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EXHIBIT 99(a)(2)
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION IN OR INTO AUSTRALIA, CANADA OR
JAPAN
17 August 2000
Recommended Cash Offer
by
General Electric Company
through its wholly-owned subsidiary
GE Power Systems Equities, Inc.
for the whole of the issued
and to be issued share capital of
Smallworldwide plc
1. Summary
General Electric Company and Smallworldwide plc announce that they have reached
agreement on the terms of a recommended cash offer to be made by General
Electric Company, through its wholly-owned subsidiary GE Power Systems Equities,
Inc., to acquire the whole of the issued and to be issued share capital of
Smallworld.
2. The Offer
The Offer will be made on the following basis:
GE will acquire all of Smallworld's outstanding ordinary shares and all
outstanding ADSs, each representing one ordinary share and evidenced by American
Depositary Receipts, in a recommended cash offer at a price per ordinary share
(or ADS) of US$20.
The Offer values the whole of the existing issued and to be issued share capital
of Smallworld at approximately US$210 million.
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The Offer Price represents a premium of approximately 125 per cent. to the
closing price of US$8.875 per Smallworld ADS on the Nasdaq National Market on 16
August 2000 (the last practicable dealing day prior to the date of this
announcement).
The initial offer period will expire 20 business days after the Offer is
commenced, unless extended (the "Offer Period"). At the conclusion of the Offer
Period, including any extension thereof, if all conditions of the Offer have
been satisfied or, where permitted, waived, the Offer may be extended for a
subsequent offer period of up to 20 business days (the "Subsequent Offer
Period"). Holders of ordinary shares and ADSs will have the right to withdraw
their acceptances of the Offer during the Offer Period, including any extension
thereof, but not during any Subsequent Offer Period.
The Offer will comply with the relevant requirements of US federal securities
laws and rules and regulations of the Code.
This announcement is not an Offer to purchase Smallworld shares. At the time
the Offer is commenced, GE will file a tender offer statement (including related
tender offer documents such as a form of letter of transmittal for US
shareholders and form of acceptance for UK shareholders) with the US Securities
and Exchange Commission (the "SEC"), and Smallworld will file a
solicitation/recommendation statement with the SEC. These documents will
contain important information about the Offer and shareholders of Smallworld are
urged to read these documents before making a decision about the Offer. Once
filed with the SEC, these documents will be available free of charge from Joanna
Morris at General Electric and Warren Ferguson at Smallworld (whose contact
details appear in the section headed "Enquiries"). In addition, the documents
filed by GE can be obtained from the SEC's website at www.sec.gov.
The Offer will be subject to the conditions set out in Appendix I to this
announcement and to the further terms set out in that Appendix and to be set out
in the Offer Document and Form of Acceptance.
The Offer is to be financed from the existing resources of GE.
3. Recommendation
The directors of Smallworld, who have been so advised by Deutsche Bank, their
financial advisers, consider the terms of the Offer to be fair and reasonable.
In providing advice to the directors of Smallworld, Deutsche Bank has taken into
account the directors' commercial assessments.
The directors of Smallworld unanimously recommend all Smallworld Shareholders to
accept the Offer as they and their connected persons have irrevocably undertaken
to do in respect of their entire holdings.
4. Inducement Fee
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Smallworld and GE have entered into an Acquisition Agreement which sets out the
terms of the Offer to be made and includes the agreement, in certain
circumstances, to pay to General Electric an inducement fee of US$1,579,888.
The inducement fee will be payable, inter alia, if (i) the Offer lapses or is
withdrawn following the withdrawal by the Board of its recommendation of the
Offer, (ii) the Offer lapses or is withdrawn, without having become
unconditional as to acceptances, after the announcement of any other competing
proposal to acquire control of Smallworld and such other proposal becomes or is
declared unconditional in all respects on or before 17 August 2001, or (iii) GE
withdraws the Offer as a result of a breach of representations and warranties or
covenants that reflects a Material Adverse Effect on Smallworld and any other
offer becomes or is declared unconditional within 12 months of the date of this
announcement.
Certain directors and executive officers of Smallworld (for themselves and
persons connected with them) have undertaken to pay in aggregate up to
US$2,805,788 to GE, if (i) the Offer lapses or is withdrawn following the
withdrawal by the Board of its recommendation of the Offer, or (ii) the Offer
lapses or is withdrawn, without having become unconditional as to acceptances,
after the announcement of any other competing proposal to acquire control of
Smallworld and such other proposal becomes or is declared unconditional in all
respects on or before 17 August 2001. Each person who has given such an
undertaking and who disposes of any of the ADSs, shares or options held by him
to the other offeror will be liable to make payments out of the excess of the
amount received by him from such disposal, net of tax, over the amount he would
have received, net of tax, under the Offer for such ADSs or shares.
5. Undertakings to Accept the Offer
All the directors of Smallworld who own Smallworld Shares and certain executive
officers (for themselves and persons connected with them) have given GE legally
binding irrevocable undertakings to accept the Offer in respect of their entire
holdings of, in aggregate, 1,113,700 Smallworld Shares, representing
approximately 14.1 per cent. of the existing issued share capital of Smallworld.
These irrevocable undertakings may not be withdrawn in the event of a higher
offer.
Certain directors of Smallworld (and four other executive officers) who hold
options over Smallworld Shares have undertaken to roll-over not less than 45 per
cent. by value of those options into GE options.
6. Comments by GE and Smallworld
Commenting on today's announcement, Robert L. Nardelli, President and CEO of GE
Power Systems, said "Smallworld's software technology solutions will offer
tremendous opportunities for our customers to improve their overall network
management and service reliability. As companies around the world race to
digitize their operations, this technology will become a
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fundamental part of our strategy to provide the energy and other high-tech
industries with innovative solutions that drive productivity. By combining this
business with our growing portfolio of software solutions we will be better
positioned to help meet the changing needs of the global energy and
communications marketplace."
Dick Newell, Chairman of Smallworld, commented "This transaction complements our
long term goal of becoming the software choice for designing and managing the
world's networks. The Board of Directors' unanimous approval of this
transaction confirms our commitment to continued growth and global opportunity."
Warren Ferguson, President and Chief Executive Officer of Smallworld, added "Our
innovative people, spatial technology, product quality, and network solutions
will make a valuable addition to GE. All of us at Smallworld can take great
pride in the fact that we are joining forces with one of the best corporations
in the world."
Upon completion of the transaction, Smallworld will become part of GE Energy
Management Services, a GE Power Systems business. "In addition to Smallworld's
strong technology and customer franchise, we are very impressed with the people
at Smallworld and excited to have them join out team," commented Steve Bolze,
President and General Manager of GE Energy Management Services. "Smallworld
will be an integral part of our growth strategy for serving customers in the
rapidly changing utility and communications industries".
7. Information on GE
GE is one of the world's largest and most diversified industrial corporations.
GE has engaged in developing, manufacturing and marketing a wide variety of
products for the generation, transmission, distribution, control and utilisation
of electricity since its incorporation in 1892. Over the years, GE has
developed or acquired new technologies or services that have broadened
considerably the scope of its activities.
GE products include major appliances; lighting products; industrial automation
products; medical diagnostic imaging equipment; motors; electrical distribution
and control equipment; locomotives; power generation and delivery products;
nuclear power support services and fuel assemblies; commercial and military
aircraft jet engines; and engineered materials, such as plastics, silicones and
superabrasive industrial diamonds.
GE services include product services; electrical product supply houses;
electrical apparatus installation, engineering, repair and rebuilding services;
and computer-related information services. Through its affiliate, the National
Broadcasting Company, Inc., GE delivers network television services, operates
television stations, and provides cable programming and distribution services.
Through another affiliate, GE Capital Services, Inc., GE offers a broad array of
financial and other services, including consumer financing, commercial and
industrial financing, real estate financing, asset management and leasing,
mortgage services, consumer savings and insurance services, speciality insurance
and reinsurance, and satellite communications.
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GE Power Systems provides turnkey equipment, services and management solutions
across the power generation, oil and gas, transmission and distribution,
distributed power and energy rental industries. This business segment had
revenues of US$10 billion in 1999.
Smallworld will become part of GE Energy Management Services (EMS) within GE
Power Systems. The EMS division is focused on providing innovative IT solutions
to utility, industrial, and communication customers.
8. Information on Smallworld
Smallworld develops and markets software products that model real-world assets
and services, allowing organisations to understand where their facilities and
customers are located, how they connect to one another and providing for the
integration of this information across the enterprise. Smallworld's object
orientated technology allows customers to streamline work processes, improve
customer service and make better use of assets.
Smallworld 3, the Company's principal product, provides a platform for building
applications that automate business processes where the spatial element is key,
and integrates the platform and applications seamlessly with the other systems
on which the user depends. Smallworld 3 and industry-specific applications are
used for such purposes as planning electric, gas and water distribution systems,
designing telecommunication networks and evaluating strategic market
opportunities.
Smallworld announced yesterday its preliminary results of operations for the
year ended 30 June 2000. Total revenues were US$78.9 million (compared to
US$71.7 million in fiscal 1999), income before income taxes was US$2.3 million
(compared to a loss of US$7.4 million in fiscal 1999) and diluted earnings per
share were US$0.14 (compared to a loss of US$0.78 in fiscal 1999).
9. Management and Employees
The existing employment rights, including pension rights, of the employees
of Smallworld will be fully safeguarded.
10. Smallworld Share Option Schemes
The Offer will extend to any Smallworld Shares issued or unconditionally
allotted before the date on which the Offer becomes or is declared unconditional
in all respects (or such later date as GE may, subject to the Code, determine)
as a result of the exercise or vesting of options granted under any Smallworld
Share Option Scheme. GE will make appropriate proposals to participants in the
Smallworld Share Option Schemes in due course.
11. Delisting of Smallworld Shares
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In the event that the Offer becomes or is declared unconditional in all
respects, GE intends to seek the cancellation of the listing of ADSs on the
Nasdaq National Market.
12. Overseas Shareholders
The availability of the Offer to persons outside the United States and the
United Kingdom may be affected by the laws of other jurisdictions. Such persons
should inform themselves about and observe any applicable requirements of those
jurisdictions.
In particular, the Offer will not be made, directly or indirectly, in or into,
or by use of the mails or any other means or instrumentality (including, without
limitation, telephonic or electronic) of interstate or foreign commerce of, or
any facilities of a national securities exchange of Australia, Canada or Japan
and will not be capable of acceptance by any such use, means, instrumentality or
facilities or from within Australia, Canada or Japan and will not be capable of
acceptance by any such use, means, instrumentality or facilities or from within
Australia, Canada or Japan. Accordingly, copies of this announcement are not
being, and must not be, mailed or otherwise distributed or sent in or into or
from Australia, Canada or Japan and persons receiving this announcement
(including custodians, nominees and trustees) must not distribute or send it
into or from Australia, Canada or Japan. Doing so may render invalid any
related purported acceptance of the Offer.
13. Posting of Documents to Shareholders
The Offer Document containing the full terms and conditions of the Offer and the
Form of Acceptance will be despatched to Smallworld Shareholders in due course.
14. General
Save as set out in this announcement, neither GE nor any of its directors, nor,
so far as they are aware, any party acting in concert with them, owns or
controls any Smallworld Shares or holds any options to purchase Smallworld
Shares or has entered into any derivative referenced to Smallworld Shares or has
obtained any irrevocable undertaking to accept the Offer.
Any person who, alone or acting together with any other person(s) pursuant to an
agreement or understanding (whether formal or informal) to acquire or control
securities of Smallworld, owns or controls, or becomes the owner or controller,
directly or indirectly, of 1 per cent. or more of any class of securities of
Smallworld is generally required under the provisions of Rule 8 of the Code to
notify the Panel by no later than 12.00 noon (London time) on the business day
following the date of the transaction of every dealing in such securities during
the period prior to the date on which the Offer is unconditional in all respects
or lapses or is withdrawn. Dealings by Smallworld or by its "associates"
(within the definition set out in the Code) in any class of securities of
Smallworld or referable thereto until the end of such period must also be
disclosed.
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The conditions and principal further terms of the Offer are set out in Appendix
I to this announcement. Appendix II contains the definitions of the terms used
in this announcement.
Enquiries:
GE Joanna Morris +1 203 373 2472
Jeff Ignaszak +1 770 859 7650
ING Barings Julian Tunnicliffe +44 20 7767 1000
(Advisers to GE)
Robin Palmer
David DiMatteo
Smallworld Warren Ferguson +1 303 779 6980
Dick Newell +44 1223 301 144
Deutsche Bank Charles Smith +44 20 7545 8000
(Advisers to Smallworld)
Michael Stock +44 20 7545 8000
ING Barings Limited, which is regulated in the United Kingdom by The Securities
and Futures Authority Limited, and ING Barings LLC in the United States, which
is regulated by the SEC, are acting for GE and no one else in connection with
the Offer and will not be responsible to anyone other than GE for providing the
protections afforded to customers of ING Barings Limited and ING Barings LLC or
for giving advice in relation to the Offer.
ING Barings Limited has approved the contents of this announcement solely for
the purposes of Section 57 of the Financial Services Act 1986.
Deutsche Bank AG, which is regulated in the United Kingdom by The Securities and
Futures Authority Limited, and Deutsche Bank Securities Inc., which is regulated
in the United States by the SEC, are acting for Smallworld and no one else in
connection with the Offer and will not be responsible to anyone other than
Smallworld for providing the protections afforded to customers of Deutsche Bank
AG or Deutsche Bank Securities Inc. or for giving advice in relation to the
Offer.
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APPENDIX I
CONDITIONS AND CERTAIN FURTHER TERMS OF THE OFFER
PART I
Notwithstanding any other provision of the Offer or the Agreement, and in
addition to and not in limitation of Offeror's rights to extend or amend the
Offer at any time, in its sole discretion (subject to the Agreement and the
Code), Offeror shall not be required to accept for payment or, subject to any
applicable rules or regulations of the SEC and the Code, pay for any Smallworld
Shares, and (subject to such rules and regulations) may delay the acceptance of
payment of or, subject to any restriction referred to above, the payment for,
and may (except as provided in the Agreement) terminate the Offer, if the
following conditions have not been satisfied, fulfilled or waived by Offeror:-
(a) the Smallworld Shares tendered pursuant to the Offer by the expiration of
the Initial Offer and not withdrawn representing not less than 90 per cent.
(or such lower percentage as Offeror may on the basis stated below decide)
in nominal value of the Smallworld Shares to which the Offer relates;
provided that this condition (the "Minimum Condition") shall not be
satisfied unless the number of Smallworld Shares tendered pursuant to the
Offer and not withdrawn, together with the Smallworld Shares owned by
Offeror, represent at least a majority of the outstanding voting power of
the Smallworld Shares and for this purpose "the Smallworld Shares to which
the Offer relates" means (I) Smallworld Shares issued or allotted on or
before the date the Offer is made and (II) Smallworld Shares issued or
allotted after that time but before the Expiration Date or such earlier
time and/or date as Offeror may subject to the Code decide but excluding
any Smallworld Shares which on the date the Offer is made are held or
contracted to be acquired by Offeror and/or its associates (within the
meaning of section 430E of the Act) and provided further that, unless
Offeror otherwise determines, the Minimum Condition shall be treated as
satisfied only at a time when all of conditions (b) to (k) inclusive are
either satisfied, fulfilled or (if capable of waiver) waived provided
however that the Offer shall not be required to be declared or be deemed to
have become unconditional as to the required level of acceptances if,
following the announcement of a reduction in the percentage of Smallworld
Shares required to be received for the purposes of the Minimum Condition,
any circumstance or event shall have been identified, threatened or shall
occur that would prohibit, restrict, delay or interfere with the
implementation of or impose additional material conditions or obligations
with respect to, or otherwise challenge, the prospect or ability of Offeror
to apply the provisions of Sections 428-430F of the Act to acquire
compulsorily any outstanding Smallworld Shares to which the Offer relates;
(b) the waiting periods under the HSR Act applicable to the proposed
acquisition of Smallworld by Offeror having expired or been terminated, if
applicable, and all other regulatory approvals required under applicable
law, the failure to obtain
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which would prevent or prohibit the consummation of the Offer, having been
obtained;
(c) there not having been instituted, and not being pending or threatened any
action, investigation or proceeding by any Governmental Entity, and there
not having been instituted, and not being pending or threatened any action
or proceeding by any other person, domestic or foreign, before any
Governmental Entity, which is reasonably likely to be determined adversely
to Offeror, (A) challenging or seeking to make illegal, to delay materially
or otherwise, directly or indirectly, to restrain or prohibit the making of
the Offer, the acceptance for payment of or payment for some of or all the
Smallworld Shares by Offeror, seeking to obtain material damages or
imposing any material adverse conditions in connection therewith or
otherwise, directly or indirectly, relating to the transactions
contemplated by the Offer, (B) seeking to restrain, prohibit or delay the
exercise of full rights of ownership or operation by Offeror or its
affiliates of all or any portion of the business or assets of Smallworld
and its Subsidiaries, taken as a whole, or of Offeror or any of its
affiliates, or to compel Offeror or any of its affiliates to dispose of or
hold separate all or any material portion of the business or assets of
Smallworld and its Subsidiaries, taken as a whole, or of Offeror or any of
its affiliates, (C) seeking to impose or confirm limitations on the ability
of Offeror or any of its affiliates effectively to exercise full rights of
ownership of the Smallworld Shares, including, without limitation, the
right to vote the Smallworld Shares acquired or owned by Offeror or any of
its affiliates on all matters properly presented to the holders of
Smallworld Shares, (D) seeking to require divestiture by Offeror or any of
its affiliates of the Smallworld Shares, or (E) that otherwise would
reasonably be expected to have a Material Adverse Effect;
(d) no action having been taken, or any statute, rule, regulation, injunction,
order or decree proposed, enacted, enforced, promulgated, issued or deemed
applicable to, or any consent or approval withheld with respect to, the
Offer, the acceptance for payment of or payment for any Smallworld Shares,
by any Governmental Entity that, in the reasonable judgment of Offeror,
might, directly or indirectly, result in any of the consequences referred
to in clauses (A) through (E) of condition (c) above;
(e) there not having occurred any change, condition, event or development that
has resulted in, or could reasonably be expected to result in, a Material
Adverse Effect;
(f) there not having occurred (A) any general suspension of trading in, or
limitation on prices for, securities on any national securities exchange or
in the over-the-counter market, or (B) the declaration of any banking
moratorium or any suspension of payments in respect of banks or any
material limitation (whether or not mandatory) on the extension of credit
by lending institutions in the United States;
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(g) (A) the representations and warranties of Smallworld contained in the
Acquisition Agreement (the terms of which are set out in Part II of this
Appendix I) being true and correct as at August 16, 2000 and as of the
Purchase Date with the same effect as if made at and as of the Purchase
Date (except to the extent such representations specifically relate to an
earlier date, in which case such representations shall be true and correct
as of such earlier date); or (B) Smallworld having performed its covenants
and obligations required to be performed by it under the Acquisition
Agreement (a summary of certain of such covenants and obligations is set
out in Part II of this Appendix I), save any failure to perform that has
been cured within ten (10) days after the giving of written notice of such
breach to Smallworld except in the case of either (A) or (B) to the extent
that the aggregate of all breaches or failures thereof would not have a
Material Adverse Effect;
(h) Smallworld and its Subsidiaries having procured all necessary third party
consents (other than from Governmental Entities) with respect to matters
material to the conduct of business by Smallworld required in connection
with the execution and delivery of the Acquisition Agreement and the
consummation of the other transactions contemplated thereby except to the
extent that the aggregate failure to procure such consents would not have a
Material Adverse Effect;
(i) the directors of Smallworld not having withdrawn, or modified or changed in
any manner adverse to Offeror (including by amendment of the Schedule 14D-9
required to be filed by Smallworld pursuant to the rules of the SEC), its
recommendation of the Offer and the directors of Smallworld not having
resolved to do any of the foregoing; and
(j) the Agreement not having been terminated in accordance with its terms (the
terms on which the Agreement may be terminated are set out in Part IV of
this Appendix I),
which, in the reasonable judgment of Offeror in any such case, and regardless of
the circumstances giving rise to any such condition, makes it inadvisable to
proceed with the Offer or the acceptance for payment of or payment for the
Ordinary Shares.
Offeror reserves the right to waive, in whole or in part, all or any of the
above conditions except conditions (a) and (b).
The Offer will lapse if it is referred to the Competition Commission before the
expiration of the Initial Offer.
If the Offer so lapses, it will cease to be capable of further acceptance and
accepting Smallworld Shareholders and Offeror will cease to be bound by any
Forms of Acceptance submitted before the time when the Offer lapses.
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If Offeror is required by the Panel to make an offer for Smallworld Shares under
the provisions of Rule 9 of the Code, Offeror may make such alterations to any
of the above conditions as are necessary to comply with the provisions of that
Rule.
PART II
In this Part II and in Part IV of this Appendix I, the following capitalised
terms have the following meanings:
<TABLE>
<S> <C>
"Acquisition Proposal" any bona fide proposal with respect to a merger, consolidation, share
exchange, tender offer, joint venture, business combination or
similar transaction involving the Company or any Subsidiary, or the
sale of more than 20% of the Ordinary Shares or other capital stock
of the Company or the sale of assets (including capital stock of the
Subsidiaries) representing more than 20% of the value of the Company
and its Subsidiaries taken as a whole
"Agreement" the acquisition agreement dated August 16, 2000 in relation to the
Offer made between General Electric Company and Smallworld
"Buyer" Offeror
"Code" the United States Internal Revenue Code of 1986, as amended
"Company" Smallworld
"Company Options" options over Smallworld Shares
"Company Shareholders" holders of the Smallworld Shares
"Company Stock Option Plans" Smallworld Option Schemes
"Finance Act" the Finance Act, 1998
"Independent Advisor" Deutsche Bank Securities Inc.
"Initial Offer" the offer to be commenced by Offeror referred to in this announcement
for so long as it is not unconditional in all respects
"Ordinary Shares" Smallworld Shares
"Press Release" this announcement
</TABLE>
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<TABLE>
<S> <C>
"Subsequent Offer" an offer commenced after the Purchase Date pursuant to Rule 14d-11
under the Securities Exchange Act of 1934 (as amended) of the United
States of America
</TABLE>
The following is the text of the representations and warranties referred to in
condition (g) in Part I above.
Section 2.1 Organization and Standing
(a) Each of the Company and each Subsidiary (as defined below) (i) is a
corporation duly organized and validly existing under the laws of
the jurisdiction of its organization, (ii) has full corporate power
and authority and all necessary government approvals to own, lease
and operate its properties and assets and to conduct its business
as presently conducted and (iii) is duly qualified or licensed to
do business as a foreign corporation in each jurisdiction where the
character of the properties owned, leased or operated by it or the
nature of its business makes such qualification or licensing
necessary, except where the failure to be so qualified would not
have a Material Adverse Effect (as hereinafter defined). For
purposes of this Agreement, the phrase "Material Adverse Effect"
shall mean, with respect to the Company, any adverse change or
deterioration in the business, assets, financial or trading
position or profits or prospects of the Company or its Subsidiaries
which is material to the Company and its Subsidiaries taken as a
whole, other than (i) any adverse change or deterioration resulting
from any change in general economic conditions or conditions
generally affecting the industry in which the Company operates and
not relating to the Company specifically or (ii) as disclosed in
the Company Accounts or this Agreement, including the Disclosure
Letter (as defined below).
(b) The Company has furnished or made available to Buyer true and
complete copies of its Memorandum and Articles of Association (the
"Articles of Association") and the Memorandum and Articles of
Association (or equivalent organizational documents) and bylaws of
each Subsidiary, each as amended to date, and their respective
minute books. Such Articles of Association (or equivalent
organizational documents) are in full force and effect, and neither
the Company nor any Subsidiary is in violation of any provision of
its Articles of Association, bylaws or equivalent organizational
documents.
Section 2.2 Capitalization. The authorized share capital of the Company
consists of 73,315,600 Ordinary Shares and 5,000,000 Super Preference
Shares (the "Preference Shares"). As of the date hereof, (i) 7,899,440
Ordinary Shares are issued and outstanding (of which 6,656,200 are held by
the Bank of New York as trustee and represented by American Depositary
Shares), all of which are validly issued and fully paid and free of
preemptive rights arising as a result of the issue thereof, (ii) 2,694,305
Company Options are outstanding, each such option entitling the holder
thereof to purchase one Ordinary Share, and 971,475 Ordinary Shares are
authorized and reserved for future issue pursuant to the Company Stock
Option Plans, and (iii) no Super
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Preference Shares are issued or outstanding. Section 2.2 of the Disclosure
Letter delivered by the Company to Buyer concurrently with the execution of
this Agreement (the "Disclosure Letter") sets forth a true and complete
list of the outstanding Company Options with the exercise price thereof.
Except as set forth above or in Section 2.2 of the Disclosure Letter, there
are no options, warrants, convertible securities, subscriptions, stock
appreciation rights, phantom stock plans or stock equivalents or other
rights, agreements, arrangements or commitments (contingent or otherwise)
of any character issued or authorized by the Company relating to the issued
or unissued capital stock of the Company or any Subsidiary or obligating
the Company or any Subsidiary to issue or sell any shares of capital stock
of, or options, warrants, convertible securities, subscriptions or other
equity interests in, the Company or any Subsidiary. All Ordinary Shares
subject to issuance as aforesaid, upon issuance on the terms and conditions
specified in the instruments pursuant to which they are issuable, will be
duly authorized, validly issued and fully paid. Except as set forth in
Section 2.2 of the Disclosure Letter, there are no outstanding contractual
obligations of the Company or any Subsidiary to repurchase, redeem or
otherwise acquire any Ordinary Shares or any capital stock of any
Subsidiary or to pay any dividend or make any other distribution in respect
thereof or to provide funds to, or make any investment (in the form of a
loan, capital contribution or otherwise) in, any person. Section 2.2 of the
Disclosure Letter sets forth a correct and complete list of each
corporation, association, subsidiary, partnership, limited liability
company or other entity of which the Company controls, directly or
indirectly, 30% or more of the outstanding equity interests (each a
"Subsidiary" and collectively, the "Subsidiaries"). Except as set forth in
Section 2.2 of the Disclosure Letter, the Company owns beneficially and of
record all of the issued and outstanding capital stock of each Subsidiary
and does not own an equity interest in any other corporation, association,
partnership, limited liability company or other entity, other than in the
Subsidiaries. Each outstanding share of capital stock of each Subsidiary is
duly authorized, validly issued and fully paid and each such share owned by
the Company or another Subsidiary is free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on the Company's or such other Subsidiary's voting
rights, charges and other encumbrances of any nature whatsoever.
Section 2.3 Authority for Agreement.
(a) The Company has all necessary power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to
consummate the other transactions contemplated by this Agreement. The
execution, delivery and performance by the Company of this Agreement,
and the consummation by the Company of the transactions contemplated
hereby, have been duly authorized by all necessary corporate action
(including, without limitation, the unanimous approval of the Board of
Directors of the Company) and no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or to
consummate the transactions contemplated by this Agreement. This
Agreement has been duly executed and delivered by the Company and,
assuming the due authorization, execution and delivery by Buyer,
constitutes a
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legal, valid and binding obligation of the Company enforceable against
the Company in accordance with its terms.
(b) At a meeting duly called and held on August 16, 2000, the Board of
Directors of the Company unanimously (i) determined that the terms of
the Initial Offer and the Subsequent Offer are fair to the Company and
the Company Shareholders, (ii) approved and authorized this Agreement,
the Initial Offer, the Subsequent Offer and the other transactions
contemplated hereby, and (iii) resolved to recommend the Initial Offer
and the Subsequent Offer to the Company Shareholders. The actions
taken by the Board of Directors of the Company constitute approval of
the Initial Offer, the Subsequent Offer, this Agreement and the other
transactions contemplated hereby.
(c) The Independent Advisor has delivered to the Board of Directors of the
Company its written opinion, dated as of the date of this Agreement,
that, as of such date and based on the assumptions, qualifications and
limitations contained therein, the consideration to be received by the
Company Shareholders in the Initial Offer and the Subsequent Offer is
fair to such holders from a financial point of view. A copy of such
opinion is included in Section 2.3(c) of the Disclosure Letter.
Section 2.4 No Conflict. The execution and delivery of this Agreement by
the Company do not, and the performance of this Agreement by the Company
and the consummation of the Initial Offer, the Subsequent Offer and the
other transactions contemplated by this Agreement will not, (i) conflict
with or violate the Company's Articles of Association or equivalent
organizational documents of any of its Subsidiaries, (ii) subject to
Section 2.5, conflict with or violate any UK or United States federal,
state or local or any foreign statute, law, rule, regulation, ordinance,
code, order, judgment, decree or any other requirement or rule of law (a
"Law") applicable to the Company or any of its Subsidiaries or by which any
property or asset of the Company or any of its Subsidiaries is bound or
affected, or (iii) result in a breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default)
under, give to others any right of termination, amendment, acceleration or
cancellation of, result in triggering any payment or other obligations, or
result in the creation of a material lien or other material encumbrance on
any property or asset of the Company or any of its Subsidiaries pursuant
to, any material note, bond, mortgage, indenture, contract, agreement,
lease, license, permit, franchise or other instrument or obligation or
Material Contract (as hereinafter defined) to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its
Subsidiaries or any property or asset of any of them is bound or affected.
Section 2.5 Required Filings and Consents. The execution and delivery of
this Agreement by the Company do not, and the performance of this Agreement
by the Company will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any UK, or United States
federal, state or local or any foreign government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign (a "Governmental Entity"),
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except (i) for applicable requirements, if any, of the Exchange Act, state
securities or "blue sky" laws ("Blue Sky Laws") and the filing of such documents
as are required by the City Code, (ii) for those required by the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), under the
German competition laws and under any similar competition or antitrust law in
any other jurisdiction in which the Company operates, (iii) for filings
contemplated by Sections 1.1, 1.2 and 2.14 hereof and (iv) where the failure to
obtain such consents, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, prevent or
materially delay the performance by the Company of any of its obligations under
this Agreement or the consummation of the Initial Offer, the Subsequent Offer or
the other transactions contemplated by this Agreement.
Section 2.6 Compliance. Each of the Company and its Subsidiaries (i) has been
operated at all times in compliance with all Laws, and is not in default under
any order of any Governmental Entity, applicable to the Company or any of its
Subsidiaries or by which any property, business or asset of the Company or any
of its Subsidiaries is bound or affected and (ii) is not in default or violation
of any notes, bonds, mortgages, indentures, contracts, agreements, leases,
licenses, permits, franchises, or other instruments or obligations or Material
Contract to which the Company or any of its Subsidiaries is a party or by which
the Company or any of its Subsidiaries or any property or asset of the Company
or any of its Subsidiaries is bound or affected, except for such defaults or
violations that, in the aggregate, are not material.
Section 2.7 SEC Filings, Financial Statements.
(a) The Company and each Subsidiary, as necessary, has filed all forms,
reports, statements and documents required to be filed with any regulatory
authority established by law in a foreign jurisdiction and with the SEC
since June 30, 1997 (the "SEC Reports" and together with the foreign
jurisdiction reports, the "Governmental Reports"), each of which has
complied in all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), and the rules
and regulations promulgated thereunder, or the Exchange Act, and the rules
and regulations promulgated thereunder, or, in the case of a foreign
jurisdiction, the relevant laws of that jurisdiction, each as in effect on
the date so filed. None of the Governmental Reports (including, but not
limited to, any financial statements or schedules included or incorporated
by reference therein) contained when filed any untrue statement of a
material fact or omitted or omits to state a material fact required to be
stated or incorporated by reference therein or necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading. Except to the extent that information contained
in any Governmental Report has been revised or superseded by a later filed
Governmental Report, none of the Government Reports contains any untrue
statement of a material fact or omits 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.
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(b) All of the financial statements included in the Governmental Reports, in
each case, including any related notes thereto, as filed with the SEC
(those filed with the SEC are collectively referred to as the "Company
Financial Statements") or with relevant authorities in foreign
jurisdictions (including, without limitation, the UK) and the Company
Accounts (as defined below), have been prepared in accordance with
generally accepted accounting principles ("GAAP") in the United States or
the UK, as the case may be, applied on a consistent basis throughout the
periods involved (except as may be indicated in the notes thereto and
subject, in the case of the unaudited statements, to normal, recurring
audit adjustments) and fairly present (or in the case of the Company
Financial Statements prepared in accordance with UK GAAP give a true and
fair view thereof) the consolidated financial position of the Company and
its Subsidiaries at the respective date thereof and the consolidated
results of their operations and changes in cash flows for the periods
indicated. For purposes of this Agreement, the term "Company Accounts"
means the Company's or its Subsidiaries individual accounts (as that term
is used in Section 226 of the Companies Act) and cash flow statement, and
the Company's and its Subsidiaries consolidated accounts, for the financial
year ended June 30, 1999, the auditor's report on those accounts, the
director's report for that year and the notes to those accounts, which have
been prepared in accordance with United States GAAP.
(c) The Company's unaudited consolidated balance sheet and consolidated
statement of operations as of and for the financial year ended June 30,
2000 (the "2000 Unaudited Financial Statements") included in Section 2.7(c)
of the Disclosure Letter have been prepared in accordance with United
States GAAP (except that such financial statements do not contain notes or
a statement of cash flows) and fairly present the consolidated financial
position of the Company and its Subsidiaries at the date thereof and the
consolidated results of its operations for the periods indicated. The 2000
Unaudited Financial Statements have been prepared on a basis consistent
with the Company Accounts.
(d) The Company's audited financial statements as of and for the financial year
ended June 30, 2000 to be delivered to Buyer on or prior to the Purchase
Date shall not differ in any material respect from the 2000 Unaudited
Financial Statements, except that such financial statements shall contain
footnotes.
(e) There are no liabilities of the Company or any of its Subsidiaries of any
kind whatsoever, whether or not accrued and whether or not contingent or
absolute, that are material to the Company and its Subsidiaries, taken as a
whole, other than (i) liabilities disclosed or provided for in the
consolidated balance sheet of the Company and its Subsidiaries included in
the Company Accounts, including the notes thereto, (ii) liabilities
specifically disclosed in the SEC Reports, (iii) liabilities incurred on
behalf of the Company in connection with this Agreement, and (iv)
liabilities incurred in the ordinary course of business
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consistent with past practice since June 30, 1999, none of which are,
individually or in the aggregate, reasonably likely to be material to the
Company.
(f) The Company has furnished or made available to Buyer a complete and correct
copy of any amendments or modifications which have not yet been filed with
the SEC to agreements, documents or other instruments which previously had
been filed by the Company with the SEC as exhibits to the SEC Reports
pursuant to the Securities Act and the rules and regulations promulgated
thereunder or the Exchange Act and the rules and regulations promulgated
thereunder.
Section 2.8 Absence of Certain Changes or Events.
(a) Except as contemplated by this Agreement, since June 30, 1999 and except as
set forth in Section 2.8 of the Disclosure Letter, the Company and its
Subsidiaries have conducted their respective businesses only in the
ordinary course and consistent with prior practice and there has not been
(i) any event or occurrence of any condition that has had or could
reasonably be expected to have a Material Adverse Effect, (ii) any
declaration, setting aside or payment of any dividend or any other
distribution with respect to any of the share capital of the Company or any
Subsidiary, (iii) any material change in accounting methods, principles or
practices employed by the Company, (iv) any sale, transfer or assignment of
any material patents, trademarks, trade names, copyrights, trade secrets or
other intangible assets, or (v) any action of the type described in
Sections 4.1(b) or clauses (i)-(vi), (xi), (xii) or (xiv) of Section 4.1(c)
which had such action been taken after the date of this Agreement would be
in violation of any such Section.
(b) Except as contemplated in this Agreement, since June 30, 2000 and except as
set forth in Section 2.8 of the Disclosure Letter, there has not been any
action of the type described in clauses (vii), (viii), (ix), (x) or (xiii)
of Section 4.1(c).
Section 2.9 Taxes.
(a) The Company and each of its Subsidiaries have timely filed all material Tax
Returns (as hereinafter defined) required to be filed by any of them. All
such Tax Returns are true, correct and complete in all material respects.
All Taxes (as hereinafter defined) of the Company and its Subsidiaries
which are (i) shown as due on such Tax Returns, (ii) otherwise due and
payable or (iii) claimed or asserted by any taxing authority to be due,
have been paid, except for those Taxes being contested in good faith and
for which provision or reserves adequate for the payment of all material
Taxes have been established in the financial statements included in the SEC
Reports in accordance with GAAP, the Company Accounts or the 2000 Unaudited
Financial Statements. There are no liens for any Taxes upon the assets of
the Company or any of its Subsidiaries, other than statutory liens for
Taxes not yet due and payable and liens for real estate Taxes contested in
good faith. The Company does not know of any proposed or threatened Tax
claims or assessments which, if upheld, could individually or in the
aggregate
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have a Material Adverse Effect. Neither the Company nor any of its
Subsidiaries has made an election under Section 341(f) of the Code (or
similar election under the Finance Act). Neither the Company nor any of its
Subsidiaries has waived (or will waive prior to the Purchase Date) any
statute of limitations in respect of Taxes or agreed to any extension of
time with respect to a Tax assessment or deficiency. The Company and each
Subsidiary has withheld and paid over to the relevant taxing authority all
material Taxes required to have been withheld and paid in connection with
payments to employees, independent contractors, creditors, Shareholders or
other third parties. The unpaid Taxes of the Company and its Subsidiaries
for the current taxable period do not exceed provisions or reserves for
Taxes in the 2000 Unaudited Financial Statements. For purposes of this
Agreement, (a) "Tax" (and, with correlative meaning, "Taxes") means any
federal, state, local or foreign income, gross receipts, property, sales,
use, license, excise, franchise, employment, payroll, premium, withholding,
alternative or added minimum, ad valorem, transfer or excise tax, or any
other tax, custom, duty, governmental fee or other like assessment or
charge of any kind whatsoever, together with any interest or penalty or
addition thereto, whether disputed or not, imposed by any Governmental
Entity, and (b) "Tax Return" means any return, report or similar statement
required to be filed with respect to any Tax (including any attached
schedules), including, without limitation, any information return, claim
for refund, amended return or declaration of estimated Tax.
(b) The Company or any Subsidiary is not and has not been a party to or
otherwise involved in any transaction, agreement or arrangement or
otherwise other than by way of a bargain at arm's length, or any
transaction, agreement or arrangement (whether or not by way of a bargain
at arm's length) under which it has been or is or may be required to make
any payment for goods, services or facilities provided to it which is in
excess of the market value of such goods, services or facilities or under
which it has been, or is or may be required to provide such goods, services
or facilities for a consideration which is less than the market value of
such goods, services or facilities and in consequence of which it is or
will be liable to Tax in respect of an amount deemed for Tax purposes to be
income or gains of the Company or any Subsidiary but not actually income or
gains of the Company or any Subsidiary.
(c) (i) Within the last five years, neither the Company nor any Subsidiary has
been a member of an affiliated group filing consolidated, combined or
unitary Tax Returns (or other Tax group for United States, UK or other Tax
jurisdictions' Laws) other than a group for which the Company was the
common parent and (ii) neither the Company nor its Subsidiaries has any
obligation under any agreement or arrangement with any person other than
the Company and its Subsidiaries with respect to material Taxes of such
other person (including pursuant to Treasury Reg. sec. 1.1502-6).
(d) Section 2.9(d) of the Disclosure Letter sets forth with reasonable
specificity: (i) all jurisdictions in which the Company or any Subsidiary
currently has a presence requiring it to pay Taxes (a "Taxable Presence")
and all jurisdictions in which the
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Company or any Subsidiary has had a Taxable Presence since January 1, 1996,
(ii) all Tax Returns filed or due to be filed applicable to the three year
period ending on the date hereof and (iii) all material correspondence with
any Tax authorities (including, without limitation, all audits, notices and
requests for information from or to taxing authorities) since January 1,
1996.
Section 2.10 Assets. Except as set forth in the Company's Annual Report on Form
20-F for the fiscal year ended June 30, 1999 (the "20-F") or in Section 2.10(a)
of the Disclosure Letter, the Company and each of its Subsidiaries have good and
marketable title to, or a valid leasehold interest in, all of their real and
personal properties and assets reflected in the 20-F or acquired after June 30,
1999 (other than assets disposed of since June 30, 1999 in the ordinary course
of business consistent with past practice), in each case free and clear of all
title defects, liens, encumbrances and restrictions, except for (i) liens,
encumbrances or restrictions which secure indebtedness which are properly
reflected in the 20-F; (ii) liens for Taxes accrued but not yet payable; (iii)
liens arising as a matter of law in the ordinary course of business with respect
to obligations incurred after June 30, 1999, provided that the obligations
secured by such liens are not delinquent; and (iv) liens that do not
individually or in the aggregate, materially detract from the value of the
assets subject thereto or materially impact the operation of the Company or any
Subsidiary. Any real property and buildings held under lease by the Company or
any of the Subsidiaries (copies of the material leases are attached to the
Disclosure Letter) are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere with the
use made and proposed to be made of such property and buildings.
Section 2.11 Change of Control Agreements. Except as set forth in Section 2.11
of the Disclosure Letter, neither the execution and delivery of this Agreement
nor the consummation of the Initial Offer, the Subsequent Offer or the other
transactions contemplated by this Agreement, will (either alone or in
conjunction with any other event) result in, cause the accelerated vesting or
delivery of, or increase the amount or value of, any payment or benefit to any
director, officer or employee of the Company. Except as set forth in Section
2.11 of the Disclosure Letter, without limiting the generality of the foregoing,
no amount paid or payable by the Company in connection with the Initial Offer,
the Subsequent Offer or the other transactions contemplated by this Agreement,
including accelerated vesting of options (either solely as a result thereof or
as a result of such transactions in conjunction with any other event), will be
an "excess parachute payment" within the meaning of Section 280G of the Code (or
similar provision under the Finance Act).
Section 2.12 Litigation. Section 2.12 of the Disclosure Letter sets forth an
accurate (a) summary description of each investigation, claim, action, suit or
proceeding ("Litigation") pending against the Company or any of its
Subsidiaries, or to the knowledge of the Company, threatened against the Company
or any of its Subsidiaries, at law or in equity or before or by any Governmental
Entity; and (b) summary description of any outstanding judgment order or decree
entered in any Litigation imposing material obligations against the Company or
any of its Subsidiaries. There is no Litigation
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pending against the Company or its Subsidiaries, or to the knowledge of the
Company, threatened against the Company or its Subsidiaries (or any of their
respective properties, rights or franchises), at law or in equity, or before or
by any Governmental Entity, that would reasonably be expected to, individually
or in the aggregate, have a Material Adverse Effect, and, to the knowledge of
the Company, no development has occurred with respect to any pending or
threatened Litigation that would reasonably be expected to result in a Material
Adverse Effect or would reasonably be expected to prevent, materially impair or
materially delay the consummation of the transactions contemplated hereby.
Neither the Company nor any of its Subsidiaries is subject to any judgment,
order or decree entered in any Litigation which would reasonably be expected to,
individually or in the aggregate, have a Material Adverse Effect.
Section 2.13 Contracts and Commitments. Section 2.13 of the Disclosure Letter
sets forth a true and correct list of the following contracts, agreements or
commitments to which the Company or a Subsidiary is a party (including every
amendment, modification or supplement to the foregoing): (i) any contracts of
employment and contracts or agreements which limit or restrict the Company, any
Subsidiary or any employee from engaging in any business in any jurisdiction,
(ii) agreements or arrangements for the purchase or sale of any assets
(otherwise than in the ordinary course of business), (iii) all bonds,
debentures, notes, loans, credit or loan agreements or commitments, mortgages,
indentures or guarantees or other agreements or contracts relating to the
borrowing of money involving amounts in excess of US$5,000,000, (iv) agreements
with unions, material independent contractor agreements and material leased or
temporary employee agreements, (v) leases of any real or personal property
involving annual rent of US$200,000 or more, and (vi) all other contracts,
agreements or commitments involving payments made by or to the Company or a
Subsidiary of US$1,000,000 (individually, a "Material Contract" and
collectively, "Material Contracts"). Except for agreements, arrangements or
commitments disclosed in Section 2.13 of the Disclosure Letter, neither the
Company nor any of its Subsidiaries is a party to any agreement, arrangement or
commitment which is material to the business of the Company or any of its
Subsidiaries. The Company has delivered or made available true and correct
copies of all such Material Contracts to Buyer. Neither the Company nor any of
its Subsidiaries is in default under any such Material Contract.
Section 2.14 Information Supplied. None of the information supplied or to be
supplied by the Company in writing to Buyer specifically for inclusion or
incorporation by reference in the Schedule TO will, at the date such documents
are first published, sent or delivered to Company Shareholders or, unless
promptly corrected, at any time during the pendency of the Initial Offer or the
Subsequent Offer 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 made therein, in light of the circumstances under which they
were made, not misleading. Neither the Schedule 14D-9 at the date such document
is first published, sent or delivered to the Company Shareholders or, unless
promptly corrected, at any time during the pendency of the Initial Offer or the
Subsequent Offer, will 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 made therein, in
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light of the circumstances under which they were made, not misleading. The
Schedule 14D-9 will comply as to form and substance in all material respects
with the requirements of the Exchange Act and the applicable rules and
regulations of the SEC thereunder. Notwithstanding the foregoing, no
representation or warranty is made by the Company with respect to statements
made or incorporated by reference therein based on information supplied by Buyer
for inclusion or incorporation by reference in any of the foregoing documents.
Section 2.15 Employee Matters.
(a) Section 2.15(a) of the Disclosure Letter sets forth a true and correct list
of each deferred compensation plan, stock option, incentive compensation
plan, equity compensation plan, "welfare plan" (within the meaning of
section 3(1) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")); "pension plan" (within the meaning of section 3(2) of
ERISA); each employment, termination or severance agreement; and each other
employee benefit plan, fund, program, agreement or arrangement, in each
case, that is sponsored, maintained or contributed to or required to be
contributed to by the Company or any Subsidiary for the benefit of any
employee or former employee of the Company or any Subsidiary. Such plans
are referred to collectively herein as the "Company Plans".
(b) The Company has made available to Buyer with respect to each of the Company
Plans true and correct copies of each of the following documents if
applicable: (i) the Company Plan document and any related trust agreement
or other funding arrangement, (ii) the most recent determination letter
from the Internal Revenue Service for such Plan, (iii) the most recent
summary plan description and related summaries of material modifications,
(iv) the Form 5500 tax forms for each of the last two years, and (v) the
most recently prepared actuarial report and financial statement.
(c) Each of the Company Plans that is maintained in the United States for the
benefit of employees who are not primarily non-resident aliens (a "US
Benefit Plan") is in material compliance with its terms and the applicable
provisions of applicable law, including without limitation, the Code and
ERISA, and the Company and its Subsidiaries have performed all obligations
required to be performed by them thereafter; each of the US Benefit Plans
intended to be "qualified" within the meaning of Section 401(a) of the Code
has received a determination letter from the Internal Revenue Service that
the US Benefit Plan is qualified and the Company knows of no condition or
event that would reasonably be expected to adversely affect such status.
Neither the Company, any Subsidiary, nor any trade or business, whether or
not incorporated, which together with the Company would be deemed a "single
employer" within the meaning of Section 4001 of ERISA (an "ERISA
Affiliate") has had in the previous six years (i) any liability, contingent
or otherwise, under Title IV of ERISA or Section 412 of the Code, or (ii)
an obligation to contribute to any "multiemployer plan" (as defined in
Section 3(37)
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of ERISA). There are no pending, or to the knowledge of the Company,
threatened or anticipated disputes, law suits, investigations, audits,
complaints or claims (other than routine claims for benefits) by, on behalf
of, with respect to or against any of the Company Plans or any trusts
related thereto except as, would not be reasonably likely to result in any
material liability to the Company or any Subsidiary. The Company and the
Subsidiaries have accrued or reserved for all liabilities under the US
Benefit Plans as required by US GAAP.
(d) Except as set forth in Section 2.15(d) of the Disclosure Letter, with
respect to each Company Benefit Plan not subject to United States law (a
"Foreign Benefit Plan"), except as would not have a Material Adverse
Effect, (i) the fair market value of the assets of each funded Foreign
Benefit Plan, the liability of each insurer for any Foreign Benefit Plan
funded through insurance or the reserve shown on the Company's consolidated
financial statements for any unfunded Foreign Benefit Plan, together with
any accrued contributions, is sufficient to procure or provide for the
projected benefit obligations, as of the Purchase Date, with respect to all
current and former participants in such plan in accordance with generally
accepted country specific actuarial assumptions and valuations, and no
transaction contemplated by this Agreement shall cause such assets or
insurance obligations or book reserve to be less than such projected
benefit obligations; and (ii) each Foreign Benefit Plan required to be
registered has been registered and has been maintained in good standing
with the appropriate regulatory authorities.
(e) With respect to each Company Plan, there has not occurred, and no person or
entity is contractually bound to enter into, any nonexempt "prohibited
transaction" within the meaning of Section 4975 of the Code or Section 406
of ERISA, nor any transaction that would result in a civil penalty being
imposed under Section 409 or 502(i) of ERISA, except for any such
transactions which, individually or in the aggregate, would not be
reasonably likely to result in any material liability to the Company or any
Subsidiary.
(f) All contributions, premiums or payments required to be made with regard to
any Company Plan have been made on or before their due dates, and all such
contributions have been fully deducted for income tax purposes and have not
been, nor would reasonably be expected to be, challenged or disallowed by
any Governmental Entity.
(g) No union or other collective bargaining unit has been certified as
representing any of the employees of the Company or any Subsidiary, nor has
the Company or any Subsidiary agreed to recognize any union or other
collective bargaining unit. Currently there are no organizational
campaigns, petitions or other unionization activities seeking recognition
of any collective bargaining unit for employees of the Company or any
Subsidiary. There are no labor disputes pending or threatened involving
strikes, work stoppages, slowdowns or lockouts with respect to employees of
the Company or any Subsidiary. There are no grievance proceedings or
claims of unfair labor practices filed with or, to the Company's
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knowledge, threatened to be filed with the National Labor Relations Board
against the Company or any Subsidiary. The Company and each Subsidiary is
in compliance in all material respects with all applicable laws relating to
the employment of labor, including those relating to wages, hours,
collective bargaining, occupational safety and health standards,
discrimination in employment, withholding of taxes, worker classification,
immigration, plant closing and mass layoffs and worker's compensation.
(h) Neither the Company nor any Subsidiary is party to any agreement with any
employee the benefits of which (including, without limitation, severance
benefits) are contingent, or the terms of which are materially altered,
upon the occurrence of a transaction involving the Company or any
Subsidiary of the nature of any of the transactions contemplated by this
Agreement.
Section 2.16 Environmental Matters. Except as set forth in Section 2.16 of the
Disclosure Letter, each of the Company and the Subsidiaries conducts its
business and operations in material compliance with all applicable environmental
laws, ordinance and regulations, and to the Company's knowledge there is no
Litigation (or basis therefor), based on or related to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling, or the emission, discharge, release or threatened release into the
environment, of any pollutant, contaminant, or hazardous or toxic material or
waste (collectively, an "Environmental Event") by the Company or any Subsidiary
which would have a Material Adverse Effect. There is no Litigation (or basis
therefor) based on or related to an Environmental Event by the Company or any
Subsidiary which would have a Material Adverse Effect. Except as set forth in
Section 2.17 of the Disclosure Letter, to the knowledge of the Company, no
notice or information of any material Environmental Event was given to any
person or entity that occupied any of the premises occupied by or used by the
Company or any Subsidiary prior to the date such premises were so occupied.
Without limiting the generality of the foregoing, the Company has received no
notice or information (and has no basis to believe) that either the Company or
any Subsidiary has disposed of or placed on or in any property or facility used
in its business any waste materials, hazardous materials or hazardous substances
in a manner that would give rise to a material liability.
Section 2.17 Intellectual Property Rights.
(a) "Intellectual Property" shall mean: (i) United States, international and
foreign patents, patent applications and statutory invention registrations,
(ii) trademarks, service marks, domain names, trade dress, logos, and other
source identifiers, including registrations and applications for
registration thereof, (iii) copyrights, including registrations and
applications for registration thereof, (iv) computer software, data,
databases, and related documentation, and (v) confidential and proprietary
information, including trade secrets and know-how. "Third Party Software"
shall mean all computer software sold or licensed to the Company by any
person other than the Company or its affiliates (as defined below) and
which is material to the operation of the business of the Company (other
than
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commercially available "off the shelf" software), "Company Software" is
software manufactured, distributed, sold, licensed or marketed by the
Company, Software means Third Party Software and Company Software.
(b) Section 2.17(b) of the Disclosure Letter sets forth a true and complete
list of all (i) patents and patent applications, registered trademarks and
trademark applications, registered copyrights and copyright applications,
Software and other Intellectual Property, in each case owned by the Company
and material to the business of the Company, and (ii) all licenses of
Intellectual Property and Software (A) to the Company from any third party,
and (B) by the Company to any third party (collectively, the "Licenses").
(c) The operation of the business of the Company, and the use in connection
therewith of (i) the Intellectual Property and Software owned by the
Company (the "Owned Intellectual Property") and (ii) the Intellectual
Property and Software licensed to the Company pursuant to the Licenses or
other licenses material to the Company (the "Licensed Intellectual
Property"), do not conflict with or infringe the Intellectual Property
rights of any third party.
(d) The Company is the sole owner, free and clear of any lien or encumbrance,
of the entire right, title and interest in and to the Owned Intellectual
Property and Licenses, and is entitled to use the Owned Intellectual
Property and Licensed Intellectual Property in the ordinary course of the
business of the Company as now conducted.
(e) The Owned Intellectual Property and the Licensed Intellectual Property
include all of the Intellectual Property used in the ordinary day-to-day
conduct of the business of the Company, and there are no other items of
Intellectual Property that are material to such ordinary day-to-day conduct
of such business. The owned Intellectual Property and, to the knowledge of
the Company, the Licensed Intellectual Property, is subsisting, valid and
enforceable, and has not been adjudged invalid or unenforceable in whole or
part.
(f) No legal proceedings have been asserted, are pending, or, to the knowledge
of the Company, threatened against the Company (i) based upon or
challenging or seeking to deny or restrict the use by the Company of any of
the Owned Intellectual Property or Licensed Intellectual Property, (ii)
alleging that the Licensed Intellectual Property is being licensed or
sublicensed in conflict with the terms of any license or other agreement,
or (iii) alleging infringement of the Intellectual Property rights of any
third party.
(g) Other than in the ordinary course of business, the Company has not granted
any license or other right to any third party with respect to the Owned
Intellectual Property or Licensed Intellectual Property. The consummation
of the transactions contemplated by this Agreement will not result in the
termination or impairment of any of the Owned Intellectual Property.
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(h) With respect to each License: (i) such License is valid and binding and in
full force and effect and represents the entire agreement between the
respective licensor and licensee with respect to the subject matter of such
License; (ii) such License will not cease to be valid and binding and in
full force and effect on terms identical to those currently in effect as a
result of the consummation of the transactions contemplated by this
Agreement, nor will the consummation of the transactions contemplated by
this Agreement constitute a breach or default under such License or
otherwise give the licensor a right to terminate such License; (iii) the
Company has not (A) received any notice of termination or cancellation
under such License, (B) received any notice of breach or default under such
License, which breach has not been cured, and (C) granted to any other
third party any rights, adverse or otherwise, under such License that would
constitute a breach of such License; and (iv) to the Company's knowledge,
neither the Company nor any other party to such License is in breach or
default thereof in any material respect, and no event has occurred that,
with notice or lapse of time, would constitute such a breach or default or
permit termination, modification or acceleration under such License.
(i) To the knowledge of the Company, the Company Software at the time of
delivery thereof is free of all material viruses, worms, trojan horses and
other material known contaminants and does not contain any bugs, errors or
problems of a material nature that disrupt its operations in any material
respect or have a materially adverse impact on the operation of other
software programs or operating systems. The Company Software at the time
of delivery thereof is free of all viruses, worms, trojan horses and other
material known contaminants, and does not contain any bugs, errors, or
problems of a material nature that disrupt its operation or have an adverse
impact on the operation of other software programs or operating systems,
except as would not have a Material Adverse Effect. The Company has
obtained all approvals necessary for exporting the Software outside the
United States and importing the Company Software into any country in which
the Company Software is now sold or licensed for use, and all such export
and import approvals in the United States and throughout the world are
valid, current, outstanding and in full force and effect. No rights in the
Company Software have been transferred to any third party except to the
customers of the Company to whom the Company has licensed such Company
Software in the ordinary course of business. None of the Company Software
is licensed pursuant to an "open source" or "GNU" license, or incorporates
or is based on any computer software that is licensed pursuant to an "open
source" or "GNU" license. The Company has the right to use all software
development tools, library functions, compilers, and other third party
software that are material to the business of the Company, or that are
required to operate or modify the Software.
Section 2.18 Brokers. Except pursuant to the Independent Advisor Engagement
Letter (as hereinafter defined), no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with this Agreement, the
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Initial Offer, the Subsequent Offer or the other transactions contemplated by
this Agreement based upon arrangements made by or on behalf of the Company.
Section 2.18 of the Disclosure Letter includes a complete and correct copy of
all agreements between the Company and the Independent Advisor pursuant to which
such firm would be entitled to any payment relating to this Agreement, the
Initial Offer, the Subsequent Offer or the other transactions contemplated by
this Agreement.
Section 2.19 Insurance Policies. The Company has delivered to Buyer prior to
the date hereof an accurate list of all material insurance policies in force
naming the Company, any of its Subsidiaries or employees thereof as an insured
or beneficiary or as a loss payable payee or for which the Company or any
Subsidiary has paid or is obligated to pay all or part of the premiums. Neither
the Company nor any Subsidiary has received notice of any pending or threatened
cancellation or premium increase (retroactive or otherwise) with respect
thereto, and each of the Company and the Subsidiaries is in compliance in all
material respects with all conditions contained therein. There are no material
pending claims against such insurance policies by the Company or any Subsidiary
as to which insurers are defending under reservation of rights or have denied
liability, and there exists no material claim under such insurance policies that
has not been properly filed by the Company or any Subsidiary. Except for the
self-insurance retentions or deductibles set forth in the policies contained in
the aforementioned list, the policies are adequate in scope and amount to cover
all prudent and reasonably foreseeable risks which may arise in the conduct of
the business of the Company and the Subsidiaries.
Section 2.20 Notes Receivable. Except as disclosed in Section 2.20 of the
Disclosure Letter, there are no notes receivable of the Company or any
Subsidiary owing by any director, officer, shareholder or employee of the
Company or any Subsidiary ("Affiliate Debt").
Section 2.21 Transactions with Affiliates. Except as set forth in Section 2.21
of the Disclosure Letter (other than compensation and benefits received in the
ordinary course of business as an employee or director of the Company or its
Subsidiaries) (collectively, the "Affiliate Transactions"), no director, officer
or other "affiliate" or "associate" (as hereinafter defined) of the Company or
any Subsidiary or any entity in which, to the knowledge of the Company, any such
director, officer or other affiliate or associate, owns any beneficial interest
(other than a publicly held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market and less than 1% of the
stock of which is beneficially owned by any such persons) has any interest in:
(i) any contract, arrangement or understanding with, or relating to the business
or operations of the Company or any Subsidiary; (ii) any loan, arrangement,
understanding, agreement or contract for or relating to indebtedness of the
Company or any Subsidiary; or (iii) any property (real, personal or mixed),
tangible, or intangible, used or currently intended to be used in, the business
or operations of the Company or any Subsidiary. For purposes of this Agreement,
the terms "associate" and "affiliate" shall have the same meaning as set forth
in Rule l2b-2 promulgated under the Exchange Act, and the term "person" shall
mean any individual, corporation, partnership (general or limited), limited
liability
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company, limited liability partnership, trust, joint venture, joint-stock
company, syndicate, association, entity, unincorporated organization or
government or any political subdivision, agency or instrumentality thereof.
Section 2.22 No Existing Discussions. As of the date hereof, the Company is not
engaged, directly or indirectly, in any negotiations or discussions with any
other party with respect to an Acquisition Proposal (as hereinafter defined).
Section 2.23 Shareholders' Rights Agreement. Neither the Company nor any
Subsidiary has, except as set forth in Section 2.23 of the Disclosure Letter,
adopted, or intends to adopt, a stockholders' rights agreement or any similar
plan or agreement which limits or impairs the ability to purchase, or become the
direct or indirect beneficial owner of, Ordinary Shares or any other equity or
debt securities of the Company or any of its Subsidiaries.
Section 2.24 Major Suppliers, Customers and Distributors.
(a) Neither the Company nor any Subsidiary has received any written notice, or
to the knowledge of the Company, oral notice, or has any reason to believe
that any significant supplier, including without limitation any sole source
supplier, will not sell raw materials, supplies, merchandise and other
goods to the Company or any Subsidiary at any time after the Purchase Date
on terms and conditions substantially similar to those used in its current
sales to the Company and its Subsidiaries, subject only to general and
customary price increases, unless comparable supplies, merchandise or other
goods are readily available from other sources on comparable terms and
conditions.
(b) Neither the Company nor any Subsidiary has received any written notice, or
to the knowledge of the Company, oral notice, or has any reason to believe
that any significant customer intends to terminate, limit or reduce its
business relations with the Company or any Subsidiary at any time after the
Purchase Date.
(c) Neither the Company nor any Subsidiary has received any written notice, or
to the knowledge of the Company, oral notice, or has any reason to believe
that any distributors, sales representatives, sales agents, or other third
party sellers, will not sell or market the products or services of the
Company or any Subsidiary at any time after the Purchase Date on terms and
conditions substantially similar to those used in the current sales and
distribution contracts of the Company and its Subsidiaries.
Section 2.25 Press Release. The Press Release does not contain any untrue
statement of a material fact or omit to state any material fact relating to the
Company which is required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Press Release complies as to form and substance in all
material respects with the applicable requirements of the City Code and the
Exchange Act (including the applicable rules and regulations of the
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SEC thereunder). Notwithstanding the foregoing, no representation or
warranty is made by the Company with respect to statements made or
incorporated by reference in the Press Release about, or based on
information supplied by, Buyer for inclusion or incorporation by reference
therein."
Part III
Smallworld has entered into a number of covenants and agreements with Offeror
pursuant to the Acquisition Agreement, including covenants, inter alia:
(A) until the Purchase Date
(i) to conduct the business of Smallworld and its Subsidiaries only in the
ordinary course of business and in a manner consistent with prior
practice;
(ii) not to, and not to permit any of its Subsidiaries to declare or pay
any dividends or make any other distributions (other than intra-group)
or to issue any new shares other than Smallworld Shares issued upon
the exercise of options in existence or warrants outstanding on
August 16, 2000;
(iii) not to, and not to permit any of its Subsidiaries to, incur any
material indebtedness or alter or create any financial obligations
with respect to employees or directors or amend or cancel any Material
Contract;
(B) subject to limited exceptions relating to the directors' fiduciary duties
and the requirements of the Code, not to withdraw, modify or qualify the
directors' recommendation of the Offer or to solicit or facilitate
negotiations regarding a competing offer;
(C) as to the conduct of certain litigation; and
(D) as to discharging its obligations in connection with Offer pursuant to the
rules and requirements of the SEC and the Code.
Part IV
Section 5.1 of the Agreement provides that the Agreement may be terminated at
any time prior to the Purchase Date:
(a) By mutual written consent of duly authorized representatives of GE and
Smallworld;
(b) By GE if the Board of Directors of Smallworld (i) shall have withdrawn or
shall have modified in a manner adverse to GE its approval of the Agreement
or its recommendation of the Offer, (ii) causes Smallworld to enter into an
agreement with respect to an
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Acquisition Proposal, (iii) shall have endorsed, approved or recommended
any Acquisition Proposal or (iv) shall have resolved to do any of the
foregoing;
(c) By GE, if as a result of the failure of any of the conditions set forth in
Annex I to the Agreement (Part I of this Appendix I), the Offer shall have
been terminated by GE or expired in accordance with its terms without GE
(or any permitted assignee) having purchased any Ordinary Shares pursuant
to the Offer;
(d) By GE, if (i) Smallworld shall have failed to perform its covenants and
other obligations under the Agreement, which failure to perform has not
been cured within ten (10) days after the giving of written notice of such
breach to the Smallworld or (ii) the representations and warranties of
Smallworld contained in the Agreement (Part II of this Appendix I) shall
not be true and correct, except in either case where such failure or breach
would not have a Material Adverse Effect;
(e) By GE, if the Minimum Condition shall not have been satisfied on the
expiration date of the Initial Offer (as such date may be extended from
time to time);
(f) By Smallworld if, in compliance with its obligations under Sections 4.5 and
4.8 of the Agreement, (i) the Board of Directors of Smallworld shall have
withdrawn or shall have modified in a manner adverse to GE its approval or
recommendation of the Initial Offer, the Subsequent Offer or the Agreement
or (ii) Smallworld shall enter into an agreement with respect to a Superior
Proposal; provided, however, that any termination of the Agreement pursuant
to Section 5.1(f) shall not be effective until Smallworld has made full
payment of all amounts provided for under Section 5.2(b) of the Agreement.
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APPENDIX II
Definitions
<TABLE>
<S> <C>
"Acquisition Agreement" the acquisition agreement dated 16 August, 2000 in relation to the Offer made
between General Electric Company and Smallworld;
"Act" the Companies Act 1985 (as amended);
"ADSs" American Depositary Shares of Smallworld each representing one ordinary share of
1p in the capital of Smallworld and evidenced by American Depositary Receipts;
"Code" The City Code on Takeovers and Mergers;
"Deutsche Bank" Deutsche Bank AG, London, Deutsche Bank Securities Inc. and their respective
affiliates;
"Form of Acceptance" means the Form of Acceptance and authority to be sent to Smallworld Shareholders
and shall, unless the context clearly requires otherwise, include letters of
transmittal made available for use by US shareholders in connection with the
Offer;
"Governmental Entity" any UK, or United States federal, state or local or any foreign government or
any court, administrative or regulatory agency or commission or other
governmental authority or agency, domestic or foreign;
"GE Group" GE and its subsidiaries;
"GE Power Systems Equities, GE Power Systems Equities, Inc., an indirect, wholly owned subsidiary of GE on
Inc." or "Offeror" behalf of whom the Offer will be made;
"General Electric" or "GE" General Electric Company
"HSR Act" the Hart-Scott-Rodino Anti-Trust Improvements Act, 1976 of the United States of
America;
"ING Barings" ING Barings Limited;
"Material Adverse Effect" with respect to Smallworld, any adverse change or deterioration in the business,
assets, financial or trading position or profits or prospects of Smallworld or
its Subsidiaries which is material to Smallworld and its Subsidiaries taken as a
whole, other than (i) any adverse change or deterioration resulting from any
change in general economic conditions or conditions generally affecting the
industry in
</TABLE>
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<TABLE>
<S> <C>
which Smallworld operates and not relating to Smallworld specifically or (ii) as
disclosed in the manner permitted by the Acquisition Agreement;
"NASDAQ" National Association of Securities Dealers Automated Quotations;
"Offer Document" the document to be despatched to Smallworld Shareholders containing the Offer;
"Offer" the recommended cash offer to be made by ING Barings on behalf of General
Electric Power Systems Equities, Inc., to acquire all of the Smallworld Shares,
including, where the context so requires, any subsequent revision, variation,
extension or renewal of such offer;
"Offer Price" US$20.00 in cash per Smallworld Share;
"Optionholders" holders of Options;
"Options" options to subscribe for Smallworld Shares granted pursuant to the terms of the
Smallworld Option Schemes;
"Panel" The Panel on Takeovers and Mergers;
"Purchase Date" the date Smallworld Shares are purchased by Offeror under the Initial Offer (as
defined in Part II of Appendix I);
"SEC" the United States Securities and Exchange Commission;
"Securities Act" the United States Securities Act of 1933, as amended;
"Smallworld" Smallworldwide plc;
"Smallworld Option Schemes" the Smallworld 1990 Incentive Share Option Plan, 1996 Incentive Share Option
Plan and the 1986 Unapproved Share Option Plan;
"Smallworld Shareholders" holders of Smallworld Shares;
"Smallworld Shares" ordinary shares of 1p each in the capital of Smallworld and, without
duplication, American Depositary Shares representing such shares;
"Subsidiary" a corporation, association, subsidiary, partnership, limited liability company
or other entity of which Smallworld controls, directly or indirectly, 30% or
more of the outstanding equity interests;
"UK" or "United Kingdom" the United Kingdom of Great Britain and Northern Ireland;
</TABLE>
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<TABLE>
<S> <C>
"US", "USA" or "United States" the United States of America, its territories and possessions, any state of the
United States of America and the District of Columbia;
"US$" being lawful currency of the US.
</TABLE>
For the purpose of this document (unless otherwise specifically provided),
"subsidiary" and "subsidiary undertaking" have the respective meanings given by
the Act.
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