, KinderCare Learning Centers, Inc., KSL Recreation Group,
Inc., Newsquest Capital plc, Owens-Illinois, Inc., PRIMEDIA, Inc., Randall's
Food Markets, Inc., Regal Cinemas, Inc., Safeway Inc., Sotheby's Holdings,
Inc. and Spalding Holdings Corporation.
Alexander Navab, Jr. has been a director of the Company since June 1995. He
has been a director of KKR since 1998, an executive of KKR since 1993 and a
limited partner of KKR Associates since 1993. From 1991 to 1993, Mr. Navab was
an associate at James D. Wolfensohn, Inc. He is also a director of Borden,
Inc., KSL Recreation Group, Inc., Neway Anchorlok International, Inc.,
Newsquest Capital plc, Regal Cinemas, Inc. and World Color Press, Inc.
A-2
<PAGE>
George R. Roberts has been a director of the Company since August 1995. He
is a managing member of the limited liability company which serves as the
general partner of KKR and a general partner of KKR Associates. He is also a
director of Accuride Corporation, Amphenol Corporation, Borden, Inc., The
Boyds Collection Ltd., Bruno's, Inc., Evenflo Company, Inc., IDEX Corporation,
KinderCare Learning Centers, Inc., KSL Recreation Group, Inc., Owens-Illinois,
Inc., PRIMEDIA, Inc., Randall's Food Markets, Inc., Regal Cinemas, Inc.,
Safeway Inc. and Spalding Holdings Corporation.
Messrs. Kravis and Roberts are first cousins.
Executive Officers
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
President, Chief Executive Officer and
Dudley P. Sheffler..... 54 Director
W. Michael Corkran..... 45 President, North America and Asia/Pacific
Patrick L. Welker...... 52 President, Europe and Latin America
Scott A. Fine.......... 39 Vice President, Finance
Valerie Gentile Sachs.. 43 Vice President, General Counsel and Secretary
David G. Phelps........ 48 Vice President, Human Resources
John L. Wilson......... 49 Vice President, Controller
</TABLE>
Dudley P. Sheffler has been President and CEO of the Company and a director
of the Company since August 1995. He has served as President of the Company
and its predecessor since 1981. Mr. Sheffler was a director of Reliance
Electric Company from 1993 to 1995 and held a number of management positions
in finance, operations and engineering at Reliance since 1970. Mr. Sheffler is
a director of the Telecommunication Industry Association.
W. Michael Corkran has been President, North America and Asia/Pacific since
July 1997. Prior to that, he was Vice President/General Manager, Reliable
Electric Division of the Company (outside plant) and its predecessor since
1993. From 1990 to 1993, Mr. Corkran served as Director of Marketing for the
Reliable Electric Division and, prior thereto, held various management
positions at Reliance Electric Corporation since 1976.
Patrick L. Welker has been President, Europe and Latin America since July
1997. Prior to that, Mr. Welker was Vice President/General Manager, Access
Systems of the Company and its predecessor since 1993. From 1991 to 1993, Mr.
Welker was the Vice President and General Manager of the Engineered Systems
Division of Reliance Comm/Tec Corporation and from 1990 to 1991, he served as
General Manager of Reliance Comm/Tec Canada.
Scott A. Fine has been Vice President, Finance since December 1997. Mr. Fine
joined the Company in 1996 as Vice President, Strategic Planning & Business
Development after having been in the Investment Banking Division at Goldman,
Sachs & Co. for the previous eleven years. Prior thereto, Mr. Fine was
associated with McKinsey & Company, Inc., a worldwide strategic consulting
firm.
Valerie Gentile Sachs has been Vice President, General Counsel and Secretary
since December 1997. Prior to that, Mrs. Sachs worked for M.A. Hanna Company
for over nine years, where her last position was Senior Associate Counsel.
David G. Phelps has been Vice President, Human Resources for the Company and
its predecessor since 1986. Prior to assuming his current position, Mr. Phelps
was Director, Human Resources for Transmission Products at Reliance Comm/Tec.
John L. Wilson has been Vice President and Controller of the Company since
August 1995. From 1993 to August 1995, Mr. Wilson was the Controller of the
Company and its predecessor and prior thereto, from 1989 to 1993, he served as
Controller of the Lorain Products Division of Reliance Comm/Tec. Mr. Wilson
held management positions in audit with Exxon Corporation for ten years before
joining Reliance Electric Company.
A-3
<PAGE>
Board Meetings and Committees
The Board held thirteen meetings during the fiscal year ended December 31,
1998. Each director, except for Mr. Kravis, attended 75% or more of the total
number of Board meetings and meetings of the committee on which the director
served during the time he served on the Board or committee.
The Board has three standing committees: an Audit Committee, a Compensation
Committee and an Executive Committee. The functions of these committees are
described below.
Audit Committee. The Audit Committee selects and engages, on behalf of the
Company, the independent public accountants to audit the Company's annual
financial statements, and reviews and approves the planned scope of the annual
audit. The Audit Committee consists of Messrs. Johnstone, Greene and Navab.
The Audit Committee met once in 1998.
Compensation Committee. The Compensation Committee establishes remuneration
levels for certain officers of the Company and performs such functions as
provided under the Company's employee benefit programs and executive
compensation programs. The Compensation Committee consists of Messrs. Greene,
Navab and Johnstone. The Compensation Committee met three times in 1998.
Executive Committee. The Executive Committee exercises all the powers of the
Board (subject to the Company's conflict of interest policies and certain
other limitations) in the management and direction of the business of the
Company. The Executive Committee consists of Messrs. Sheffler, Greene and
Navab. The Executive Committee met six times in 1998.
There is no standing Nominating Committee.
Directors Compensation
Directors who are also employees of the Company receive no remuneration for
serving as directors. Each director who is not an employee of the Company (a
"Non-Employee Director") receives an annual retainer of $25,000.
In addition, the 1998 Equity Participation Plan of the Company (the "Equity
Plan") provides for (i) automatic grants of non-qualified stock options to
purchase 10,000 shares of Common Stock to each Non-Employee Director at the
time of election to the Board (or for each Non-Employee Director who was not
an employee at the time of the initial public offering of the Company's Common
Stock (the "IPO") at the time of the IPO), and (ii) automatic grants of non-
qualified stock options to purchase a set number of shares of Common Stock to
each Non-Employee Director upon each successive anniversary of such grant date
upon which the Non-Employee Director remains a member of the Board. In
addition, the Equity Plan provides that each Non-Employee Director who
purchases 5,000 shares of the Company's Common Stock during the 90-day period
from and including the first date that such Non-Employee Director is elected
to the Board will be granted on the date of such purchase non-qualified stock
options to purchase 10,000 shares. For Non-Employee Directors who were Non-
Employee Directors at the time of the IPO, such 90-day period runs from and
includes the date of the IPO. Each such grant shall be set forth in a written
agreement between the Company and the Non-Employee Director indicating the
terms and conditions of the option. The exercise price of such options shall
be the fair market value of a share of Common Stock on the date of grant. Each
option shall become exercisable in cumulative annual installments of one-fifth
each on each of the first five anniversaries of the date of the grant so long
as the Non-Employee Director continues to serve as a director of the Company;
provided, however, to the extent permitted by Rule 16b-3, the Board may
accelerate the exercisability of options upon the occurrence of certain
specified extraordinary corporate transactions or events, and provided further
that upon the occurrence of a "Change in Control" of the Company (as defined
in the Equity Plan) all outstanding options shall become immediately
exercisable. No portion of an option granted to any Non-Employee Director
shall be exercisable after the tenth anniversary of the date of grant or more
than three months after the termination of the Non-Employee Director's
services as director of the Company, provided, however, that in the event of
the Non-
A-4
<PAGE>
Employee Director's death or disability, the option may be exercised until the
earlier of 12 months following such death or disability or the tenth
anniversary of the date of grant.
The Company maintains a deferred compensation plan, effective January 1,
1996, for non-employee directors of the Company (the "Directors' Deferred
Compensation Plan"). Such directors may defer all or a portion of their
compensation to a deferred compensation account under the Directors' Deferred
Compensation Plan. Each director makes an investment election directing that
his deferred compensation be invested in whole or in part in one of the
investment funds offered under the Directors' Deferred Compensation Plan by
its manager, The Vanguard Group. Amounts in deferred compensation accounts
become distributable on the date that the director ceases to be a director or
such earlier time approved by the Board. In October, 1998, the Company
established an additional deferral into a "phantom stock" account that tracks
the Company's stock performance. Messrs. Greene, Kravis and Roberts elected to
move their deferral balance, and directed future deferrals, into such account.
On February 28, 1999, in connection with the Merger and pursuant to the terms
of the Directors' Deferred Compensation Plan, the Board approved the payment
to each participant in the Directors' Deferred Compensation Plan of a single
lump sum cash payment of all amounts credited to such participant's account,
including any "phantom" stock account, which payment shall occur upon the
earliest of (i) the date on which such participant ceases to be a member of
the Board, (ii) the occurrence of a Change of Control (as such term is defined
in the Directors' Deferred Compensation Plan) and (iii) the consummation of
the Merger. Consummation of the Offer will constitute a Change of Control.
All directors are reimbursed for reasonable expenses incurred to attend
director and committee meetings.
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 1, 1999, the beneficial
ownership of Common Stock by (i) each person known by the Company to be the
beneficial owner of 5% or more of the Common Stock, (ii) each person who is a
director or Named Executive Officer (as defined below) of the Company and
(iii) all directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned
--------------------------------------
Amount and Nature Percentage
Name of Beneficial Owner of Beneficial Ownership (1) Ownership
- ------------------------ -------------------------- ----------
<S> <C> <C>
KKR Associates, L.P. (2)............... 45,831,283 81.2%
Henry R. Kravis (3).................. 64,000 *
George R. Roberts (4)................ 64,000 *
James H. Greene, Jr. (5)............. 44,000 *
Rysaffe Trustee Company (CI) Limited
(6)................................... 2,655,940 4.7
Dudley P. Sheffler (7)................. 362,078 *
W. Michael Corkran (8)................. 110,314 *
Patrick L. Welker (9).................. 137,366 *
Michael K. Pratt (10).................. 24,916 *
Richard L. Schwob (11)................. 128,401 *
Alexander Navab, Jr. (12).............. 14,000 *
R.C. Johnstone, Jr..................... 5,000 *
All officers and directors as a group
(12 persons) (13)..................... 1,128,014 2.0
</TABLE>
- --------
* Less than 1%
(1) For purposes of this table, a person is deemed as of any date to have
"beneficial ownership" of any security that such person has a right to
acquire within 60 days after such date. Shares that each identified
stockholder has the right to acquire within 60 days of the date of the
table set forth above are deemed to be outstanding in calculating the
percentage ownership of such stockholder, but are not deemed outstanding
as to any other person.
A-5
<PAGE>
(2) Shares of Common Stock shown as owned by KKR Associates are owned of
record by CMT Associates, L.P. and KKR Partners II, L.P. of which KKR
Associates is the sole general partner and as to which it possesses sole
voting and investment power. Messrs. Kravis, Roberts and Greene (who are
directors of the Company) and Messrs. Paul E. Raether, Michael W.
Michelson, Michael T. Tokarz, Clifton S. Robbins, Edward D. Gilhuly, Perry
Golkin, Scott M. Stuart and Robert I. MacDonnell, as general partners of
KKR Associates, may be deemed to share beneficial ownership of any shares
beneficially owned by KKR Associates, but disclaim any such beneficial
ownership. The address of KKR Associates is 9 West 57th Street, New York,
New York 10019.
(3) Includes an aggregate of 4,000 options that are exercisable within 60 days
of the date hereof and excludes 2,904 units of a stock fund that track
performance of the Company's Common Stock offered pursuant to the
Directors' Deferred Compensation Plan.
(4) Includes an aggregate of 4,000 options that are exercisable within 60 days
of the date hereof and excludes 287 units of a stock fund that track
performance of the Company's Common Stock offered pursuant to the
Directors' Deferred Compensation Plan.
(5) Includes an aggregate of 4,000 options that are exercisable within 60 days
of the date hereof and excludes 3,106 units of a stock fund that track
performance of the Company's Common Stock offered pursuant to the
Directors' Deferred Compensation Plan.
(6) Includes 2,655,940 shares registered in the name of Rysaffe Trustee
Company (CI) Limited A/C BH87. The trust was sponsored by Barry Houghton
MBE, who disclaims beneficial ownership of such shares. The address of
Rysaffe Trustee Company is P.O. Box 141, La Tonnele House, Le Banques, St.
Sampson, Guernsey GY1 3H5, United Kingdom.
(7) Includes an aggregate of 204,000 options that are exercisable within 60
days of the date hereof and 8,078 shares held in the 401(k) plan.
(8) Includes an aggregate of 70,000 options that are exercisable within 60
days of the date hereof and 314 shares held in the 401(k) plan.
(9) Includes an aggregate of 80,080 options that are exercisable within 60
days of the date hereof and 407 shares held in the 401(k) plan.
(10) Includes an aggregate of 7,850 options that are exercisable within 60
days of the date hereof and 67 shares held in the 401(k) plan.
(11) Includes an aggregate of 72,080 options that are exercisable within 60
days of the date hereof and 3,321 shares held in the 401(k) plan.
(12) Includes an aggregate of 4,000 options that are exercisable within 60
days of the date hereof. Mr. Navab is a director of KKR and a limited
partner of KKR Associates. Mr. Navab disclaims that he is the beneficial
owner of any shares beneficially owned by KKR Associates.
(13) Includes an aggregate of 524,040 options that are exercisable within 60
days of the date hereof. Does not include shares owned by KKR Associates.
A-6
<PAGE>
CERTAIN RELATIONSHIPS, TRANSACTIONS AND ARRANGEMENTS
CMT Associates, L.P. ("CMT Associates"), KKR Partners II, L.P. ("KKR
Partners" and, collectively with CMT Associates, the "Investment
Partnerships") and KKR Associates (collectively with the Investment
Partnerships, the "KKR Partnerships") beneficially own approximately 81.2% of
the Company's outstanding shares of Common Stock. As a result the KKR
Partnerships have the power to elect all of the Company's directors, appoint
new management and approve any action requiring the approval of the holders of
Common Stock. KKR Associates is the general partner of the Investment
Partnerships. The general partners of KKR Associates are Messrs. Henry R.
Kravis, George R. Roberts, Paul E. Raether, Michael W. Michelson, James H.
Greene, Jr., Michael T. Tokarz, Clifton S. Robbins, Edward A. Gilhuly, Perry
Golkin, Scott M. Stuart and Robert I. MacDonnell. Messrs. Kravis, Roberts and
Greene are also directors of the Company, as is Alexander Navab, Jr., who is a
director of KKR and a limited partner of KKR Associates. Each of the general
partners of KKR Associates is also a member of KKR & Co., L.L.C., which serves
as the general partner of KKR.
From time to time, KKR has received customary investment banking fees for
services rendered to the Company in connection with divestitures, acquisitions
and certain other transactions. KKR received a fee of $7.5 million in cash
from the Company for negotiating the purchase of the Company in August 1995
(the "RELTEC Acquisition") and arranging the financing therefor, plus the
reimbursement of its expenses in connection therewith. The Company paid KKR a
$2.0 million fee for consulting services related to the acquisition of the
Rainford Group plc in September 1996 (the "Rainford Acquisition"). In
addition, KKR has rendered management, consulting and financial services to
the Company for an annual fee of $0.75 million, payable quarterly. During the
years ended December 31, 1998, 1997 and 1996, the Company paid $0.8 million,
$0.8 million and $0.8 million, respectively, to KKR for such services and for
reimbursement of expenses. In consideration of its advisory services to the
Company in connection with the negotiation of the Offer and the Merger, KKR
will receive a fee of $6,667,000, payable upon consummation of the Offer.
In connection with the RELTEC Acquisition, the Investment Partnerships
entered into Securities Purchase Agreements pursuant to which they acquired
28,000,000 shares of Common Stock and one of the Investment Partnerships, CMT
Associates acquired a Subordinated Promissory Note in the principal amount of
$135,000,000 (the "Bridge Loan"). The Bridge Loan was guaranteed by the
Company's sole wholly owned direct subsidiary. The Securities Purchase
Agreements contain provisions (i) restricting the Investment Partnerships'
ability to sell shares of Common Stock for up to 90 days after the effective
date of certain registration statements, (ii) requiring the Company to
reimburse the Investment Partnerships for all costs and expenses arising in
connection with the administration, enforcement and preservation of rights
under the Securities Purchase Agreements, including, without limitation, all
expenses incurred by the Investment Partnerships in connection with the
maintenance of their books and records, preparation of tax returns and
delivery of tax information to their partners and all travel and other out-of-
pocket expenses of KKR Associates in connection with the operation and
business of the Investment Partnerships and their ownership of the Common
Stock and Bridge Loan and (iii) indemnifying the Investment Partnerships and
all of their partners from liabilities, damages and expenses relating to or
arising out of the Investment Partnerships' ownership of the Common Stock and
Bridge Loan or litigation to which such persons are made a party in their
capacity as an owner of such securities.
Also in connection with the RELTEC Acquisition, the Investment Partnerships
entered into the Registration Rights Agreement, dated August 1, 1995, (the
"Registration Rights Agreement") with the Company. Pursuant to such agreement
the Investment Partnerships have the right, under certain circumstances and
subject to certain conditions, to require the Company to register under the
Securities Act of 1933, as amended, shares of Common Stock held by them. In
addition, the Registration Rights Agreement also provides the Investment
Partnerships with certain piggyback registration rights. The Registration
Rights Agreement provides, among other things, that the Company will pay all
expenses in connection with the first six demand registrations requested by
the Investment Partnerships and in connection with any registration in which
the Investment Partnerships participates through piggyback registration rights
granted under such agreement.
A-7
<PAGE>
In connection with the issuance of shares of Common Stock to employees of
the Company pursuant to the 1995 Plan, such employees granted CMT Associates
certain "drag along" rights and CMT Associates granted such employees certain
"tag along" rights.
On September 7, 1995, CMT Associates exchanged $35.0 million of the
principal amount of the Bridge Loan into 7,000,000 shares of Common Stock
pursuant to the terms of the Bridge Loan. On September 11, 1995, the Company
repaid $25.0 million of the principal amount of the Bridge Loan with proceeds
from borrowings under its then existing bank credit agreement. In August 1996,
CMT Associates exchanged the remaining $75.0 million principal amount for
6,434,783 shares of Common Stock, plus 1,000 shares of Series A Preferred
Stock that was subsequently sold to a third party. On April 1, 1997, CMT
Associates purchased an additional 4,000,000 shares of Common Stock for
$50,000,000, which proceeds were used to repay indebtedness.
In connection with the Rainford Acquisition, 2,951,044 shares of Common
Stock were issued in exchange for certain shares of Rainford Common Stock held
for the benefit of Barry Houghton, the former Chairman of Rainford, and his
family (the "Settlements") pursuant to certain settlement agreements. The
Settlements and the Company entered into a Put/Call Agreement in August 1996
which provided, among other things, the Company the right, under certain
circumstances, to purchase some or all of the shares of Common Stock held by
the Settlements, and to the Settlements, the right, under certain
circumstances, to sell to the Company up to 10% of the shares of Common Stock
held by the Settlements. The Put/Call Agreement terminated at the time of the
Company's initial IPO. The Settlements also entered into a Stockholders'
Agreement with the Company, the Investment Partnerships and certain other
shareholders of Rainford. In the Stockholders' Agreement the Settlements
granted the Investment Partnerships certain "drag along" rights and the
Investment Partnerships granted the Settlements certain "tag along" rights. In
addition, the Settlements have granted the Company a right of first refusal
with respect to certain transfers of the Common Stock held by the Settlements
and the Company granted the Settlements certain piggyback registration rights.
In connection with the purchase of Common Stock pursuant to the 1995 Plan,
the Company made loans to certain employees. The only loan outstanding in
fiscal 1998 to an executive officer was to Valerie Gentile Sachs, Vice
President, General Counsel and Secretary. The principal amount of the loan is
due no later than five years from the date of issuance. Interest accrues at
the one-month LIBOR rate plus 100 basis points and is paid semi-monthly with
certain principal repayments required as part of annual management incentive
awards. The loan is secured by a pledge of the Common Stock held by Ms. Sachs.
The largest amount outstanding on Ms. Sachs' loan during 1998 was $219,689 and
at December 31, 1998, the outstanding principal balance was $219,406.
A-8
<PAGE>
EXECUTIVE OFFICER COMPENSATION
The following table sets forth information concerning the compensation of
the Chief Executive Officer and four most highly compensated executive
officers of the Company (the "Named Executive Officers"), whose total salary
and bonus for fiscal 1998 exceeded $100,000 for services rendered in all
capacities of the Company and its subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
--------------------------------- -------------
Securities
Other Underlying
Name and Annual Options All Other
Principal Position Year Salary Bonus Compensation(1) (# of Shares) Compensation(2)
------------------ ---- -------- -------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Dudley P. Sheffler...... 1998 $450,000 $239,400 $ -- 67,500 $61,494
President and Chief 1997 400,000 370,080 -- 60,000 44,505
Executive Officer
W. Michael Corkran...... 1998 266,678 93,270 124,865 27,500 21,945
President, North America 1997 200,000 133,640 -- 55,000 8,366
and Asia/Pacific
Patrick L. Welker....... 1998 225,000 99,000 63,924 22,500 27,108
President, Europe and 1997 184,294 133,640 -- 41,200 15,454
Latin America
Michael K. Pratt........ 1998 205,008 60,000 -- 15,390 21,486
Vice President, General 1997 177,294 95,090 -- 19,375 10,372
Manager, Access Systems
Richard L. Schwob....... 1998 204,200 46,350 -- 15,390 20,498
Vice President-Sales 1997 174,197 92,006 -- 19,375 11,589
</TABLE>
- --------
(1) Other annual compensation for Messrs. Sheffler, Schwob, and Pratt did not
exceed $50,000 or 10% of each of their combined annual salaries and
bonuses for any period reported. The amounts shown for Mr. Corkran and Mr.
Welker consist principally of a $117,198 reimbursement to Mr. Corkran for
expenses in connection with moving from Chicago to Cleveland and a $61,790
payment to Mr. Welker for reimbursement of relocation expenses in
connection with Mr. Welker's relocation from Dallas, Texas to Coventry,
United Kingdom in addition to a housing allowance and overseas
compensation for Mr. Welker's service in Coventry.
(2) Represents (i) Company savings plan 401(k) matching contributions, (ii)
RELTEC Retirement Plan contributions, (iii) payments pursuant to the
RELTEC Deferred Compensation Plan equal to lost Company savings plan
matching contributions resulting from Internal Revenue Code limitations
and (iv) in the case of Mr. Sheffler, long term disability insurance
premiums as follows:
<TABLE>
<CAPTION>
401(k) Retirement Deferred Long Term
Plan Plan Compensation Plan Disability
------ ---------- ----------------- ----------
<S> <C> <C> <C> <C>
Mr. Sheffler
1998...................... $4,800 $7,548 $47,646 $1,500
1997...................... 4,750 7,548 30,907 1,300
Mr. Corkran
1998...................... 2,400 7,548 11,997 --
1997...................... 2,400 5,966 -- --
Mr. Welker
1998...................... 4,800 7,548 14,760 --
1997...................... 4,750 5,966 4,738 --
Mr. Pratt
1998...................... 4,487 7,548 9,451 --
1997...................... 3,532 3,468 3,372 --
Mr. Schwob
1998...................... 4,800 7,548 8,150 --
1997...................... 4,750 3,653 3,186 --
</TABLE>
A-9
<PAGE>
Retirement Plans
General
The Company maintains a number of "tax qualified" retirement plans,
including a 401(k) savings plan, that are each generally available to a broad
classification of its employees. In addition, the Company also maintains
frozen defined benefit pension plans (the "Pension Plans") for certain
eligible salaried and hourly employees (including the Named Executive
Officers). Benefits under the Pension Plans are generally determined on the
basis of average compensation and/or years of service. Effective December 31,
1997, benefit accruals under the Pension Plans were frozen. Compensation taken
into account under the Pension Plans generally includes salary and bonus and
other compensation disclosed in the Summary Compensation Table. The normal
retirement age under the Pension Plans is 65; however, retirement before age
65 can be elected under certain conditions. Pension amounts will be reduced to
reflect retirement prior to age 65.
Supplemental Retirement Plan for Key Employees
The Company maintains a Supplemental Retirement Plan for Key Employees (the
"Supplemental Plan"), an unfunded "non-qualified" plan that covers certain
employees designated by the Board (including the Named Executive Officers) who
participate in the Pension Plans and the Deferred Compensation Plan described
below or whose benefits under the Pension Plans are limited due to
restrictions imposed by federal tax laws. Effective December 31, 1997, benefit
accruals under the Supplemental Plan were frozen. Benefits under the
Supplemental Plan are based on years of service (including years of service
not taken into account under the Pension Plan) and total annual compensation
as reported in the Summary Compensation Table and, for participants in the
Deferred Compensation Plan, a specified percentage of average awards under
such plan multiplied by years of service.
Special Retirement Program for Elected Officers
The Company also maintains a deferred compensation plan (the "Special
Retirement Program") for principal officers of the Company who participated in
a similar predecessor plan of Reliance Electric Company. A principal officer
must have served as such for at least two years and, upon retirement, must
have at least ten years of service with the Company to be eligible to
participate in the Special Retirement Program. Eligibility to participate in
the Special Retirement Program is subject to the approval of the Board in the
event of retirement prior to the normal retirement date. An individual will
not be eligible to participate in the Special Retirement Program in the event
of retirement prior to reaching age 55. Effective December 31, 1997, benefit
accruals under the Special Retirement Program were frozen.
The maximum retirement allowance provided under the Special Retirement
Program upon a participant's retirement (or at age 60, if retirement commences
before age 60), will be 50% of the average of the three best years of total
"compensation" (salary plus annual bonus), less pension attributable to the
Company contributions under the Company Pension Plan, the Supplemental
Retirement Plan and any retirement plan of a prior employer following
retirement from the Company, and less 50% of primary Social Security benefit.
The maximum retirement allowance of 50% will be payable to the person holding,
on retirement, the office of Chief Executive Officer of the Company, and to
any other participant with 15 years of service with the Company upon
retirement. If a participant, other than the Chief Executive Officer of the
Company, has less than 15 years of service upon retirement, the retirement
allowance will be reduced by .2777% for each month of service less than 180
months. Under the Special Retirement Program, the group life and medical
insurance coverage (other than salary continuation) in effect for a
participant at the time of early retirement will be continued until normal
retirement.
Deferred Compensation Plan
The Company also maintains an unfunded "non-qualified" deferred compensation
plan (the "Deferred Compensation Plan") for elected officers and other
qualified employees (an "Eligible Employee") of the Company and its
subsidiaries and affiliates. An Eligible Employee can elect to defer up to 25%
of his or her
A-10
<PAGE>
base salary and up to 100% of any bonus compensation. In addition, because
federal law places limitations on contributions to the Company's 401(k)
retirement savings plan and the defined contribution retirement plan, the
Company contributes to the Deferred Compensation Plan for each participant the
amount of matching employer contributions to which the participant would be
entitled under the 401(k) savings plan and/or the defined contribution
retirement plan but for such limitations. Under the Deferred Compensation Plan
all amounts deferred by an Eligible Employee are paid into a rabbi trust, the
trustee of which is The Vanguard Group. An Eligible Employee can direct the
investment of deferred compensation into selected investment funds managed by
The Vanguard Group. The amounts credited to such accounts will become
distributable at age 65 or earlier with the approval of the Board. In
addition, in the event of a "change of control" (as defined under the Deferred
Compensation Plan), payment of all accounts shall be accelerated and payable
in a lump sum within 30 days after such event. The Company currently intends
to modify the Deferred Compensation Plan to permit the continuation of
compensation deferral following a change of control.
Option Grants Table
The following Option Grants Table sets forth, as to the Named Executive
Officers, certain information relating to stock options granted during fiscal
1998. In addition, in accordance with the rules of the Securities and Exchange
Commission (the "Commission"), the table also shows a hypothetical potential
realizable value of such options based on assumed rates of annual compounded
stock price appreciation of 5% and 10% from the date the options were granted
over the full option term. The assumed rates of growth were selected by the
Commission for illustration purposes only, and are not intended to predict
future stock prices, which will depend upon market conditions and the
Company's future performance and prospects.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential Realizable Value at
------------------------------------------------- Assumed Annual Rates of
Number of % of Total Stock Price Appreciation for
Securities Options Option Term
Underlying Granted to Exercise or -----------------------------
Options Employees in Base Price Expiration 5% 10%
Granted(#)(1) Fiscal Year ($/SH) (Date) ($) ($)
------------- ------------ ----------- ---------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Dudley P. Sheffler...... 67,500 2.0 $30.75 8/03/08 $ 1,305,349 $ 3,308,011
W. Michael Corkran...... 27,500 * 30.75 8/03/08 531,809 1,347,708
Patrick L. Welker....... 22,500 * 30.75 8/03/08 435,116 1,102,670
Michael K. Pratt........ 15,390 * 30.75 8/03/08 297,619 754,226
Richard L. Schwob....... 15,390 * 30.75 8/03/08 297,619 754,226
</TABLE>
- --------
* Less than 1%.
(1) The options were granted pursuant to the Equity Plan. The options become
exercisable as to 20% of the shares underlying such options on each
anniversary of the grant. Pursuant to the Equity Plan, upon the occurrence
of a Change of Control of the Company, the Compensation Committee has sole
discretion to undertake broad actions to prevent dilution or enlargement
of the benefits or intended potential benefits to any individual option
holder under the Equity Plan or to facilitate such transactions or events.
"Change in Control" (as defined in the Equity Plan) is deemed to have
occurred generally upon (i) a sale of all or substantially all of the
assets of the Company to a person who is not an affiliate of KKR or an
entity in which the stockholders of the Company immediately prior to such
transaction do not control more than 50% of the voting stock of the
Company immediately following the transaction, (ii) a sale by KKR or any
of its affiliates resulting in more than 50% of the voting stock of the
Company being held by a person or Group (as defined in the Equity Plan)
that does not include KKR or any of its affiliates or (iii) a merger or
consolidation of the Company into another person which is not an affiliate
of KKR or an entity in which the stockholders of the Company immediately
prior to such transaction do not control more than 50% of the voting power
immediately following the transaction. Consummation of the Offer and
Merger will constitute a Change of Control under the Equity Plan. A
description of the treatment of options in the Merger is contained in the
Schedule 14D-9 under the heading "Item 3. Identity and Background--The
Merger Agreement."
A-11
<PAGE>
Year-End Option Value Table
The following table sets forth certain information concerning the number of
stock options held by the Named Executive Officers as of December 31, 1998,
and the value of in-the-money options outstanding as of such date. None of the
Named Executive Officers exercised options in 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options at Fiscal Year- in-the-Money Options at
End Fiscal Year-End(1)
------------------------- -------------------------
Shares
Acquired on Value
Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dudley P. Sheffler...... none n/a 204,000 223,500 $3,326,760 $2,411,640
W. Michael Corkran...... none n/a 70,000 92,500 1,038,300 869,850
Patrick L. Welker....... none n/a 80,080 89,620 1,252,975 968,392
Michael K. Pratt........ none n/a 7,850 39,915 80,226 246,487
Richard L. Schwob....... none n/a 72,080 70,510 1,175,455 852,112
</TABLE>
- --------
(1) Market Value of underlying securities at year end (based upon market value
of $22.19 as of December 31, 1998) minus the exercise price.
Compensation Committee Interlocks and Insider Participation
Mr. Greene is a member of the limited liability company which serves as the
general partner of KKR and a general partner of KKR Associates. Mr. Navab is a
director of KKR and a limited partner of KKR Associates. The KKR Partnerships
beneficially own 81.2% of the Company's outstanding shares of Common Stock.
From time to time, KKR has received customary investment banking fees for
services rendered to the Company in connection with divestitures, acquisitions
and certain other transactions. KKR received a fee of $7.5 million in cash
from the Company for negotiating the purchase of the Company in the RELTEC
Acquisition and arranging the financing therefor, plus the reimbursement of
its expenses in connection therewith. The Company paid KKR a $2.0 million fee
for consulting services related to the Rainford Acquisition. In addition, KKR
has rendered management, consulting and financial services to the Company for
an annual fee of $0.75 million, payable quarterly. During the years ended
December 31, 1998, 1997 and 1996, the Company paid $0.8 million, $0.8 million
and $0.8 million, respectively, to KKR for such services and for reimbursement
of expenses. In connection with its advisory services to the Company in
connection with the negotiation of the Offer and the Merger, KKR will receive
a fee of $6,667,000 payable upon consummation of the Offer.
Report on Compensation of Executive Officers
The Compensation Committee (the "Committee") of the Board of Directors is
responsible for the Company's executive compensation philosophy and major
compensation policies. The Committee is also responsible for determining all
aspects of the compensation paid to the Chief Executive Officer, and reviews
and approves recommendations for compensation paid to the other executive
officers. The Committee has access to an independent compensation consultant
and to competitive compensation data. The Committee is composed of one
outside, independent director and two outside directors who are affiliated
with the Company's controlling shareholder.
The primary objectives of the Company's executive compensation program are
to:
. Create a total compensation environment that enables the Company to
attract, motivate and retain high quality executives who can produce
superior results on a sustained basis;
A-12
<PAGE>
. Ensure that each element of the compensation package aligns the interests
of executives and those of shareholders;
. Create an opportunity for executives to earn above average compensation
when the value created for shareholders is above average; and
. Encourage teamwork in order to focus attention on critical aspects of
Company performance.
The executive compensation program provides an overall level of compensation
opportunity that is competitive with comparably sized and comparably
performing companies within the telecommunications equipment, high technology
and durable goods industries (the "Comparable Companies").
The following discussion describes the Company's approach to executive
compensation and provides commentary on the major components of the program.
The Committee retains the right to consider factors other than those described
below in setting executive compensation levels for individual officers.
In determining fiscal 1999 compensation levels, the Committee took into
account the Company's 1998 operating performance, the individual executive's
performance relative to their personal objectives, and the executive's total
cash compensation compared to the external market.
Executive Compensation Program
The Company's executive compensation program is comprised of base salary,
annual incentive compensation, long-term incentive compensation, and various
benefits generally available to all full-time employees of the Company.
Annual Compensation. Annual cash compensation consists of base salary and
annual incentive awards. The Company's objective is to pay "above average"
when performance targets are achieved. This is accomplished through a mix of
base salary and incentives, which are more highly leveraged to performance
(above and below plan) than is typically found in similar plans for Comparable
Companies. By design, annual incentive opportunities are above average at the
target level of performance, and base salaries are below average. Placing a
greater proportion of cash compensation at risk ensures above-average pay only
when performance goals are achieved or exceeded.
Annual incentive targets are established at above-average levels for each
executive. A competitive base salary is calculated as the amount necessary,
when added to the target annual incentive, to equal the market median for
total cash compensation plus 10%.
This target base salary is used as a reference point. The Committee also
takes into account individual experience, performance during the prior 12
months, future performance potential, retention considerations, and other
issues specific to the particular executive. Salaries for the Company's
executives generally fall within a range of plus or minus 20% of the target
base salary.
The Management Incentive Plan ("MIP") is the Company's annual incentive
program for executives and key managers. The purpose of the MIP is to provide
a financial incentive for management employees to help the Company achieve key
financial and operational objectives. Target MIP award levels are set at
"above-average" levels as described above. Actual MIP awards vary
significantly from the target award levels depending on the Company's
financial performance and individual performance. MIP awards are based on
Company performance as compared to predetermined financial goals and to
individual performance as compared to predetermined individual goals, which
may include business unit financial and operational metrics.
In order for participants to receive a MIP award at least 80% of the
Company's target earnings before interest, taxes, depreciation and
amortization ("EBITDA") must be met. The maximum individual incentive award
component equals the Company EBITDA component award. Therefore, if Company
EBITDA
A-13
<PAGE>
performance exceeds plan, a larger individual incentive opportunity exists.
Conversely, if Company EBITDA performance is below plan, a smaller individual
incentive opportunity exists.
The EBITDA component of the MIP provides incentive compensation that relates
the financial reward to an increase in the value of the Company to its
shareholders. The Company believes that EBITDA performance is a financial
performance measure that is closely correlated with increases in shareholder
value.
MIP awards are payable in cash. However, executives and other designated
senior management employees may elect to defer payment into the Deferred
Compensation Plan.
The 1998 MIP awards for all participants, other than the Chief Executive
Officer, depended equally on achievement of the Company's EBITDA target and
individual objective performance. The 1998 MIP award for the Chief Executive
Officer was based 100% on achievement of the Company's EBITDA target. In 1998,
EBITDA performance of the Company was below the Company's EBITDA target. As a
result, maximum MIP awards were also below target amounts. Consistent with the
MIP's design, total cash compensation levels for executives and key managers
fell below averages when compared to the Comparable Companies.
Long-term Incentive Compensation. Long-term incentives are provided to
executive officers primarily through the Company's stock option program. The
primary purpose of the stock option program is to align executive officer
compensation directly with the creation of shareholder value. The Committee
considers factors such as overall Company performance, granting practices of
Comparable Companies, the amount of stock options already outstanding or
previously granted, and retention considerations in determining the size of
stock option awards under the program.
The Company has also established stock ownership guidelines for its
executive and operating officers. The Chief Executive Officer and regional
Presidents are required to own stock equal to four times and three times base
salary, respectively. Other executive and operating officers are required to
own stock equal to one times to two times base salary. At the end of 1998 all
of the Company's executive officers had met their stock ownership
requirements.
Prior to the Company's initial public offering of common stock (March 12,
1998), stock options were granted under the 1995 Stock Purchase and Option
Plan for employees of RELTEC Corporation and its Subsidiaries as time options
that vested ratably over five (5) years and as performance options that vested
ratably over five (5) years against achievement of pre-determined Company
EBITDA targets. From and after the Company's initial public offering, stock
options have been granted under the 1998 Equity Participation Plan of RELTEC
Corporation (the "1998 Plan") as time options that vest ratably over five (5)
years. Stock options have an exercise price equal to the fair market value of
the Company's Common Stock on the date of grant. Generally, the stock options
have a ten-year term. Executive officers will only receive benefit from stock
options if, at the time the options are exercised, the price of the Common
Stock has appreciated over the price on the date of the stock option grant.
Currently, executive officers are receiving stock option grants on a
periodic basis.
Benefits. The Company provides health and welfare and retirement benefits to
its executives that are generally similar to those available to Company
employees. The executives and other select managers also participate in the
Deferred Compensation Plan which is designed to restore certain Retirement
Plan and Savings and Investment Plan (401(k)) benefits that otherwise would be
lost as a result of limitations placed on contributions to tax-qualified
retirement plans under the Internal Revenue Code.
Chief Executive Officer Compensation
Mr. Sheffler's base salary at the end of 1997 was $400,000. In 1998 the
Committee approved an increase of 12.5% which raised his salary to $450,000.
In determining Mr. Sheffler's salary, the Committee considered such
A-14
<PAGE>
factors as the Company's financial performance, Mr. Sheffler's leadership at
the Company, in the community and within the industry, his performance with
respect to personal objectives and his pay in relation to the pay of the chief
executive officers of the Comparable Companies. The base salary of $450,000
placed Mr. Sheffler's salary at approximately the 25th percentile of the
salaries of the chief executive officers of the Comparable Companies.
Under the terms of the MIP program, Mr. Sheffler's target award is based
100% on the Company EBITDA performance. For 1998, Company EBITDA performance
was below target, resulting in an award that was $239,400, also below target.
Mr. Sheffler's 1998 total annual cash compensation ($689,400) falls at or
below the 25th percentile of the total annual cash compensation of the Chief
Executive Officers of the Comparable Companies.
In accordance with the long-term incentive plan described above, in 1998 Mr.
Sheffler received a stock option grant for 67,500 shares of Common Stock.
These stock options have an exercise price equal to fair market value of the
Common Stock on the date of grant ($30.75).
Section 162(m) Policy
The Committee does not believe that during the 1999 fiscal year annual
compensation provided to any of the executive officers will exceed $1,000,000
within the meaning of Section 162(m) of the Internal Revenue Code. Under
Section 162(m), all compensation in excess of $1,000,000 for any such officer
must meet certain shareholder approval and Company performance requirements in
order for the Company to fully deduct these amounts. The 1998 Plan has
provisions approved by the Company's shareholders so that amounts realized
from the exercise of options granted under the 1998 Plan will not be included
in calculations under Section 162(m).
Compensation Committee
James H. Greene, Jr.
R.C. Johnstone, Jr.
Alexander Navab, Jr.
A-15
<PAGE>
Stock Performance Graph
Set forth below is a line graph comparing the total cumulative return on the
Common Stock based on the market price of the Common Stock since March 18,
1998, when the Company's initial public offering of Common Stock was
completed.
COMPARISON OF CUMULATIVE TOTAL RETURNS
Value of $100 Invested on March 18, 1998
----------------------------------------
S&P 500
RELTEC COMMUNICATION S&P 500
CORPORATION EQUIPMENT INDEX INDEX
----------- --------------- ---------
3/18/98 100 100 100
3/30/98 122.20 105.12 114.73
6/30/98 146.55 108.59 127.11
9/30/98 50.86 97.79 96.03
12/31/98 76.51 118.61 149.21
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
reports of ownership and changes of ownership with the Commission and each
exchange on which the Company's securities are registered. Officers, directors
and greater than ten percent stockholders are required by Commission
regulations to furnish the Company with copies of all ownership forms they
file.
Based solely on a review of copies of reporting forms furnished to it, or
written representations that no forms were required, to the Company's
knowledge, except as set forth below, all filing requirements applicable to
its officers, directors and beneficial owners under Section 16(a) of the
Exchange Act were complied with during fiscal 1998 except that Form 3's for
each of Messrs. Paul E. Raether, Michael W. Michelson, Michael T. Tokarz,
Clifton M. Robbins, Edward D. Gilhuly, Perry G. Golkin and Robert I.
MacDonnell, each of whom is a general partner of KKR Associates, were not
filed until April 10, 1998.
A-16
<PAGE>
SCHEDULE I
As of the date of this Information Statement, the Purchaser has not
determined who will be the Designees. However, such Designees will be selected
from the following list of directors and executive officers of GEC, p.l.c. or
its affiliates promptly upon the purchase by the Purchaser of a majority of
the outstanding Shares pursuant to the Offer or by the Purchaser of the
Principal Stockholders Shares pursuant to the Stockholder Agreement. The
information contained herein concerning GEC, p.l.c. and its directors and
executive officers and those of its affiliates has been furnished by Parent
and the Purchaser. The Company assumes no responsibility for the accuracy or
completeness of such information.
The name, present principal occupation or employment and five-year
employment history of each Designee and certain other information is set forth
below. Except as noted, none of the persons listed below owns any Shares or
has engaged in any transactions with respect to Shares during the past 60
days. During the last five years, neither GEC, p.l.c., Parent nor any
individual indicated has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) nor was such person a party to a
civil proceeding of a judicial or administrative body of competent
jurisdiction, and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any
violation or such laws. All of the individuals listed below are citizens of
the United Kingdom, except for Messrs. Edeus and Korb and Ms. Hoffman who are
citizens of the United States.
<TABLE>
<CAPTION>
Name and
Business Present Principal Occupation or Employment
Address and Five-Year Employment History
- -------- ------------------------------------------
<S> <C>
Mike Barton Managing Director of Marconi Communications
Marconi Communications Limited Limited (1998-present); Managing Director of
New Century Park GEC Industrial Group (1997-1998); Managing
Coventry, CV3 1HJ (England) Director of GPT Public Networks Group (1995-
1997); Finance Director of GPT Public Networks
Group (1994-1995).
Thomas R. Edeus Treasurer of GEC Incorporated (1997-present);
GEC Incorporated Videojet Systems International, Inc. (1997-
c/o Videojet Systems International, Inc. present) and A.B. Dick Company (1994-1997).
1500 Mittel Boulevard
Wood Dale, IL 60191-1073
Patricia A. Hoffman Secretary of GEC Incorporated (1997-present);
GEC Incorporated Attorney for Videojet Systems International,
c/o Videojet Systems International, Inc. Inc. (1997-present) and A. B. Dick Company
1500 Mittel Boulevard (1994-1997).
Wood Dale, IL 60191-1073
William B. Korb President and CEO of Gilbarco Inc. (1994-
Gilbarco Inc present).
7300 W. Friendly Avenue
P.O. Box 22087
Greensboro, NC 27420
Andy Lee Human Resources Director of Marconi
Marconi Communications Limited Communications Limited (1998-Present);
New Century Park Personnel Director of Marconi Electronic
Coventry, CV3 1HJ (England) Systems Limited (1996-1998); Personnel Director
of GPT Public Networks Group (1994-1996).
John Charles Mayo President and Treasurer of GEC Acquisition
The General Electric Company, p.l.c. Corp. (1999-present); Finance Director of The
One Bruton Street General Electric Company, p.l.c. (1997-
London,WIX 8AQ (England) present); Finance Director of Zeneca Group
PLC(7) (1994-1997).
Robert Ian Meakin Executive Director of The General Electric
The General Electric Company, p.l.c. Company, p.l.c. (1998-present); Personnel
One Bruton Street Director of The General Electric Company,
London, WIX 8AQ (England) p.l.c. (1996-present); Personnel Director of
British Aerospace plc (1994-1996).
Peter Rowley Group Commercial Director of Marconi
Marconi Communications Limited Communications Limited (1998-Present); Managing
New Century Park Director, Distribution of GEC Industrial Group
Coventry, CV3 1HJ (England) (1997-1998); Managing Director of GEC Marconi
In-Flight Systems Limited (1995-1997);
Commercial Director of GPT Limited (1994-1995).
</TABLE>
I-1
<PAGE>
EXHIBIT 1
<PAGE>
CONFORMED COPY
================================================================================
AGREEMENT AND PLAN OF MERGER
By and Among
GEC Incorporated
George Acquisition Corp.
and
Reltec Corporation
Dated as of March 1, 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
The Offer
---------
SECTION 1.1. The Offer................................... 2
SECTION 1.2. Company Action.............................. 4
SECTION 1.3. Boards of Directors and Committees;......... 6
Section 14(f)
ARTICLE II
The Merger
----------
SECTION 2.1. The Merger.................................. 8
SECTION 2.2. Effective Time; Closing..................... 8
SECTION 2.3. Effects of the Merger; Subsequent........... 9
Actions
SECTION 2.4. Certificate of Incorporation and............ 9
By-Laws
SECTION 2.5. Directors................................... 10
SECTION 2.6. Officers.................................... 10
SECTION 2.7. Conversion of Shares........................ 10
SECTION 2.8. Employee Stock Options...................... 10
SECTION 2.9. Stockholders' Meeting....................... 12
ARTICLE III
Dissenting Shares; Exchange of Shares
-------------------------------------
SECTION 3.1. Dissenting Shares........................... 13
SECTION 3.2. Exchange of Certificates.................... 14
ARTICLE IV
Representations and Warranties of the Company
---------------------------------------------
SECTION 4.1. Organization and Qualification;............. 16
Subsidiaries
SECTION 4.2. Capitalization of the Company and........... 17
its Subsidiaries
SECTION 4.3. Authority Relative to this Agreement........ 18
SECTION 4.4. Non-Contravention; Required Filings......... 20
and Consents
SECTION 4.5. Reports..................................... 21
<PAGE>
SECTION 4.6. Absence of Certain Changes;................. 23
Derivatives
SECTION 4.7. Schedule 14D-9; Offer Documents;............ 24
Proxy Statement
SECTION 4.8. Finder's Fee................................ 25
SECTION 4.9. Absence of Litigation....................... 25
SECTION 4.10. Taxes....................................... 26
SECTION 4.11. Employee Benefits........................... 28
SECTION 4.12. Compliance; Permits......................... 31
SECTION 4.13. Environmental Matters....................... 32
SECTION 4.14. Intellectual Property....................... 35
SECTION 4.15. Significant Agreements...................... 39
SECTION 4.16. Insurance................................... 40
SECTION 4.17. Labor Matters............................... 40
SECTION 4.18. Year 2000................................... 40
ARTICLE V
Representations and Warranties of Parent.and
--------------------------------------------
Acquisition Sub
---------------
SECTION 5.1. Organization................................ 41
SECTION 5.2. Authority Relative to this Agreement........ 41
SECTION 5.3. Non-Contravention; Required Filings......... 42
and Consents
SECTION 5.4. Offer Documents; Schedule 14D-9;............ 43
Proxy Statement
SECTION 5.5. No Prior Activities......................... 44
SECTION 5.6. Finder's Fee................................ 44
SECTION 5.7. Financing................................... 44
SECTION 5.8. Parent Not an Interested Stockholder........ 44
ARTICLE VI
Covenants
---------
SECTION 6.1. Conduct of Business of the Company.......... 45
SECTION 6.2. Proxy Statements............................ 48
SECTION 6.3. Access to Information; Confidentiality...... 48
Agreement
SECTION 6.4. Reasonable Best Efforts..................... 49
SECTION 6.5. Public Announcements........................ 50
SECTION 6.6. Indemnification; Insurance.................. 50
SECTION 6.7. Notification of Certain Matters............. 51
SECTION 6.8. Employee Plans.............................. 52
SECTION 6.9. No Solicitation............................. 53
SECTION 6.10. Agreements With Sellers (or their........... 54
affiliates)
ii
<PAGE>
SECTION 6.11. Employee Matters.......................... 55
SECTION 6.12. Acquisition Sub........................... 55
SECTION 6.13. FIRPTA Affidavit.......................... 55
SECTION 6.14. Third Party Standstill Agreements;........ 55
Tortious Interference
ARTICLE VII
Conditions to Consummation of the Merger
----------------------------------------
SECTION 7.1. Conditions to the Company's, Parent's....... 56
and Acquisition Sub's Obligation
to Effect the Merger
ARTICLE VIII
Termination; Amendment; Waiver
------------------------------
SECTION 8.1. Termination................................. 57
SECTION 8.2. Effect of Termination....................... 58
SECTION 8.3. Fees and Expenses........................... 58
SECTION 8.4. Amendment................................... 58
SECTION 8.5. Extension; Waiver........................... 59
ARTICLE IX
Miscellaneous
-------------
SECTION 9.1. Non-Survival of Representations and......... 59
Warranties
SECTION 9.2. Entire Agreement; Assignment................ 60
SECTION 9.3. Notices..................................... 60
SECTION 9.4. Governing Law............................... 62
SECTION 9.5. Parties in Interest......................... 62
SECTION 9.6. Remedies.................................... 63
SECTION 9.7. Severability................................ 63
SECTION 9.8. Interpretation.............................. 63
SECTION 9.9. Certain Definitions......................... 64
SECTION 9.10. Counterparts................................ 65
Annex A - Offer Conditions
iii
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of March 1,
1999, is by and among RELTEC CORPORATION, a Delaware
corporation (the "Company"), GEC Incorporated, a Delaware
-------
corporation ("Parent"), and GEORGE ACQUISITION CORP., a
------
Delaware corporation ("Acquisition Sub").
---------------
WHEREAS, the Boards of Directors of Parent, Acquisition Sub, and the
Company have each approved the acquisition of the Company by Parent upon the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance thereof, it is proposed that Acquisition Sub
shall make a tender offer (as it may be amended from time to time as permitted
under this Agreement, the "Offer") to acquire all outstanding shares of common
-----
stock, par value $0.01 per share, of the Company (the "Shares"), for a cash
------
amount of $29.50 per Share net to the selling stockholders (such amount, or any
greater amount per Share paid pursuant to the Offer, being hereinafter referred
to as the "Per Share Amount") in accordance with the terms and subject to the
----------------
conditions provided for herein;
WHEREAS, simultaneously with the execution and delivery hereof,
Parent, Acquisition Sub, KKR Associates, L.P., KKR Partners II, L.P. and CMT
Associates, L.P. (collectively, the "Sellers"), are entering into a stockholder
-------
agreement and proxy (the "Stockholder Agreement") pursuant to which the Sellers
---------------------
have agreed, among other things, to tender all of the Shares held by the Sellers
(the "KKR Shares") to Acquisition Sub pursuant to the Offer and grant to
----------
Acquisition Sub an option to purchase the KKR Shares (the "Option");
------
WHEREAS, the Board of Directors of the Company (the "Board") has (i)
-----
determined that this Agreement and the transactions contemplated hereby,
including the Offer and the Merger are fair to and in the best interests of the
stockholders of the Company, (ii) approved this Agreement and the transactions
contemplated hereby, including the Offer, the Merger and the transactions
contemplated by the Stockholder Agreement and (iii) recommended in satisfaction
of all applicable requirements for Board action under Section 251 of the General
Corporation Law of the State of Delaware ("Delaware Law") in order for the
------------
Merger to be validly approved that the stockholders of the Company accept the
Offer, tender their Shares thereunder and, to the extent required by applicable
law, approve and adopt this Agreement and the Merger; and
<PAGE>
WHEREAS, the Boards of Directors of Parent and Acquisition Sub have
each approved the merger (the "Merger") of Acquisition Sub with and into the
------
Company following the Offer in accordance with the Delaware Law upon the terms
and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, the Company, Parent and Acquisition Sub hereby agree as follows.
ARTICLE I
The Offer
---------
SECTION 1.1. The Offer.
---------
(a) Subject to the conditions of this Agreement including those set
forth in Annex A hereto, as promptly as practicable, but in no event later
than the fifth business day following the initial public announcement of
the terms of this Agreement (which shall occur as promptly as practicable
but in no event later than 24 hours after the execution hereof),
Acquisition Sub shall commence (within the meaning of Rule 14d-2(a) of the
Exchange Act) the Offer to purchase all of the outstanding Shares at the
Per Share Amount net to the seller in cash. The obligation of Acquisition
Sub to accept for payment and pay for Shares tendered pursuant to the Offer
shall be subject to the condition that a number of Shares representing not
less than a majority of the Company's outstanding Shares (on a fully
diluted basis excluding any Employee Options (as defined in Section 2.8)
which are not exercisable as of the date of such calculation) shall have
been validly tendered and not withdrawn prior to the expiration date of the
Offer (the "Minimum Condition"), and the obligation of Acquisition Sub to
-----------------
commence the Offer and accept for payment and pay for Shares tendered
pursuant to the Offer shall be subject to the other conditions set forth in
Annex A hereto. The initial expiration date of the Offer shall be the 20th
business day following the commencement of the Offer (determined using Rule
14-1(c)(6) under the Exchange Act). If, on any scheduled expiration date of
the Offer, the conditions set forth in clauses (ii), (iii) or (iv) of Annex
A have not been satisfied or waived, at the written request of the Company,
Acquisition Sub shall, from time to time, extend the expiration date of the
Offer for the period set forth in such written requests. It is agreed that
the
2
<PAGE>
Minimum Condition and the other conditions set forth in Annex A hereto
are for the sole benefit of Acquisition Sub and may be asserted by
Acquisition Sub regardless of the circumstances giving rise to any such
condition. Acquisition Sub expressly reserves the right in its sole
discretion to waive, in whole or in part at any time or from time to time,
any such condition, to increase the price per Share payable in the Offer or
to make any other changes in the terms and conditions of the Offer,
provided that, unless previously approved by the Company in writing, no
--------
change may be made that decreases the price per Share payable in the Offer,
changes the form of consideration payable in the Offer, reduces the maximum
number of Shares to be purchased in the Offer, imposes conditions to the
Offer in addition to those set forth in Annex A hereto, changes the
expiration date of the Offer or otherwise amends, adds or waives any term
or condition of the Offer in any manner adverse to the holders of Shares,
and provided, further, that Acquisition Sub shall not waive the Minimum
-------- -------
Condition without the prior written consent of the Company.
Notwithstanding the foregoing, Acquisition Sub may, without the consent of
the Company, (i) extend the Offer, if at the scheduled expiration date of
the Offer any of the conditions to Acquisition Sub's obligation to purchase
Shares are not satisfied, until such time as such conditions are satisfied
or waived, (ii) extend the Offer for a period of not more than 5 business
days beyond the expiration date that would otherwise be permitted under
clause (i) of this sentence, if on the date of such extension (x) less than
90% of the Shares on a fully diluted basis have been validly tendered and
not properly withdrawn pursuant to the Offer and (y) Acquisition Sub has
permanently waived all of the conditions to the Offer set forth in Annex A
(other than the conditions set forth in clause (v)(b) of Annex A) and (iii)
extend the Offer for any period required by any regulation, rule,
interpretation or position of the Securities and Exchange Commission
("SEC") or the staff thereof applicable to the Offer. On the terms and
---
subject to the conditions of the Offer and this Agreement, Acquisition Sub
shall, and Parent shall cause Acquisition Sub to, pay for all Shares
validly tendered and not withdrawn pursuant to the Offer that Acquisition
Sub becomes obligated to purchase pursuant to the Offer as soon as
practicable after the expiration of the Offer and in any event no later
than the close of business on the business day following the expiration of
the Offer. Notwithstanding anything to the contrary contained in this
Agreement, Parent and Acquisition Sub shall not be required to commence the
3
<PAGE>
Offer in any jurisdiction other than the United States of America.
(b) As soon as practicable on the date of commencement of the Offer,
Parent and Acquisition Sub shall file with the SEC a Tender Offer Statement
on Schedule 14D-1 with respect to the Offer which will contain the Offer to
Purchase and the related Letter of Transmittal (collectively and together
with any supplements or amendments thereto, the "Offer Documents"). The
---------------
Offer Documents will comply in all material respects with the provisions of
applicable federal law. Parent, Acquisition Sub and the Company each
agrees promptly to correct any information provided by it for use in the
Offer Documents if and to the extent that it shall have become false or
misleading in any material respect, and Parent and Acquisition Sub each
further agrees to take all steps necessary to cause the Offer Documents as
so corrected to be filed with the SEC and to be disseminated to holders of
Shares, in each case as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given a reasonable
opportunity to review and comment on the Offer Documents prior to their
filing with the SEC and shall be provided with any comments Parent,
Acquisition Sub and their counsel may receive from the SEC or its staff
with respect to the Offer Documents promptly after receipt of such
comments.
SECTION 1.2. Company Action.
--------------
(a) The Company hereby approves of and consents to the Offer and
represents and warrants that the Board, at a meeting duly called and held
on February 28, 1999, unanimously (i) determined that this Agreement and
the transactions contemplated hereby, including the Offer and the Merger
are fair to and in the best interests of the stockholders of the Company,
(ii) approved this Agreement and the transactions contemplated hereby,
including the Offer, the Merger and the transactions contemplated by the
Stockholder Agreement and (iii) recommended in satisfaction of all
applicable requirements for Board action under Section 251 of the Delaware
Law in order for the Merger to be validly approved that the stockholders of
the Company accept the offer, tender their Shares thereunder and, to the
extent required by applicable law, approve and adopt this Agreement and the
Merger. The Company further represents and warrants that each of Morgan
Stanley & Co. Incorporated and Salomon Smith Barney Inc. (collectively, the
"Company's Financial
--------------------
4
<PAGE>
Advisors") has delivered to the Board its opinion dated as of February 28,
---------
1999 to the effect that, as of such date, the consideration to be received
by the holders of Shares (other than Parent and its affiliates) pursuant to
this Agreement and Plan of Merger is fair to such holders from a financial
point of view (the "Fairness Opinions"). As of the date hereof, the Company
-----------------
has been authorized by the Company's Financial Advisors to permit the
inclusion of the Fairness Opinions in their entirety or reference thereto
(subject to the Company's Financial Advisors prior approval of any such
reference) in the Offer to Purchase, the Schedule 14D-9, the Proxy
Statement or any other document required to be distributed to the Company's
stockholders referred to below. The Company hereby consents to the
inclusion in the Offer Documents of the recommendations of the Board
described in this Section 1.2(a).
(b) The Company shall file with the SEC and mail to holders of Shares
a Solicitation/Recommendation Statement on Schedule 14D-9 (together with
any amendments or supplements thereto, the "Schedule 14D-9") containing the
--------------
recommendations described in Section 1.2(a), and shall mail the Schedule
14D-9 to the stockholders of the Company promptly after the commencement of
the Offer. Such Schedule 14D-9 shall be filed on the same date as the
Schedule 14D-1 is filed and mailed together with the Offer Documents. The
Schedule 14D-9 will comply in all material respects with the provisions of
applicable federal securities laws. Subject to Section 6.9(d), the
Schedule 14D-9 shall at all times contain the determinations, approvals and
recommendations described in Section 1.2(a). Parent, Acquisition Sub and
the Company each agrees promptly to correct any information provided by it
for use in the Schedule 14D-9 if and to the extent that it shall have
become false or misleading in any material respect and the Company agrees
to take all steps necessary to cause the Schedule 14D-9 as so corrected to
be filed with the SEC and to be disseminated to holders of Shares, in each
case as and to the extent required by applicable federal securities laws.
Parent, Acquisition Sub and their counsel shall be given a reasonable
opportunity to review and comment on the Schedule 14D-9 prior to its filing
with the SEC and shall be provided with any comments the Company and its
counsel may receive from the SEC or its staff with respect to the Schedule
14D-9 promptly after receipt of such comments. Parent and Acquisition Sub
agree to provide such information necessary for the preparation of the
exhibits and
5
<PAGE>
schedules to the Schedule 14D-9 which the Company shall reasonably request.
(c) In connection with the Offer, the Company will promptly furnish
Acquisition Sub with mailing labels, security position listings and any
available listing or computer file containing the names and addresses of
the record holders of the Shares as of a recent date and shall furnish
Acquisition Sub with such additional information and assistance (including,
without limitation, updated lists of stockholders, mailing labels and lists
of securities positions) as Acquisition Sub or its agents may reasonably
request in communicating the Offer to the record and beneficial holders of
Shares. Subject to the requirements of applicable law, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Merger, Acquisition Sub and its
affiliates and associates shall hold in confidence the information
contained in such labels, listings and files, will use such information
only in connection with the Offer or the Merger, and, if this Agreement
shall be terminated, will promptly deliver to the Company all copies of
such information then in their possession.
SECTION 1.3. Boards of Directors and Committees; Section 14(f).
-------------------------------------------------
(a) Promptly upon the purchase by Acquisition Sub of a majority of the
outstanding Shares pursuant to the Offer or the purchase by Acquisition Sub
of the KKR Shares upon exercise of the Option pursuant to the stockholder
agreement, and from time to time thereafter, Acquisition Sub shall be
entitled to designate up to such number of directors, rounded up to the
next whole number, on the Board that equals the product of (i) the total
number of directors on the Board (giving effect to the election of any
additional directors pursuant to this Section) multiplied by (ii) the
percentage that the number of Shares owned by Acquisition Sub and its
affiliates (including any Shares purchased pursuant to the Offer and the
Stockholder Agreement) bears to the total number of outstanding Shares;
provided, however, that until the Effective Time there shall be at least
-------- -------
two Continuing Directors (as defined herein); and the Company shall, upon
request by Acquisition Sub, promptly either increase the size of the Board
or use its best efforts to secure the resignation of such number of
directors as is necessary to enable Acquisition Sub's designees
6
<PAGE>
to be elected to the Board and shall cause Acquisition Sub's designees to
be so elected. Promptly upon request by Acquisition Sub, the Company will
use its best efforts to cause persons designated by Acquisition Sub to
constitute the same percentage as is on the Board of (i) each committee of
the Board, (ii) each board of directors of each subsidiary of the Company
designated by Acquisition Sub and (iii) each committee of each such board.
Notwithstanding the foregoing, until the time Acquisition Sub purchases
Shares representing a majority of the Company's voting power on a fully-
diluted basis, the Company shall use its best efforts to ensure that all of
the members of the Board and such boards and committees as of the date
hereof who are not employees of the Company or affiliates of the Sellers
shall remain members of the Board and such boards and committees until the
Effective Time (as defined in Section 2.2).
(b) The Company's obligations to appoint designees to the Board shall
be subject to Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 14f-1 promulgated thereunder. The
------------
Company shall promptly take all actions required pursuant to Section 14(f)
and Rule l4f-1 in order to fulfill its obligations under this Section 1.3
and shall include in the Schedule 14D-9 such information with respect to
the Company and its officers and directors as is required under Section
14(f) and Rule 14f-1. Parent or Acquisition Sub will supply to the Company
in writing and be solely responsible for any information with respect to
either of them and their nominees, officers, directors and affiliates
required by Section 14(f) and Rule 14f-1.
(c) After the time that Acquisition Sub's designees constitute at
least a majority of the Board and until the Effective Time, any action by
the Company with respect to this Agreement and the transactions
contemplated hereby which materially and adversely affects the interests of
the stockholders of the Company other than Parent and its affiliates, shall
require the approval of a majority of the then serving directors, if any,
who are directors as of the date hereof (the "Continuing Directors"). If
--------------------
there is more than one Continuing Director and, prior to the Effective
Time, the number of Continuing Directors is reduced for any reason, the
remaining Continuing Director shall be entitled to designate a person to
fill such vacancies, who shall be deemed a Continuing Director for purposes
of this Agreement. In the event
7
<PAGE>
there is only one Continuing Director and he or she resigns or is removed
or if all Continuing Directors resign or are removed, he, she or they, as
applicable, shall be entitled to designate his, her or their successors, as
the case may be, each of whom shall be deemed a Continuing Director for
purposes of this Agreement. The Board shall not delegate any matter set
forth in this Section 1.3 to any committee of the Board.
ARTICLE II
The Merger
----------
SECTION 2.1. The Merger. At the Effective Time and upon the terms
----------
and subject to the conditions of this Agreement and Delaware Law, Acquisition
Sub shall be merged with and into the Company, whereupon the separate corporate
existence of Acquisition Sub shall cease and the Company shall continue as the
surviving corporation (the "Surviving Corporation"). At Acquisition Sub's
---------------------
option, subject to Section 9.2 hereof, the Merger may be structured so that any
direct or indirect wholly owned subsidiary of The General Electric Company,
p.l.c. ("GEC, p.l.c.") (or the successor to the non-defense business of GEC,
-----------
p.l.c.) other than Acquisition Sub is merged with and into the Company; provided
--------
that Parent shall continue to be responsible for its and Acquisition Sub's
obligations hereunder. In the event of such election, the parties agree to
execute an appropriate amendment to this Agreement in order to reflect such
election.
SECTION 2.2. Effective Time; Closing. As soon as practicable after
-----------------------
the satisfaction or waiver of the conditions set forth in Article VII, the
parties hereto will file a certificate of merger or, in the event Acquisition
Sub holds 90% or more of the outstanding Shares, a Certificate of Ownership and
Merger, in either case, in form and substance satisfactory to Parent and the
Company, with the Secretary of State of the State of Delaware and make all other
filings or recordings required by Delaware Law in connection with the Merger
(the "Certificate of Merger"). The Merger shall become effective at such time as
---------------------
the Certificate of Merger is duly filed with the Secretary of State of the State
of Delaware (the "Effective Time"). Prior to such filing, a closing (the
--------------
"Closing") shall be held at the place designated by Parent in New York, New York
- --------
for the purpose of confirming the satisfaction or waiver of the conditions set
forth in Article VII. The date on which the Closing occurs is referred to
herein as the "Closing Date".
------------
8
<PAGE>
SECTION 2.3. Effects of the Merger; Subsequent Actions.
-----------------------------------------
(a) The Merger shall have the effects set forth in Delaware Law.
Without limiting the generality of the foregoing, and subject thereto and
any other applicable laws, at the Effective Time, all the properties,
rights, privileges, powers and franchises of the Company and Acquisition
Sub shall vest in the Surviving Corporation, and all debts liabilities,
restrictions, disabilities and duties of the Company and Acquisition Sub
shall become the debts, liabilities, restrictions, disabilities and duties
of the Surviving Corporation.
(b) If, at any time after the Effective Time, the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of the Company or Acquisition Sub acquired
or to be acquired by the Surviving Corporation as a result of or in
connection with the Merger, or otherwise to carry out this Agreement, the
officers and directors of the Surviving Corporation shall be authorized to
execute and deliver, in the name and on behalf of the Company or
Acquisition Sub, all such deeds, bills of sale, assignments, assumption
agreements and assurances and to take and do, in the name and on behalf of
each of such corporations or otherwise, all such other actions and things
as may be necessary or desirable to vest, perfect or confirm any and all
right, title and interest in, to and under such rights, properties or
assets of the Surviving Corporation or otherwise to carry out this
Agreement.
SECTION 2.4. Certificate of Incorporation and By-Laws.
----------------------------------------
(a) The Certificate of Incorporation of Acquisition Sub in effect
immediately prior to the Effective Time shall be the Certificate of
Incorporation of the Surviving Corporation until amended in accordance with
applicable law; provided that the name of the Surviving Corporation as set
--------
forth in its Certificate of Incorporation shall be changed at the Effective
Time to reflect RELTEC CORPORATION as the name of the Surviving
Corporation.
(b) The By-Laws of Acquisition Sub in effect at the Effective Time
shall be the By-Laws of the
9
<PAGE>
Surviving Corporation until amended in accordance with applicable law.
SECTION 2.5. Directors. The directors of Acquisition Sub at the
---------
Effective Time shall be the initial directors of the Surviving Corporation, each
to hold office in accordance with the Certificate of Incorporation and By-laws
of the Surviving Corporation and until his or her successor is duly elected and
qualified.
SECTION 2.6. Officers. The officers of Acquisition Sub at the
--------
Effective Time, and/or any individuals designated by Parent, shall be the
initial officers of the Surviving Corporation, each to hold office in accordance
with the Certificate of Incorporation and By-Laws of the Surviving Corporation
and until his or her successor is duly appointed and qualified.
SECTION 2.7. Conversion of Shares. At the Effective Time, by virtue
--------------------
of the Merger and without any action on the part of Parent, Acquisition Sub, the
Company or the holder of any of the following securities:
(a) Subject to Section 2.7(b), each Share issued and outstanding
immediately prior to the Effective Time (other than Shares referred to in
Section 2.7(b) hereof and Dissenting Shares (as hereinafter defined)),
shall by virtue of the Merger and without any action on the part of the
holder thereof be converted into the right to receive an amount equal to
the Per Share Amount in cash, without interest (the "Merger
------
Consideration").
-------------
(b) Each Share that is owned by the Company or by any wholly owned
subsidiary of the Company and each Share that is owned by Parent,
Acquisition Sub or any other wholly owned subsidiary of Parent shall
continue to be outstanding and shall not be cancelled or retired and no
consideration shall be delivered in exchange therefor.
(c) Each share of Common Stock, par value $0.01 per share, of
Acquisition Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and become one validly issued, fully paid and
nonassessable share of Common Stock, par value $0.01 per share, of the
Surviving Corporation.
SECTION 2.8. Employee Stock Options. (a) Each unvested, outstanding
-----------------------
option to purchase Shares (including any time options or performance options)
("Employee Options") issued pursuant to the Amended and Restated 1995 Stock
- ------------------
Purchase and Option Plan for Employees of Reltec
10
<PAGE>
Holdings, Inc. (the "1995 Plan") and Subsidiaries and The 1998 Equity
---------
Participation Plan of Reltec Corporation (collectively, the "Company Stock
-------------
Plans") may be accelerated in connection with any change of control (as defined
- -----
in the applicable Company Stock Plans) that results from the Offer or the
Merger, except for the following:
(i) Employee Options issued under the 1995 Plan to former employees
of Rainford Group, plc that vest based upon performance will not be
accelerated but shall be converted as of the Effective Time into options
that vest in equal installments over the performance measurement period
remaining after the Effective Time;
(ii) Employee Options issued to former employees of Positron Fiber
Systems Corporation that by their current terms terminate upon a change of
control will terminate;
(iii) Employee Options issued since the Company's initial public
offering in March 1998 will not be accelerated (other than so-called "Stock
in the Future" options which will accelerate).
(b) At the Effective Time, each outstanding vested Employee Option
(including any such option which has vested as a result of acceleration as set
forth in Section 2.8(a)) shall, subject to Section 2.8(d), be cancelled by the
Company, and each holder of any such cancelled vested Employee Option shall be
entitled to receive from the Company or, at Parent's option, any subsidiary of
the Company (in each case, with funds provided, directly or indirectly, by GEC,
p.l.c. (or any successor to the non-defense business)) in consideration for
cancellation an amount in cash (less applicable withholding Taxes (as defined in
Section 4.10 hereof)) equal to the product of (i) the number of Shares subject
to such vested Employee Option multiplied by (ii) the excess, if any, of the
Merger Consideration over the exercise price per Share previously subject to
such vested Employee Option.
(c) At the Effective Time, each outstanding unvested Employee Option
(other than options that by their terms are cancelled or terminated) shall not
be cancelled or exercised but shall be amended and converted into phantom stock
units equivalent to a number of ordinary shares of GEC, p.l.c. ("GEC Shares")
----------
(rounded down to the nearest whole share) determined by multiplying the number
of Shares subject to such unvested Employee Option by the Conversion Ratio (as
defined below), at a price per GEC Share equivalent (rounded up to the nearest
whole penny) equal to (A) the exercise price for the Shares previously
purchasable
11
<PAGE>
pursuant to such unvested Employee Option converted into pounds sterling at the
Noon Buying Rate (as defined below) divided by (B) the Conversion Ratio (each,
as so adjusted, a "Substitute Phantom Unit"). The value of each Substitute
-----------------------
Phantom Unit will be payable upon exercise (less applicable withholding Taxes),
at Parent's election, in cash or GEC Shares (provided that such GEC Shares are
--------
publicly traded on the London Stock Exchange or a U.S. stock exchange) valued at
the closing sales price for a GEC Share on the London Stock Exchange (the "LSE")
---
on the date of exercise and shall have other terms and conditions comparable to
those of the unvested Employee Option replaced by such Substitute Phantom Unit.
The "Conversion Ratio" shall be equal to the Merger Consideration converted into
----------------
pounds sterling at the noon buying rate in New York City for cable transfers in
pounds sterling as certified for customs purposes by the Federal Reserve Bank of
New York on the date of the Effective Time (the "Noon Buying Rate") divided by
-----------------
an amount equal to the average of the closing price for a GEC Share on the LSE
for the twenty trading days preceding the Effective Time and weighted for
trading volumes of GEC Shares on each such day. In the event another company
becomes the successor ultimate parent of Parent, the shares of such successor
will be substituted for GEC Shares on an equitable basis.
(d) Subject to the need to comply with applicable legal requirements,
Parent shall provide to each holder of a vested Employee Option that is to be
cancelled at the Effective Time in lieu of the positive cash payment pursuant to
Section 2.8(b), an alternative of converting such vested Employee Option into
Substitute Phantom Units on the same basis described in Section 2.8(c).
SECTION 2.9. Stockholders' Meeting. (a) If the adoption of this
---------------------
Agreement by the stockholders of the Company is required by Delaware Law, the
Company, acting through the Board, shall as soon as practicable after the
purchase of Shares by Acquisition Sub pursuant to the Offer or the Stockholder
Agreement:
(i) duly call, give notice of, convene and hold a meeting of its
stockholders for the purpose of considering and taking action upon this
Agreement and the Merger (the "Stockholders Meeting"). Without limiting
--------------------
the generality of the foregoing, the Company agrees that its obligations
pursuant to this Section 2.9(a)(i) shall not be affected by the
commencement, public proposal, public disclosure or communication to the
Company of any Acquisition Proposal (as defined herein).
12
<PAGE>
(ii) include in the Proxy Statement (as defined in Section 4.7) the
recommendation of the Board sufficient to satisfy all applicable
requirements for Board action under Section 251 of the Delaware Law in
order for the Merger to be validly approved.
(iii) use its reasonable best efforts to obtain the necessary
approvals by its stockholders of this Agreement and the transactions
contemplated hereby.
(b) At the Stockholders' Meeting, each of Parent and Acquisition Sub
will vote (and will cause each of their respective affiliates to vote) all
Shares owned by it (or their respective affiliates) in favor of adoption of this
Agreement and the transactions contemplated hereby.
(c) Notwithstanding the foregoing, (i) if GEC, p.l.c., Acquisition Sub
or any other Subsidiary of Parent shall own, in the aggregate, at least 90% of
the outstanding Shares, the parties shall take all necessary and appropriate
action to cause the Merger to become effective as soon as practicable after the
expiration of the Offer without the Stockholders Meeting in accordance with
Section 253 of the Delaware Law and (ii) the parties shall, at the request of
Parent, take all necessary and appropriate action to effect the Merger through a
written consent in lieu of the Stockholders Meeting to the extent permitted by,
and in accordance with, applicable law.
ARTICLE III
Dissenting Shares; Exchange of Shares
-------------------------------------
SECTION 3.1. Dissenting Shares. Notwithstanding anything in this
-----------------
Agreement to the contrary, Shares outstanding immediately prior to the Effective
Time and held by a holder who has not voted in favor of the Merger or consented
thereto in writing and who has demanded appraisal for such Shares in accordance
with Section 262 of Delaware Law ("Dissenting Shares") shall not be converted
-----------------
into a right to receive the Merger Consideration unless such holder fails to
perfect or withdraws or otherwise loses his right to appraisal. If, after the
Effective Time, such holder fails to perfect or withdraws or loses his right to
appraisal, such Shares shall be treated as if they had been converted as of the
Effective Time into a right to receive the Merger Consideration without interest
thereon. The Company shall give Acquisition Sub prompt notice of any demands
received by the Company for appraisal of Shares, and, prior to the Effective
Time, Acquisition Sub shall have the right to participate in all negotiations
and proceedings
13
<PAGE>
with respect to such demands. Prior to the Effective Time, the Company shall
not, except with the prior written consent of Acquisition Sub, make any payment
with respect to, or settle or offer to settle, any such demands.
SECTION 3.2. Exchange of Certificates.
------------------------
(a) Prior to the Effective Time, Parent shall designate a bank or
trust company reasonably acceptable to the Company to act as paying agent
(the "Paying Agent") in effecting the payment of the Merger Consideration
------------
upon surrender of certificates (the "Certificates") that, prior to the
------------
Effective Time, represented Shares. Upon the surrender of each such
Certificate formerly representing Shares, together with a properly
completed letter of transmittal, the Paying Agent shall pay the holder of
such Certificate the Merger Consideration multiplied by the number of
Shares formerly represented by such Certificate, in exchange therefor, and
such Certificate shall forthwith be cancelled. Until so surrendered and
exchanged, each such Certificate (other than Certificates representing
Dissenting Shares or Shares held by Parent, Acquisition Sub or the Company,
or any direct or indirect subsidiary thereof) shall represent solely the
right to receive the Merger Consideration. No interest shall be paid or
accrue to the holders of Shares in respect of the Merger Consideration. If
the Merger Consideration (or any portion thereof) is to be delivered to any
person other than the person in whose name the Certificate formerly
representing Shares surrendered in exchange therefor is registered, it
shall be a condition to such exchange that the Certificate so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and
that the person requesting such exchange shall pay to the Paying Agent any
transfer or other Taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the
Certificate surrendered, or shall establish to the satisfaction of the
Paying Agent that such tax has been paid or is not applicable.
(b) Parent or Acquisition Sub shall deposit, or cause to be deposited
on a timely basis, as and when the Paying Agent requires after the
Effective Time, in trust with the Paying Agent the Merger Consideration to
which holders of Shares shall be entitled at the Effective Time pursuant to
Section 2.7(a) hereof, provided that no such deposit shall relieve Parent
--------
of its obligation to pay the Merger Consideration pursuant to Section
2.7(a). Subject to Section 3.2(c) and
14
<PAGE>
3.2(e), Parent shall cause the Paying Agent to hold the amounts deposited
with it for the benefit of the holders of Shares.
(c) The Merger Consideration shall be invested by the Paying Agent, as
directed by Parent, on a timely basis. Any interest and other income
resulting from such investments shall be paid to Parent.
(d) Promptly after the Effective Time, the Paying Agent shall mail to
each record holder of Certificates that immediately prior to the Effective
Time represented Shares a form of letter of transmittal and instructions
reasonably acceptable to the Company for use in surrendering such
Certificates and receiving the Merger Consideration in exchange therefor.
(e) Promptly following the date that is six months after the Effective
Time, the Paying Agent shall deliver to Parent all cash and documents in
its possession relating to the transactions described in this Agreement,
and the Paying Agent's duties shall terminate. Thereafter, each holder of
a Certificate formerly representing a Share may surrender such Certificate
to the Surviving Corporation and (subject to applicable abandoned property,
escheat and similar laws) receive in exchange therefor the Merger
Consideration, without any interest thereon.
(f) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any Shares. If, after the
Effective Time, Certificates formerly representing Shares are presented to
the Surviving Corporation or the Paying Agent, they shall be cancelled and
exchanged for the Merger Consideration, as provided in this Article III,
subject to applicable law in the case of Dissenting Shares.
(g) Parent or any of its affiliates shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this
Agreement to any former holder of Shares such amounts as Parent (or any
affiliate thereof) is required to deduct and withhold with respect to the
making of such payment under the Internal Revenue Code of 1986 (the
"Code"), or any provision of state, local or foreign tax law. To the
----
extent that amounts are so withheld by Parent (or any affiliate thereof)
and paid by Parent (or any affiliate thereof) to the applicable taxing
authority, such withheld amounts shall be treated for all purposes of this
Agreement as having been paid to the former holder
15
<PAGE>
of Shares in respect of which such deduction and withholding was made by
Parent (or any affiliate thereof).
ARTICLE IV
Representations and Warranties of the Company
---------------------------------------------
The Company represents and warrants to Parent and Acquisition Sub as
follows:
SECTION 4.1. Organization and Qualification; Subsidiaries.
--------------------------------------------
(a) Each of the Company and its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted except where the failure to be so
organized, existing and in good standing or to have such power and
authority would not, individually or in the aggregate, have a material
adverse effect on the business, properties, assets, condition (financial or
otherwise) or results of operations of the Company and its subsidiaries,
taken as a whole (a "Material Adverse Effect") or a material adverse effect
-----------------------
on the ability of the Company to perform its obligations hereunder.
Notwithstanding anything to the contrary, the term "Material Adverse
Effect" shall not include (i) any change, circumstance, event or effect
that relates to or results primarily from the announcement or other
disclosure or consummation of the transactions contemplated by this
Agreement, or (ii) changes in general economic conditions, financial
markets (including fluctuations in the price of shares of Company Common
Stock or shares of capital stock of GEC, p.l.c.) or conditions in the
telecommunications or technology sectors generally.
(b) Each of the Company and its subsidiaries is duly qualified or
licensed and in good standing to do business in each jurisdiction
(including any foreign country) in which the property owned, leased or
operated by it or the nature of the business conducted by it makes such
qualification or licensing necessary, except where the failure to be so
duly qualified or licensed and in good standing would not, individually or
in the aggregate, have a Material Adverse Effect.
16
<PAGE>
(c) The Company has heretofore furnished or made available to Parent
complete and correct copies of the Company's Restated Certificate of
Incorporation and By-Laws and the equivalent organizational documents of
each of its subsidiaries listed in Schedule 4.1(c) (the "Material
--------
Subsidiaries"), each as amended to the date hereof, as requested by Parent,
------------
except for certain organizational documents of non-U.S. subsidiaries that
will be furnished or made available in English prior to the Effective Time.
Such Restated Certificate of Incorporation, By-Laws and equivalent
organizational documents are in full force and effect and no other
organizational documents are applicable to or binding upon the Company or
its Material Subsidiaries. The Company is not in violation of any of the
provisions of its Restated Certificate of Incorporation or By-Laws and no
Material Subsidiary of the Company is in violation of any of the provisions
of such subsidiary's equivalent organizational documents.
(d) The Company has heretofore furnished or made available to Parent a
complete and correct list of the subsidiaries of the Company, which list
sets forth the percentage of total capital stock of or other equity
interests in such subsidiaries owned by the Company, directly or
indirectly. No subsidiary of the Company that is not a Material Subsidiary
is, individually or when taken together with all other subsidiaries of the
Company that are not Material Subsidiaries, material to the business of the
Company and its subsidiaries taken as a whole. Except as set forth in
Schedule 4.1(d), no entity in which the Company owns, directly or
indirectly, less than a 50% equity interest is, individually or when taken
together with all other such entities, material to the business of the
Company and its subsidiaries, taken as a whole. No subsidiary of the
Company that is not a Material Subsidiary has any material liabilities.
SECTION 4.2. Capitalization of the Company and its Subsidiaries. The
--------------------------------------------------
authorized capital stock of the Company consists of (i) 150,000,000 Shares of
which, as of February 19, 1999, 56,419,890 Shares were issued and outstanding
and (ii) 20,000,000 shares of Preferred Stock, par value of $0.01 per share, of
which, as of February 19, 1999, no shares were issued and outstanding. All
outstanding shares of capital stock of the Company have been validly issued, and
are fully paid, nonassessable and free of preemptive rights. As of February 19,
1999, Employee Options to purchase an aggregate of 6,569,342 Shares were
outstanding and the weighted average exercise price of such Employee Options was
$14.21 per Share. Except
17
<PAGE>
as set forth above or in Schedule 4.2, and except as a result of the exercise of
Employee Options outstanding as of February 26, 1999, there are outstanding (i)
no shares of capital stock or other voting securities of the Company, (ii) no
securities of the Company convertible into or exchangeable for shares of capital
stock or voting securities of the Company, (iii) no options, subscriptions,
warrants, convertible securities, calls or other rights to acquire from the
Company, and no obligation of the Company to issue, deliver or sell any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of the Company and (iv) no equity
equivalents, "phantom" stock rights, stock appreciation rights, performance
shares, interests in the ownership or earnings of the Company or other similar
rights issued by the Company (collectively, "Company Securities"). Except as set
-------------------
forth in Schedule 4.2 or as contemplated by this Agreement or the Stockholders
Agreement, there are no outstanding obligations of the Company or any of its
subsidiaries to repurchase, redeem or otherwise acquire any Company Securities.
Except as set forth in Schedule 4.2, each of the outstanding shares of capital
stock of each of the Company's subsidiaries is duly authorized, validly issued,
fully paid and nonassessable and is directly or indirectly owned by the Company,
free and clear of all security interests, liens, claims, pledges, charges,
voting agreements or other encumbrances of any nature whatsoever (collectively,
"Liens"). Except as set forth in Schedule 4.2, there are no existing options,
- -----
calls or commitments of any character relating to the issued or unissued capital
stock or other securities of any subsidiary of the Company. Except as set forth
in Schedule 4.2, and the Stockholders Agreement, there are no voting trusts,
proxies or other agreements, commitments or understandings of any character to
which the Company or any of its subsidiaries is a party or by which the Company
or any of its subsidiaries is bound with respect to the voting of any shares of
capital stock of the Company or any of its subsidiaries or with respect to the
registration of the offering, sale or delivery of any shares of capital stock of
the Company or any of its subsidiaries under the Securities Act. There are not
any bonds, debentures, notes or other indebtedness of the Company or its
subsidiaries having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which stockholders of the
Company may vote ("Voting Company Debt").
-------------------
SECTION 4.3. Authority Relative to this Agreement. The Company has
------------------------------------
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
18
<PAGE>
transactions contemplated hereby, subject in the case of the Merger, to the
adoption of this Agreement and approval of the Merger by the stockholders of the
Company to the extent so required by the Delaware Law. The Board, at a meeting
duly called and held on February 28, 1999, (i) determined that this Agreement
and the transactions contemplated hereby, including the Offer and the Merger,
are fair to and in the best interests of the stockholders of the Company, (ii)
approved this Agreement and the transactions contemplated hereby, including the
Offer, the Merger and the transactions contemplated by the Stockholder Agreement
and (iii) recommended in satisfaction of all applicable requirements for Board
action under Section 251 of the Delaware Law in order for the Merger to be
validly approved that the stockholders of the Company accept the Offer, tender
their Shares thereunder and, to the extent required by applicable law, approve
and adopt this Agreement and the Merger. Such approvals constitute all Board
action required to be taken in connection with this Agreement, the Merger and
the other transactions contemplated hereby by Section 251 of the Delaware Law in
order for the Merger to be validly approved. The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by the Board and no
other corporate proceedings on the part of the Company are necessary to
authorize this Agreement or to consummate the transactions so contemplated
(other than and only to the extent required by Delaware Law, with respect to the
Merger, the approval and adoption of this Agreement by the holders of a majority
of the outstanding Shares and the filing of the Certificate of Merger). The
Board has taken all action necessary with respect to the transactions
contemplated hereby and by the Stockholder Agreement so as to render
inapplicable to such transactions, including, without limitation, the Merger and
the purchase of Shares pursuant to the Stockholder Agreement, the restrictions
on business combinations contained in Section 203 of the Delaware Law. This
Agreement has been duly and validly executed and delivered by the Company and,
assuming it constitutes a valid and binding agreement of the other parties
hereto, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium and other similar laws relating to or affecting creditors generally,
or by general equity principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
19
<PAGE>
SECTION 4.4. Non-Contravention; Required Filings and Consents.
------------------------------------------------
(a) Except as set forth in Schedule 4.4, the execution, delivery and
performance by the Company of this Agreement and the consummation of the
transactions contemplated hereby (including the Merger) do not and will not
(i) contravene or conflict with the Restated Certificate of Incorporation
or By-Laws of the Company or the equivalent organizational documents of any
of its Material Subsidiaries; (ii) assuming that all consents,
authorizations and approvals contemplated by subsection (b) below have been
obtained and all filings described therein have been properly made,
contravene or conflict with or constitute a violation of any provision of
any law, regulation, judgment, injunction, order or decree binding upon or
applicable to the Company, any of its subsidiaries or any of their
respective properties; (iii) conflict with, or result in the breach or
termination of any provision of or constitute a default (with or without
the giving of notice or the lapse of time or both) under, or give rise to
any right of termination, cancellation, or loss of any benefit to which the
Company or any of its subsidiaries is entitled under any provision of any
agreement, contract, license or other instrument binding upon the Company,
any of its subsidiaries or any of their respective properties, or allow the
acceleration of the performance of, any obligation of the Company or any of
its subsidiaries under any indenture, mortgage, deed of trust, lease,
license, contract, instrument or other agreement to which the Company or
any of its subsidiaries is a party or by which the Company or any of its
subsidiaries or any of their respective assets or properties is subject or
bound; or (iv) result in the creation or imposition of any Lien on any
asset of the Company or any of its subsidiaries, except in the case of
clauses (ii), (iii) and (iv) for any such contraventions, conflicts,
violations, breaches, terminations, defaults, cancellations, losses,
accelerations and Liens which would not individually or in the aggregate
have a Material Adverse Effect or be reasonably expected to prevent or
materially delay the consummation by the Company of the transactions
contemplated by this Agreement or otherwise have a material adverse effect
on the ability of the Company to perform its other obligations hereunder.
(b) The execution, delivery and performance by the Company of this
Agreement and the consummation of the transactions contemplated hereby
(including the
20
<PAGE>
Merger) by the Company require no filings, notices, declarations, consents
or other actions to be made by the Company with, nor are any approvals or
other confirmations or consents required to be obtained by the Company
from, any governmental or regulatory (including Stock exchange) authority,
agency, court, commission, body or other governmental entity (including the
U.K. Panel on Takeovers and Mergers) ("Governmental Entity") (except those
---------------------
the failure of which to make, give or obtain, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect or prevent or materially delay the Company's ability to consummate
the transactions contemplated hereby or otherwise have a material adverse
effect on the ability of the Company to perform its other obligations
hereunder), other than filings, notices, approvals, confirmations,
consents, declarations or decisions (i) relating to the filing of the
Certificate of Merger in accordance with Delaware Law; (ii) required by the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
---
Act"); (iii) required by the Exchange Act and state securities, takeover
---
and Blue Sky laws; (iv) required by the Canadian Competition Act; (v) from
the Italian Autorita Garante della Concorrenza e del Mercato that it does
not intend to initiate a second stage investigation of the transactions
contemplated hereby (including the Merger) or any matters arising therefrom
under Article 16 of Law no.287 of October 10, 1990; (vi) from the German
Federal Cartel Office, during the one month time limit referred to in
Section 40 paragraph 1 of the Act against Restraints on Competition, that
the conditions for a prohibition in Section 36 paragraph 1 of the Act
against Restraints on Competition are not fulfilled, or, if no such
confirmation is received, this one month time limit having expired without
the parties having been notified by the Federal Cartel Office that it has
entered into the examination of the proposed concentration; and (vii) from
the U.K. Office of Fair Trading that it is not the intention of the U.K.
Secretary of State for Trade and Industry ("U.K. Secretary of State") to
-----------------------
refer the transactions contemplated hereby or any matters arising therefrom
to the U.K. Monopoly and Mergers Commission ("MMC") (collectively clauses
---
(i) through (vii) are the "Company Governmental Approvals").
------------------------------
SECTION 4.5. Reports.
-------
(a) The Company has filed all required forms, reports and documents
with the Securities and Exchange Commission (the "SEC") since March 12,
---
1998. The
21
<PAGE>
Company has made available to Parent, in the form filed with the
SEC, the Company's (i) Registration Statement on Form S-1 and the
Prospectus dated March 12, 1998, included therein relating to the initial
public offering of the Shares, (ii) Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1998, June 30, 1998 and September 30, 1998 and
(iii) all other reports or registration statements filed by the Company
with the SEC since March 12, 1998 (collectively, the "SEC Reports"). The
-----------
Company also has made available to Parent, a draft dated February 24, 1999
of the Company's financial statements for the year ended December 31, 1998
and the related draft of Management's Discussion and Analysis of Results of
Operations (the "1998 Draft Report"). The SEC Reports were prepared in
-----------------
accordance with all applicable requirements of the Securities Act of 1933,
as amended (the "Securities Act"), and the Exchange Act and the 1998 Draft
--------------
Report has been prepared on a consistent basis with the SEC Reports. As of
their respective dates, none of the SEC Reports including, without
limitation, any financial statements or schedules included therein,
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. As of its date, the financial statements contained
in the 1998 Draft Report fairly present, in conformity with generally
accepted accounting principles applied on a consistent basis, the
consolidated financial position of the Company and its consolidated
subsidiaries and their consolidated results of operations (subject to the
lack of complete footnote disclosure). The audited consolidated financial
statements and unaudited condensed consolidated interim financial
statements of the Company included in the SEC Reports fairly present, in
conformity with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto), the
consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject to normal
year-end adjustments and the lack of footnote disclosure (to the extent
permitted by SEC rules in the case of the SEC Reports) in the case of any
unaudited interim financial statements).
(b) Except as disclosed in the SEC Reports filed prior to the date of
this Agreement or as set forth in
22
<PAGE>
Schedule 4.5(b), the Company and its subsidiaries have no liabilities of
any nature (whether accrued, absolute, contingent or otherwise) which would
be required to be reflected, reserved for or disclosed under generally
accepted accounting principles in consolidated financial statements of the
Company (including the notes thereto), except for liabilities incurred in
the ordinary course of business since December 31, 1997 or liabilities
which would not, individually or in the aggregate, have a Material Adverse
Effect or a material adverse effect on the ability of the Company to
perform its obligations hereunder.
SECTION 4.6. Absence of Certain Changes; Derivatives.
---------------------------------------
(a) Since December 31, 1997 to the date hereof, except as disclosed in
the SEC Reports filed prior to the date of this Agreement or as set forth
in Schedule 4.6(a), neither the Company nor any of its Material
Subsidiaries has (i) declared, set aside or paid any dividend or other
distribution (whether in cash, stock, or property or any combination
thereof) in respect of its capital stock (other than to the Company or to
any wholly owned subsidiary of the Company) (ii) entered into, adopted or
amended or materially increased the benefits paid or payable under any
severance, termination or deferred compensation agreement or arrangement
with any director, officer or employee, (iii) changed any of the accounting
principles or practices used by the Company, except as required as a result
of a change in law, SEC guidelines or generally accepted accounting
principles, (iv) settled or compromised, or agreed to settle or compromise,
any litigation, or agreed to assign any claims, which involve a payment or
waiver by the Company or any subsidiary of the Company of amounts in excess
of $3 million in the aggregate, or (v) entered into any transaction, or
conducted its business or operations, except in the ordinary course of
business or where such transactions or conduct would not, individually or
in the aggregate, have a Material Adverse Effect or a material adverse
effect on the ability of the Company to perform its obligations hereunder.
Since December 31, 1997, except as set forth in Schedule 4.6(a) or as
disclosed in the SEC Reports filed prior to the date of this Agreement,
there has not been any event, change, effect or development that,
individually or in the aggregate, has had or would reasonably be expected
to have a Material Adverse Effect or a material adverse effect on the
23
<PAGE>
ability of the Company to perform its obligations hereunder.
(b) Schedule 4.6(b) sets forth a complete and correct list of all
Derivative Financial Instruments (including the face, contract or notional
amount of and any open position relating to such Derivative Financial
Instruments and a brief summary of the nature and terms thereof) as of
December 31, 1998 which the Company or any of its subsidiaries is a party
or by which the Company or any of its subsidiaries or any of their
respective assets or properties is subject or bound (including, without
limitation, funds of the Company or any of its subsidiaries invested by any
other person). For purposes of this Agreement "Derivative Financial
--------------------
Instrument" means any option, futures, forward, swap option or swap
----------
contract, or any other financial instrument with similar characteristics
and/or generally characterized as a "derivative product".
SECTION 4.7. Schedule 14D-9; Offer Documents, Proxy Statement.
------------------------------------------------
(a) Neither the Schedule 14D-9, nor any of the information provided or
to be provided by the Company or by its auditors, attorneys, financial
advisors or other consultants or advisers specifically for use in the Offer
Documents and any other documents to be filed with the SEC in connection
with the transactions contemplated hereby, including any amendment or
supplement to such documents, shall, on the respective dates the Schedule
14D-9, the Offer Documents and any other documents to be filed with the SEC
in connection with the transactions contemplated hereby or any supplements
or amendments thereto are filed with the SEC or on the date first
published, sent or given to the Company's stockholders, as the case may be,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make
the statements therein, in
24
<PAGE>
light of the circumstances under which they were made, not misleading. The
proxy or information statement or similar materials distributed, if any, to
the Company's stockholders in connection with the Merger, including any
amendments or supplements thereto (the "Proxy Statement"), shall not, at
the time filed with the SEC, at the time mailed to the Company's
stockholders, at the time of the Stockholders Meeting, if any, or at the
Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they are made, not misleading. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to any information
provided by Parent, Acquisition Sub or their auditors, attorneys, financial
advisors or other consultants or advisors specifically for use in the
Schedule 14D-9 or the Proxy Statement. The Schedule 14D-9 and the Proxy
Statement will comply as to form in all material respects with the
provisions of the Exchange Act and the rules and regulations thereunder.
SECTION 4.8. Finder's Fee. Neither any broker, finder, investment
------------
banker or other intermediary (other than the Company's Financial Advisors and
Kohlberg Kravis Roberts & Co., L.P., the fees of which collectively shall not
exceed the amount set forth in Schedule 4.8) is entitled to any brokerage,
finder's or other fee (including any exit or management fee) or commission in
connection with the transactions contemplated by this Agreement or by the
Stockholder Agreement based upon arrangements made by and on behalf of the
Company.
SECTION 4.9. Absence of Litigation. Except as disclosed in the SEC
---------------------
Reports filed prior to the date hereof, the 1998 Draft Report or in Schedule
4.9, there is no action, suit, claim, investigation or proceeding pending
against, or to the knowledge of the Company, threatened against, the Company or
any of its subsidiaries or any of their respective properties before any court
or arbitrator or any administrative, regulatory or governmental body, or any
agency or official which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect or a material adverse effect on the
ability of the Company to perform its obligations hereunder (other than
litigation related to, challenging or seeking to prevent, enjoin, alter or delay
the Offer, the Merger or the other transactions contemplated hereby or by the
Stockholder Agreement). Except as disclosed in the SEC Reports filed prior to
the date of this Agreement, the Draft 1998 Report or in Schedule 4.9, there is
no action, suit, claim, investigation or proceeding pending against, or to the
knowledge of the Company, threatened against, the Company or any of its
subsidiaries or any of their respective properties before any court or
arbitrator or any administrative, regulatory or governmental body, or any agency
or official which alleges criminal action or inaction which, if proved, would
have a Material Adverse Effect. Except as disclosed in the SEC Reports filed
prior to the date of this Agreement, the Draft Annual Report or in Schedule 4.9,
neither the Company nor any of its subsidiaries nor any of their respective
properties is
25
<PAGE>
subject to any order, writ, judgment, injunction, consent agreement, decree,
determination or award having, or which would reasonably be expected to have, a
Material Adverse Effect or which would prevent or materially delay the
consummation of the transactions contemplated hereby or otherwise have a
material adverse effect on the ability of the Company to perform its other
obligations hereunder.
SECTION 4.10. Taxes. Except as set forth in the SEC Reports filed
-----
prior to the date of this Agreement, the 1998 Draft Report or in Schedule 4.10,
(a) the Company and its subsidiaries have filed, been included in or sent, all
material returns, material declarations and reports and information returns and
statements required to be filed or sent by or relating to any of them relating
to any Taxes (as defined below) with respect to any material income, properties
or operations of the Company or any of its subsidiaries (collectively,
"Returns"); (b) as of the time of filing, the Returns correctly reflected in all
-------
material respects the facts regarding the income, business, assets, operations,
activities and status of the Company and its subsidiaries and any other material
information required to be shown therein; (c) the Company and its subsidiaries
have timely paid or made provision for all material Taxes due and payable; (d)
the Company and its subsidiaries have made or will make provision for all
material Taxes payable for any periods that end before the Effective Time for
which no Returns have yet been filed and for any periods that begin before the
Effective Time and end after the Effective Time to the extent such Taxes are
attributable to the portion of any such period ending at the Effective Time; (e)
the charges, accruals and reserves for taxes reflected on the books of the
Company and its subsidiaries are adequate under generally accepted accounting
principles to cover the Tax liabilities accruing or payable by the Company and
its subsidiaries in respect of periods prior to the date hereof; (f) neither the
Company nor any of its subsidiaries is delinquent in the payment of any material
Taxes or has requested any extension of time within which to file or send any
material Return (other than extensions granted to the Company for the filing of
its Returns as set forth in Schedule 4.10), which Return has not since been
filed or sent; (g) no material deficiency for any Taxes has been proposed,
26
<PAGE>
asserted or assessed in writing against the Company or any of its subsidiaries
(or any member of any affiliated or combined group of which the Company or any
of its subsidiaries is or has been a member for which either the Company or any
of its subsidiaries could be liable) other than those asserted deficiencies
being contested in good faith by appropriate proceedings and set forth in
Schedule 4.10 (which shall set forth the nature of the proceeding, the type of
return, the deficiencies proposed, asserted or assessed and the amount thereof,
and the taxable year in question); (h) neither the Company nor any of its
subsidiaries has granted any extension of the limitation period applicable to
any material Tax claims other than those Taxes being contested in good faith by
appropriate proceedings and set forth in Schedule 4.10; (i) neither the
Company nor any of its subsidiaries is subject to liability for Taxes of any
person (other than the Company or its subsidiaries), including, without
limitation, liability arising from the application of U.S. Treasury Regulation
Section 1.1502-6 or any analogous provision of state, local or foreign law; (j)
neither the Company nor any of its subsidiaries is or has been a party to any
material tax sharing agreement with any corporation which is not currently a
member of the affiliated group of which the Company is currently a member, other
than such tax indemnification agreements set forth in Schedule 4.10; (k) to the
best of the Company's knowledge and as of the date hereof, no person who holds
five percent (5%) or more of the stock of the Company is a "foreign person" as
defined in Section 1445 of the Code; and (l) all Taxes that the Company and each
of its subsidiaries are required by law to withhold or collect, including
without limitation, sales and use taxes, and amounts required to be withheld for
Taxes of employees and other withholding taxes, have been duly withheld or
collected and, to the extent required, have been paid over to the proper
governmental agencies or are held in separate bank accounts for such purpose,
except for Taxes the failure of which to withhold or collect would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect or a material adverse effect on the ability of the Company to
perform its obligations hereunder.
"Tax" or "Taxes" shall mean all Federal, state, local, foreign and
--- -----
other taxes, charges, fees, duties (including customs duties), levies or other
assessments, including without limitation, income, gross receipts, net proceeds,
alternative or add-on minimum, ad valorem, value added, turnover, real and
personal property (tangible and intangible), sales, use, franchise, excise,
value added, stamp, leasing, lease, user, transfer, fuel, excess profits,
occupational, interest equalization, windfall profits, severance, license,
payroll, environmental, capital stock, disability, employee's income
withholding, other withholding, unemployment and Social Security taxes, which
are imposed by any governmental authority (domestic or foreign), and such term
shall include any interest, penalties or additions to tax attributable thereto.
27
<PAGE>
SECTION 4.11. Employee Benefits.
-----------------
(a) Schedule 4.11 (a) contains a true and complete list of each
material employment contract, bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance or termination pay,
hospitalization or other medical, dental, life, disability or other
insurance, supplemental unemployment benefits, profit-sharing, pension,
savings or retirement plan, program, agreement or arrangement, and each
other employee benefit plan, program, agreement or arrangement, sponsored,
maintained or contributed to or required to be contributed to by the
Company or by any trade or business, whether or not incorporated (an "ERISA
-----
Affiliate"), that together with the Company would be deemed a "single
---------
employer" within the meaning of Section 4001 of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), for the benefit of any
-----
employee, terminated employee or non-employee director of the Company or
any ERISA Affiliate (the "Plans"). Schedule 4.11(a) identifies each of the
-----
Plans that is an "employee benefit plan," as that term is defined in
Section 3(3) of ERISA (the "ERISA Plans").
-----------
(b) With respect to each Plan, the Company has heretofore delivered or
made available to Parent true and complete copies of each of the following
documents (to the extent applicable):
(i) a copy thereof;
(ii) a copy of the most recent annual report and actuarial
report, if required under ERISA, and the most recent report prepared
with respect thereto in accordance with Statement of Financial
Accounting Standards No. 87, Employer's Accounting for Pensions;
(iii) a copy of the most recent actuarial report prepared with
respect thereto in accordance with Statement of Financial Accounting
Standards No. 106, Employer's Accounting for Non-Pension Post
Retirement Benefits.
(iv) a copy of the most recent actuarial report prepared with
respect thereto in accordance with the Statement of Financial
Accounting Standards NO. 106 Employers Accounting for Post-Retirement
Benefits;
28
<PAGE>
(v) a copy of the most recent Summary Plan Description;
(vi) if the Plan is funded through a trust or any third party
funding vehicle, a copy of the trust or other funding agreement and
the latest financial statements thereof; and
(vii) the most recent determination letter received from the
Internal Revenue Service with respect to each Plan intended to qualify
under section 401(a) of the Code.
(c) With respect to each ERISA Plan subject to Title IV of ERISA, no
material liability (other than liabilities for premiums due the Pension
Benefit Guaranty Corporation ("PBGC") (which premiums have been paid when
----
due)) under Title IV of ERISA has been incurred by the Company or any ERISA
Affiliate that has not been satisfied in full, and, to the knowledge of the
Company, no condition exists that presents a material risk to the Company
or any ERISA Affiliate of incurring a material liability under such Title.
To the extent this representation applies to Sections 4041, 4064, 4069 or
4204 of Title IV of ERISA, it is made not only with respect to each ERISA
Plan but also with respect to any employee benefit plan, program, agreement
or arrangement subject to Title IV of ERISA to which the Company or any
ERISA Affiliate made, or was required to make, contributions during the
five year period ending on the Effective Time.
(d) To the Company's knowledge, the PBGC has not instituted
proceedings to terminate any ERISA Plan and, to the knowledge of the
Company, no condition exists that presents a material risk that such
proceedings will be instituted.
(e) Neither the Company nor any ERISA Affiliate, nor, to the knowledge
of the Company, any ERISA Plan, nor any trust created thereunder, nor any
trustee or administrator thereof has engaged in a transaction in connection
with which the Company or any ERISA Affiliate, any ERISA Plan, any such
trust, or any trustee or administrator thereof, or any party dealing with
any ERISA Plan or any such trust could be subject to either a civil penalty
assessed pursuant to Section 409 or 502(i) of ERISA or a Tax imposed
pursuant to section 4975 or 4976 of the Code, except for such penalties and
Taxes which would not, individually or in the aggregate, have a Material
Adverse Effect or a material adverse effect on the
29
<PAGE>
ability of the Company to perform its obligations hereunder.
(f) To the Company's knowledge, no ERISA Plan or any trust established
thereunder has incurred any "accumulated funding deficiency" (as defined in
------------------------------
Section 302 of ERISA and Section 412 of the Code), whether or not waived,
as of the last day of the most recent fiscal year of each ERISA Plan ended
prior to the Effective Time and all contributions required to be made with
respect thereto (whether pursuant to the terms of any ERISA Plan or
otherwise) on or prior to the Effective Time have been timely made.
(g) No ERISA Plan is a "multiemployer pension plan", as defined in
--------------------------
Section 3(37) of ERISA, nor is any ERISA Plan a plan described in Section
4063(a) of ERISA.
(h) To the knowledge of the Company, each Plan has been operated and
administered in all material respects in accordance with its terms and
applicable law, including but not limited to ERISA and the Code.
(i) Except as set forth on Schedule 4.11(i), each ERISA Plan intended
to be "qualified" within the meaning of Section 401(a) of the Code has been
---------
drafted with the intention to be so qualified and has been or will be
submitted to the Internal Revenue Service along with a request for a
favorable determination letter on or before the date hereof, and it is
anticipated that each such plan will be modified so as to incorporate any
conforming amendments requested or required by the Internal Revenue Service
as a condition to the issuance of such favorable determination letter.
(j) To the Company's knowledge, except as reasonably estimated and as
set forth on Schedule 4.11(j), no amounts payable by the Company or its
subsidiaries could fail to be deductible for federal income tax purposes by
application of Section 280G of the Code.
(k) Except as set forth in Schedule 4.11(k), no Plan provides
benefits, including without limitation, death or medical benefits (whether
or not insured), with respect to current or former employees of the Company
or any ERISA Affiliate beyond their retirement, disability or other
termination of service (other than (i) coverage mandated by applicable law
or (ii) death benefits or retirement benefits under any "employee
30
<PAGE>
pension plan," as that term is defined in Section 3(2) of ERISA).
(l) Except as provided in Schedule 4.11(l), the consummation of the
transactions contemplated by this Agreement will not (i) entitle any
current or former employee or officer or non-employee director of the
Company or any ERISA Affiliate to severance pay, unemployment compensation
or any other payment, except as expressly provided in this Agreement or
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer or non-employee director.
(m) There are no pending or, to the knowledge of the Company,
threatened claims by or on behalf of any Plan, by any employee or
beneficiary covered under any such Plan, or otherwise involving any such
Plan (other than routine claims for benefits).
(n) The Company has reserved the right to amend or terminate any Plan
which is an employee benefit plan, as that term is defined in Section 3(3)
of ERISA.
(o) Except as set forth in Schedule 4.11(o), the Merger will not
constitute a "Change in Control" under the terms of any Plan.
-----------------
SECTION 4.12. Compliance; Permits. (a) Neither the Company nor any
-------------------
of its subsidiaries is in violation of, or has violated, any applicable
provisions of (i) any laws, rules, statutes, orders, ordinances or regulations
or (ii) any note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise, or other instrument or obligations to which the
Company or any of its subsidiaries is a party or by which the Company or any of
its subsidiaries or its or any of their respective properties are bound or
affected, which individually or in the aggregate, would have or be reasonably
expected to result in a Material Adverse Effect or a material adverse effect on
the ability of the Company to perform its obligations hereunder.
(b) The Company and its subsidiaries hold all permits, licenses,
easements, variances, exceptions, consents, certificates, orders and approvals
from Governmental Entities that are material to the operation of the business of
the Company and its subsidiaries, taken as a whole (collectively, the "Company
-------
Permits"), except where the failure to hold or maintain any of the foregoing
- -------
would not, in the aggregate, have a Material Adverse Effect. The Company and
its subsidiaries are in compliance with the
31
<PAGE>
terms of the Company Permits, except where the failure to so comply would not,
in the aggregate, have a Material Adverse Effect or a material adverse effect on
the ability of the Company to perform its obligations hereunder.
SECTION 4.13. Environmental Matters. (a) Except as disclosed in the
---------------------
SEC Reports filed prior to the date hereof, the 1998 Draft Report or in Schedule
4.13:
(i) the Company and its subsidiaries are in compliance with all
applicable Environmental Laws (as defined below) (which compliance
includes, but is not limited to, the possession by the Company and its
subsidiaries of all permits and other governmental authorizations required
under applicable Environmental Laws (collectively, "Environmental
-------------
Permits"), and compliance with the terms and conditions thereof), except
for any noncompliance that individually or in the aggregate could not
reasonably be expected to have a Material Adverse Effect or a material
adverse effect on the ability of the Company to perform its obligations
hereunder. Except as set forth in Schedule 4.13, neither the Company nor
any of its subsidiaries has received any written communication, whether
from a governmental authority that alleges that the Company is not in such
compliance, and there are no past or present actions, activities,
circumstances, conditions, events or incidents that may prevent or
interfere with such compliance in the future, except, in each case, for any
actions, activities, circumstances, conditions, events or incidents that,
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect or a material adverse effect on the ability of the
Company to perform its obligations hereunder;
(ii) there is no Environmental Claim (as defined below) pending or,
to the knowledge of the Company, threatened against the Company or any of
its subsidiaries, or to the knowledge of the Company, against any person or
entity whose liability for any Environmental Claim the Company or any of
its subsidiaries has retained or assumed either contractually or by
operation of law, which individually or in the aggregate would reasonably
be expected to have a Material Adverse Effect or a material adverse effect
on the ability of the Company to perform its obligations hereunder;
(iii) there are no past or present actions, activities,
circumstances, conditions, events or incidents (including, without
limitation, the release,
32
<PAGE>
emission, discharge, presence or disposal of any Hazardous Material) (as
defined below) which could form the basis of any Environmental Claim
against the Company or any of its subsidiaries, or, to the knowledge of the
Company, against any person or entity whose liability for any Environmental
Claim the Company or any of its subsidiaries has or may have retained or
assumed either contractually or by operation of law, which individually or
in the aggregate would reasonably be expected to have a Material Adverse
Effect or a material adverse effect on the ability of the Company to
perform its obligations hereunder;
(iv) neither the Company nor any of its subsidiaries has, and to the
knowledge of Company, no other person has Released (as defined below),
placed, stored, buried or dumped Hazardous Materials on, beneath or
adjacent to any property owned, operated or leased or formerly owned,
operated or leased by the Company or any of its subsidiaries and neither
the Company nor any of its subsidiaries has received notice that it is a
potentially responsible party for the Cleanup (as defined below) of any
property, whether or not owned or operated by the Company or any of its
subsidiaries, which individually or in the aggregate would reasonably be
expected to have a Material Adverse Effect or a material adverse effect on
the ability of the Company to perform its obligations hereunder;
(v) the Company and its subsidiaries have delivered or otherwise made
available for inspection to Parent true, complete and correct copies and
results of any material reports, studies, analyses, tests or monitoring
possessed or initiated by the Company or any of its subsidiaries within the
last three years pertaining to Hazardous Materials on, beneath or adjacent
to the property owned or leased by the Company or any of its subsidiaries
or regarding the Company's and its subsidiaries' compliance with applicable
Environmental Laws;
(vi) no transfers of permits or other governmental authorizations
under Environmental Laws, and no additional permits or other governmental
authorizations under Environmental Laws, will be required to permit the
Company and its subsidiaries or the Surviving Corporation and its
subsidiaries, as the case may be, to be in full compliance all applicable
Environmental Laws for the period immediately following the transactions
contemplated hereby, as conducted by the Company and its subsidiaries
immediately prior to the date hereof; and to the extent
33
<PAGE>
that such transfers or additional permits and other governmental
authorizations are required, the Company and its subsidiaries agree to use
best efforts to effect such transfers and obtain such permits and other
governmental authorizations at the time such transfers, permits and other
governmental authorizations are required by law, except for any of the
foregoing that would not, individually or in the aggregate, have a Material
Adverse Effect; and
(vii) neither the Company nor any of its subsidiaries will be
required by any Governmental Entity or Environmental Law to make any
expenditure, whether for emission control, waste materials or wastewater
treatment, or otherwise, to assure the compliance of the Company and its
subsidiaries with all applicable Environmental Laws and Environmental
Permits as of the Closing Date, except for any of the foregoing that would
not, individually or in the aggregate, have a Material Adverse Effect.
(b) The following terms as used in this Section shall have the
following meanings:
"Cleanup" means all actions required by governmental entities or
-------
Environmental Laws to: (1) clean-up, remove, treat or remediate Hazardous
Materials in the indoor or outdoor environment; (2) prevent the Release of
Hazardous Materials so that they do not migrate, endanger or threaten to
endanger public health or welfare or the indoor or outdoor environment; (3)
perform pre-remedial studies and investigations and post-remedial monitoring and
care; or (4) respond to any government requests for information or documents in
any way relating to cleanup, removal, treatment or remediation or potential
cleanup, removal, treatment or remediation or Hazardous Materials in the indoor
or outdoor environment.
"Environmental Claim" means any claim, action, cause of action,
-------------------
investigation or written notice by any person or entity alleging potential
liability (including, without limitation, potential liability for investigatory
costs, cleanup costs, monitoring costs, governmental response costs, natural
resources damages, property damages, personal injuries, or penalties) arising
out of, based on or resulting from (a) the presence, or Release into the indoor
or outdoor environment, of any Hazardous Materials at any location, whether or
not owned or operated by the Company or any of its subsidiaries or (b)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law.
34
<PAGE>
"Environmental Laws" means all federal, state, local and foreign laws
------------------
and regulations relating to pollution or protection of human health or the
environment, including without limitation, laws relating to Releases or
threatened Releases of Hazardous Materials into the indoor or outdoor
environment (including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
disposal, transport or handling of Hazardous Materials and all laws and
regulations with regard to record keeping, notification, disclosure and
reporting requirements respecting Hazardous Materials.
"Hazardous Materials" means all substances defined as Hazardous
-------------------
Substances, Oils, Pollutants or Contaminants in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. (S) 300.5, or defined as such
by, or regulated as such by, or regulated as such under any Environmental Law.
"Release" means any release, spill, emission, discharge, leaking,
-------
pumping, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the indoor or outdoor environment (including, without limitation,
ambient air, surface water, groundwater and surface or subsurface strata) or
into or out of any property, including the movement of Hazardous Materials
through or in the air, soil, surface water, groundwater or property.
SECTION 4.14. Intellectual Property. Schedule 4.14 of the Agreement
---------------------
contains a complete list of all Patents and Trademarks (each as defined herein)
(completed or in process), including all registered rights, which are owned by
the Company for use in or necessary for the conduct of the business of the
Company as such business is currently conducted and presently contemplated to be
conducted. The Company and each of its Subsidiaries has used its reasonable
efforts to protect the proprietary nature of each item of Intellectual Property
(as defined below) that it considers confidential, and to maintain in confidence
all trade secrets and confidential information that it presently owns or uses.
Except as set forth in Schedule 4.14 and except to the extent that the
inaccuracy of any of the following (or the circumstances giving rise to such
inaccuracy) would not individually or in the aggregate reasonably be expected to
have a Material Adverse Effect or a material adverse effect on the ability of
the Company to perform its obligations hereunder:
(a) The rights of the Company in and to each item of Intellectual
Property are owned or licensed by the
35
<PAGE>
Company, free and clear of any Liens or other restrictions (except, in the
case of licensed Intellectual Property, as set forth in the license
therefor). All of the Company's rights in and to such Intellectual Property
are freely assignable in its own name, including the right to create
derivative works, and the Company is under no obligation to pay any royalty
or other compensation to any third party or to obtain any approval or
consent for use of any of the Intellectual Property (except, in the case of
licensed Intellectual Property, as set forth in the license therefor). None
of the Intellectual Property is subject to any outstanding judgment, order,
decree, stipulation, injunction or charge; no charge, complaint, action,
suit, proceeding, hearing, investigation, claim, or demand is pending or,
to the knowledge of the Company, threatened, which challenges the legality,
validity, enforceability, the Company's use or ownership of any of the
Intellectual Property.
(b) No material breach or default (or event which with notice or lapse
of time or both would result in an event of default) by the Company exists
or has occurred under any License-In (as defined below) or other agreement
pursuant to which the Company uses any Intellectual Property, and the
consummation of the transactions contemplated by this Agreement will not
violate or conflict with or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) or result in a
forfeiture under, or constitute a basis for termination of, any such
License-In or other agreement.
(c) The Company owns or has the right to use all the Intellectual
Property necessary to provide, produce, sell and license the services and
products currently provided, produced, sold and licensed by the Company,
and to conduct the Company's business as presently conducted and
contemplated to be conducted, and the consummation of the transactions
contemplated hereby will not alter or impair any such rights, including any
right of the Company to use or sublicense any Intellectual Property owned
by others. To the knowledge of the Company, the Intellectual Property
covers all rights which are necessary to operate the business of the
Company as it is presently conducted and currently contemplated to be
conducted and to satisfy and perform the contracts, commitments,
arrangements and understandings with customers of the Company. The Company
has no knowledge of any reason the Company will not be able to continue to
own, possess or have access to, and to use, license and sub-
36
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license on reasonable terms, all Intellectual Property and other
proprietary rights necessary for the lawful conduct of its business as
presently conducted and currently contemplated to be conducted, without any
infringement with the rights of others.
(d) To the knowledge of the Company, no Intellectual Property owned or
used by the Company, and no Intellectual Property, product or service
practiced, offered, licensed by, sold or under development by the Company,
infringes any trademark, trade name, copyright, trade secret, patent, right
of publicity, right of privacy or other proprietary right of any Person or
would give rise to an obligation to render an accounting to any Person as a
result of co-authorship, co-invention or an express or implied contract for
any use or transfer. The Company has received no written notice of any
adversely held patent, invention, trademark, copyright, service mark, trade
name or trade secret of any other Person alleging or threatening to assert
that the Company's use of any of the Intellectual Property infringes upon
or is in conflict with any intellectual property or proprietary rights of
any third party. The Company has no knowledge of any basis for any charge
or claim, threatened claim or any suit or action asserting any such
infringement or asserting that the Company does not have the legal right to
own, enforce, sell, license, lease or otherwise use any such Intellectual
Property, process, product or service.
(e) All the Company's Patents and Trademarks (each, as defined below)
listed in Schedule 4.14 and material registered Copyrights as having been
issued by, registered with or filed with the United States Patent and
Trademark Office or Register of Copyrights or the corresponding offices of
other countries have been so duly registered, filed in or issued, as the
case may be, and have been properly maintained and renewed in accordance
with all applicable provisions of law and administrative regulations in the
United States and each such other country. The Company has used its
reasonable efforts to diligently protect its rights in the Intellectual
Property and any related apparatus or processes and there have been no acts
or omissions by the Company, the result of which would be to compromise the
rights of the Company to apply for or enforce appropriate legal protection
of such Intellectual Property.
(f) Each of the Company's employees and those independent contractors
retained by the Company who,
37
<PAGE>
either alone or in concert with others, created or creates, developed or
develops, invented or invents, discovered or discovers, derived or derives,
programmed or programs or designed or designs any of the Intellectual
Property, has entered into a written agreement with the Company providing,
in substance, that all such Intellectual Property and information is
proprietary to the Company and is not to be divulged or misused and
obligating the disclosure and transfer to the Company, in consideration for
normal salary and continued employment or consultant fees, as the case may
be, of all inventions, developments and discoveries and work-product which
during the period of his or her employment or consultancy with the Company,
as the case may be, such employee and independent contractor made or makes
or conceived or conceives of either solely or jointly with others, that
related or relate to any subject matter with which such employee's or
independent contractor's work for the Company was concerned, or related or
relates to or were or are connected with the business, products or projects
of the Company, or involved or involve the use of the Company's time,
material or facilities. To the knowledge of the Company, no former
employees or independent contractors of the Company have any claim or right
to any of the Intellectual Property necessary for the lawful conduct of the
Company's business as now conducted and currently contemplated to be
conducted. To the knowledge of the Company, no employee of the Company is a
party to or otherwise bound by any agreement with or obligated to any other
Person (including, any former employer) which in any respect conflicts with
any obligation or commitment of such employee to the Company under any
agreement to which currently he or she is a party or otherwise.
For purposes of this Agreement, "Intellectual Property" means all of the
---------------------
following which is owned by, licensed by, licensed to, used or held for use by
the Company (including all copies and embodiments thereof, in whatever media):
(i) all registered and unregistered trademarks, trade dress, service marks,
logos, trade names, corporate names and other indications of origin, the
goodwill associated with the foregoing and registrations in any jurisdiction,
and applications in any jurisdiction to register (the "Trademarks"); (ii) all
----------
issued U.S. and foreign patents and pending patent applications (including,
without limitation, divisionals, continuation, continuation in part, continuing
and renewal applications), patent disclosures and improvements thereto (the
"Patents"); (iii) all registered and unregistered copyrights and all
- --------
applications to register the same (the "Copyrights"), (iv) all computer software
----------
and
38
<PAGE>
databases owned by the Company or under development for the Company (the
"Software"); (v) all licenses and agreements pursuant to which the Company has
- ---------
acquired rights in or to the Trademarks, Patents, Copyrights or Software
(excluding software and databases licensed to the Company under standard (except
for immaterial deviations), nonexclusive software licenses granted to end-user
customers by third parties in the ordinary course of such third parties'
business) ("Licenses-In"), (vi) all licenses and agreements pursuant to which
-----------
the Company has licensed or transferred the rights in and to Company
Intellectual Property ("Licenses Out"'); and (vii) all categories of trade
------------
secrets, know-how, inventions (whether or not patentable and whether or not
reduced to practice), processes, procedures, drawings, specifications, designs,
plans, proposals, technical data, copyrightable works and other proprietary
technical information ("Proprietary Rights").
------------------
SECTION 4.15. Significant Agreements. Schedule 4.15 sets forth a
----------------------
complete and correct list of all written and, to the Company's knowledge, oral
contracts, agreements and commitments to which the Company or any of its
subsidiaries is a party which would be listed as an exhibit to the Company's
Annual Report on Form 10-K if filed on the date of this Agreement (the
"Significant Agreements"). The Company has heretofore furnished or made
- -----------------------
available to Parent complete and correct copies of the Significant Agreements,
each as amended or modified to the date hereof (including any waivers with
respect thereto). Except as set forth on Schedule 4.4 or Schedule 4.15, each of
the Significant Agreements is in full force and effect and enforceable in
accordance with its terms; neither the Company nor any of its subsidiaries has
received any written notice of cancellation or termination of, or any expression
or indication of an intention or desire to cancel or terminate, any of the
Significant Agreements; no Significant Agreement is the subject of, or, to the
knowledge of the Company, has been threatened to be made the subject of, any
arbitration, suit or other legal proceeding; with respect to any Significant
Agreement which by its terms will terminate as of a certain date unless renewed
or unless an option to extend such Significant Agreement is exercised neither
the Company nor any of its subsidiaries has received any notice (written or
oral), or otherwise has any knowledge, that any such Significant Agreement will
not be so renewed or that any such extension option will not be exercised; and
there exists no event of default or occurrence, condition or act on the part of
the Company or any of its subsidiaries or, to the knowledge of the Company, on
the part of the other parties to the Significant Agreements which constitutes or
would constitute (with notice or lapse of time or both) a breach of or default
under any of the Significant
39
<PAGE>
Agreements, except to the extent that the inaccuracy of the foregoing would not,
individually or in the aggregate, have a Material Adverse Effect and would not,
individually or in the aggregate, have a material adverse effect on the ability
of the Company to perform its obligations hereunder.
SECTION 4.16. Insurance. The Company and its subsidiaries maintain
---------
policies of fire and casualty, liability and other forms of insurance in such
amounts, with such deductibles and against such risks and losses as are in the
Company's judgment, reasonable for the assets and properties of the Company and
its subsidiaries and as are customary in the Company's industry and, as of the
date of this Agreement, except (i) as set forth in Schedule 4.16 or (ii) as
would not have, individually or in the aggregate, a Material Adverse Effect or a
material adverse effect on the ability of the Company to perform its obligations
hereunder, all such policies are in full force and effect, all premiums due and
payable thereon have been paid, and no notice of cancellation or termination has
been received with respect to any such policy.
SECTION 4.17. Labor Matters. Except as set forth in Schedule 4.17,
-------------
and except for normal and customary labor arrangements outside of North America,
neither the Company nor any of its subsidiaries is a party to any collective
bargaining or other labor union contract applicable to persons employed by the
Company or any of its Material Subsidiaries, no collective bargaining agreement
is being negotiated by the Company or any of its Material Subsidiaries and the
Company has no knowledge of any activities or proceedings of any labor union to
organize any of their respective employees. There is no labor dispute, strike or
work stoppage against the Company or any of its subsidiaries pending or, to the
Company's knowledge, threatened which may interfere with the respective business
activities of the Company or any of its subsidiaries, except where such dispute,
strike or work stoppage would not reasonably be expected to have a Material
Adverse Effect or a material adverse effect on the ability of the Company to
perform its obligations hereunder.
SECTION 4.18. Year 2000. The computer software and hardware operated
---------
by the Company and its subsidiaries that is used in the conduct of their
business is capable of providing or being adapted to provide uninterrupted
millennium functionality to record, store, process and present calendar dates
falling on or after January 1, 2000 in substantially the same manner and with
the same functionality as such software and hardware records, stores, processes
and presents such calendar dates falling on or before December 31, 1999 other
than such interruptions in
40
<PAGE>
millennium functionality that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or a material adverse
effect on the ability of the Company to perform its obligations hereunder.
ARTICLE V
Representations and Warranties of Parent and
--------------------------------------------
Acquisition Sub
---------------
Each of Parent and Acquisition Sub represents and warrants to the
Company as follows:
SECTION 5.1. Organization. Each of Parent and Acquisition Sub is a
------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. Each of Parent and Acquisition Sub has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted, except where the failure to have
such power and authority would not, individually or in the aggregate, have a
material adverse effect on the business, properties, assets, condition
(financial or otherwise) or results of operations of Parent and its
subsidiaries, taken as a whole, (a "Parent Material Adverse Effect") or on the
------------------------------
ability of the Parent or Acquisition Sub to perform its obligations hereunder.
Parent owns, directly or indirectly, all the capital stock of Acquisition Sub.
GEC, p.l.c. owns, directly or indirectly, all the capital stock of Parent.
SECTION 5.2. Authority Relative to this Agreement. Each of Parent and
------------------------------------
Acquisition Sub has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the transactions contemplated hereby. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the board of directors of Acquisition Sub
and Parent and by Parent as the sole stockholder of Acquisition Sub, and no
other corporate proceedings on the part of Parent, Acquisition Sub, GEC, p.l.c.
or any of its subsidiaries are necessary to authorize this Agreement or to
consummate the transactions so contemplated. This Agreement has been duly and
validly executed and delivered by each of Parent and Acquisition Sub and,
assuming it constitutes a valid and binding agreement of each of the other
parties hereto, constitutes a legal, valid and binding agreement of each of
Parent and Acquisition Sub, enforceable against each of Parent and Acquisition
Sub in accordance with its terms , except as such enforceability may be limited
by bankruptcy,
41
<PAGE>
insolvency, reorganization, moratorium and other similar laws relating to or
affecting creditors generally, or by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
SECTION 5.3. Non-Contravention, Required Filings and Consents.
------------------------------------------------
(a) The execution, delivery and performance by Parent and Acquisition
Sub of this Agreement and the consummation of the transactions contemplated
hereby (including the Merger) do not and will not (i) contravene or
conflict with the Certificate of Incorporation or By-Laws of Parent or
Acquisition Sub, (ii) assuming that all consents, authorizations and
approvals contemplated by subsection (b) below have been obtained and all
filings described therein have been properly made, contravene or conflict
with or constitute a violation of any provision of any law, regulation,
judgment, injunction, order or decree binding upon or applicable to Parent
or Acquisition Sub or any of their respective properties; (iii) conflict
with, or result in the breach or termination of any provision of or
constitute a default (with or without the giving of notice or the lapse of
time or both) under, or give rise to any right of termination,
cancellation, or loss of any benefit to which Parent or Acquisition Sub is
entitled under any provision of any agreement, contract, license or other
instrument binding upon Parent, Acquisition Sub or any of their respective
properties, or allow the acceleration of the performance of, any obligation
of Parent or Acquisition Sub under any indenture, mortgage, deed of trust,
lease, license, contract, instrument or other agreement to which Parent or
Acquisition Sub is a party or by which Parent or Acquisition Sub or any of
their respective assets or properties is subject or bound; or (iv) result
in the creation or imposition of any Lien on any asset of Parent or
Acquisition Sub, except in the case of clauses (ii), (iii) and (iv) for any
such contraventions, conflicts, violations, breaches, terminations,
defaults, cancellations, losses, accelerations and Liens which,
individually or in the aggregate, would not reasonably be expected to
prevent, or materially delay the consummation of the Offer or the Merger.
(b) The execution, delivery and performance by Parent and Acquisition
Sub of this Agreement and the consummation of the transactions contemplated
hereby (including the Merger) by Parent and Acquisition Sub
42
<PAGE>
require no filings, notices, declarations, consents or other actions to be
made by Parent or Acquisition Sub with, nor are any approvals or other
confirmations or consents required to be obtained by Parent or Acquisition
Sub from, any Governmental Entity (except those the failure of which to
make, give or obtain, individually or in the aggregate, would not
reasonably be expected to prevent or materially delay Parent's or
Acquisition Sub's ability to consummate the transactions contemplated
hereby), other than filings, notices, approvals, confirmations, consents,
declarations or decisions (i) relating to the filing of the Certificate of
Merger in accordance with Delaware Law; (ii) required by the HSR Act; (iii)
required by the Exchange Act and state securities, takeover and Blue Sky
laws; (iv) required by the Canadian Competition Act; (v) from the Italian
Autorita Garante della Concorrenza e del Mercato that it does not intend to
initiate a second stage investigation of the transactions contemplated
hereby (including the Merger) or any matters arising therefrom under
Article 16 of Law no.287 of October 10, 1990; (vi) from the German Federal
Cartel Office, during the one month time limit referred to in Section 40
paragraph 1 of the Act against Restraints on Competition, that the
conditions for a prohibition in Section 36 paragraph 1 of the Act against
Restraints on Competition are not fulfilled, or, if no such confirmation is
received, this one month time limit having expired without the parties
having been notified by the Federal Cartel Office that it has entered into
the examination of the proposed concentration; and (vii) from the U.K.
Office of Fair Trading that it is not the intention of the U.K. Secretary
of State to refer the transactions contemplated hereby or any matters
arising therefrom to the MMC (clauses (i) through (vii) are referred to
herein as the "Parent Governmental Approvals").
-----------------------------
SECTION 5.4. Offer Documents; Schedule 14D-9; Proxy Statement.
------------------------------------------------
Neither the Offer Documents, nor any of the information provided or to be
provided by Parent or Acquisition Sub or their auditors, attorneys, financial
advisors or other consultants or advisors specifically for use in the Schedule
14D-9 and any other documents to be filed with the SEC in connection with the
transactions contemplated hereby, including any amendment or supplement to such
documents, shall, on the respective dates the Offer Documents, the Schedule 14D-
9 and any other documents to be filed with the SEC in connection with the
transactions contemplated hereby or any supplements or amendments thereto are
filed with the SEC or on the date first published, sent or given to the
Company's stockholders, as the case may be,
43
<PAGE>
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, neither Parent nor Acquisition Sub
makes any representation or warranty with respect to any information provided by
the Company or by its auditors, attorneys, financial advisors or other
consultants or advisors specifically for use in the Offer Documents. None of the
information provided by Parent or Acquisition Sub or by their auditors,
attorneys, financial advisors or other consultants or advisors specifically for
use in the Proxy Statement shall, at the time filed with the SEC, at the time
mailed to the Company's stockholders, at the time of the Stockholders' Meeting
or at the Effective Time, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein in light of the circumstances under which
they are made, not misleading. The Offer Documents will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder.
SECTION 5.5. No Prior Activities. Since the date of its
-------------------
incorporation, Acquisition Sub has not engaged in any activities other than in
connection with or as contemplated by this Agreement or in connection with
arranging any financing required to consummate the transactions contemplated
hereby.
SECTION 5.6. Finder's Fee. No Broker, finder, investment banker or
------------
other intermediary (other than Credit Suisse First Boston) is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement or by the Stockholder Agreement
based upon arrangements made by and on behalf of Parent or Acquisition Sub.
SECTION 5.7. Financing. Parent has available, and will make
---------
available to Acquisition Sub, sufficient funds to consummate the Offer and the
Merger on the terms contemplated by this Agreement.
SECTION 5.8. Parent Not an Interested Stockholder. As of the date
------------------------------------
hereof, (i) neither Parent nor any of its affiliates is, with respect to the
Company, an "Interested Stockholder", as such term is defined in Section 203 of
Delaware Law and (ii) except to the extent that Parent and its affiliates may be
deemed to hold Shares as a result of this Agreement or the Stockholder
Agreement, Parent and its affiliates collectively do not hold directly
44
<PAGE>
or indirectly five percent (5%) or more of the outstanding voting securities of
the Company.
ARTICLE VI
Covenants
---------
SECTION 6.1. Conduct of Business of the Company. Except as otherwise
----------------------------------
expressly provided in this Agreement or consented to by Parent, during the
period from the date hereof to the Effective Time, the Company and its
subsidiaries will each conduct its operations according to its ordinary course
of business and the Company and its subsidiaries will each use its reasonable
best efforts to preserve intact its business organization, to keep available the
services of its officers and employees and to maintain existing relationships
with licensors, licensees, suppliers, bankers, insurers, contractors,
distributors, customers and others having business relationships with it.
Without limiting the generality of the foregoing, and except as specifically
contemplated by this Agreement or disclosed in the SEC Reports filed prior to
the date of this Agreement, the 1998 Draft Report or as set forth in Schedule
6.1, prior to the Effective Time, neither the Company nor any of its
subsidiaries will, without the prior written consent of Parent:
(a) amend or propose to amend its certificate or articles of
incorporation or by-laws or equivalent organizational documents,
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise) any stock of any class or any other securities or equity
equivalents (including, without limitation, stock appreciation rights and
Voting Company Debt), except as required by option agreements as in effect
as of the date hereof, or except as contemplated by Section 2.8, amend any
of the terms of any such securities or agreements outstanding as of the
date hereof,
(c) effect any reorganization or recapitalization or split, combine or
reclassify any shares of its capital stock, declare, set aside or pay any
dividend or other distribution (whether in cash, stock, or property or any
combination thereof) in respect of its capital stock or redeem, repurchase
or otherwise
45
<PAGE>
acquire any of its securities or any securities of its subsidiaries;
(d) (i) incur any indebtedness for borrowed money (except for short
term indebtedness incurred in the ordinary course of business pursuant to
existing lines of credit) or issue any debt securities or, except in the
ordinary course of business, assume, guarantee or endorse the obligations
of any other person, except for intercompany indebtedness between the
Company and its wholly owned subsidiaries or between any of the Company's
wholly owned subsidiaries; (ii) make any loans, advances or capital
contributions to, or investments in, any other person (other than to wholly
owned subsidiaries of the Company) except in the ordinary course of
business; (iii) pledge or otherwise encumber shares of capital stock of the
Company or any of its subsidiaries except in the ordinary course of
business; (iv) enter into or invest in any Derivative Financial Instruments
except in the ordinary course of business consistent with the Company's
current investment and risk management policies (it being understood that
the Company shall continue its current investment and risk management
policies); or (v) mortgage or pledge any of its assets, tangible or
intangible, or except in the ordinary course of business, create or suffer
to exist any Lien thereupon, provided that, notwithstanding anything to the
-------- ----
contrary and without limiting the generality of the foregoing, no
transaction described in clauses (iv) and (v) shall be permitted without
Parent's consent for any such transaction (or series of related
transactions) the value of which is in excess of $20 million;
(e) enter into, adopt or (except as may be required by law) amend or
terminate any bonus, profit sharing, compensation, severance, termination,
stock option, stock appreciation right, restricted stock, performance unit,
stock equivalent, stock purchase agreement, pension, retirement, deferred
compensation, employment, severance or other employee benefit agreement,
trust, plan, fund or other arrangement for the benefit or welfare of any
director, officer or employee, or (except, in the case of employees who are
not officers or directors, for normal compensation increases in the
ordinary course of business that, in the aggregate, do not result in a
material increase in benefits or compensation expense to the Company)
increase in any manner the compensation or benefits of any director,
officer or employee or pay any benefit not required by any plan or
arrangement as in effect as of the date hereof (including, without
limitation, the
46
<PAGE>
granting of stock options, restricted stock, stock appreciation rights,
"phantom" stock rights or performance units);
(f) sell, lease or otherwise dispose of, or grant any Lien with
respect to any assets (including technology assets) or properties of the
Company and its subsidiaries, or enter into any contract, agreement,
commitment or transaction with respect to the foregoing that are,
individually or in the aggregate, material to any of the Company and its
subsidiaries, taken as a whole, except for dispositions of excess or
obsolete assets and sales of inventories in the ordinary course of
business;
(g) change any of the accounting principles or practices used by it,
except as may be required as a result of a change in law, SEC guidelines or
generally accepted accounting principles;
(h) (i) acquire (by merger, consolidation, acquisition of stock or
assets (including technology assets) or otherwise) any corporation,
partnership or other business organization or division thereof, (ii)
authorize any new capital expenditure or expenditures which, individually,
is in excess of $2,500,000 or, in the aggregate, are in excess of
$10,000,000; (iv) settle any litigation for amounts in excess of the
greater of $200,000 individually or $1,000,000 in the aggregate or, with
respect to any litigation as to which reserves have been recorded on the
books of the Company, the amount reserved for such litigation; or (v) enter
into or amend any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(i) make any Tax election or settle or compromise any Tax liability,
other than in the ordinary course of business;
(j) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction in the ordinary course of
business or in accordance with their terms, or reflected or reserved
against in the consolidated financial statements (or the notes thereto) of
the Company and its consolidated subsidiaries or incurred in the ordinary
course of business;
(k) (i) terminate, modify, amend or waive compliance with any material
provision of any of the
47
<PAGE>
Significant Agreements, or fail to take any reasonable action necessary to
preserve the material benefits of any Significant Agreement to the Company
or any of its subsidiaries or (ii) enter into any agreement which, if such
agreement is entered into, would be a Significant Agreement;
(1) enter into any new agreements with, or commitments to, insurance
brokers or advisers extending beyond one year or extend any insurance
policy beyond one year (including, for the avoidance of doubt, the
directors' and officers' liability insurance policies referred to in
Section 6.6); or
(m) take, or agree in writing or otherwise to take, any of the actions
described above in Section 6.1.
SECTION 6.2. Proxy Statements.
----------------
To the extent that the Company is required by Section 2.9 hereof to
hold the Stockholders Meeting, the Company shall, as promptly as practicable
following the date hereof, prepare and file the Proxy Statement with the SEC
under the Exchange Act. As soon as practicable following completion of review
of the Proxy Statement by the SEC, the Company shall mail the Proxy Statement to
its stockholders who are entitled to vote at the Stockholders' Meeting. The
Proxy Statement shall contain the recommendation of the Board sufficient to
satisfy all applicable requirements for Board action under Section 251 of the
Delaware Law in order for the Merger to be validly approved.
SECTION 6.3. Access to Information; Confidential ity Agreement.
-------------------------------------------------
(a) Between the date hereof and the Effective Time, the Company will
give each of Parent and Acquisition Sub and their counsel, financial
advisors, auditors, and other authorized representatives reasonable access
during normal business hours to all management employees, plants, offices,
warehouses and other facilities and to all books and records of the Company
and its subsidiaries, will permit each of Parent and Acquisition Sub and
their respective counsel, financial advisors, auditors and other authorized
representatives to make such inspections as Parent or Acquisition Sub may
reasonably require and will cause the Company's officers and those of its
subsidiaries to furnish Parent or Acquisition Sub or their representatives
with such financial and operating data and other information with respect
to the business
48
<PAGE>
and properties of the Company and any of its subsidiaries as Parent or
Acquisition Sub may from time to time reasonably request, in all such
cases, however, subject to existing confidentiality and similar non-
disclosure obligations and preservation of attorney client work product
privileges. Without limiting the generality of the foregoing but subject to
the limitations contained therein, the Company shall provide to Parent all
information in respect of the Company and its business that Parent shall
from time to time reasonably request to enable Parent or its affiliates to
comply with all U.K. statutory and other legal and regulatory provisions
(including the U.K. Companies Act 1985, the U.K. Financial Services Act
1986 and the rules and regulations promulgated thereunder, and the rules
and requirements of the London Stock Exchange, and including in respect of
any documentation or information that Parent or its affiliates is required
to issue or file from time to time, whether or not such documentation or
information is issued or filed as a result of, or in connection with, the
Offer or Merger).
(b) The parties agree that the provisions of the Confidentiality
Agreement dated as of February 4, 1999 (the "Confidentiality Agreement")
-------------------------
shall remain binding and in full force and effect and that the terms of the
Confidentiality Agreement are incorporated herein by reference and that all
information provided by the Company pursuant to this Section 6.3 shall be
subject to such agreement; provided, however, that any consents from the
-------- -------
Company necessary under the Confidentiality Agreement for Parent and
Acquisition Sub to consummate the transactions contemplated by this
Agreement and the Stockholders Agreement shall be deemed to have been made.
The parties shall comply with, and shall cause their respective
Representatives (as defined below) to comply with, all of their respective
obligations under the Confidentiality Agreement until Acquisition Sub
purchases a majority of the outstanding Shares pursuant to the Offer.
SECTION 6.4. Reasonable Best Efforts. Subject to the terms and
-----------------------
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all actions, and to do,
or cause to be done, all things reasonably necessary, proper or advisable on
their part under this Agreement or laws and regulations to consummate and make
effective the transactions contemplated by this Agreement and the Stockholder
Agreement. Without limiting the generality of the foregoing, Parent,
Acquisition Sub, Sellers and the
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<PAGE>
Company shall cooperate with one another (i) in the preparation and filing of
the Offer Documents, the Schedule 14D-9, the Proxy Statement and any required
filings in connection with the Company Governmental Approvals, the Parent
Governmental Approvals and any other applicable laws; (ii) in determining
whether action by or in respect of, or filing with, any Governmental Entity is
required, proper or advisable or any actions, consents, waivers or approvals are
required to be obtained from parties to any contracts, in connection with the
transactions contemplated by this Agreement and the Stockholder Agreement; (iii)
in taking all action reasonably necessary, proper or advisable to secure any
necessary consents, approvals or waivers from third parties, including under
existing debt obligations of the Company and its subsidiaries or to amend the
notes, indentures or agreements relating to such existing debt obligations to
the extent required by such notes, indentures or agreements, or to redeem or
repurchase such debt obligations; (iv) in contesting any pending legal
proceeding, whether judicial or administrative, relating to the Offer or the
Merger including seeking to have any stay or temporary restraining order entered
by any court or other Governmental Entity vacated or reversed; (v) executing any
additional instruments necessary to consummate the transactions contemplated
hereby and (vi) in seeking timely to obtain any such actions, consents and
waivers and to make any such filings. In case at any time after the Effective
Time any further action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party hereto shall
take all such necessary action.
SECTION 6.5. Public Announcements. Parent and Acquisition Sub, on
--------------------
the one hand, and the Company, on the other hand, will consult with each other
before issuing any press release with respect to the transactions contemplated
by this Agreement and the Stockholder Agreement, and shall not issue any such
press release or make any such public statement prior to such consultation (and
affording the other party or parties an opportunity to comment thereon), except
as may be required by applicable law or by applicable rules of any securities
exchange.
SECTION 6.6. Indemnification, Insurance.
--------------------------
(a) From and after the Effective Time, Parent and Acquisition Sub
shall indemnify and hold harmless each person who is, or has been at any
time prior to the date hereof or who becomes prior to the Effective Time,
an officer, director or employee of the Company or any of its subsidiaries
(collectively, the "Indemnified Parties" and individually, the "Indemnified
------------------- -----------
Party")
-----
50
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against all losses, liabilities, expenses, claims or damages in
connection with any claim, suit, action, proceeding or investigation based
in whole or in part on the fact that such Indemnified Party is or was a
director, officer or employee of the Company or any of its subsidiaries or
as trustee or fiduciaries of any plan for the benefit of employees and
arising out of acts or omissions occurring prior to and including the
Effective Time (including but not limited to the transactions contemplated
by this Agreement) to the fullest extent permitted by applicable law, for a
period of not less than six years following the Effective Time; provided
--------
that in the event any claim or claims are asserted or made within such six-
year period, all rights to indemnification in respect of any such claim or
claims shall continue until final disposition of any and all such claims.
(b) Parent shall cause the Certificate of Incorporation and By-Laws of
the Surviving Corporation and its subsidiaries to include provisions for
the limitation of liability of directors and indemnification of the
Indemnified Parties to the fullest extent permitted under Delaware Law and
shall not permit the amendment of such provisions in any manner adverse to
the Indemnified Parties, as the case may be, without the prior written
consent of such persons, for a period of six years from and after the date
hereof.
(c) For six years after the Effective Time, the Surviving Corporation
shall cause to be maintained the current policies of directors' and
officers' liability insurance maintained by the Company (provided that the
Surviving Corporation may substitute therefor policies of at least the same
coverage containing terms and conditions which are substantially
equivalent) with respect to matters occurring prior to the Effective Time,
to the extent such policies are available; provided, that in no event shall
the Surviving Corporation be required to expend, in order to maintain or
procure insurance coverage pursuant to this Section 6.6(c), any amount per
annum greater than 150% of the current annual premiums paid by the Company
for such insurance (which the Company represents and warrants to be not
more than $305,375.
SECTION 6.7. Notification of Certain Matters. The Company shall give
-------------------------------
prompt notice to Parent or Acquisition Sub, and Parent or Acquisition Sub shall
give prompt notice to the Company, upon becoming aware of (i) the occurrence or
nonoccurrence of any event, the occurrence or
51
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nonoccurrence of which has resulted in, or could reasonably be expected to
result in, any condition to the Offer set forth in Annex A, or any condition to
the Merger set forth in Article VII, not being satisfied, (ii) the failure of
such party to comply with any covenant or agreement to be complied with by it
pursuant to this Agreement which has resulted in, or could reasonably be
expected to result in, any condition to the Offer set forth in Annex A, or any
condition to the Merger set forth in Article VII, not being satisfied and (iii)
the occurrence, or nonoccurrence, of any event the occurrence, or nonoccurrence,
of which would cause any representation or warranty contained in this Agreement
to be untrue or inaccurate, which has resulted in, or could be reasonably
expected to result in any condition to the Offer set forth in Annex A not to be
satisfied. The delivery of any notice pursuant to this Section 6.7 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
SECTION 6.8. Employee Plans.
--------------
(a) Except as may be otherwise agreed to by Parent and the Company,
the Company Stock Plans shall terminate as of the Effective Time. Prior to
the purchase by Parent, Acquisition Sub and their affiliates of Shares
pursuant to the Offer or the KKR Shares upon the exercise of the Option
pursuant to the Stockholder Agreement, the Board (or, if appropriate, any
committee thereof) shall adopt such resolutions or take such other actions
as are required to (i) effect the transactions contemplated by Section 2.8
hereof and (ii) with respect to any stock option, stock appreciation or
other stock benefit plan of the Company or any of its subsidiaries not
addressed by the preceding clause, ensure that the Company or any duly
appointed committee will not use its discretion to accelerate the vesting
of any award under any such Plan and following the Effective Time, no
participant therein shall have any right thereunder to acquire any capital
stock of the Surviving Corporation or any subsidiary thereof.
(b) Between the date of this Agreement and the Effective Time, the
Company shall reasonably cooperate with Parent and Acquisition Sub in
structuring transactions (including those described in Section 2.8 with
respect to Employee Options) so as to optimize the
52
<PAGE>
tax treatment of the Company, Parent and Acquisition Sub in connection
therewith.
SECTION 6.9. No Solicitation.
---------------
(a) The Company will immediately cease any existing discussions or
negotiations with any third parties conducted prior to the date hereof with
respect to any Acquisition Proposal (as defined below). The Company shall
not directly or indirectly, through any officer, director, employee,
representative, agent or affiliates, including any investment banker,
attorney, or accountant (collectively, "Representatives") retained by the
---------------
Company or any of its Subsidiaries or affiliates, (i) solicit, initiate,
encourage or otherwise facilitate (including by way of furnishing
information) any inquiries or proposals that constitute, or could
reasonably be expected to lead to, a proposal or offer for a merger,
consolidation, business combination, sale of substantial assets, sale of
15% or more of shares of capital stock (including, without limitation, by
way of a tender offer) or similar transactions involving the Company or any
of its subsidiaries, other than the transactions contemplated by this
Agreement or the Stockholders Agreement (any of the foregoing inquiries or
proposals being referred to in this Agreement as an "Acquisition
-----------
Proposal"), or (ii) engage in negotiations or discussions concerning, or
provide any non-public information to any person or entity relating to, any
Acquisition Proposal.
(b) Neither the Board nor any committee thereof shall (i) subject to
Section 6.9(d), withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Parent or Acquisition Sub, the approval or recommendation
by the Board or such committee of the Offer, the Agreement; (ii) approve
or recommend, or propose to approve or recommend, any Acquisition Proposal;
or (iii) cause or permit the Company or any of its subsidiaries to enter
into any agreement, including an agreement in principle or letter of intent
relating to an Acquisition Proposal (an "Acquisition Agreement").
---------------------
(c) The Company shall notify Parent immediately (and no later than 24
hours) after receipt by the Company of any Acquisition Proposal or any
request for non-public information in connection with an Acquisition
Proposal or for access to the properties, books or records of the Company
by any person or entity that informs the Company that it is considering
making,
53
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or has made, an Acquisition Proposal. Such notice shall be made orally and
in writing and shall indicate in reasonable detail the identity of the
offeror and the terms and conditions of such proposal, inquiry or contact.
(d) Nothing contained in this Section 6.9 shall prohibit the Company
from taking and disclosing to its stockholders a position contemplated by
Rule 14e-2(a) promulgated under the Exchange Act or from making any legally
required disclosure to the stockholders of the Company. Notwithstanding
anything else to the contrary, neither the Company nor the Board shall take
any action that would (x) prevent, impede or delay the Offer, the
Stockholder Meeting or the ability of the stockholders to hold a meeting to
vote on the Merger or adopt this Agreement, (y) prevent, impede or delay
(i) the ability of the stockholders of the Company (A) to tender or sell
their Shares in the Offer and (B) to approve and adopt this Agreement, the
Merger and the other transactions contemplated hereby, or (ii) the ability
of the Company, Parent or Acquisition Sub from effecting the Offer or,
after the stockholders of the Company have voted in favor of the Merger and
adopted the Merger Agreement, from effecting the Merger in accordance with
Delaware Law or (z) result in the Board not having taken all Board action
required to satisfy all applicable requirements of Delaware Law in
connection with this Agreement, the Merger and the other transactions
contemplated hereby. Notwithstanding anything to the contrary, the Company
will duly call, give notice and hold the Stockholders Meeting, if required
by the Delaware Law, for the purpose of considering and taking action upon
this Agreement and the Merger whether or not the Board has determined at
any time after the date hereof it is no longer advisable for the
stockholders of the Company to adopt this Agreement. It is understood that
any violation of the restrictions set forth in this Section 6.9 by any
Representative of the Company or any of its subsidiaries, whether or not
such person is purporting to act on behalf of the Company or otherwise,
shall be deemed to be a breach of this Section 6.9 by the Company.
SECTION 6.10. Agreements With Sellers (or their affiliates).
---------------------------------------------
Notwithstanding anything to the contrary contained in any contract, agreement or
commitment between the Company or any of its subsidiaries, on the one hand, and
Sellers or any of their affiliates (other than the Company and its
subsidiaries), on the other hand (the "Sellers' Agreements"), the Sellers'
-------------------
Agreements set forth on
54
<PAGE>
Schedule 6.10 shall terminate as of the Effective Time without liability on the
part of any of the parties thereto.
SECTION 6.11. Employee Matters.
----------------
(a) For a period of at least two years after the Effective Time,
Parent shall cause the Surviving Corporation to provide compensation and
benefit plans (other than any stock-based plans, programs or arrangements)
that are in the aggregate substantially as favorable as the Company's
existing compensation, welfare and pension benefit plans, programs and
arrangements for the benefit of current and former employees and directors
of the Company (subject to such modification as may be required by
applicable law).
(b) If any employee of the Company or any of its subsidiaries becomes
a participant in any employee benefit or compensation plan, arrangement,
practice or policy of Parent or any affiliate of Parent, such employee
shall be given credit for eligibility and vesting under such plan
arrangement, practice or policy for all service prior to the Effective Time
with the Company, any of its subsidiaries, affiliates or any predecessors
for which the employee would have been credited in the Company's plans
immediately prior to the Effective Time.
SECTION 6.12. Acquisition Sub . Parent will take all action
----------------
necessary to cause Acquisition Sub to perform its obligations hereunder and to
consummate the Offer and the Merger on the terms and conditions set forth
herein.
SECTION 6.13. FIRPTA Affidavit. The Company will use its best
----------------
efforts to cause each person who holds five percent (5%) or more of the stock of
the Company to deliver an affidavit stating, under penalties of perjury, such
person's U.S. taxpayer identification number and that such person is not a
"foreign person" as defined in Section 1445 of the Code.
SECTION 6.14. Third Party Standstill Agreements; Tortious
-------------------------------------------
Interference. During the period from the date of this Agreement through the
- ------------
Effective Time, the Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill or similar agreement to which the
Company or any of its subsidiaries is a party (other than any involving Parent).
Subject to the foregoing, during such period, the Company agrees to enforce, to
the fullest extent permitted under applicable law, the provisions of any such
agreements, including obtaining injunctions to prevent any breaches of such
agreements and
55
<PAGE>
to enforce specifically the terms and provisions thereof in any court having
jurisdiction.
ARTICLE VII
Conditions to Consummation of the Merger
----------------------------------------
SECTION 7.1. Conditions to the Company's, Parent's and Acquisition
-----------------------------------------------------
Sub's Obligation to Effect the Merger. The respective obligations of Company,
- -------------------------------------
Parent and Acquisition Sub to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions:
(a) if required by Delaware Law, this Agreement shall have been
adopted by the affirmative vote of the stockholders of the Company by the
requisite vote in accordance with Delaware Law;
(b) any waiting period applicable to the Merger under the HSR Act
shall have terminated or expired and the other Company Governmental
Approvals and Parent Governmental Approvals, the failure of which to obtain
would be reasonably expected to have a Material Adverse Effect or a Parent
Material Adverse Effect ("Required Approvals"), shall have been obtained or
------------------
satisfied, as the case may be, on terms satisfactory to Parent in its
reasonable discretion; provided that this condition may not be asserted by
--------
the Company with respect to any Required Approval if the potential penalty
for any failure to receive such Required Approval will be borne only by
Parent or Acquisition Sub;
(c) no statute, rule, regulation, executive order, decree, ruling,
injunction or other order shall have been enacted, entered, promulgated or
enforced by any court or other Governmental Authority of competent
jurisdiction that prohibits the Merger or makes the Merger illegal; and
(d) Acquisition Sub, Parent or their affiliates shall have accepted
for payment and purchased Shares pursuant to and subject to the conditions
of the Offer or the KKR Shares upon the exercise of the Option pursuant to
the Stockholder Agreement.
56
<PAGE>
ARTICLE VIII
Termination; Amendment; Waiver
------------------------------
SECTION 8.1. Termination. This Agreement may be terminated and the
-----------
Merger may be abandoned at any time prior to the Effective Time, notwithstanding
approval thereof by the stockholders of the Company:
(a) by mutual written consent of Parent, Acquisition Sub and the
Company;
(b) by Parent or the Company if any court or other Governmental Entity
of competent jurisdiction shall have issued an order, decree or ruling or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall
have become final and nonappealable;
(c) by Parent or the Company, if Acquisition Sub shall have (i) failed
to commence the Offer as provided in Section 1.1, (ii) terminated or
withdrawn the Offer without purchasing any Shares pursuant to the Offer or
(iii) failed to pay for Shares pursuant to the Offer by July 1, 1999 (the
"Termination Date"); provided, that the right to terminate this Agreement
----------------- --------
under this subparagraph (c) shall not be available (x) to any party
(including Acquisition Sub's failure in the case of Parent) whose failure
to fulfill any obligation under this Agreement has been the cause or
resulted in one of the circumstances described in clause (i), (ii) or
(iii), (y) to the Company if any of the events specified in Section 6.2(d)
of the Stockholder Agreement shall have occurred, or a breach of the
Stockholder Agreement by any Seller has been the cause or resulted in one
of the circumstances described in clause (i), (ii), or (iii) or (z) to any
party if Acquisition Sub, Parent or their affiliates shall have exercised
the Option unless such exercise subsequently is voided under the terms of
the Stockholder's Agreement;
(d) by Parent or Acquisition Sub, at any time prior to the purchase by
Acquisition Sub, Parent or their affiliates of Shares pursuant to and
subject to the conditions of the Offer or the purchase of the KKR Shares
upon the exercise of the Option pursuant to the Stockholder Agreement, if
(i) any representation or warranty of the Company contained herein or of
the Sellers contained in the Stockholder Agreement that is qualified as to
materiality shall not be true and
57
<PAGE>
correct or any representation or warranty of the Company contained herein
or of the Sellers contained in the Stockholder Agreement that are not so
qualified shall not be true and correct in any material respect, (ii) there
shall have been a breach of any covenant or agreement (including Section
6.9) of the Company contained herein or of the Sellers contained in the
Stockholder Agreement (including Section 8 thereof) which would materially
adversely affect (or materially delay) the consummation of the Offer or the
Merger or the transactions contemplated by the Stockholder Agreement, which
shall not have been cured prior to the earlier of 10 business days
following notice of such breach and two business days prior to the date the
Offer expires, provided, however, the Company will have no right to cure a
------- --------
breach of Section 6.9; or
(e) by the Company prior to the purchase by Acquisition Sub, Parent or
their affiliates of Shares pursuant to and subject to the conditions of the
Offer or the purchase of any KKR Shares upon exercise of the Option
pursuant to the Stockholders Agreement, if (i) there shall have been a
material breach of any representation or warranty in this Agreement or the
Stockholders Agreement on the part of Parent or Acquisition Sub which
adversely affects (or materially delays) the consummation of the Offer or
(ii) there shall have been a material breach of any covenant or agreement
in this Agreement or the Stockholders Agreement on the part of Parent or
Acquisition Sub which adversely affects (or materially delays) the
consummation of the Offer which shall not have been cured prior to the
earlier of (A) 10 business days following notice of such breach and (B) two
business days prior to the date on which the Offer expires.
SECTION 8.2. Effect of Termination. In the event of the termination
---------------------
and abandonment of this Agreement pursuant to Section 8.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto, other than the provisions of this Section 8.2 and Sections
4.8, 5.6, 6.3(b) and 8.3 and Article IX. The termination of this Agreement shall
not relieve any party from liability for any willful breach of any covenant
contained in this Agreement.
SECTION 8.3. Fees and Expenses. Each party shall bear its own
-----------------
expenses and costs in connection with this Agreement and the transactions
contemplated hereby.
SECTION 8.4. Amendment. Subject to Section 1.3(c), this Agreement
---------
may be amended by action
58
<PAGE>
taken by the Company, Parent and Acquisition Sub at any time before or after
adoption of the Merger by the stockholders of the Company (if required by
applicable law) but, after any such approval, no amendment shall be made that
requires the approval by the Company's stockholders without obtaining such
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
SECTION 8.5. Extension; Waiver. Subject to Section 1.3(c), at any
-----------------
time prior to the Effective Time, the Company, on the one hand, and Parent and
Acquisition Sub, on the other hand, may (i) extend the time for the performance
of any of the obligations or other acts of the other party, (ii) waive any
inaccuracies in the representations and warranties of the other party contained
herein or in any document, certificate or writing delivered pursuant hereto, or
(iii) waive compliance by the other party with any of the agreements or
conditions contained herein. Any agreement on the part of any party hereto to
any such extension or waiver shall be valid only if set forth in an instrument
in writing signed on behalf of such party. The failure of any party hereto to
assert any of its rights hereunder shall not constitute a waiver of such rights.
No delay on the part of any party hereto in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party hereto of any right, power or privilege hereunder operate
as a waiver of any other right, power or privilege hereunder, nor shall any
single or partial exercise of any right, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege hereunder. Unless otherwise provided, the rights and remedies
herein provided are cumulative and are not exclusive of any rights or remedies
which the parties hereto may otherwise have at law or in equity.
ARTICLE IX
Miscellaneous
-------------
SECTION 9.1. Non-Survival of Representations and Warranties. None of
----------------------------------------------
the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the Effective Time, except for
those covenants and agreements contained herein and therein that by their terms
apply or are to be performed in whole or in part after the Effective Time and
this Article IX. Each party hereto
59
<PAGE>
agrees that, except for the representations and warranties contained in this
Agreement and the Stockholder Agreement, (i) none of the Company, Parent or
Acquisition Sub or any of their respective officers, directors, employees,
affiliates, agents, financial or legal advisors or other representatives makes
any other representations or warranties, whatsoever, oral or written, express or
implied, and each hereby disclaims any other representations and warranties made
by itself or any of its officers, directors, employees, affiliates, agents,
financial and legal advisors or other representatives, with respect to the
execution and delivery of this Agreement, the documents and the instruments
referred to herein, or the transactions contemplated hereby or thereby,
notwithstanding the delivery or disclosure to the other party or the other
party's representatives of any documentation or other information with respect
to any one or more of the foregoing, and (ii) none of the parties hereto is
relying on any disclosure, statement, representation or warranty, oral or
written, express or implied, made by any other party hereto or such party's
officers, directors, employees, affiliates, agents, financial or legal advisors
or other representatives.
SECTION 9.2. Entire Agreement; Assignment. This Agreement (including
----------------------------
the Schedules hereto), the Confidentiality Agreement and the Stockholder
Agreement (i) constitute the entire agreement among the parties hereto with
respect to the subject matter hereof and supersede all other prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof and (ii) shall not be assigned by operation of law or
otherwise; provided that Acquisition Sub may assign its rights and obligations
--------
(including the right to purchase Shares in the Offer) in whole or in part to any
direct or indirect subsidiary of GEC, p.l.c. (or the successor to the non-
defense business of GEC, p.l.c.) (provided that such transferee agrees in
writing to be bound by this Agreement), but no such assignment shall relieve
Parent or Acquisition Sub of its obligations hereunder if such assignee does not
perform such obligations.
SECTION 9.3. Notices. All notices, requests, claims, demands and
-------
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
facsimile, overnight courier or by registered or certified
60
<PAGE>
mail (postage prepaid, return receipt requested), to the other party as follows:
if to Parent or Acquisition Sub:
GEC Incorporated and
George Acquisition Corp.
c/o Videojet Systems International, Inc.
1500 Mittel Boulevard
Wood Dale, Illinois 60191-1073
Attention: Patricia A. Hoffman, Secretary
Facsimile: (630) 238-3998
with copies to:
Mayer, Brown & Platt
Bucklersbury House
3, Queen Victoria Street
London, EC4N 8EL, ENGLAND
Attention: Jeffrey I. Gordon
Facsimile: 011-44-171-329-4455
and
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York, 10019
Attention: Philip A. Gelston
Facsimile: (212) 474-3700
if to the Company:
Reltec Corporation
5900 Landerbrook Drive, Suite 300
Cleveland, Ohio 44124-4019
Attention: Valerie Gentile Sachs,
Vice President and General Counsel
Facsimile: (440) 460-3690
with copies to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, California 94025
Attention: Peter F. Kerman
Facsimile: (650) 463-4600
61
<PAGE>
Attention: Peter F. Kerman
Facsimile: (650) 463-4600
or to such other address as the person to whom notice is given may have
previously furnished to the other in writing in the manner set forth above.
SECTION 9.4. Governing Law. This Agreement shall be governed by and
-------------
cons irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the States of Delaware and of the United States of
America located in the State of Delaware or any appellate court thereof (the
"Delaware Courts") for any litigation arising out of or relation to this
-------- ------
Agreement and the transactions contemplated hereby (and agrees not to commence
any litigation relating thereto except in such Delaware Courts), waives any
objection to the laying of venue of any such litigation in the Delaware Court
that such litigation brought therein has been brought in an inconvenient forum.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Each party to this
Agreement irrevocably consents to service of process in the manner provided for
notices in Section 9.3. Nothing in this Agreement will affect the right of any
party to this Agreement to serve process in any other manner permitted by law.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY
ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT
ISSUES, AND THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT
IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE
AGREEMENTS DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED
HEREBY OR THEREBY. EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE EITHER OF SUCH WAIVERS, (ii) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES SUCH WAIVERS VOLUNTARILY, AND (iv)
IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE
MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.4.
SECTION 9.5. Parties in Interest. This Agreement shall be binding
-------------------
upon and inure solely to the benefit of each party hereto and its successors and
62
<PAGE>
permitted assigns, and, except as provided in Article II (other than Section
2.8), Section 1.3(c) and Section 6.6 nothing in this Agreement, express or
implied, is intended to or shall confer upon any other person any rights,
benefits or remedies or any nature whatsoever under or by reason of this
Agreement.
SECTION 9.6. Remedies. The parties hereto agree that irreparable
--------
damage would occur in the event any provision of this agreement was not
performed in accordance with the terms hereof or otherwise breached and that the
parties shall be entitled to specific performance of the terms hereof or to an
injunction to prevent such breach, in addition to any other remedy at law or in
equity.
SECTION 9.7. Severability. The provisions of this Agreement shall be
------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity and enforceability of the other provisions hereof. If
any provision of this Agreement, or the application thereof to any person or
entity or any circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid and
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
SECTION 9.8. Interpretation. The descriptive headings herein are
--------------
inserted for convenience of reference only and are not intended to be part of or
to affect the meaning or interpretation of this Agreement. When a reference is
made in this Agreement to Sections, Exhibits or Schedules, such reference shall
be to a Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. It is understood and agreed that neither the specifications of any
dollar amount in this Agreement nor the inclusion of any specific item in the
Schedules or Exhibits is intended to imply that such amounts or higher or lower
amounts, or the items so included or other items, are or are not material, and
neither party shall use the fact or setting or such amounts or the fact of the
inclusion of such item in the Schedules or Exhibits in any dispute or
controversy between the parties as to whether any obligation, item or matter is
or is not material for purposes hereof.
63
<PAGE>
SECTION 9.9. Certain Definitions. For purposes of this Agreement,
-------------------
the term:
(a) "affiliate" of a person means a person that directly or
---------
indirectly, through one or more intermediaries, controls, is controlled by,
or is under common control with, the first mentioned person;
(b) "business day" shall mean any day other than a Saturday, Sunday or
------------
federal holiday;
(c) "control" (including the terms "controlled by" and "under common
-------
control with") means the possession, directly or indirectly or as trustee
or executor, of the power to direct or cause the direction of the
management policies of a person, whether through the ownership of stock, as
trustee or executor, by contract or credit arrangement or otherwise;
(d) "generally accepted accounting principles" shall mean the
----------------------------------------
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession in the United States, in each case applied on a basis consistent
with the manner in which the audited financial statements for the fiscal
year of the Company ended December 31, 1997 were prepared;
(e) "including" means including, without limitation;
---------
(f) "person" means an individual, corporation, partnership,
------
association, trust, unincorporated organization, Governmental Entity, other
entity or group (as defined in Section 13(d)(3) of the Exchange Act), and
(g) "subsidiary" or "subsidiaries" of any person means any
---------- ------------
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the stock or other equity
interests the holder of which is generally entitled to vote for the
election of the board of directors or other governing body of such
corporation, partnership, joint venture or other legal entity.
64
<PAGE>
SECTION 9.10. Counterparts. This Agreement may be executed in two or
------------
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
65
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its representatives thereunto duly authorized, all as
of the day and year first above written.
RELTEC CORPORATION
By: /s/ Scott A. Fine
-----------------
Name:Scott A. Fine
Title:Vice President
GEC INCORPORATED
By: /s/ Michael Lester
------------------
Name:Michael Lester
Title:Director
GEORGE ACQUISITION CORP.
By: /s/ John Mayo
-------------
Name:John Mayo
Title:Director
<PAGE>
ANNEX A
OFFER CONDITIONS
The capitalized terms used in this Annex A have the meanings set forth
in the attached Agreement, except that the term "Merger Agreement" shall be
----------------
deemed to refer to the attached Agreement and the term "Commission" shall be
----------
deemed to refer to the SEC.
Notwithstanding any other provision of the Offer, Acquisition Sub
shall not be required to accept for payment or, subject to any applicable rules
and regulations of the Commission, including Rule 14e-l(c) under the Exchange
Act (relating to Acquisition Sub's obligation to pay for or return Shares
promptly after termination or withdrawal of the Offer), to pay for any Shares
tendered pursuant to the Offer, and may postpone the acceptance for payment or,
subject to the restriction referred to above, payment for any Shares tendered
pursuant to the Offer, and may terminate the Offer and not accept for payment
any Shares, if (i) upon expiration of the Offer as determined in accordance with
the Merger Agreement the Minimum Condition shall not have been satisfied, (ii)
upon expiration of the Offer as determined in accordance with the Merger
Agreement any applicable waiting period under the HSR Act shall not have expired
or been terminated, (iii) Parent, Acquisition Sub and the Company shall not
have obtained, on terms satisfactory to Parent in its reasonable discretion,
from (A) the German Federal Cartel Office, during the one month time limit
referred to in Section 40 paragraph 1 of the Act against Restraints on
Competition, confirmation that the conditions for a prohibition in Section 36
paragraph 1 of the Act against Restraints on Competition are not fulfilled, or,
if no such confirmation is received, the one month time limit having expired
without the parties having been notified by the Federal Cartel Office that it
has entered into the examination of the proposed concentration, (B) the
consents, authorizations and approvals required by the Canadian Competition Act;
(C) confirmation from the Italian Autorita Garante della Concorrenza e del
Mercato that it does not intend to initiate a second stage investigation of the
transactions contemplated hereby (including the Merger) or any matters arising
therefrom under Article 16 of Law no.287 of October 10, 1990; and (D)
confirmation from the U.K. Office of Fair Trading that it is not the intention
of the U.K. Secretary of State to refer the transactions contemplated hereby or
any matters arising therefrom to the MMC, (iv) any other authorizations,
consents, orders or approvals of, or declarations or filing with, or expirations
of waiting periods imposed by, any Governmental Entity, the failure of which to
obtain would reasonably be expected to have a Material Adverse
<PAGE>
Effect, a Parent Material Adverse Effect or a material adverse effect on the
ability of the Company, Parent or Acquisition Sub to perform its obligations
under the Merger Agreement, shall not have been obtained or satisfied on terms
satisfactory to Parent in its reasonable discretion or (v) at any time on or
after the date of the Merger Agreement and prior to the acceptance for payment
of Shares, any of the following conditions occurs or has occurred:
(a) there shall be pending any suit, action or proceeding by any
Governmental Entity, that has a reasonable likelihood of success, (A)
challenging the acquisition by Parent or Acquisition Sub of any Shares,
seeking to restrain or prohibit the making or consummation of the Offer or
the Merger, or seeking to obtain from the Company, Parent or any of their
respective subsidiaries or affiliates any damages that are material in
relation to the Company and its subsidiaries taken as a whole, (B) seeking
to prohibit or limit the ownership or operation by the Company, Parent or
any of their respective subsidiaries or affiliates of any material portion
of the business or assets of the Company, Parent or any of their respective
subsidiaries or affiliates, or to compel the Company, Parent or any of
their respective Subsidiaries or affiliates to dispose of or hold separate
any material portion of the business or assets of the Company, Parent or
any of their respective Subsidiaries or affiliates which are material to
Parent and its subsidiaries, taken as a whole, or the Company and its
subsidiaries, taken as a whole, as the case may be, as a result of the
Offer, the Merger or any of the other transactions contemplated by the
Agreement or (C) which otherwise is reasonably likely to have a Material
Adverse Effect or a material adverse effect on the ability of the Company
to perform its obligations hereunder;
(b) there shall be any statute, rule, regulation, legislation,
interpretation, judgment, order or injunction enacted, entered, enforced,
promulgated, amended or issued with respect to, or deemed applicable to (A)
Parent, the Company or any of their respective Subsidiaries or affiliates
or (B) the Offer or the Merger by any Governmental Authority that has or is
reasonably likely to result, directly or indirectly, in any of the
consequences referred to in paragraph (a) above;
(c) there shall have occurred (A) any general suspension of trading
in, or limitation on prices for, securities on any securities exchange or
in the over-
2
<PAGE>
the-counter market in the United States or the United Kingdom for a period
of 5 or more business days, (B) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States or
United Kingdom (whether or not mandatory) or (C) any material and mandatory
limitation, by any United States or United Kingdom governmental authority
or agency on the extension of credit by banks or other financial
institutions generally; or
(d) since the date of the Merger Agreement, there shall have occurred
any event, change, effect or development that, individually or in the
aggregate, has had or would reasonably likely have a Material Adverse
Effect or a material adverse effect on the ability of the Company to
perform its obligations hereunder; or
(e) the Company shall have breached or failed to perform in any
material respect any of its covenants or agreements under the Merger
Agreement (including Section 6.9 thereof), or any Seller shall have
breached or failed to perform in any material respect any of its covenants
or agreements under the Stockholder Agreement which shall not have been
cured prior to the earlier of 10 business days prior to the date the Offer
expires; provided, however, the Company will have no right to cure a breach
of Section 6.9 of the Merger Agreement and no Seller shall have any right
to cure a breach of Section 8 of the Stockholder Agreement; or
(f) any of the representations and warranties of the Company set
forth in the Merger Agreement or of any Seller set forth in the Stockholder
Agreement that are qualified as to materiality shall not be true and
correct or any of the representations and warranties of the Company set
forth in the Merger Agreement or of any Seller set forth in the Stockholder
Agreement that are not so qualified shall not be true and correct in any
material respect, in each case as if such representations and warranties
were made at the time of such determination (or, in the case of any
representation and warranty made as of a specified date, as of such date)
and which inaccuracy shall not have been cured prior to the earlier of 10
business days following the notice of such inaccuracy and two business days
prior to the date the Offer expires; or
(g) the Merger Agreement shall have been terminated in accordance
with its terms;
3
<PAGE>
which, in the sole judgment of Parent or Acquisition Sub in any such case, and
regardless of the circumstances (including any action or omission by Acquisition
Sub) giving rise to any such condition makes it inadvisable to proceed with such
acceptance for payment or payments.
The foregoing conditions are for the sole benefit of Parent and
Acquisition Sub and may be asserted by Parent or Acquisition Sub regardless of
the circumstances giving rise to any such condition or may be waived, subject to
Section 1.1 of the Merger Agreement that the Minimum Condition may not be waived
without the written consent of the Company, by Acquisition Sub in whole or in
part at any time or from time to time in their sole discretion. The failure by
Parent or Acquisition Sub at any time to exercise any of the foregoing rights
shall not be deemed a waiver of any such right, the waiver of any such right
with respect to particular facts or circumstances shall not be deemed a waiver
with respect to any other facts or circumstances, and each such right shall be
deemed an ongoing right that may be asserted at any time or from time to time.
4
<PAGE>
EXHIBIT (c)(1)
<PAGE>
CONFORMED COPY
STOCKHOLDER AGREEMENT AND PROXY (this
"Agreement"), dated as of March 1, 1999, by and among
---------
GEC Incorporated, a Delaware corporation ("Parent"),
------
George Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent, organized under the
laws of Delaware ("Acquisition Sub"), and the limited
---------------
partnerships affiliated with KKR Associates, L.P. whose
names are set forth on the signature pages hereof
(each, a "Stockholder");
-----------
WHEREAS each Stockholder has beneficial ownership of the number of
shares of common stock, $0.01 par value, of Reltec Corporation, a Delaware
corporation (the "Company"), set forth opposite the name of such Stockholder on
-------
Schedule A (such class of stock sometimes referred to herein as the "Company
-------
Common Stock", and the shares of Company Common Stock, including such shares
- ------------
that are acquired as a result of a stock dividend, stock split,
recapitalization, combination, reclassification, exchange, or change of such
shares, that are, from time to time, beneficially owned by each Stockholder
sometimes referred to herein as "such Stockholder's Shares");
-------------------------
WHEREAS, simultaneously with the execution and delivery hereof,
Parent, Acquisition Sub and the Company have entered into an Agreement and Plan
of Merger (the "Merger Agreement"), dated as of the date hereof, which Merger
----------------
Agreement has been unanimously approved by the Board of Directors of the
Company, and has been approved by the Board of Directors of Parent and
Acquisition Sub. The directors of the Company unanimously voted in favor of the
adoption of the Merger Agreement and the recommendation that stockholders of the
Company approve the merger (the "Merger") contemplated by the Merger Agreement
------
and tender their shares of Company Common Stock pursuant to the Offer (as
defined below) to be commenced by Acquisition Sub pursuant to the Merger
Agreement;
WHEREAS, pursuant to the Merger Agreement, Acquisition Sub, or other
wholly owned subsidiary of Parent will commence an offer (the "Offer") for all,
-----
but not less than a majority on a fully-diluted basis, of the shares of
outstanding Company Common Stock at the Per Share Amount (as defined in the
Merger Agreement) in cash; and
<PAGE>
WHEREAS, as a condition to entering into the Merger Agreement and
commencing the Offer, Parent and Acquisition Sub have required that each of the
Stockholders enter into this Agreement;
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, each of the Stockholders, severally, agrees with
Parent and Acquisition Sub as follows:
Section 1. Capitalized Terms. Capitalized terms used but not defined
-----------------
herein shall have the meanings assigned to such terms in the Merger Agreement.
Section 2. Representations and Warranties of Stockholders. Each
----------------------------------------------
Stockholder represents and warrants to Parent and Acquisition Sub as follows:
(a) Such Stockholder is a limited partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction under
which it is organized.
(b) Such Stockholder has all necessary partnership power and
authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
(c) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by such Stockholder, and no other partnership
proceedings on the part of such Stockholder are necessary to authorize this
Agreement or to consummate the transactions so contemplated.
(d) This Agreement has been duly and validly executed and delivered
by such Stockholder and, assuming this Agreement constitutes a valid and
binding obligation of each of Parent and Acquisition Sub, constitutes a
legal, valid and binding agreement of such Stockholder enforceable against
such Stockholder in accordance with its terms, except that (i) such
enforcement may be subject to applicable bankruptcy, insolvency or other
similar laws, now or hereafter in effect, affecting creditors' rights
generally, and (ii) the remedy of specific performance and injunctive and
other forms of equitable relief may be subject to equitable defenses and to
the discretion of the court before which any proceeding therefor may be
brought.
-2-
<PAGE>
(e) The execution, delivery and performance by such Stockholder of
this Agreement and the consummation of the transactions contemplated hereby
do not and will not (i) contravene or conflict with its partnership
agreement or certificate of limited partnership, (ii) assuming that all
consents, authorizations and approvals contemplated by subsection (f) below
have been obtained and all filings described therein have been made,
contravene or conflict with or constitute a violation of any provision of
any law, regulation, judgment, injunction, order or decree binding upon or
applicable to such Stockholder or any of its properties; (iii) conflict
with, or result in the breach or termination of or constitute a default
(with or without the giving of notice or the lapse of time or both) under,
or give rise to any right of termination, cancellation, or loss of any
benefit to which such Stockholder is entitled under any provision of any
agreement, contract, license or other instrument binding upon such
Stockholder or any of its properties, or allow the acceleration of the
performance of any obligation of such Stockholder under any indenture,
mortgage, deed of trust, lease, license, contract, instrument or other
agreement to which such Stockholder is a party or by which such Stockholder
its assets or properties is subject or bound; or (iv) result in the
creation or imposition of any Lien on any asset of such Stockholder, except
in the case of clauses (ii), (iii) and (iv) for any such contraventions,
conflicts, violations, breaches, terminations, defaults, cancellations,
losses, accelerations and Liens which would not individually or in the
aggregate be reasonably expected to prevent, materially delay or materially
impair the consummation by such Stockholder of the transactions
contemplated by this Agreement.
(f) The execution, delivery and performance by such Stockholder of
this Agreement and the consummation of the transactions contemplated hereby
by such Stockholder require no filings, notices, declarations, consents or
other actions to be made by such Stockholder with, nor are any approvals or
other confirmations or consents required to be obtained by such Stockholder
from any Governmental Entity (except those the failure of which to make,
give or obtain, individually or in the aggregate, would not reasonably be
expected to prevent or materially delay such Stockholder's ability to
consummate the transactions contemplated hereby), other than filings,
notices, approvals, confirmations, consents, declarations or decisions (i)
required by the HSR Act; (ii) required by
-3-
<PAGE>
the Exchange Act and state securities, takeover and Blue Sky laws; (iii)
required by the Canadian Competition Act; (iv) from the Italian Autorita
Garante della Concorrenza e del Mercato that it does not intend to initiate
a second stage investigation of the transactions contemplated hereby
(including the Merger) or any matters arising therefrom under Article 16 of
Law no.287 of October 10, 1990; (v) from the German Federal Cartel Office,
during the one month time limit referred to in Section 40 paragraph 1 of
the Act against Restraints on Competition, that the conditions for a
prohibition in Section 36 paragraph 1 of the Act against Restraints on
Competition are not fulfilled, or, if no such confirmation is received,
this one month time limit having expired without the parties having been
notified by the Federal Cartel Office that it has entered into the
examination of the proposed concentration; and (vi) from the U.K. Office of
Fair Trading that it is not the intention of the U.K. Secretary of State to
refer the transactions contemplated hereby or any matters arising therefrom
to the MMC (clauses (i) through (vi) are referred to herein as the
"Stockholder Governmental Approvals").
----------------------------------
(g) As of the date hereof, there is no action, suit, claim,
investigation or proceeding pending against, or to the knowledge of such
Stockholder, threatened against any Stockholder or properties before any
court or arbitrator or any administrative, regulatory or governmental body,
or any agency or official which challenges or seeks to prevent, enjoin,
alter or delay the Offer or the Merger or any of the other transactions
contemplated hereby or by the Merger Agreement. As of the date hereof,
such Stockholder is not and none of its properties is subject to any order,
writ, judgment, injunction, decree, determination or award which would
prevent or delay the consummation of the transactions contemplated hereby.
(h) Such Stockholder has, and at any Closing (as defined below)
hereunder such Stockholder will have, good and valid title to such
Stockholder's Shares, free and clear of, except as set forth in Schedule
2(1), any Liens, proxies, voting trusts or agreements, understandings or
arrangements, except for any Liens or proxies arising hereunder.
(i) Except as set forth in Schedule 2(1), there are no options or
rights to acquire, or any agreements to which such Stockholder is a party
relating to such Stockholder's Shares, other than this Agreement.
-4-
<PAGE>
(j) The transfer of such Stockholder's Shares hereunder will transfer
to Acquisition Sub good and valid title to such Stockholder's Shares, free
and clear of any Liens, proxies, voting trusts or agreements,
understandings or arrangements, except for any Liens or proxies arising
hereunder.
(k) Such Stockholders' Shares described in Schedule A represent all
of the Shares beneficially owned (within the meaning of Rule 13d-3 under
the Exchange Act) by such Stockholder.
(l) Schedule 2(1) sets forth a complete and correct list of all
contracts, agreements and commitments (oral or written), together with a
description of monetary obligations thereof, between the Company or any of
its subsidiaries, on the one hand, and such Stockholder, on the other hand.
(m) Such Stockholder is not a "foreign person" as defined in Section
1445(f)(3) of the Code.
(n) Such Stockholder understands and acknowledges that Parent is
entering into, and causing Acquisition Sub to enter into, the Merger
Agreement in reliance upon such Stockholder's execution and delivery of
this Agreement.
Section 3. Representations and Warranties of Parent and Acquisition
--------------------------------------------------------
Sub. Each of Parent and Acquisition Sub represents and warrants to the
- ---
Stockholders as follows:
(a) Each of Parent and Acquisition Sub is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.
(b) Each of Parent and Acquisition Sub has all necessary corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby.
(c) The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and
validly authorized by the board of directors of each of Parent and
Acquisition Sub, and no other corporate proceedings on the part of Parent
or Acquisition Sub are necessary to authorize this Agreement or to
consummate the transactions so contemplated.
-5-
<PAGE>
(d) This Agreement has been duly and validly executed and delivered
by each of Parent and Acquisition Sub and, assuming this Agreement
constitutes a valid and binding obligation of each Stockholder, constitutes
a legal and binding agreement of each of Parent and Acquisition Sub
enforceable against each of Parent and Acquisition Sub in accordance with
its terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency or other similar laws, now or hereafter in effect,
affecting creditors' rights generally, and (ii) the remedy of specific
performance and injunctive and other forms of equitable relief may be
subject to equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
(e) The execution, delivery and performance by each of Parent and
Acquisition Sub of this Agreement and the consummation of the transactions
contemplated hereby do not and will not (i) contravene or conflict with the
constitutional documents of Parent or Acquisition Sub, (ii) assuming that
all consents, authorizations and approvals contemplated by subsection (f)
below have been obtained and all filings described therein have been made,
contravene or conflict with or constitute a violation of any provision of
any law, regulation, judgment, injunction, order or decree binding upon or
applicable to Parent or Acquisition Sub or, any of their respective
subsidiaries or properties; (iii) conflict with, or result in the breach or
termination of any provision of or constitute a default (with or without
the giving of notice or the lapse of time or both) under, or give rise to
any right of termination, cancellation, or loss of any benefit to which
Parent or Acquisition Sub or any of their respective subsidiaries is
entitled under any provision of any agreement, contract, license or other
instrument binding upon Parent or Acquisition Sub, any of their respective
subsidiaries or any of their respective properties, or allow the
acceleration of the performance of any obligation of Parent or Acquisition
Sub or any of their respective subsidiaries under any indenture, mortgage,
deed of trust, lease, license, contract, instrument or other agreement to
which Parent or Acquisition Sub or any of their respective subsidiaries is
a party or by which Parent or Acquisition Sub or any of their respective
subsidiaries or any of their respective assets or properties is subject or
bound; or (iv) result in the creation or imposition of any Lien on any
asset of Parent or Acquisition Sub or any of their respective
-6-
<PAGE>
subsidiaries, except in the case of clauses (iii) and (iv) for any such
contraventions, conflicts, violations, breaches, terminations, defaults,
cancellations, losses, accelerations and Liens which would not individually
or in the aggregate be reasonably expected to prevent, materially delay or
materially impair the consummation by such Stockholder of the transactions
contemplated by this Agreement.
(f) The execution, delivery and performance by Parent and Acquisition
Sub of this Agreement and the consummation of the transactions contemplated
hereby by Parent and Acquisition Sub require no filings, notices,
declarations, consents or other actions to be made by Parent or Acquisition
Sub with, nor are any approvals or other confirmations or consents required
to be obtained by Parent or Acquisition Sub from, any Governmental Entity
(except those the failure of which to make, give or obtain, individually or
in the aggregate, would not reasonably be expected to prevent or materially
delay Parent's or Acquisition Sub's ability to consummate the transactions
contemplated hereby), other than filings, notices, approvals,
confirmations, consents, declarations or decisions (i) required by the HSR
Act; (ii) required by the Exchange Act and state securities, takeover and
Blue Sky laws; (iii) required by the Canadian Competition Act; (iv) from
the Italian Autorita Garante della Concorrenza e del Mercato that it does
not intend to initiate a second stage investigation of the transactions
contemplated hereby (including the Merger) or any matters arising therefrom
under Article 16 of Law no.287 of October 10, 1990; (v) from the German
Federal Cartel Office, during the one month time limit referred to in
Section 40 paragraph 1 of the Act against Restraints on Competition, that
the conditions for a prohibition in Section 36 paragraph 1 of the Act
against Restraints on Competition are not fulfilled, or, if no such
confirmation is received, this one month time limit having expired without
the parties having been notified by the Federal Cartel Office that it has
entered into the examination of the proposed concentration; and (vi) from
the U.K. Office of Fair Trading that it is not the intention of the U.K.
Secretary of State to refer the transactions contemplated hereby or any
matters arising therefrom to the MMC (clauses (i) through (vi) are referred
to herein as "Parent Governmental Approvals").
-----------------------------
Section 4. Agreement to Tender. (a) Each Stockholder agrees that,
-------------------
promptly after receipt of the Offer
-7-
<PAGE>
Documents, such Stockholder will tender all of such Stockholder's Shares
pursuant to the Offer and will not withdraw such Shares prior to the termination
withdrawal or expiration date of the Offer (or any extension thereof) (it being
understood that the obligation contained in this section is unconditional,
subject to Section 17).
(b) Each Stockholder will receive the same Per Share Amount received
by other stockholders of the Company in the Offer with respect to the Shares
tendered by it in the Offer. On the business day after the date the Shares are
accepted for payment and purchased by Acquisition Sub pursuant to the Offer,
Acquisition Sub or Parent, as the case may be, shall make payment by wire
transfer of immediately available funds to each Stockholder of the purchase
price for such Stockholder's Shares to an account designated by such
Stockholder.
Section 5. Agreement to Vote; Proxy. (a) Each Stockholder agrees, to
------------------------
the extent such Stockholder continues to own, or have legal rights in respect
of, its Shares, with, and covenants to, Parent and Acquisition Sub as follows:
(i) At any meeting of stockholders of the Company called to vote upon
the Merger, the Merger Agreement or the other transactions contemplated by
the Merger Agreement or upon which a vote, consent or other approval with
respect to the Merger, the Merger Agreement or the other transactions
contemplated by the Merger Agreement is sought, such Stockholder shall vote
(or cause to be voted) or shall consent, execute a consent or cause to be
executed a consent in respect of such Stockholder's Shares in favor of the
Merger, the execution and delivery by the Company of the Merger Agreement
and the approval of the terms thereof and each of the other transactions
contemplated by the Merger Agreement.
(ii) At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which their vote,
consent or other approval is sought, such Stockholder shall vote (or cause
to be voted) such Stockholder's Shares against (x) any Acquisition Proposal
or any action which is a component of any Acquisition Proposal or would be
a component of an Acquisition Proposal if it were contained in a proposal,
(y) any merger agreement or merger (other than the Merger Agreement and the
Merger), reorganization, recapitalization, dissolution, liquidation or
winding up of or by the Company or
-8-
<PAGE>
(z) any amendment of the Company's Certificate of Incorporation or By-laws
which amendment would in any manner partially or wholly prevent or
materially impede, interfere with or delay the Merger, the Merger Agreement
or any of the other transactions contemplated by the Merger Agreement (each
of the foregoing in clause (x), (y) or (z) above, a "Competing
---------
Transaction").
-----------
(iii) In furtherance and not in derogation of the foregoing, such
Stockholder agrees with, and covenants to, Parent and Acquisition Sub that,
at the request of Parent, such Stockholder shall use all reasonable
efforts, and shall cooperate in all respects with Parent, Acquisition Sub
and the Company, (i) to satisfy any legal, regulatory or other stock
exchange requirements that apply to approving the Merger, the Merger
Agreement and the other transactions contemplated by the Merger Agreement
by written consent pursuant to Section 228 of the Delaware Law and (ii)
subject to satisfaction of the foregoing, to effect a written consent
satisfying the requirements of Section 228 of the Delaware Law in favor of
the adoption and approval for purposes of Section 251 of the Delaware Law
of the Merger, the Merger Agreement and each of the other transactions
contemplated by the Merger Agreement.
(b) Each Stockholder hereby grants to, and appoints, Patricia Hoffman
and Thomas Edeus and any other individual who is designated by Parent, until the
termination of this Agreement pursuant to Section 17, an irrevocable proxy,
coupled with an interest, and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such Stockholder, with
respect to all such Stockholder's Shares, to vote such Stockholder's Shares, or
grant or execute a consent or approval, in the complete discretion of Parent or
Acquisition Sub, as the case may be, at any meeting of stockholders of the
Company or at any adjournment thereof or in any other circumstances upon which
their vote, consent or other approval is sought (i) in favor of the Merger and
any transactions contemplated by, or necessary or desirable to consummate the
transactions contemplated by, the Merger Agreement and the adoption of the
Merger Agreement and (ii) against any Competing Transaction. Such irrevocable
proxy is executed and intended to be irrevocable in accordance with the
provisions of Section 212(e) of the Delaware Law. Each Stockholder agrees that
this Agreement, including the provisions of this Section 5 will be recorded in
the books and records of the Company.
-9-
<PAGE>
Section 6. Purchaser's Option. The parties further agree as follows:
------------------
(a) Each Stockholder does hereby grant to Acquisition Sub an
irrevocable option (collectively, with respect to all the Stockholders'
Shares the "Option") to purchase all, but not less than all, such
------
Stockholder's Shares, subject to the terms and conditions of this Section
and Section 17.
(b) The exercise price for each Share of Stockholders Shares shall be
the Per Share Amount.
(c) In the event of any change in the number or kind of such
Stockholder's Shares by reason of stock dividends, stock splits,
recapitalizations, combinations, reclassifications, exchanges or changes of
shares, then the exercise price for such Stockholder's Shares shall be
adjusted appropriately so that the total amount to be paid upon exercise in
whole of the Option with respect to such Stockholder's Shares would remain
unchanged.
(d) The Option may be exercised prior to the termination of this
Agreement specified in Section 17 in the event that the Offer has expired
or has otherwise been terminated and any Stockholder has failed to tender
all of its Shares in accordance with Section 4 or has withdrawn any of its
Shares tendered in the Offer prior to such expiration or termination.
(e) In the event Acquisition Sub wishes to exercise the Option,
Acquisition Sub shall send a written notice (the "Notice") to each
------
Stockholder specifying a date (not sooner than two nor later than ten
business days from the date the Notice is given) for the closing of such
purchase of all of such Stockholder's Shares (the "Closing"). The Closing
-------
will take place at such location in New York, New York, as Acquisition Sub
shall specify in the Notice. At the Closing, payment for such Stockholder's
Shares then being purchased shall be made to such Stockholder by wire
transfer in immediately available funds in the amount of the aggregate
exercise price, against delivery to Acquisition Sub of (i) a certificate or
certificates registered in its name evidencing such Shares duly endorsed
for transfer and (ii) an affidavit of such Stockholder that is not a
"foreign person" as defined in Section 1445(f)(3) of the Code. Such Shares
will be imprinted with any legends required by applicable securities laws.
-10-
<PAGE>
(f) Parent and Acquisition Sub agree that, in the event that the
Option is exercised, Acquisition Sub will agree to purchase from any holder
of Shares with tag-along or similar rights granted by any Stockholder that
wishes to sell its shares of Company Common Stock to Acquisition Sub of all
shares of Company Common Stock of such holder on the same terms of the
purchase pursuant to the exercise of the Option.
(g) The obligations of such Stockholder to deliver, and Acquisition
Sub to purchase and pay for, such Stockholder's Shares, or any portion
thereof, upon exercise of the Option are subject to the conditions that (i)
no preliminary or permanent injunction or other order prohibiting the
delivery of such Stockholder's Shares issued by a court of competent
jurisdiction shall be in effect and (ii) any waiting period applicable to
the Merger under the HSR Act shall have terminated or expired and the other
Company Governmental Approvals and Parent Governmental Approvals, the
failure of which to obtain would be reasonably expected to have a Material
Adverse Effect or a Parent Material Adverse Effect ("Required Approvals"),
------------------
shall have been obtained or satisfied, as the case may be, on terms
satisfactory to Parent in its reasonable discretion; provided that this
--------
condition may not be asserted by any Stockholder with respect to any
Required Approval if the potential penalty for any failure to receive such
Required Approval will be borne only by Parent or Acquisition Sub. In the
event that any of the aforesaid conditions has not been satisfied at or
prior to the scheduled time of Closing, the Closing shall be delayed for
such period as shall be necessary in order for such conditions to be
satisfied, but in no event shall the Closing be delayed by more than 60
days. If the Closing does not occur within such period, the Option and the
exercise of the Option shall terminate and be void. Termination of this
Agreement after a Notice has been properly delivered under this Agreement
will not terminate or otherwise affect the parties' obligations hereunder
as to the exercise of the Option pursuant to such Notice.
(h) The obligation of Acquisition Sub to purchase and pay for such
Stockholder's Shares, or any portion thereof, upon exercise of the Option
is also subject to the fulfillment, or waiver by Acquisition Sub, of the
conditions (which may be waived by Acquisition Sub in its sole discretion)
that (i) such Stockholder's representations and warranties contained in
this Agreement, and the Company's representations and
-11-
<PAGE>
warranties contained in the Merger Agreement shall be true and correct on
and as of the date of the Closing, as though such representations and
warranties were made on such date, (ii) such Stockholder shall have
performed in all material respects all of its covenants and agreements
under this Agreement required to be performed at or prior to the Closing or
the Company shall have performed in all material respects all of its
covenants and agreements under the Merger Agreement required to be
performed at or prior to the Closing hereunder, and (iii) such Stockholder
shall have delivered to Parent and Acquisition Sub on the date of the
Closing a certificate to such effect, and the Company shall have delivered
to Parent and Acquisition Sub on the date of the Closing a certificate to
such effect executed by the Chief Executive Officer of the Company.
(i) Notwithstanding anything to the contrary, Parent and Acquisition
Sub agree that, upon completion of the purchase of each Stockholder's
Shares pursuant to the Option, there shall be no conditions to effect the
Merger under the Merger Agreement or otherwise, except for the conditions
set forth in Section 7.1(a) and (c) of the Merger Agreement.
(j) Parent and Acquisition Sub agree not to terminate the Offer prior
to its scheduled expiration date (determined in the manner provided in the
Merger Agreement) if at such time, any Stockholder has failed to tender all
of its Shares in accordance with Section 4 unless Parent or Acquisition Sub
has first provided the Stockholders with one business days' prior written
notice of its intent to terminate the Offer.
Section 7. Additional Covenants. Except pursuant to this Agreement,
--------------------
no Stockholder shall, without the prior written consent of Parent, directly or
indirectly (i) during the term of this Agreement grant any proxies or enter into
any voting trust, power of attorney or other agreement or arrangement with
respect to the voting of such Stockholder's Shares, (ii) acquire, sell, assign,
transfer, encumber or otherwise dispose of, or enter into any contract, option
or other arrangement or understanding with respect to the direct or indirect
acquisition or sale, assignment, transfer, encumbrance or other disposition of
any of such Stockholder's Shares during the term of this Agreement or (iii) take
any other action that would in any way restrict, limit or interfere with the
performance of its obligations hereunder or the transactions contemplated
hereby. Each Stockholder agrees not to seek or solicit any such
-12-
<PAGE>
acquisition or sale, assignment, transfer, encumbrance or other disposition or
any such contract, option or other arrangement or assignment or understanding
and agrees to notify Parent promptly and to provide all details requested by
Parent if such Stockholder shall be approached or solicited, directly or
indirectly, by any Person with respect to any of the foregoing. Each Stockholder
agrees to use its reasonable best endeavors to cause the Company to perform its
obligations under the Merger Agreement. Each Seller agrees (i) promptly to
exercise any "drag-along" or other rights that permit it to require any other
person to sell its Shares upon a sale by such Seller of its Shares ("Drag-Along
----------
Rights") to cause the person subject to such Drag-Along Rights to tender in the
- ------
Offer, and not withdraw, any shares held by such person and (ii) promptly to use
its reasonable best efforts to cause each of its affiliates to exercise any
Drag-Along Rights held by such affiliate to cause the person subject to such
Drag-Along Rights to tender in the Offer, and not withdraw, any shares held by
such person.
Section 8. No Solicitations. Each Stockholder and its affiliates
----------------
(other than the Company and its subsidiaries will immediately cease any existing
discussions or negotiations with any third parties conducted prior to the date
hereof with respect to any Acquisition Proposal. Each Stockholder agrees that it
will not, and will use its best efforts to cause such affiliates not to,
directly or indirectly, solicit, initiate or knowingly encourage inquiries or
proposals that constitute, or could reasonably be expected to lead to an
Acquisition Proposal or engage in negotiations or discussions concerning to, or
provide any confidential information relating to, any Acquisition Proposal or
agree to approve or recommend or participate in any Acquisition Proposal or
sell, transfer or otherwise dispose of any Shares or participation in any
Acquisition Proposal (other than pursuant to this Agreement or the Merger
Agreement). Each Stockholder agrees that it or any of such affiliates will
promptly advise Parent of, and communicate to Parent the terms of, any such
inquiry or proposal it or any of such affiliates may receive, and will promptly
advise Parent if it or any of such affiliates provides any such information to
any such person. Without limiting the foregoing, it is understood that any
violation of the restrictions set forth in the preceding sentence by an
investment banker, financial advisor, attorney, accountant or other
representative or agent of any Stockholder shall be deemed to be a violation of
this Section 8 by such Stockholder. In addition, during the period from the
date of this Agreement through the Effective Time, the Stockholders shall not
terminate, amend, modify or
-13-
<PAGE>
waive any provision of any confidentiality or standstill agreement relating to
the Company to which it or any of its affiliates is a party. During such period,
the Stockholders shall, and shall cause the Company to enforce, to the fullest
extent permitted under applicable law, the provisions of any such agreement,
including by seeking to obtain injunctions to prevent any breaches of such
agreements and to enforce specifically the terms and provisions thereof in any
court of the United States of America or of any state having jurisdiction.
Section 9. Actions by Board. No action taken by the Board shall
----------------
modify, alter, change or otherwise affect the obligations of the Stockholders
hereunder.
Section 10. Governing Law. This Agreement shall be governed by the
-------------
internal laws of the State of Delaware without regard to the principles of
conflicts of law. Each of the parties hereto irrevocably and unconditionally
consents to submit to the exclusive jurisdiction of the courts of the States of
Delaware and of the United States of America located in the State of Delaware or
any appellate court thereof (the "Delaware Courts") for any litigation arising
---------------
out of or relation to this agreement and the transactions contemplated hereby
(and agrees not to commence any litigation relating thereto except in such
Delaware Courts), waives any objection to the laying of venue of any such
litigation in the Delaware Court that such litigation brought therein has been
brought in an inconvenient forum. Each of the parties hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Each party to this Agreement irrevocably consents to service
of process in the manner provided for notices in Section 11. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER
THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND
THEREFORE IT HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING
OUT OF OR RELATING TO THIS AGREEMENT AND ANY OF THE AGREEMENTS DELIVERED IN
CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. EACH
PARTY CERTIFIES AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER
PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE EITHER OF SUCH
WAIVERS, (ii) IT
-14-
<PAGE>
UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF SUCH WAIVERS, (iii) IT MAKES
SUCH WAIVERS VOLUNTARILY, AND (iv) IT HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 10.
Section 11. Notices. Notices under this Agreement shall be deemed to
-------
be duly given when delivered in person, by cable, telegram, telex or facsimile,
by overnight courier or by registered or certified mail (postage prepaid, return
receipt requested) in writing as follows:
If to Parent or Acquisition Sub, to:
GEC Incorporated and
George Acquisition Corp.
c/o Videojet Systems International, Inc.
1500 Mittel Boulevard
Wood Dale, Illinois 60191-1073
Attention: Patricia A. Hoffman, Secretary
Facsimile: (630) 238-3998
with copies to:
Mayer, Brown & Platt
Bucklersbury House
3, Queen Victoria Street
London, EC4N 8EL, ENGLAND
Attention: Jeffrey I. Gordon
Facsimile: 011-44-171-329-4455
and
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York, 10019
Attention: Philip A. Gelston
Facsimile: (212) 474-3700
If to any Stockholder, to such
Stockholder at the address set
forth on Schedule A hereto
Section 12. Entire Agreement; Amendments. This Agreement
-----------------------------------------
constitutes the entire understanding of the parties with respect to the subject
matter hereof. There are
-15-
<PAGE>
no restrictions, agreements, promises, warranties, covenants or undertakings
with respect to the subject matter hereof other than those expressly set forth
herein or therein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to its subject matter and is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder. This Agreement may be amended only by a written instrument
duly executed by Acquisition Sub and the holders of all the Stockholder's
Shares.
Section 13. Assignment. Notwithstanding any other provision of this
----------
Agreement, this Agreement shall not be assignable by any party hereto except by
Parent or Acquisition Sub to any direct or indirect wholly owned subsidiary of
The General Electric Company, p.l.c.; provided, however, that no such assignment
-------- -------
shall relieve either Parent or Acquisition Sub from its obligations hereunder.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable against, (i) as to each Stockholder, such
Stockholder and such Stockholder's beneficiaries and representatives, and (ii)
Parent and Acquisition Sub and their successors and permitted assigns. Each
Stockholder agrees that this Agreement and the obligations of such Stockholder
hereunder shall attach to such Stockholder's Shares and shall be binding upon
any person or entity to which legal or beneficial ownership of such Shares shall
pass, whether by operation of law or otherwise, including such Stockholder's
heirs, guardians, administrators or successors.
Section 14. Severability. The provisions of this Agreement shall be
------------
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity and enforceability of the other provisions hereof. If
any provision of this Agreement, or the application thereof to any person or
entity or any circumstance, is invalid or unenforceable, (a) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid and
unenforceable provision and (b) the remainder of this Agreement and the
application of such provision to other persons, entities or circumstances shall
not be affected by such invalidity or unenforceability, nor shall such
invalidity or unenforceability affect the validity or enforceability of such
provision, or the application thereof, in any other jurisdiction.
Section 15. Stop Transfer Order. In furtherance of this Agreement,
-------------------
concurrently herewith each Stockholder shall and hereby does authorize Parent
and Acquisition Sub to notify the Company's transfer agent that there is a stop
transfer order with respect to all of such Stockholder's
-16-
<PAGE>
Shares subject to the terms of this Agreement (and that this Agreement places
limits on the voting and transfer of such Shares). The Stockholders further
agree to cause the Company not to register the transfer of any certificate
representing any Stockholder's Shares unless such transfer is made in accordance
with the terms of this Agreement.
Section 16. Further Action. From time to time, at the request of
--------------
Parent or Acquisition Sub and without further consideration, each Stockholder
shall execute and deliver to Parent and Acquisition Sub such documents and take
such action as Parent or Acquisition Sub may reasonably request in order to
consummate the transactions contemplated hereby, including vesting in
Acquisition Sub good and valid title to such Stockholder's Shares.
Section 17. Termination. This Agreement, including the Option, shall
-----------
terminate and be of no further force and effect upon the earliest to occur of
(a) the Effective Time, (b) a date selected by Parent, at its option, by written
notice to the Stockholders, (c) the termination of the Merger Agreement pursuant
to its terms or (d) the Termination Date, as it may be extended under the Merger
Agreement; provided, however, that if Acquisition Sub exercises the Option by
-------- -------
sending a Notice on or prior to the date on which this Agreement would terminate
pursuant to this Section 17, but the Closing with respect to such Notice does
not occur on or before such date, whether due to the failure of a condition set
forth in Section 6(g) or otherwise, then the termination date shall be
postponed, and this Agreement shall terminate on the earlier to occur of (i) the
first day following such Closing and (ii) 60 days after the exercise of the
Option, at which time this Agreement, the Option and the exercise thereof shall
terminate and be void. Notwithstanding the foregoing, this Agreement will not
terminate pursuant to clause (d) of the prior sentence if at the Termination
Date the Company cannot otherwise terminate the Merger Agreement under Section
8.1 of the Merger Agreement unless Parent or Acquisition Sub terminates the
Merger Agreement.
Section 18. Survival. None of the representations, warranties,
--------
covenants and other agreements in this Agreement or in any instrument delivered
pursuant to this Agreement, including any rights arising out of any breach of
such representations and warranties (other than those made in Section 2(j)),
covenants and other agreements, shall survive the Effective Time, except for
those covenants and agreements contained herein and therein that by their terms
apply or are to be performed in whole or in part after the Effective Time, and
this Section 18 and Sections 10, 11, 13, 15, 16, 21 and 22. Each party hereto
agrees that, except for the representations and warranties contained in this
Agreement, (i) none of the Stockholders, Parent or Acquisition Sub or any of
their respective officers, directors, employees, affiliates, agents, financial
or legal
-17-
<PAGE>
advisors or other representatives makes any other representations or warranties,
whatsoever, oral or written, express or implied, and each hereby disclaims any
other representations and warranties made by itself or any of its officers,
directors, employees, affiliates, agents, financial and legal advisors or other
representatives, with respect to the execution and delivery of this Agreement,
the documents and the instruments referred to herein, or the transactions
contemplated hereby or thereby, notwithstanding the delivery or disclosure to
the other party or the other party's representatives of any documentation or
other information with respect to any one or more of the foregoing, and (ii)
none of the parties hereto is relying on any disclosure, statement,
representation or warranty, oral or written, express or implied, made by any
other party hereto or such party's officers, directors, employees, affiliates,
agents, financial or legal advisors or other representatives.
Section 19. Counterparts. This Agreement may be executed in one or
------------
more counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more of the counterparts have been signed
by each of the parties and delivered to the other parties, it being understood
that all parties need not sign the same counterpart.
Section 20. Announcements. So long as this Agreement is in effect,
-------------
except as required by applicable law or applicable SEC, stock exchange or the
National Association of Securities Dealers, Inc. requirements, the parties
hereto and their representatives shall not issue or cause the publication of any
press release, public announcement or other public statement, with respect to
the transactions contemplated by this Agreement without the prior consent of the
other parties hereto, which consent shall not be unreasonably withheld.
Section 21. Specific Performance. The Stockholders, Parent and
--------------------
Acquisition Sub acknowledge that this Agreement and such Stockholders' Shares
are unique and that no party will have an adequate remedy at law if any other
party breaches any covenant herein or fails to perform its obligations
hereunder. Accordingly, the Stockholders, Parent and Acquisition Sub agree that
the others shall have the right, in addition to any other rights which it may
have, to specific performance and equitable injunctive relief if any party shall
fail or threaten to fail to perform any of its obligations under this Agreement.
Section 22. Expenses. Whether or not the Option is exercised, all
--------
costs and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expense, except that the costs and expenses of the Stockholders shall be paid by
the Company.
-18-
<PAGE>
Section 23. Limited Liability of Partners. Notwithstanding any other
------------------------------
provision of this Agreement, no general partner or limited partner, nor any
future general or limited partner of any Stockholder, shall have any personal
monetary liability for performance of any obligation of such Stockholder under
this Agreement. Any monetary liability of the Stockholder under this Agreement
shall be satisfied solely out of the assets of the Stockholder.
Section 24. Stockholder Capacity. Each Stockholder signs solely in
--------------------
its capacity as the record holder and beneficial owner of the Shares and nothing
herein shall limit or affect any actions taken by any officer or director of the
Company or its subsidiaries in his or her capacity as an officer or director of
the Company to the extent permitted by the Merger Agreement (including causing
its representatives to take actions permitted by the Merger Agreement).
Section 25. Parent Actions. Parent shall cause Acquisition Sub to
---------------
perform each of its obligations hereunder.
-19-
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its representatives thereunto duly authorized, all
as of the day and year first above written.
GEC INCORPORATED
By: /s/ Michael Lester
------------------
Name: Michael Lester
Title: Director
GEORGE ACQUISITION CORP.
By: /s/ John Mayo
-------------
Name: John Mayo
Title: Director
CMT ASSOCIATES, L.P.
By: /s/ Alex Navab, Jr.
-------------------------
Name: Alex Navab, Jr.
Title: Attorney-In-Fact
KKR PARTNERS II, L.P.
By: /s/ Alex Navab, Jr.
-------------------------
Name: Alex Navab, Jr.
Title: Attorney-In-Fact
KKR ASSOCIATES, L.P.
By: /s/ Alex Navab, Jr.
-------------------
Name: Alex Navab, Jr.
Title: Attorney-In-Fact
-20-
<PAGE>
Schedule 2(1)
1. Securities Purchase Agreements between the Company and the Stockholders.
The Company may owe the Stockholders certain amounts pursuant to the
expense reimbursement provisions contained in such agreements.
2. Registration Rights Agreements between the Company and the Stockholders.
3. Stockholder Agreements between the Company, the Stockholders and certain
stockholders of the Company.
<PAGE>
Schedule A
TO THE
STOCK PURCHASE AGREEMENT
Capitalized terms used in this Schedule A and not otherwise, defined in
this Schedule A have the respective meanings assigned to such terms in the
attached Stockholders Agreement.
<TABLE>
<CAPTION>
Name and address of each Stockholder Number of Shares
- ------------------------------------ ----------------
<S> <C>
CMT Associates, L.P. 45,042,183 Shares
c/o Kohlberg Kravis Roberts & Co., L.P.
9 West 57th Street
New York, New York
Attention: James H. Greene, Jr.
with a copy to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, California 94025
Attention: Peter F. Kerman
KKR Partners II, L.P. 392,600 Shares
c/o Kohlberg Kravis Roberts & Co., L.P.
9 West 57th Street
New York, New York
Attention: James H. Greene, Jr.
with a copy to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, California 94025
Attention: Peter F. Kerman
KKR Associates, L.P. 396,500 Shares
c/o Kohlberg Kravis Roberts & Co., L.P.
9 West 57th Street
New York, New York
Attention: James H. Greene, Jr.
with a copy to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, California 94025
Attention: Peter F. Kerman
Total
----------
45,831,283 Shares
</TABLE>
<PAGE>
EXHIBIT 4
<PAGE>
RELTEC Corporation
5900 Landerbrook Drive
Suite 300
Cleveland, Ohio 44124-4019
Telephone:(440) 460-3600
FAX (440) 460-3690
CONFIDENTIAL
February 4, 1999
Mr. John C. Mayo
Finance Director
The General Electric Company, p.l.c.
One Bruton Street
London, UK W1X 8AQ
Dear Mr. Mayo:
In connection with your consideration of a possible business combination
transaction ("Transaction") involving RELTEC Corporation, we have agreed to
provide each other with certain information that is either non-public,
confidential or proprietary in nature. All information furnished by or on
behalf of either company (the "Disclosing Party") to the other (the "Receiving
Party"), or to its respective directors, officers and other employees,
Affiliates (as defined in Section 10(a) below), attorneys, accountants,
financial advisors, persons contemplating providing financing, experts or other
consultants (collectively "representatives") (whether before or after the date
of this Agreement), together with all notes, memoranda, analyses, compilations,
studies or other textual, numerical or graphical material prepared by the
Receiving Party or its respective representatives which contain or otherwise
reflect such information or the Receiving Party's view of, or interest in, the
Disclosing Party, is hereafter referred to as the "Information." As used
herein, Information shall include information in any form, whether written,
visual, oral or otherwise. In consideration of our being furnished with the
Information, we each agree that:
1. The Information will be kept confidential by the Receiving Party and its
representatives and will not, without the Disclosing Party's prior written
consent, be disclosed by the Receiving Party or by its representatives, in
any manner whatsoever, in
<PAGE>
The General Electric Company, p.l.c.
February 4, 1999
Page 2
whole or in part, and shall not be used by the Receiving Party or its
representatives directly or indirectly for any purpose other than
evaluating, negotiating or effecting a Transaction. Moreover, we each agree
to transmit the Information only to our respective representatives who need
to know the Information for the purpose of evaluating, negotiating or
effecting the Transaction and who are informed by the applicable Receiving
Party of the confidential nature of the Information and who agree to be
bound by the terms of this letter agreement applicable to representatives.
Each party shall be responsible for any breach of this letter agreement by
its respective representatives.
2. The Information which is furnished to a Receiving Party, or to its
representatives, will be destroyed or returned to the Disclosing Party as
soon as reasonably practicable upon the Disclosing Party's request without
retaining any copies thereof. That portion of the Information which
consists of notes, memoranda, analyses, compilations, studies or other
textual, numerical or graphical material prepared by the Receiving Party or
its respective representatives, will, at the request of the Disclosing
Party, be destroyed or erased, and such destruction or erasure shall be
certified in writing to the Disclosing Party by an authorized officer
supervising such destruction or erasure. Notwithstanding the return,
destruction or erasure of Information, the Receiving Party shall continue
to be bound by the restrictions on disclosure and non-use of the Disclosing
Party's Information set forth herein.
3. This letter agreement shall be inoperative as to such portions of the
Information which (i) are or become generally available to the public
through no fault or action of Receiving Party or its representatives; (ii)
become available to Receiving Party, its representatives or to the general
public on a non-confidential basis from a source, other than the Disclosing
Party, which is not prohibited from disclosing such portions by a
contractual, legal or fiduciary obligation; (iii) were known to Receiving
Party or its representatives on a non-confidential basis prior to its
disclosure to Receiving Party or its representatives by Disclosing Party or
one of its representatives or (iv) are developed independently by Receiving
Party without reference to any of the Information disclosed by the
Disclosing Party. In the event of a dispute, the party asserting that
information is within any of the exceptions set forth in the foregoing
clauses (i) through (iv) shall have the burden of proving that such
information is within the scope of such exception.
4. Except for such public disclosure as may be necessary, in a party's good
faith judgment following consultation with outside counsel, for such party
not to be in violation of any applicable law, regulation, order or stock
exchange rule or regulation, or with the prior written consent of the other
party, such party and its representatives shall not:
<PAGE>
The General Electric Company, p.l.c.
February 4, 1999
Page 3
(a) make any disclosure to any person of (i) the fact that
discussions, negotiations or investigations are taking or have taken place
concerning a Transaction, (ii) the existence or contents of this letter
agreement, or the fact that either party has requested or received
Information from the other party, or (iii) any of the terms, conditions or
other facts with respect to any proposed Transaction, including the status
thereof, or
(b) make any public statement concerning a proposed Transaction.
If a party proposes to make any disclosure (following consultation with
outside counsel) for such party not to be in violation of any applicable
law, regulation, order, or stock exchange rule or regulation, such party
shall, if practicable, provide the other party with the text of the
proposed disclosure as far in advance of its disclosure as is reasonably
practicable and shall in good faith consult with and consider the
suggestions of the other party concerning the nature and scope of the
information that such party proposes to disclose. The term "person" as used
in this letter shall be broadly interpreted to include, without limitation,
any corporation, company, governmental agency or body, partnership or
individual.
5. Each party acknowledges that it is aware, and each party will advise its
representatives who are informed as to the matters which are the subject of
this letter agreement, that certain laws prohibit any person who has
received material, non-public information concerning the matters which are
the subject of this letter agreement from purchasing or selling securities
of either party or from communicating such information to any person under
circumstances in which it is reasonably foreseeable that such person is
likely to purchase or sell such securities. Nothing herein shall constitute
an admission by either party that any Information of the other party in
fact contains material non-public information concerning the other party.
6. In the event that the Receiving Party or any of its representatives is
required by statute, rule, regulation, or stock exchange rule or regulation
or is requested in any proceeding to disclose any Information of the
Disclosing Party, the Receiving Party or such representative will give the
Disclosing Party prompt notice of such request so that the Disclosing Party
may seek an appropriate protective order. It is further agreed that, if in
the absence of a protective order, the Receiving Party or such
representative is nonetheless compelled to disclose Information of the
Disclosing Party, the Receiving Party or such representative may disclose
such Information without liability under this agreement, provided, however,
that the Receiving Party or such representative gives the Disclosing Party
written notice of the Information to be disclosed as far in advance of its
disclosure as is reasonably practicable and, upon the request of and at the
expense of the Disclosing Party,
<PAGE>
The General Electric Company, p.l.c.
February 4, 1999
Page 4
uses reasonable efforts to obtain assurances that confidential treatment
will be accorded to such Information.
7. During the course of each party's evaluation of a possible Transaction,
all inquiries and other communications are to be made only to such
directors, officers and employees of the other party as such other party
shall authorize. Accordingly, each party agrees not to directly or
indirectly contact or communicate with any other shareholder, director,
officer or other employees of the other party regarding any matter relating
to a Transaction prior to the public announcement (if any) of a Transaction
by the parties without the consent of the other party. Each party agrees
that, without the other party's prior written consent, it will not, for a
period of eighteen (18) months from the date of this letter agreement,
directly or indirectly, solicit or induce or attempt to solicit or induce
any key employee with whom a party became acquainted as a result of
evaluating, negotiating or effecting a Transaction, to terminate their
employment with the other party. For the purposes hereof, solicitation or
inducement shall not include the placement of any employment advertisement
in a publication of general circulation.
8. Although the Disclosing Party has endeavored to include in the
Information of the Disclosing Party information known to it which it
believes to be relevant for the purpose of the Receiving Party's
investigation, the Receiving Party acknowledges that neither the Disclosing
Party nor any of its representatives have made or make any representation
or warranty as to the accuracy or completeness of such Information. The
Receiving Party agrees that neither the Disclosing Party nor any of its
representatives shall have any liability to the Receiving Party or any of
the Receiving Party's representatives resulting from the use of the
Information of the Disclosing Party. Legal effect will be given only to
those representations or warranties that are made in a definitive written
agreement memorializing the Transaction when, as, and if, executed and
delivered by the parties hereto, and subject to such limitations and
restrictions as may be specified in such definitive agreement.
9. Each party agrees that money damages would not be a sufficient remedy
for any breach of this agreement by such party or its representatives, and
that in addition to all other remedies each party shall be entitled to
specific performance and injunctive or other equitable relief as a remedy
for any such breach by the other party, and each party further agrees to
waive and to use its reasonable efforts to cause its representatives to
waive any requirement for the securing or posting of any bond in connection
with such remedy.
10.(a) Each party agrees that for a period of two (2) years after the date
hereof unless and until it shall have been specifically invited or
authorized in writing by the other party, it will not, and will cause each
of its Affiliates (as defined below) who have been provided
<PAGE>
The General Electric Company, p.l.c.
February 4, 1999
Page 5
Information not to, directly or indirectly, either alone or in concert with
others, solicit, seek or offer to effect, negotiate with or provide any
information to the Board of Directors of the other party, to any director
or officer of the other party or to any shareholder or security holder of
the other party or otherwise make any public announcement or proposal or
offer whatsoever with respect to, (i) any form of business combination or
similar transaction involving the other party including, without
limitation, a merger, consolidation, tender or exchange offer, sale or
purchase of a business or securities or of material assets outside of the
ordinary course of business, or dissolution or liquidation of the other
party, (ii) any type of restructuring, recapitalization or similar
transaction with respect to the other party, or (iii) any request or
proposal to amend, waive or terminate any provision of this Section 10(a)
or 10(b). With respect to any party, the term "Affiliates" shall mean a
person that, directly or indirectly, through one or more intermediaries,
controls or is controlled by, or is under common control with such party.
(b) Each party agrees that for a period of two (2) years after the
date hereof, without the prior written consent of the other party, it will
not, and will cause each of its Affiliates who have been provided
Information not to, singly or as part of a "partnership, limited
partnership, syndicate or other group" (as those terms are used within the
meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), which meanings shall apply for all purposes
of this agreement), directly or indirectly, through one or more
intermediaries or otherwise:
(i) acquire, offer or propose to acquire, or agree to acquire,
by purchase or otherwise, (A) any securities entitled to, or that
may be entitled to, vote generally in the election of the other
party's Board of Directors (collectively, "Voting Securities"), or
(B) any direct or indirect rights or options to acquire (through
purchase, exchange, conversion or otherwise) any Voting Securities,
or (C) any material assets or securities of the other party;
(ii) make, or in any way participate, in any "solicitation" of
"proxies" (as such terms are defined or used in Regulation 14A of
the Exchange Act) with respect to the Voting Securities (including
by the execution of action by written consent), become a
"participant" in any "election contest" (as such terms are defined
or used in Rule 14a-11 of the Exchange Act) with respect to the
other party, seek to advise, encourage or influence any person or
entity with respect to the voting of any Voting Securities or demand
a copy of the other party's stock ledger, list of its shareholders,
or other books and records;
<PAGE>
The General Electric Company, p.l.c.
February 4, 1999
Page 6
(iii) participate in or encourage the formation of any group
which owns or seeks or offers to acquire beneficial ownership of
securities of the other party or any material assets of the other
party or rights to acquire such securities or which seeks or offers
to affect control of the other party or for the purpose of
circumventing any provisions of this agreement; or
(iv) otherwise act, alone or in concert with others
(including by providing financing to another party), to seek or
offer to control, in any manner, the management, Board of Directors
or policies of the other party.
11. Notwithstanding anything to the contrary contained herein, this
agreement shall not prohibit:
(a) The General Electric Company, p.l.c. ("GEC") or its Affiliates
from acquiring any securities of RELTEC Corporation ("RELTEC") from
Kohlberg Kravis Roberts & Co., L.P. ("KKR") or its Affiliates, or from
entering into any other transaction or arrangement, or negotiation or
discussion related thereto, with KKR or its Affiliates or from making any
solicitation or offer related thereto, or providing any Information to KKR
or its Affiliates; provided that all such solicitations, offers,
negotiations, discussions or the provision of Information shall be made
only to those representatives of KKR who are members of the Board of
Directors of RELTEC (at the date of this letter the KKR representatives on
the Board are Henry Kravis, George Roberts, James Greene, Jr. and
Alexander Navab, Jr.; and GEC shall be advised of any changes in KKR
representation on the Board) or such other persons as they may designate,
or
(b) either KKR or its Affiliates or RELTEC or its Affiliates from
acquiring any stock of GEC or from entering into any other transaction or
arrangement, or negotiation or discussion related thereto, or from making
any solicitation or offer related thereto, or providing any Information to
GEC or its Affiliates.
12. This agreement shall be governed and construed in accordance with the
laws of the State of New York without giving effect to its conflict of
laws principles or rules. Each party hereto consents and submits to the
exclusive jurisdiction of the courts of the State of New York and the
courts of the United States located in the State of New York for the
adjudication of any action, suit, or proceeding arising out of or
otherwise relating to this agreement.
13. Neither party grants a license, by implication or otherwise, under any
of such party's trade secrets or other intellectual property rights to the
other party by entering into this
<PAGE>
The General Electric Company, p.l.c.
February 4, 1999
Page 7
agreement or by furnishing Information of such party to the other party
and its representatives. This agreement contains the sole and entire
agreement between the parties with respect to the confidentiality of the
Information and the confidentiality of their discussions, negotiations and
investigations concerning a Transaction. This agreement may be amended,
modified or waived only by a separate written instrument duly signed and
delivered by or on behalf of both parties.
14. The invalidity or unenforceability of any provision of this agreement
shall not impair or affect the validity or enforceability of any other
provision of this agreement unless the enforcement of such provision in
such circumstances would be inequitable. It is expressly understood that
this agreement is not intended to, and does not, constitute an agreement
to consummate a Transaction, to conduct or continue negotiations with
respect to a Transaction, or to enter into a definitive Transaction
agreement, and neither party shall have any rights or obligations of any
kind whatsoever with respect to such a Transaction by virtue of this
letter agreement or by virtue of any other written or oral expression by
the parties' respective representatives unless and until a definitive
written Transaction agreement between the parties is executed and
delivered by both parties, other than for the matters specifically agreed
to herein. Both parties further acknowledge and agree that each party, in
its capacity as a Disclosing Party, reserves the right, in its sole
discretion, to provide or not to provide Information of the Disclosing
Party to the Receiving Party under this letter agreement, to reject any
and all proposals made by the other party or any of its representatives
with regard to a Transaction, and to terminate discussions and
negotiations at any time.
If you are in agreement with the foregoing, please so indicate by signing,
dating and returning one copy of this agreement, which will constitute your
agreement with respect to the matters set forth herein.
Very truly yours,
RELTEC Corporation
/s/ Scott A. Fine
- --------------------------------------------
BY: Scott A. Fine, Vice President - Finance
<PAGE>
The General Electric Company, p.l.c.
February 4, 1999
Page 8
Confirmed and agreed to:
The General Electric Company, p.l.c.
By: /s/ John C. Mayo
--------------------
Dated: February 10, 1999
<PAGE>
[Letterhead of]
[The General Electric Company, p.l.c.]
Dudley P. Sheffler Alexander Navab, Jr.
Chief Executive Officer KKR Associates
Reltee Corporation 9 West 57th Street
5900 Landerbrook Drive New York, N.Y.
Cleveland, Ohio 44124
February 28, 1999
Gentlemen:
Reference is hereby made to (i) the Agreement and Plan of Merger dated
as of March 1, 1999 (the "Merger Agreement"), by and among GEC Incorporated, a
Delaware corporation ("GEC Inc") and a wholly-owned subsidiary of The General
Electric Company, p.l.c., Company No. 67307 ("GEC p.l.c.), George Acquisition
Corp., a Delaware corporation and a wholly-owned subsidiary of GEC Inc.
("Purchaser"), and Reltec Corporation, a Delaware corporation (the "Company"),
and (ii) the Agreement dated March 25, 1998, for a Euro 6,000,000,000 Syndicated
Credit Facility for GEC p.l.c. (the "Credit Agreement"), arranged by the banks
named therein, with HSBC Investment Bank PLC, as Agent, and Marine Midland Bank,
as U.S. Swingline Agent.
In connection with the Merger Agreement, GEC p.l.c. hereby represents
and warrants to, and agrees with, you as follows:
1. GEC Inc. is a "Subsidiary" of GEC p.l.c., as such term is defined
in the Credit Agreement.
2. GEC p.l.c. has delivered the documents required by Section 28.4(a)
of the Credit Agreement, including a Borrower Accession Agreement (as defined in
the Credit Agreement) executed by GEC p.l.c. and GEC Inc., so that GEC Inc. is
an "Additional Borrower" under the Credit Agreement. Prior to the earlier to
occur of (i) the date which is one day after the Effective Time (as defined in
the Merger Agreement) and (ii) the date the Merger Agreement is terminated, GEC
p.l.c. will not exercise its rights under Section 9.5 of the Credit Agreement to
request that GEC Inc. cease to be a Borrower under the Credit Agreement.
<PAGE>
2
3. From and after the date hereof until the earlier to occur of (i)
the date which is one day after the Effective Time (as defined in the Merger
Agreement) and (ii) the date the Merger Agreement is terminated, GEC p.l.c.
shall cause the total amount of Advances (as defined in the Credit Agreement)
for all the Borrowers to be in an amount such that, upon satisfaction of the
conditions precedent set forth in the Credit Agreement, GEC Inc. may borrow
Advances in the aggregate amount then necessary to complete the acquisition of
all the outstanding Shares (as defined in the Merger Agreement), upon the terms
and conditions set forth in the Merger Agreement.
4. As of the date hereof, the Credit Agreement is in full force and
effect and constitutes a legal, valid and binding obligation of GEC p.l.c.
(assuming due authorization, execution and delivery by the other parties
thereto), enforceable against GEC p.l.c. in accordance with its terms. As of
the date hereof, GEC p.l.c. could satisfy all the conditions precedent to
borrowing an Advance under the Credit Agreement if a Request (as defined in the
Credit Agreement) for an Advance was made by GEC p.l.c. under the Credit
Agreement on this date.
5. GEC p.l.c. otherwise intends to make available to GEC Inc. funds
to enable it to complete the acquisition of all the outstanding Shares, upon the
terms and conditions set forth in the Merger Agreement.
Yours sincerely,
/s/ John Mayo
John Mayo
<PAGE>
EXHIBIT 6
[RELTEC Corporation Letterhead]
March 5, 1999
Dear Stockholder:
We are pleased to inform you that on March 1, 1999, RELTEC Corporation (the
"Company") entered into an Agreement and Plan of Merger with GEC Incorporated
("Parent") and its wholly owned subsidiary, GEC Acquisition Corp.
("Purchaser"), which provides for the acquisition of the Company. Under the
terms of the Merger Agreement, Purchaser today commenced a tender offer (the
"Offer") to purchase all of the Company's outstanding shares of common stock
(the "Shares") for $29.50 per Share in cash. The Merger Agreement further
provides that, following consummation of the Offer, Purchaser will be merged
with the Company (the "Merger") and Shares that are not acquired through the
Offer (other than those held by stockholders who perfect their appraisal
rights, Shares owned by the Company and Shares owned by Parent or any direct
or indirect wholly owned subsidiary of Parent or the Company) will be
converted in the Merger into the right to receive the same consideration as is
paid in the Offer.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY HAS DETERMINED THAT THE MERGER
AGREEMENT AND TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE OFFER AND THE
MERGER, ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE
COMPANY, HAS APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER AND THE MERGER, AND RECOMMENDS THAT YOU ACCEPT
THE OFFER AND TENDER YOUR SHARES TO PURCHASER PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors which are described in the enclosed
Schedule 14D-9. Each of Morgan Stanley & Co. Incorporated and Salomon Smith
Barney Inc., financial advisors to the Company, has delivered to the Board of
Directors a written opinion dated as of February 28, 1999 to that effect that,
as of such date and based upon and subject to certain matters stated in their
respective opinions, the $29.50 per Share consideration to be received in the
Offer and the Merger by the holders of Shares (other than Parent and its
affiliates) pursuant to the Merger Agreement was fair, from a financial point
of view, to such holders. In addition, certain affiliates of Kohlberg Kravis
Roberts & Co., L.P. have agreed to tender into the Offer approximately 81.2%
of the Shares outstanding.
Additional information with respect to the Offer and the Merger is contained
in the enclosed Schedule 14D-9, and we urge you to consider this information
carefully.
On behalf of the Board of Directors and management of the Company, I thank
you for the support you have given to the Company.
Sincerely,
/s/ Dudley P. Sheffler
President and Chief Executive Officer
<PAGE>
Exhibit 7
[MORGAN STANLEY LETTERHEAD]
February 28, 1999
Board of Directors
RELTEC Corporation
5900 Landerbrook Drive, Suite 300
Cleveland, OH 44124-4019
Members of the Board:
We understand that RELTEC Corporation ("RELTEC" or the "Company"), GEC
Incorporated ("GEC"), a wholly owned subsidiary of The General Electric
Company, p.l.c., and George Acquisition Corp., a wholly owned subsidiary of
GEC ("Acquisition Sub"), propose to enter into an Agreement and Plan of
Merger, substantially in the form of a draft dated February 28, 1999 (the
"Merger Agreement"), which provides, among other things, for (i) the
commencement by Acquisition Sub of a tender offer (the "Tender Offer") for all
outstanding shares of common stock, par value $0.01 per share (the "Company
Common Stock") of the Company for $29.50 per share net to the seller in cash,
and (ii) the subsequent merger (the "Merger") of Acquisition Sub with and into
the Company. Pursuant to the Merger, the Company will become a wholly owned
subsidiary of GEC, and each outstanding share of Company Common Stock, other
than shares held in treasury or held by GEC or any affiliate of GEC or as to
which dissenters' rights have been perfected, will be converted into the right
to receive $29.50 in cash. The terms and conditions of the transaction are
more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the consideration to be
received by the holders of shares of the Company Common Stock pursuant to the
Merger Agreement is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and other
information of RELTEC;
(ii) reviewed certain internal financial statements and other financial
and operating data concerning RELTEC prepared by the management of RELTEC;
(iii) analyzed certain financial projections prepared by the management
of RELTEC;
(iv) discussed the past and current operations and financial condition
and the prospects of RELTEC with senior executives of RELTEC;
(v) reviewed the reported prices and trading activity for the Company
Common Stock;
(vi) compared the financial performance of RELTEC and the prices and
trading activity of the Company Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(viii) participated in discussions and negotiations among representatives
of RELTEC and GEC and their financial and legal advisors;
<PAGE>
(ix) reviewed the draft Merger Agreement and certain related documents;
and
(x) performed such other analyses and considered such other factors as we
have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes
of this opinion. With respect to the financial projections, we have assumed
that they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company. We have not made any independent valuation or appraisal of the assets
or liabilities of the Company, nor have we been furnished with any such
appraisals. Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of,
the date hereof.
We have acted as financial advisor to the Board of Directors of RELTEC in
connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for RELTEC and GEC and their
affiliates and have received fees for the rendering of these services.
It is understood that this letter is for the information of the Board of
Directors of RELTEC, except that this opinion may be included in its entirety
in any filing made by RELTEC in respect of the transaction with the Securities
and Exchange Commission. In addition, Morgan Stanley expresses no opinion or
recommendation as to whether the stockholders of the Company should accept the
Tender Offer.
Based upon and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be received by holders of shares of the
Company Common Stock pursuant to the Merger Agreement is fair from a financial
point of view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Cordell G. Spencer
-----------------------------------
Cordell G. Spencer
Managing Director
<PAGE>
Exhibit 8
[LETTERHEAD OF SALOMON SMITH BARNEY INC.]
February 28, 1999
The Board of Directors
RELTEC Corporation
5900 Landerbrooke Drive, Suite 300
Cleveland, Ohio 44124
Members of the Board:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of the common stock of RELTEC Corporation ("RELTEC") of
the consideration to be received by such holders pursuant to the terms and
subject to the conditions set forth in an Agreement and Plan of Merger (the
"Merger Agreement") to be entered into by and among RELTEC, GEC Incorporated
("GEC") and George Acquisition Corp., a wholly owned subsidiary of GEC
("Acquisition Sub"). As more fully described in the Merger Agreement, (i) GEC
will cause Acquisition Sub to commence a tender offer to purchase all
outstanding shares of the common stock, par value $0.01 per share, of RELTEC
(the "RELTEC Common Stock") at a purchase price of $29.50 per share, net to
the seller in cash (the "Cash Consideration" and, such tender offer, the
"Tender Offer") and (ii) subsequent to the Tender Offer, Acquisition Sub will
be merged with and into RELTEC (the "Merger" and, together with the Tender
Offer, the "Transaction") and each outstanding share of RELTEC Common Stock
not previously tendered will be converted into the right to receive the Cash
Consideration.
In arriving at our opinion, we reviewed a draft of the Merger Agreement
dated February 28, 1999 and held discussions with certain senior officers,
directors and other representatives and advisors of RELTEC and certain senior
officers and other representatives and advisors of GEC concerning the
business, operations and prospects of RELTEC. We examined certain publicly
available business and financial information relating to RELTEC as well as
certain financial forecasts and other information and data for RELTEC which
were provided to or otherwise discussed with us by the management of RELTEC.
We reviewed the financial terms of the Transaction as set forth in the Merger
Agreement in relation to, among other things: current and historical market
prices and trading volumes of RELTEC Common Stock; the historical and
projected earnings and other operating data of RELTEC; and the capitalization
and financial condition of RELTEC. We considered, to the extent publicly
available, the financial terms of certain other similar transactions recently
effected which we considered relevant in evaluating the Transaction and
analyzed certain financial, stock market and other publicly available
information relating to the businesses of other companies whose operations we
considered relevant in evaluating those of RELTEC. In connection with our
engagement, we were requested to approach, and we held discussions with,
selected third parties to solicit indications of interest in the possible
acquisition of all or a part of RELTEC. In addition to the foregoing, we
conducted such other analyses and examinations and considered such other
information and financial, economic and market criteria as we deemed
appropriate in arriving at our opinion.
In rendering our opinion, we have assumed and relied, without independent
verification, upon the accuracy and completeness of all financial and other
information and data publicly available or furnished to or otherwise reviewed
by or discussed with us. With respect to financial forecasts and other
information and data provided to or otherwise reviewed by or discussed with
us, we have been advised by the management of RELTEC that such forecasts and
other information and data were reasonably prepared on bases reflecting the
best currently available estimates and judgments of the management of RELTEC
as to the future financial performance of RELTEC. We have not made or been
provided with an independent evaluation or appraisal of the assets or
liabilities (contingent
<PAGE>
or otherwise) of RELTEC nor have we made any physical inspection of the
properties or assets of RELTEC. Representatives of RELTEC have advised us, and
we have assumed, that the final terms of the Merger Agreement will not vary
materially from those set forth in the draft reviewed by us. We express no
view as to, and our opinion does not address, the relative merits of the
Transaction as compared to any alternative business strategies that might
exist for RELTEC or the effect of any other transaction in which RELTEC might
engage. Our opinion is necessarily based upon information available to us, and
financial, stock market and other conditions and circumstances existing and
disclosed to us, as of the date hereof.
Salomon Smith Barney Inc. has acted as financial advisor to RELTEC in
connection with the proposed Transaction and will receive a fee for such
services, a significant portion of which is contingent upon the consummation
of the Transaction. We have in the past provided investment banking services
to RELTEC and its affiliates, and affiliates of GEC, unrelated to the proposed
Transaction, for which services we have received compensation. In the ordinary
course of our business, we and our affiliates may actively trade or hold the
securities of RELTEC and affiliates of GEC for our own account or for the
account of our customers and, accordingly, may at any time hold a long or
short position in such securities. In addition, we and our affiliates
(including Citigroup Inc. and its affiliates) may maintain relationships with
RELTEC, GEC and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of RELTEC in its evaluation of the
proposed Transaction, and our opinion is not intended to be and does not
constitute a recommendation to any stockholder as to whether such stockholder
should tender shares of RELTEC Common Stock in the Tender Offer or how such
stockholder should vote on any matters relating to the proposed Transaction.
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Cash Consideration to be
received in the Transaction by the holders of RELTEC Common Stock (other than
GEC or its affiliates) is fair, from a financial point of view, to such
holders.
Very truly yours,
/s/ Salomon Smith Barney Inc.
SALOMON SMITH BARNEY INC.
