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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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TRACOR, INC.
(NAME OF SUBJECT COMPANY)
TRACOR, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
892349200
(CUSIP NUMBER OF CLASS OF SECURITIES)
RUSSELL E. PAINTON
VICE PRESIDENT, SECRETARY
AND GENERAL COUNSEL
TRACOR, INC.
6500 TRACOR LANE
AUSTIN, TEXAS 78725-2000
(512) 926-2800
FAX: (512) 929-2257
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE
AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
WITH A COPY TO:
DARREL A. RICE, ESQ.
WINSTEAD SECHREST & MINICK P.C.
5400 RENAISSANCE TOWER
1201 ELM STREET
DALLAS, TEXAS 75270
(214) 745-5255
FAX: (214) 745-5390
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Tracor, Inc., a Delaware corporation (the
"Company"), and the address of the principal executive offices of the Company
is 6500 Tracor Lane, Austin, Texas 78725-2000. The title of the class of
equity securities to which this statement relates is the common stock, par
value $.01 per share, of the Company (the "Common Stock"), together with the
associated preferred stock purchase rights (the "Rights" and, together with
the Common Stock, the "Shares") issued pursuant to the Rights Agreement dated
February 12, 1997 (the "Rights Agreement"), between the Company and Harris
Trust and Savings Bank, as Rights Agent.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to a tender offer by GEC Acquisition Corp., a
Delaware corporation ("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), disclosed in a Tender Offer Statement
on Schedule 14D-1, dated April 27, 1998 (the "Schedule 14D-1"), to purchase
all outstanding Shares, at a price of $40.00 per Share, net to the seller in
cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated April 27, 1998 (the "Offer to Purchase"), and the related
Letter of Transmittal (which together, with any amendments or supplements
thereto, collectively shall constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of April 21, 1998 (the "Merger Agreement"), among Parent, Purchaser and the
Company. The Merger Agreement provides, among other things, that as soon as
practicable after the satisfaction or waiver of the conditions set forth in
the Merger Agreement, the Purchaser will be merged with and into the Company
(the "Merger"), and the Company will continue as the surviving corporation
(the "Surviving Corporation") and become a wholly owned subsidiary of Parent.
A copy of the Merger Agreement is attached hereto as Exhibit 1 and
incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Purchaser and Parent are located at 5700 West Touhy Avenue, Niles, Illinois
60714-4690 (c/o NI Holdings Incorporated).
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding and
actual or potential conflict of interest between the Company or its affiliates
and: (i) its executive officers, directors or affiliates or (ii) Purchaser,
its executive officers, directors or affiliates, is set forth below or
described in the Company's information statement (the "Information
Statement"), a copy of which is attached as Schedule I (which information is
incorporated herein by reference).
THE MERGER AGREEMENT
The summary of the Merger Agreement contained in pages 19 to 27 of the Offer
to Purchase, which has been filed with the Securities and Exchange Commission
(the "Commission") as an exhibit to the Schedule 14D-1, a copy of which is
enclosed with this Schedule 14D-9, is incorporated herein by reference. Such
summary should be read in its entirety for a more complete description of the
terms and provisions of the Merger Agreement. A copy of the Merger Agreement
has been filed as Exhibit 1 hereto and is incorporated herein by reference.
The following is a summary of certain portions of the Merger Agreement which
relate to arrangements among the Company, Purchaser, Parent and the Company's
executive officers and directors and is qualified in its entirety by reference
to the Merger Agreement.
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Board Representation and Management. The Merger Agreement provides that
promptly upon the acceptance for payment of, and payment by Purchaser for, any
Shares pursuant to the Offer, Purchaser shall be entitled to designate such
number of directors on the Company's Board of Directors (the "Board") as will
give Purchaser representation on the Board equal to at least the number of
directors, rounded up to the next whole number, which is the product of (a)
the total number of directors on the Board (giving effect to the directors
elected pursuant to this sentence) multiplied by (b) the percentage that (i)
such number of Shares so accepted for payment and paid for by Purchaser plus
the number of Shares otherwise owned by Purchaser or any other subsidiary of
Parent bears to (ii) the number of Shares outstanding, and the Company shall,
at such time, take all action necessary to cause Purchaser's designees to be
so elected, by either obtaining the resignations of those incumbent directors
designated by the Company or increasing the size of the Board, and causing
Purchaser's designees to be elected. Purchaser's designees shall be divided
among the classes of directors as necessary to comply with the requirements of
the Company's bylaws. The Company's obligation to appoint Purchaser's
designees to the Board is subject to Section 14 (f) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), which requires the Company to
mail to its stockholders the Information Statement containing the information
required by Section 14 (f) of the Exchange Act and Rule 14f-1 promulgated
thereunder.
The Merger Agreement also provides that prior to the effective time of the
Merger (the "Effective Time"), the Board shall include at least three
directors who are directors on the date of the Merger Agreement (the
"Independent Directors"). In the event the number of Independent Directors
shall be reduced below three for any reason whatsoever, any remaining
Independent Directors (or, Independent Director, if there shall be only one
remaining) shall be entitled to designate persons to fill such vacancies who
shall be deemed to be Independent Directors for purposes of the Merger
Agreement or, if no Independent Directors then remain, the other directors
promptly shall designate three persons to fill such vacancies who shall not be
officers, stockholders or affiliates of Parent or Purchaser, and such persons
shall be deemed to be Independent Directors for purposes of the Merger
Agreement.
The Merger Agreement provides the directors of Purchaser immediately prior
to the Effective Time shall be the directors of the Surviving Corporation
following the Merger and such directors will hold office in accordance with
the certificate of incorporation and bylaws of the Surviving Corporation, and
the officers of the Company immediately prior to the Effective Time shall be
the officers of the Surviving Corporation, in each case until the earlier of
their resignation or removal or until their respective successors are duly
elected or appointed and qualify.
Acquisition Proposals and Certain Matters Relating to Termination. The
Merger Agreement permits the Company to furnish nonpublic information to, and
participate in discussions and negotiations with, any third party that has
submitted an unsolicited written takeover proposal constituting a Superior
Proposal (as defined in the Merger Agreement) to the Company, if the Board
determines in good faith, after consultation with its outside legal counsel,
that failing to take such actions would result in a breach of the fiduciary
duty of the Board to the stockholders of the Company under applicable law;
provided, however, the Board may not terminate the Merger Agreement unless
concurrently with such termination, the Company enters into an acquisition
agreement in connection with a Superior Proposal. The termination provisions
of the Merger Agreement, which were a condition to Parent's proposal, provide
that Parent could be entitled to a fee of $40 million and reimbursement of
Parent's actual and reasonably documented out-of-pocket expenses of up to $5
million if (x) Parent shall have terminated the Merger Agreement because the
Board (1) has withdrawn, modified or changed its recommendation to the
Company's stockholders or approval in respect of the Merger Agreement or the
Offer in a manner adverse to Parent or Purchaser, (2) shall have recommended,
approved or publicly proposed any Acquisition Proposal (as defined in the
Merger Agreement) or (3) shall cause the company to enter into any letter of
intent, agreement in principle, acquisition agreement or other similar
agreement, or (y) the Company shall have terminated the Merger Agreement to
allow the Company to enter into an agreement in respect of an Acquisition
Proposal which the Board has determined is a Superior Proposal.
Stock Options, Restricted Stock and Warrants. The Merger Agreement provides
that, upon consummation of the Merger, all then outstanding options ("Company
Stock Options") issued under any Company option plan (the "Company Option
Plans") and all Shares subject to a vesting requirement granted to any Company
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employee or director ("Restricted Stock") will be cancelled in exchange for a
cash payment to the holder of a Company Stock Option or Restricted Stock award
equal to (i) in the case of Company Stock Options, A times B, where A equals
the difference between $40.00 and the per share exercise price of the holder's
Company Stock Option and B equals the number of Shares subject to the holder's
Company Stock Option and (ii) in the case of Restricted Stock, the number of
shares of the holder's Restricted Stock times $40.00. Before the commencement
of the Offer, the Company shall take all actions (including obtaining any and
all consents from employees or directors) necessary to implement the
provisions described in the immediately preceding sentence; provided, the
Company may not provide additional compensation, benefits or other payments to
holders of Company Stock Options or Restricted Stock as an inducement to
consent to the provisions described in the immediately preceding sentence.
Except as provided in the Merger Agreement or as otherwise agreed to by the
parties (a) the Company Option Plans shall terminate as of the Effective Time
and the provisions in any other plan, program or arrangement providing for the
issuance or grant by the Company or any of its subsidiaries of any interest in
respect of the capital stock of the Company or any of its subsidiaries shall
be terminated as of the Effective Time, and (b) following the Effective Time
no holder of Company Stock Options or Restricted Stock or any participant in
such plans, programs or arrangements shall have any right thereunder to
acquire any equity securities of the Company, the Surviving Corporation or any
subsidiary thereof. The Company shall take all actions necessary to comply
with the provisions of the Warrant Agreement dated as of December 20, 1991,
between the Company and Ameritrust Company National Association, as Warrant
Agent, so that upon exercise of the Warrants at any time on or after the
Effective Time and payment of the exercise price, the holder thereof shall be
entitled to receive, and the Warrants shall thereafter represent the right to
receive, in lieu of Shares issuable upon such exercise prior to the Effective
Time, cash in an amount per Share, equal to $40.00.
As of March 31, 1998, the current directors and executive officers of the
Company as a group held Company Stock Options granted under the 1991 Stock
Plan for Employees of Tracor, Inc. and its Subsidiaries and the 1995 Stock
Plan for Employees of Tracor, Inc. and its Subsidiaries to purchase an
aggregate of 1,598,707 Shares at exercise prices ranging from $2.00 to $30.38
per Share. In all, options to purchase an aggregate of 2,305,757 Shares were
outstanding at such date under the Company Option Plans. As of March 31, 1998,
the directors and executive officers of the Company as a group held 6,000
shares of Restricted Stock.
Employee Agreements. Pursuant to the Merger Agreement, all employment
agreements, severance agreements, deferred compensation agreements and
supplemental retirement agreements with employees of the Company and its
subsidiaries that are listed on Section 7.10 of the Company's Disclosure
Letter delivered to Purchaser pursuant to the Merger Agreement will be binding
and enforceable obligations of the Surviving Corporation to the same extent as
they were binding and enforceable obligations of the Company and its
subsidiaries as of the date of the Merger, except as the parties thereto may
otherwise agree.
Each of the executive officers named in the Summary Compensation Table which
appears in Schedule I hereto has executed employment agreements with the
Company. All of the agreements provide for a termination date of December 31,
1999, or the first day of the year following the year in which the officer
reaches his/her 65th birthday. The agreements also provide for automatic
renewals unless terminated earlier by the officer or the Board.
Among other things, the employment agreements assure the continuation of
each such officer's base salary as of such date and his/her continued
participation in the Company incentive and other welfare and benefit plans, as
well as continuation of his/her then current level of job position and
responsibilities, failing which such officer may terminate his/her employment
with the Company and receive, as termination pay, stipulated amounts equal to
up to two times such officer's base salary then in effect and other benefits.
Under each employment agreement, the Company has the right to terminate an
officer for cause, under which circumstances the officer would not be entitled
to termination pay. Each agreement provides that upon termination the officer
will not compete with the Company for a period of six months after the date of
termination nor will the officer divulge confidential information or trade
secrets to third parties.
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Employee Benefit Plans. Pursuant to the Merger Agreement, until at least
December 31, 1998, Parent shall provide or cause to be provided, to all
employees of the Company and its subsidiaries compensation, incentive pay and
benefits substantially comparable in the aggregate to those provided to such
employees by the Company and its subsidiaries as of the date on which the
acceptance for payment and payment by Purchaser for Shares tendered pursuant
to the Offer occurs (the "Offer Closing Date"). All employees of the Surviving
Corporation and its subsidiaries on the Effective Time shall, from and after
the Effective Time, be granted credit for vesting and eligibility purposes for
all service with the predecessors of the Surviving Corporation and its
subsidiaries. In addition, Parent has agreed to (i) waive any pre-existing
condition exclusions and actively-at-work requirements, so long as the
affected employee was not excluded from participation in a benefit plan of the
Surviving Corporation or its subsidiaries by virtue of such pre-existing
condition and to (ii) credit certain expenses incurred by employees of the
Company or its subsidiaries for purposes of satisfying applicable deductible,
coinsurance and out-of-pocket provisions of certain welfare plans maintained
by the Surviving Corporation and its subsidiaries.
INDEMNIFICATION UNDER DELAWARE LAW, THE COMPANY'S CERTIFICATE OF INCORPORATION
AND BYLAWS AND THE MERGER AGREEMENT
The Company is a Delaware corporation. Reference is made to Section 145 of
the Delaware General Corporation Law (the "DGCL"), which provides that a
corporation may indemnify any person who was, is or is threatened to be made,
a party to any threatened, pending or completed legal action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than by or in the right of such corporation), by reason of the fact such
person is or was an officer, director, employee or agent of such corporation,
or is or was serving at the request of such corporation as a director,
officer, employee or agent of another corporation or enterprise. The indemnity
may include expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided such officer,
director, employee or agent acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests and, with
respect to criminal proceedings, had no reasonable cause to believe his
conduct was unlawful. A Delaware corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except no indemnification is permitted without approval from the
Delaware Court of Chancery if the officer or director is adjudged to be liable
to the corporation. Where an officer or director is successful on the merits
or otherwise in the defense of any action referred to above, the corporation
must indemnify him against the expenses that such officer or director actually
and reasonably incurred.
Reference is also made to Section 102(b)(7) of the DGCL, which enables a
corporation in its certificate of incorporation to eliminate or limit the
personal liability of a director to the corporation or its stockholders for
violations of the director's fiduciary duty, except (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) pursuant to Section 174 of the DGCL
(providing for liability of directors for unlawful payment of dividends or
unlawful stock purchases or redemptions), or (iv) for any transaction from
which a director derived an improper personal benefit.
Article VII of the Restated Certificate of Incorporation of the Company (the
"Certificate") provides for indemnification of the officers and directors of
the Company to the fullest extent permitted by Section 145 of the DGCL.
Article VI of the Certificate provides that, except under certain
circumstances (similar to those listed under Section 102(b)(7) of the DGCL
described above), directors of the Company shall not be personally liable to
the Company or its shareholders for monetary damages for breach of fiduciary
duties as a director. Finally, Article VIII, Section 6 of the Company's
Amended and Restated Bylaws (the "Bylaws") provides that the Company shall
indemnify its directors, officers, employees and agents to the fullest extent
permitted by Delaware law.
The Merger Agreement contains various provisions governing the
indemnification of present and former officers and directors of the Company
and its subsidiaries. The Merger Agreement provides that, for a period of six
years from the Offer Closing Date, the rights to indemnification for acts or
omissions occurring prior to the
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Offer Closing Date currently afforded to such officers and directors in the
certificates of incorporation and bylaws of the respective companies shall
continue in full force and effect. Parent has agreed to cause to be maintained
for a period of six years from the Offer Closing Date the Company's current
directors' and officers' insurance and indemnification policy (the "D&O
Insurance") and the current fiduciary liability insurance policy (the
"Fiduciary Insurance") to the extent such insurance policies provide coverage
for events occurring prior to the Effective Time. Parent has the option to
substitute policies or financial guarantees which provide at least the same
coverage and contain terms and conditions that are no less advantageous than
those currently in effect. In the event that, during the six-year period
described above, Parent is unable to obtain the D&O Insurance and the
Fiduciary Insurance or such policies would cost in excess of $350,000 and
$150,000, respectively, Parent is obligated to use all reasonable efforts to
cause to be obtained as much D&O Insurance and Fiduciary Insurance as can be
obtained for the remainder of such six-year period for an aggregate amount
(including all amounts paid by the Company after April 21, 1998) not in excess
of $350,000 and $150,000, respectively, on terms and conditions no less
advantageous than those currently in effect. If any claim or claims are,
subsequent to the Offer Closing Date and within six years from the Offer
Closing Date, made in writing against any present or former director or
officer of the Company based on the services of such person prior to the Offer
Closing Date as a director or officer, the indemnification provisions
described above shall continue in effect until the final disposition of all
such claims.
STOCKHOLDER AGREEMENT
The following is a summary of certain material provisions of the Stockholder
Agreement, dated as of April 21, 1998, among Parent and Purchaser, on the one
hand, and each member of the Board and certain members of the Company's
management (the "Certain Stockholders"), on the other hand (the "Stockholder
Agreement"). This summary does not purport to be complete and is qualified in
its entirety by reference to the Stockholder Agreement which is filed herewith
as Exhibit 2 and is incorporated herein by reference.
Pursuant to the Stockholder Agreement, each of the Certain Stockholders has
unconditionally agreed to tender into the Offer, and not to withdraw
therefrom, the Shares set forth in the Stockholder Agreement with respect to
each such Certain Stockholder, as such Shares may be adjusted by stock
dividend, stock split, recapitalization, combination and exchange of Shares,
merger, consolidation, reorganization or other change or transaction of or by
the Company, together with Shares that may be acquired after April 21, 1998 by
such Certain Stockholder, including Shares issuable upon the exercise of
Company Stock Options or Warrants (collectively, the "Subject Shares"). In
addition, each Certain Stockholder has granted to Purchaser an irrevocable
option (the "Option") to purchase any or all Subject Shares owned by such
Certain Stockholder and any or all Subject Shares for which any Company Stock
Options and Warrants are then exercisable on the date the Option is exercised
by Purchaser, in each case at a price per Share equal to $40.00.
Each Certain Stockholder severally has agreed as follows: (a) such Certain
Stockholder will not (i) sell, transfer, pledge, assign or otherwise dispose
of, or enter into any contract, option or other arrangement (including any
profit sharing arrangement) or understanding with respect to the sale,
transfer, pledge, assignment or other disposition of, such Certain
Stockholder's Subject Shares to any person other than Purchaser or Purchaser's
designee, (ii) enter into any voting arrangement, whether by proxy, voting
agreement, voting trust, power-of-attorney or otherwise, with respect to such
Certain Stockholder's Subject Shares or (iii) take any other action that would
in any way restrict, limit or interfere with the performance of its
obligations under the Stockholder Agreement or the transactions contemplated
thereby; (b) solely in each Certain Stockholder's capacity as a stockholder of
the Company (without respect to any Certain Stockholder's capacity as a
director or officer of the Company), until the Merger is consummated or the
Merger Agreement is terminated, such Certain Stockholder will not, nor will
such Certain Stockholder permit any investment banker, financial adviser,
attorney, accountant or other representative or agent of such Certain
Stockholder to, directly or indirectly (i) solicit, initiate or encourage
(including by way of furnishing information), or take any other action
designed or reasonably likely to facilitate, any inquiries or the making of
any proposal which constitutes, or may reasonably be expected to lead to, any
acquisition proposal or (ii) participate in any discussions or negotiations
regarding any acquisition proposal; (c) at any meeting of stockholders of the
Company called to vote upon the Merger and the Merger
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Agreement or at any adjournment thereof or in any other circumstances upon
which a vote, consent or other approval (including by written consent) with
respect to the Merger and the Merger Agreement is sought, such Certain
Stockholder will vote (or cause to be voted) such Certain Stockholder's
Subject Shares in favor of the Merger, the adoption by the Company of the
Merger Agreement and the approval of the other transactions contemplated by
the Merger Agreement; and (d) at any meeting of stockholders of the Company or
at any adjournment thereof or in any other circumstances upon which such
Certain Stockholder's vote, consent or other approval is sought, such Certain
Stockholder will vote (or cause to be voted) such Certain Stockholder's
Subject Shares against (i) any merger agreement or merger (other than the
Merger Agreement and the Merger), consolidation, combination, sale of
substantial assets, reorganization, recapitalization, dissolution, liquidation
or winding up of or by the Company or any other Acquisition Proposal
(collectively, "Alternative Transactions") or (ii) any amendment of the
Company's Certificate or Bylaws or other proposal or transaction involving the
Company or any of its subsidiaries, which amendment or other proposal or
transaction would in any manner impede, frustrate, prevent or nullify the
Offer, the Merger, the Merger Agreement or any of the other transactions
contemplated by the Merger Agreement (collectively, "Frustrating
Transactions"). The Stockholder Agreement provides that each Certain
Stockholder executed the Stockholder Agreement solely in his or her capacity
as the beneficial owner of such Certain Stockholder's Subject Shares and
nothing therein shall limit or affect any actions taken by a Certain
Stockholder in his capacity as an officer or director of the Company or any
subsidiary of the Company to the extent specifically permitted by the Merger
Agreement.
Under the Stockholder Agreement each Certain Stockholder has irrevocably
granted to, and appointed, Mark Ronald and John Currier and any other
individual who shall thereafter be designated by Parent, and each of them,
such Certain Stockholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such Certain
Stockholder, to vote such Certain Stockholder's Subject Shares, or grant a
consent or approval in respect of such Subject Shares, 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, in
favor of the Merger, the adoption 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 against any Alternative Transaction
or Frustrating Transaction.
CONFIDENTIALITY AGREEMENT
The following is a summary of certain material provisions of the
Confidentiality Agreement, dated March 6, 1998, between the Company and GEC-
Marconi, N.A., Inc. ("GEC Marconi") (the "Confidentiality Agreement"). This
summary does not purport to be complete and is qualified in its entirety by
reference to the Confidentiality Agreement which is filed herewith as Exhibit
3 and is incorporated herein by reference.
The Confidentiality Agreement contains customary provisions pursuant to
which, among other things, GEC-Marconi and the Company each agreed to keep
confidential certain nonpublic, confidential or proprietary information
furnished to it by the other relating to their respective businesses, subject
to certain exceptions (the "Evaluation Materials"). Each of GEC-Marconi and
the Company also agreed to use the Evaluation Materials solely for the purpose
of evaluating a possible transaction involving the Company and GEC-Marconi and
that, upon request, each would promptly either deliver or destroy the
Evaluation Materials. GEC-Marconi additionally agreed for a period of one year
from the date of the Confidentiality Agreement, without the prior approval of
the Company's Board, it would not (i) acquire or make any proposal to acquire
any securities or property of the Company, (ii) propose to enter into a merger
or business combination involving the Company or purchase a material portion
of the assets of the Company, (iii) make or participate in any solicitation of
proxies to vote, or seek to advise or influence any person with respect to the
voting of any securities of the Company, (iv) form, join, or participate in a
"group" (within the meaning of Section 13(d)(3) of the Exchange Act) with
respect to any voting securities of the Company, (v) otherwise act or seek to
control or influence the management, the Board or policies of the Company,
(vi) disclose any intention, plan or arrangement inconsistent with the
foregoing, or (vii) take any action which might require the Company to make a
public announcement regarding the possibility of a business combination or
merger. The foregoing restrictions would not apply in the event of an offer by
a third party to acquire 20% or more of the Shares or an announcement by a
third party of a proposal to merge with the Company, in either case, which has
not been endorsed by the Board.
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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.
CERTAIN CONFLICTS
The transactions contemplated by the Merger Agreement will constitute a
"change in control" for purposes of certain Company executive compensation
arrangements which include change of control provisions. Following is a
description of certain of the benefit plans of the Company or its subsidiaries
which provide coverage for a limited number of executive officers of the
Company or its subsidiaries. The following descriptions do not purport to be
complete and are qualified by reference to the copies of the plans attached
hereto as Exhibits 4(a), 4(b) and 4(c) and which are incorporated herein by
reference.
Tracor Deferred Compensation Plan (effective December 1, 1996, as amended
January 1, 1997). Certain of the Company's executives participate in the
Tracor Deferred Compensation Plan (the "TDCP"). To the extent an employee
defers compensation under the TDCP, he may be eligible for a matching
contribution from the Company as well as participation in profit sharing
through the TDCP. A contributing employee is immediately vested in any
deferred contributions made by him, but vests over time in any matching
contribution or profit sharing. In the event of a change in control of the
Company, any matching contribution or profit sharing is immediately vested. In
addition, the plan document provides there can be no merger, consolidation
with, transfer, or sale of the assets or liabilities of the TDCP to any other
plan unless the participants in the TDCP would have, following such event,
accounts which are equal to or greater than the corresponding account had the
TDCP been terminated immediately before such merger, consolidation, transfer
or sale.
GDE Systems, Inc. Deferred Compensation Plan (amended and restated effective
as of April 1, 1994, and as subsequently amended). The GDE Systems, Inc.
Deferred Compensation Plan (the "GDE DCP") provides specified benefits to a
group of management, highly compensated employees and directors of GDE
Systems, Inc. ("GDE") including the deferral of receipt of a portion of
current income on a pre-tax basis and receiving an attractive, tax-deferred
interest credit on such deferrals. A participant is always 100% vested in an
elective deferral amount and vesting of any matching contribution is
determined in GDE's sole discretion. According to the terms of the plan, GDE
has the right to terminate the GDE DCP at any time. Prior to a change in
control (as defined therein), GDE shall have the option to pay any benefits
due in a lump sum or in monthly installments for up to 15 years, with interest
credited during the installment period at specified rates. Following a change
in control GDE must pay any benefits due in a lump sum upon termination of the
GDE DCP. In addition, upon a change in control a participant's benefit in
connection with a termination of employment following such change in control
shall be computed at a rate greater than the normal interest rate.
Amended and Restated Non-qualified Supplemental Retirement Benefit Plans. On
March 13, 1998, the Company entered into Amended and Restated Non-qualified
Supplemental Retirement Benefit Plans ("RBPs") with the following individuals:
James B. Skaggs, Robert K. Floyd, Russell E. Painton, John M. Rock III, Roger
W. Sadler, George R. Melton and K. Bruce Hamilton. The RBPs provide the
Company will, in consideration of services previously rendered and to be
rendered, pay to the named individuals and their respective spouses a
Supplemental Retirement Benefit (the "Benefit") upon certain conditions. The
Benefit under the RBPs is equal to (i) 50% of the average monthly eligible
earnings (including compensation, deferred amounts, commissions and
contributions to deferred compensation plans) from the Company for the 36
months immediately preceding the individual's termination of employment, less
(ii) the amount of monthly retirement income then payable to such individual
under the Tracor Retirement Plan as a single life annuity. This amount is then
multiplied by the "vested percentage" for such individual (equal to 20% per
year for each year of full time employment subsequent to December 21, 1991),
which is then multiplied by a fraction determined utilizing years of credited
service. In the event of a merger or consolidation of the Company with any
other corporation, or in the event of the sale of all or substantially all the
assets of the Company, the successor entity will be required by the Company to
assume all obligations of the Company under the RBPs. In addition, in any such
event Messrs. Skaggs and Floyd may elect to receive their respective Benefits
in a lump sum.
7
<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) RECOMMENDATION OF THE BOARD.
THE BOARD HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER AND DETERMINED
THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY. THE BOARD UNANIMOUSLY
RECOMMENDS THAT ALL HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
(B) BACKGROUND; REASONS FOR THE RECOMMENDATION.
The Company provides sophisticated electronic and information technology
products, systems and services to the U.S. Department of Defense ("DOD"),
other U.S. government agencies, foreign governments and commercial customers.
Historically, a primary component of the Company's business strategy has been
selected strategic acquisitions of companies with complementary business areas
where significant consolidation and cost reduction opportunities exist. Until
recently, this strategy has been aided by the consolidation of the defense
industry and the availability of acquisition opportunities at reasonable
prices. Since August 1993, the Company has made three substantial acquisitions
and, as a result, has been able to establish a major presence, and
substantially increase its revenues, in its markets serving a broad range of
DOD and other government customers.
Since the end of the Cold War, declining defense budgets and increasing
pressures for cost reductions have precipitated a rapid consolidation in the
defense industry. The needs of the Company's primary customer, the DOD, have
changed significantly and, in the future, expenditures in the defense area are
likely to be inhibited by the same factors. As a result of the rapid
consolidation in the defense industry, the number of suitable potential
acquisition candidates is dwindling while the cost of such potential
acquisition candidates is significantly increasing. Consequently, the
Company's opportunities for growth through acquisitions are under mounting
pressure and have become increasingly less certain.
The Company has also been faced with increased competition from larger
competitors. In particular, there has been a trend toward vertical integration
in the defense industry, with platform manufacturers integrating backward
through the acquisition of defense electronics companies, a trend which the
Company believes will continue and which could have the effect of placing the
Company at a competitive disadvantage.
During the past year, the Company made several bids for acquisition
candidates, but in each case, the successful bidder was a larger company with
greater available resources and which was able and willing to pay a premium
for the acquisition significantly higher than the Company believed was
economically justifiable or feasible, particularly in the case of a company of
Tracor's size. As a result, the Company has been evaluating the changing
nature of the defense industry and the effect of the consolidation on its
strategy to continue maximizing shareholder value by growth through
acquisitions.
Over the past six months the Company identified twelve candidates, which it
considered to constitute the universe of the most likely potential purchasers
of the Company. In formulating this list of candidates the Company analyzed
the factors it considered to be most important in evaluating the merits of a
strategic partnership including the business fit, the strength of the
candidate's balance sheet, impact on profit and loss, timing, other current
priorities of the potential purchasers and the desire to enter into such a
strategic partnership given stated business objectives and recent track
records with other acquisitions. The Company requested BT Wolfensohn, a
division of BT Alex. Brown Incorporated, to undertake a financial analysis of
the candidates identified by management and, using the criteria previously
articulated and the financial analysis prepared by BT Wolfensohn, management
ranked the potential candidates. Based upon the financial analysis prepared by
BT Wolfensohn and the Company's criteria, the Company's management believes
that the Company identified and reviewed all of the companies in the United
States and abroad with the ability and interest in pursuing a combination with
the Company.
8
<PAGE>
The Company eliminated four of the twelve candidates as being unlikely
candidates for entering into such a large transaction, given their existing
commitments and the diversion of other recent major acquisitions. During
February and March 1998, the Company and BT Wolfensohn contacted the remaining
candidates identified by the Company. Three of the candidates notified the
Company that they were not interested in pursuing a transaction with the
Company. One company expressed an interest in further discussions at some
later date, however, the preliminary valuation numbers suggested by such
company would have resulted in a price per share that is less than the price
per share offered by Purchaser. The Company held extensive meetings with the
four remaining candidates, including GEC, p.l.c. None of the candidates, with
the exception of GEC, p.l.c., were prepared to proceed on a basis which the
Company believed would increase value for the Company's stockholders.
On March 5, 1998, Mr. James B. Skaggs met with Mr. Mark Ronald, President
and Chief Executive Officer of GEC Marconi. At the meeting, Mr. Skaggs and Mr.
Ronald exchanged information regarding the Company and Parent. On March 11,
1998, representatives of the Company met with GEC Marconi and its financial
advisor, Morgan Stanley, on a confidential basis, and on March 12, 1998, the
Company's representatives again met with GEC Marconi and Morgan Stanley. A
follow-up meeting was held with GEC Marconi on March 17, 1998. From March 17,
1998, through March 24, 1998, negotiations between representatives of Morgan
Stanley and BT Wolfensohn took place concerning the purchase price. On March
25, 1998, the Company received a preliminary, non-binding indication of
interest from GEC, p.l.c. setting forth the terms and conditions upon which
GEC, p.l.c. or a U.S. affiliate would consider purchasing the Company and
requesting a 21-day exclusivity period.
On March 28, 1998, the Board reviewed GEC, p.l.c.'s expression of interest
at a board meeting attended by representatives of the Company's outside legal
counsel, Winstead Sechrest & Minick P.C. and BT Wolfensohn. Information was
presented regarding, among other things, certain background information, legal
considerations and certain regulatory issues relating to the Company's
classified business. The Board also discussed the steps the Company had
previously taken to identify and evaluate potential purchasers, contacts with
other potential purchasers, as well as information about GEC, p.l.c. and its
expression of interest. BT Wolfensohn presented a preliminary valuation
analysis of the Company. The Board unanimously agreed that the Company should
proceed with the merger discussions with GEC, p.l.c. and tentatively concluded
that any transaction of this nature should be structured as a cash tender
offer followed by a merger. The Board did not grant the exclusivity period
requested by GEC, p.l.c. However, the Company did not conduct any further
discussions with other potential acquirers. The Board authorized the retention
of BT Wolfensohn as the Company's financial advisor in connection with the
proposed Merger.
Commencing in late March, 1998 members of GEC Marconi's management met with
members of the Company's management to review various information relating to
the Company and to conduct a detailed due diligence review of the Company's
three business sectors. In addition, during this period, legal representatives
of each company and various outside financial and accounting advisors of
Parent and the Company conducted legal, financial and accounting due diligence
and negotiated the terms of the proposed Merger and the Merger Agreement.
On April 16, 1998, the Board considered the proposed Merger. Representatives
of Winstead Sechrest & Minick P.C. and BT Wolfensohn were present. Information
was presented regarding, among other things, the status of the proposed
Merger, legal considerations relating thereto, and terms of the proposed
Merger. The Board discussed the draft Merger Agreement, the proposed Merger
and the Company's alternatives.
On April 21, 1998, the Board further considered the proposed Merger. Further
information was presented to the directors, including presentations by
representatives of BT Wolfensohn relating to financial considerations with
respect to the proposed Merger and Winstead Sechrest & Minick relating to
legal considerations with respect to the proposed Merger. Representatives of
BT Wolfensohn then delivered their opinion as of that date and subject to the
assumptions and other matters set forth in the opinion, as to the fairness,
from a financial point of view, to the Company's stockholders of the $40 per
Share cash consideration in the Offer and Merger.
After discussion and further analysis, the Board unanimously approved the
Offer and the Merger for the reasons described hereafter, and unanimously
recommended that the Company's stockholders accept the Offer
9
<PAGE>
and tender their shares pursuant thereto. With respect to the Merger, the
Board unanimously recommended that, if a stockholder vote is required by
applicable law, the stockholders of the Company vote in favor of approval and
adoption of the Merger Agreement and the Merger.
Also, on April 21, 1998, the Company was informed that GEC, p.l.c.'s Board
of Directors had unanimously approved the Merger. The parties then executed
the Merger Agreement and the Stockholder Agreement and publicly announced the
transaction.
On April 27, 1998, Purchaser commenced the Offer.
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that all holders of Shares tender such Shares pursuant to the
Offer, the Board considered a number of factors, including:
(i) the familiarity of the Board with the business, results of
operations, properties and financial condition of the Company and the
nature of the defense industry, based, in part, upon presentations by the
management of the Company, including the prospects if the Company were to
remain independent, and the presentations by BT Wolfensohn;
(ii) the effect of recent mergers and consolidations in the defense
industry on the competitive nature of the industry;
(iii) the terms of the Merger Agreement, including (x) the proposed
structure of the Offer and the Merger involving an immediate cash tender
offer for all outstanding Shares to be followed by a merger for the same
consideration, thereby enabling stockholders to obtain cash for their
Shares at the earliest possible time and (y) the fact that financing is not
a condition to the Offer and Merger;
(iv) that the discussions with a number of unrelated parties, although
preliminary in nature, indicated that a per Share cash price of $40 was at
the upper end of the range at which a transaction was likely to be
consummated;
(v) that the $40 per Share Offer Price represents (x) a premium of
approximately 10% over the closing price for the Shares on April 20, 1998,
the last trading day prior to the public announcement of the execution of
the Merger Agreement and a premium of approximately 22% and 29% over the
average closing price for the Shares for the 20 and 60 trading days,
respectively, ending on April 20, 1998 and (y) a price higher than the
Shares have ever traded;
(vi) the presentations by BT Wolfensohn at the March 28, April 16 and
April 21, 1998 Board meetings and the opinion of BT Wolfensohn dated as of
April 21, 1998, to the effect that, as of such date and based upon and
subject to the matters reviewed with the Board, the $40 per Share cash
consideration to be received by the holders of the Shares pursuant to the
Offer and the Merger is fair from a financial point of view to such
holders. A copy of the opinion of BT Wolfensohn, which sets forth the
factors considered and the assumptions made by BT Wolfensohn, is attached
hereto as Exhibit 5 and incorporated herein by reference. STOCKHOLDERS ARE
URGED TO READ THE OPINION OF BT WOLFENSOHN CAREFULLY IN ITS ENTIRETY;
(vii) that GEC, p.l.c. had requested in connection with its negotiations
with the Company that led to the Merger Agreement that the Company not
solicit possible acquisition interest from third parties, and that no such
solicitation would be undertaken for a period of two weeks subsequent to
commencing such negotiations. In determining that this was an appropriate
course of action, the Board considered (w) the results of the Company's
contact with other potential acquirers, (x) the uncertainties and potential
adverse impact that a "public" auction of the Company could have on the
business, employees and prospects of the Company, including its
relationships with customers and other third parties, (y) its belief, after
considering the presentations of its financial advisors, that the price per
Share in the Offer and Merger was sufficiently attractive so that it did
not feel compelled to seek other offers prior to executing the Merger
Agreement, and (z) the terms of the Merger Agreement, which permit the
Company, under certain
10
<PAGE>
circumstances, to participate in discussions and negotiations with third
parties and to enter into a Third Party Acquisition (as defined in the
Merger Agreement). The Board, after considering the presentations of its
financial advisors, did not believe that the termination provisions
referred to below would deter a higher offer.
The Board did not assign relative weights to the foregoing factors or
determine that any factor was of particular importance. Rather, the Board
viewed its position and recommendation as being based on the totality of the
information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
BT Wolfensohn was retained, pursuant to the terms of a letter agreement,
dated March 11, 1998, to assist the Company in identifying and evaluating
potential acquisition candidates and to render an opinion letter as to the
consideration to be received by the Company's stockholders pursuant to the
terms of the Merger Agreement from a financial point of view. The Company
agreed to pay BT Wolfensohn a fee of $500,000 in the event a definitive
agreement was executed and the Company requested an opinion from BT
Wolfensohn, plus, in the event a transaction is consummated with one of three
identified candidates, of which Parent is one, an additional fee of $4,250,000
payable at closing. In the event the transaction is not consummated and the
Company receives a break-up fee or other similar termination fee, the Company
has agreed to pay BT Wolfensohn a fee equal to 20% of such termination fee
when it is received by the Company. The Company has also agreed to reimburse
BT Wolfensohn for its reasonable out-of-pocket expenses, including fees of its
legal counsel and other advisors who may be retained with the Company's
consent, and to indemnify BT Wolfensohn for certain liabilities arising out of
or in connection with BT Wolfensohn's engagement.
BT Wolfensohn and/or its affiliates have provided certain investment
banking, underwriting, financial advisory and other services to the Company
and its affiliates from time to time for which it has received customary
compensation. In the ordinary course of its business, affiliates of BT
Wolfensohn may from time to time effect transactions and hold positions in
securities of the Company.
Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transactions in the Shares have been effected during the past 60 days
by the Company or, to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by them (other than
Shares issuable upon exercise of Company Stock Options and Shares, if any,
which if tendered could cause such persons to incur liability under the
provisions of Section 16(b) of the Exchange Act) or to vote such Shares in
favor of approval and adoption of the Merger Agreement. Certain stockholders
of the Company, including all of the directors, K. Bruce Hamilton, Barry G.
Campbell, George R. Melton and Terry A. Straeter, have entered into a
Stockholder Agreement with Parent and Purchaser, pursuant to which each
Certain Stockholder has agreed, among other things, to tender all of such
Certain Stockholder's Subject Shares in the Offer and to vote such Subject
Shares in favor of the Merger.
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<PAGE>
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result
in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale
or transfer of a material amount of assets by the Company or any subsidiary of
the Company; (iii) a tender offer for or other acquisition of securities by or
of the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth in this Schedule 14D-9, there are no transactions,
Board resolutions, agreements in principle or signed contracts in response to
the Offer that relate to or would result in one or more of the events referred
to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) Rights Agreement
Pursuant to the Merger Agreement, the Company has taken all action
(including, if necessary, redeeming all of the outstanding rights issued
pursuant to the Rights Agreement or amending or terminating the Rights
Agreement) so the execution, delivery and performance of the Merger Agreement
and the Stockholder Agreement and the consummation of the Merger and the other
transactions contemplated or permitted by the Merger Agreement and the
Stockholder Agreement will not result in the grant of any rights to any person
under the Rights Agreement or enable or require any outstanding rights to be
exercised, distributed or triggered. In addition, the Merger Agreement
provides the Board shall not take any action to amend the Rights Agreement,
except as described above, and shall not take any action with respect to, or
make any determination under, the Rights Agreement.
The Company and Harris Trust and Savings Bank, as Rights Agent, executed the
First Amendment to the Rights Agreement on April 24, 1998 (the "First
Amendement"), a copy of which is filed herewith as Exhibit 6 and is
incorporated herein by reference. The First Amendment exempts the transactions
contemplated or permitted by the Merger Agreement and the Stockholder
Agreement from the provisions of the Rights Agreement which would otherwise
trigger the distribution of Rights thereunder.
(b) Delaware General Corporation Law 203 and State Takeover Statutes
Section 203 of the Delaware General Corporation Law ("DGCL") provides that a
corporation organized under Delaware law, such as the Company, shall not
engage in a business combination with a stockholder beneficially owning 15% or
more of the outstanding voting stock of such corporation (an "Interested
Stockholder") for a period of three years following the date such stockholder
first becomes an Interested Stockholder unless (i) prior to the date the
stockholder first becomes an Interested Stockholder, the board of directors of
the corporation approved either the business combination or the transaction
which resulted in the stockholder becoming an Interested Stockholder, (ii)
upon becoming an Interested Stockholder, the Interested Stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time the
transaction commenced, or (iii) on or subsequent to the date the stockholder
becomes an Interested Stockholder, the business combination is approved by the
stockholders by the affirmative vote of at least two-thirds of the outstanding
voting stock which is not owned by the Interested Stockholder. The Company's
Board has approved the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, and, therefore, Section 203 of
the DGCL is inapplicable to the Offer and the Merger.
Pursuant to the Merger Agreement, the Company has agreed to take all steps
necessary to ensure that no other state takeover statute or similar law or
regulation becomes applicable to the Merger Agreement or the Stockholder
Agreement and if any state takeover statute or similar law or regulation
becomes applicable to the Merger Agreement or the Stockholder Agreement, to
ensure the Offer, the Merger and the other transactions contemplated by the
Merger Agreement or the Stockholder Agreement may be consummated as promptly
as
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<PAGE>
practicable on the terms set forth in the Merger Agreement and the Stockholder
Agreement and otherwise to minimize the effect of such law or regulation on
the Offer, the Merger and the other transactions contemplated thereby.
(c) Information Statement
The Information Statement attached hereto as Schedule I hereto is being
furnished in connection with the possible designation by Purchaser, pursuant
to the Merger Agreement, of certain persons to be appointed to the Board other
than at a meeting of the Company's stockholders.
(d) Certain Regulatory Matters-Exon Florio
Consummation of the Merger is conditioned upon certain matters relating to
the Exon-Florio Act, which grants to the President of the United States the
authority to review any business combination that could result in foreign
control over persons engaged in interstate commerce in the United States. The
Exon-Florio Act is administered by the Committee on Foreign Investment in the
United States ("CFIUS"), which has the authority to review whether a proposed
acquisition by a foreign investor poses a threat to national security and to
recommend to the President whether such a proposed acquisition should be
blocked. Under the Merger Agreement, Parent and Purchaser are not obligated to
effect the Merger unless the period of time for any applicable review by CFIUS
has expired, and CFIUS has not taken any action or made any recommendation to
the President to block or prevent consummation of the Offer or the Merger.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
Exhibit 1 Agreement and Plan of Merger dated as of April 21, 1998, by and
among GEC Incorporated, GEC Acquisition Corp. and Tracor, Inc.
Exhibit 2 Stockholder Agreement dated as of April 21, 1998, by and among
GEC Incorporated, GEC Acquisition Corp., each member of Tracor,
Inc.'s Board of Directors and certain members of Tracor, Inc.'s
management.
Exhibit 3 Confidentiality Agreement dated March 6, 1998, by and between
Tracor, Inc. and GEC Marconi, N.A., Inc.
Exhibit 4(a) Tracor Deferred Compensation Plan.
Exhibit 4(b) GDE Systems, Inc. Deferred Compensation Plan.
Exhibit 4(c) Form of Amended and Restated Non-Qualified Supplemental
Retirement Benefit Plan.
*Exhibit 5 Opinion of BT Wolfensohn, dated April 21, 1998.
Exhibit 6 First Amendment to Rights Agreement dated as of April 24, 1998,
by and between Tracor, Inc. and Harris Trust and Savings Bank as
Rights Agent.
*Exhibit 7 Letter to Stockholders of James B. Skaggs, dated April 27, 1998.
*Exhibit 8 Joint Press Release issued by GEC, p.l.c. and Tracor, Inc.,
dated April 27, 1998.
*Exhibit 9 Press Release issued by Tracor, Inc., dated April 27, 1998.
*Schedule I Information Statement of the Company.
</TABLE>
- - --------
*Included in copies of the Schedule 14D-9 mailed to shareholders.
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<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: April 27, 1998
/s/ Russell E. Painton
By___________________________________
Russell E. Painton
Vice President, Secretary and
General counsel
14
<PAGE>
SCHEDULE I
TRACOR, INC.
6500 TRACOR LANE
AUSTIN, TEXAS 78725-2000
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 April 27, 1998 as a
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Tracor, Inc. (the "Company") to the holders of record of
shares of Common Stock, par value $.01 per share, of the Company (the
"Shares") at the close of business on or about April 21, 1998. You are
receiving this Information Statement in connection with the possible election
of persons designated by Purchaser (as defined below) to a majority of the
seats on the Board of Directors of the Company.
On April 21, 1998, the Company, GEC Acquisition Corp., a Delaware
corporation ("Purchaser"), and GEC Incorporated, a Delaware corporation
("Parent"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") in accordance with the terms and subject to the conditions of
which (i) Parent will cause Purchaser to commence a tender offer (the "Offer")
for all the issued and outstanding shares of Company Common Stock, including
the associated preferred stock purchase rights (the "Rights"), at a price per
Share of $40.00 net to the seller in cash, and (ii) following consummation of
the Offer and subject to certain conditions, Purchaser will merge with and
into the Company (the "Merger"). As a result of the Offer and the Merger, the
Company will become a wholly owned subsidiary of Parent.
The Merger Agreement requires the Company to take all actions necessary to
cause Purchaser's designees to be elected to the Board of Directors of the
Company (the "Board") under the circumstances described therein. See Section
2.4 of the Merger Agreement-- "Composition of the Board of Directors; Section
14(f)."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action. Capitalized terms used herein and not
otherwise defined herein shall have the respective meanings set forth in the
Schedule 14D-9.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on April 27,
1998. The Offer is scheduled to expire at 12:00 midnight, New York City time,
on Friday, May 22, 1998, unless the Offer is extended.
The information contained in this Information Statement concerning Parent,
Purchaser and Purchaser's designees has been furnished to the Company by
Parent, and the Company assumes no responsibility for the accuracy or
completeness of such information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of April 6, 1998, there were
25,206,204 Shares outstanding, 2,452,016 Shares authorized for issuance
pursuant to the exercise of outstanding stock options and 975,195 Shares
authorized for issuance pursuant to the exercise of outstanding Series A
Warrants. The Board is divided into three classes and currently consists of
seven members, of whom three have terms of office expiring in 1999, two have
terms of office expiring in 2000 and two have terms of office expiring in
2001. At each annual meeting of stockholders, directors constituting one class
are elected for three year terms. Under the Company's current Bylaws, the
number of directors is fixed from time to time by resolution of the Board.
I-1
<PAGE>
RIGHT TO DESIGNATE DIRECTORS; PURCHASER'S DESIGNEES
The Merger Agreement provides promptly upon the acceptance for payment of,
and payment by Purchaser for, any Shares pursuant to the Offer, Purchaser
shall be entitled to designate such number of directors on the Board as will
give Purchaser representation on the Board equal to at least that number of
directors, rounded up to the next whole number, which is the product of (a)
the total number of directors on the Board (giving effect to the directors
elected pursuant to this sentence) multiplied by (b) the percentage that (i)
such number of Shares so accepted for payment and paid for by Purchaser plus
the number of Shares otherwise owned by Purchaser or any other subsidiary of
Parent bears to (ii) the number of such Shares outstanding, and the Company
shall, at such time, cause Purchaser's designees to be so elected; provided,
however, that in the event Purchaser's designees are appointed or elected to
the Board, until the effective time of the Merger (the "Effective Time") the
Board shall have at least three directors who are directors on the date of the
Merger Agreement (the "Independent Directors"); and provided further that, in
such event, if the number of Independent Directors shall be reduced below
three for any reason whatsoever, any remaining Independent Directors (or
Independent Director, if there shall be only one remaining) shall be entitled
to designate persons to fill such vacancies who shall be deemed to be
Independent Directors for purposes of the Merger Agreement or, if no
Independent Directors then remain, the other directors shall promptly
designate three persons to fill such vacancies who shall not be officers,
stockholders or affiliates of Parent or Purchaser, and such persons shall be
deemed to be Independent Directors for purposes of the Merger Agreement.
Subject to applicable law, the Company shall take all action requested by
Parent necessary to effect any such election. Purchaser's designees shall be
divided between the classes of directors as necessary to comply with the
requirements of the Company's bylaws. In connection with the foregoing, the
Company shall promptly, at the option of Purchaser, either increase the size
of the Board or obtain the resignation of such number of its current directors
as is necessary to enable Purchaser's designees to be elected or appointed to
the Board as provided above.
It is expected Purchaser's designees may assume office at any time following
the purchase by Purchaser of Shares pursuant to the Offer, which purchase
cannot be earlier than May 25, 1998, and that, upon assuming office,
Purchaser's designees will thereafter constitute at least a majority of the
Board.
I-2
<PAGE>
PURCHASER'S DESIGNEES
None of Purchaser's designees currently is a director of, or holds any
position with, the Company. To the best of Parent's and Purchaser's knowledge,
except as set forth in the Offer to Purchase, none of Purchaser's designees or
any of their associates beneficially owns any equity securities or rights to
acquire equity securities of the Company, nor has any such person been
involved in any transaction with the Company or any of its directors,
executive officers or affiliates that is required to be disclosed pursuant to
the rules and regulations of the Securities and Exchange Commission (the
"Commission"). Purchaser has informed the Company that each of Purchaser's
designees listed below has consented to act as a director. Each person is a
citizen of the United States and, unless otherwise noted, the business address
of each of Purchaser's designees is c/o GEC Marconi, N.A., Inc., 164 Totowa
Road, P.O. Box 975, Wayne, New Jersey 07474-0975. The following is certain
biographical information pertaining to each of Purchaser's designees:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT AND
NAME AGE DIRECTORSHIPS
---- --- --------------------------------------
<S> <C> <C>
John A. Currier............ 56 Vice President and Secretary of GEC Acquisition
Corp. (April 1998 to present); Director, Vice
President of Contracts and Compliance, Secretary
and General Counsel of GEC Marconi, N.A., Inc.
(August 1997 to present); Director and Vice
President of Hazeltine Corporation (June 1996 to
April 1998); Director, Vice President, Secretary
and General Counsel of GEC Marconi Hazeltine
Corporation (March 1990 to present); Director of
Chilton Memorial Hospital Foundation (1993 to
present).
Jack J. Sweet.............. 56 Vice President-Human Resources of GEC Marconi,
N.A., Inc. (April 1997 to present); Vice
President of Human Resources of GEC Marconi
Hazeltine Corporation (June 1996 to March 1997);
Vice President of Human Resources for GEC-MESC
(September 1990 to July 1996).
Peter V. Price............. 40 Vice President-Finance and Chief Financial
Officer of GEC Marconi, N.A., Inc. (January 1998
to present); Director and Vice President-Finance
of GEC Marconi Hazeltine Corporation (1998 to
present); Senior Vice President-Finance and
Contracts and Acting Division President of
Lockheed-Martin Tactical Defense Systems
(formerly Loral Corporation) (1994 to 1997);
Vice President-Finance of Lockheed-Martin Conic
(1992 to 1994).
Mark H. Ronald............. 56 Director of Canadian Marconi Company (February
1998 to present); President of GEC Acquisition
Corp. (April 1998 to present); Director,
President and Chief Executive Officer of GEC
Marconi, N.A., Inc. (August 1997 to present);
Director, President and Chief Executive officer
of GEC Marconi Hazeltine Corporation (June 1993
to present); President and Chief Executive
Officer of GEC Marconi Electronic Systems
Corporation (1993 to present); Director,
President and Chief Executive Officer of
Hazeltine Corporation (July 1996 to April 15,
1998); Director, President and Chief Operating
Officer of AEL Industries, Inc. (1985 to June
1993).
</TABLE>
I-3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
There are currently seven positions on the Company's Board, consisting of
two Class I positions, two Class II positions and three Class III positions.
Each director is elected for a term of three years, with the Class III
directors holding office until the 1999 annual meeting of stockholders, the
Class I directors holding office until the 2000 annual meeting of stockholders
and the Class II directors holding office until the 2001 annual meeting of
stockholders. In addition, all directors hold office until their respective
successors have been duly elected and qualified or until their earlier
resignation or removal.
Set forth below are the name, age, present principal occupation or
employment and five-year employment history of each of the current directors
of the Company as well as the executive officers of the Company. The business
address of each such person is c/o Tracor, Inc., 6500 Tracor Lane, Austin,
Texas 78725-2000. Each individual listed below is a citizen of the United
States.
<TABLE>
<CAPTION>
DIRECTOR
NAME AGE POSITION(S) WITH THE COMPANY SINCE
---- --- ---------------------------- --------
<S> <C> <C> <C>
James B. Skaggs......... 60 President, Chief Executive Officer, 1991
Director, Chairman of the Board
Lt. Gen. Thomas P. 67 Director 1994
Stafford USAF (ret.)...
William E. Conway, Jr... 48 Director 1995
Dr. Julian Davidson..... 70 Director 1991
Anthony Grillo.......... 42 Director 1991
Bob Marbut.............. 62 Director 1991
Elvis L. Mason.......... 64 Director 1991
Robert K. Floyd......... 61 Vice President and Chief Financial Officer N/A
Barry G. Campbell....... 56 Vice President; Chief Executive Officer of N/A
Tracor Systems Technologies, Inc.
K. Bruce Hamilton....... 56 Vice President; President of Tracor N/A
Systems Technologies, Inc.
George R. Melton........ 51 Vice President; President of Tracor N/A
Aerospace, Inc.
Dr. Terry A. Straeter... 55 Vice President; President of GDE Systems, N/A
Inc.
Woody Endsley........... 45 Vice President and Treasurer N/A
Robert J. Fitch......... 49 Vice President--Government Relations N/A
Russell E. Painton...... 57 Vice President, General Counsel and N/A
Corporate Secretary
John M. Rock, III....... 58 Vice President--Technology and Information N/A
Systems
Roger W. Sadler......... 60 Vice President--Business Development N/A
Kathy Thompson.......... 50 Vice President--Human Resources N/A
</TABLE>
Mr. Skaggs has been President and Chief Executive Officer of the Company
since 1991. Mr. Skaggs served as President, Chief Executive Officer, and a
Director of Westmark Systems, Inc. from March 1990 through December 1991, and
is currently a director of Alamo Group Inc. Mr. Skaggs' term expires in 2001.
Lt. Gen. Stafford is a member of the Audit/Ethics Committee. He is a former
astronaut and a co-founder of the technical consulting firm of Stafford, Burke
and Hecker, Inc. (1983). He serves on the Boards of Directors of AlliedSignal
Corporation (March 1981 to present); CMI, Inc. (1983 to present); Seagate
Technologies, Inc. (March 1988 to present); Tremont, Inc. (October 1990 to
present); and Wheelabrator Technologies, Inc. (September 1987 to present), all
of which are listed on the New York Stock Exchange. He also serves on the
I-4
<PAGE>
boards of Timet, Inc. (April 1996 to present) and Cycomm International
(October 1996 to present), listed, respectively, on Nasdaq and the American
Stock Exchange. Lt. Gen. Stafford's term expires in 2001.
Mr. Conway is a member of the Audit/Ethics Committee. He joined The Carlyle
Group in August 1987 and is a managing director. He serves on the Boards of
Directors of GTS Duratek, Inc. (January 1995 to present); Howmet
International, Inc. (December 1995 to present); and Nextel Communications,
Inc. (February 1997 to present). He also serves on the boards of several
private companies in which The Carlyle Group has invested. Prior to the
Company's acquisition of GDE Systems, Inc. ("GDE"), he served as Chairman of
the Board of GDE. Mr. Conway's term expires in 2000.
Dr. Davidson is Chairman of the Compensation/Stock Option Committee. He has
been President and Chief Executive Officer of Davidson Enterprises, LLC, a
commercial and defense consulting firm since April 1, 1996. Before that, he
was a Senior Vice President of Booz, Allen and Hamilton from May 1984 to April
1996. He also serves as a director on the boards of several privately held
companies. Dr. Davidson's term expires in 1999.
Mr. Grillo is Chairman of the Audit/Ethics Committee. He has been a Senior
Managing Director of The Blackstone Group, L.P., an investment banking firm
since May 1991. Mr. Grillo currently serves as a member of the Board of
Directors of Littelfuse, Inc. (November 1991 to present), a former affiliate
of the Company's predecessor, as well as a member of the boards of People's
Choice TV; Bar Technologies, Inc.; and The Academy of Political Science. Mr.
Grillo's term expires in 1999.
Mr. Marbut is a member of the Compensation/Stock Option Committee. He is
Chairman and Co-Chief Executive Officer of Hearst-Argyle Television, Inc., a
Nasdaq-traded television station group which was created in the merger of
Hearst Broadcasting and Argyle Television, Inc. in August 1997. Previously, he
was Co-Founder, Chairman, and Chief Executive Officer of Argyle Television
since its inception in 1994. He also founded Argyle Television Holding, Inc.
in 1993, a television station group for which he served as Chairman and Chief
Executive Officer until it was sold in April 1995. He is also Chairman and
Chief Executive Officer of Argyle Communications, Inc. (founded in January
1992), which is the managing general partner of Argyle Communications
Partners, L.P., a limited partnership involved in the acquisition and
operation of television stations, and successor to The Argyle Group, of which
he had been Chairman and Chief Executive Officer since January 1992. He serves
on the Boards of Directors of Tupperware Corporation (1996 to present);
Ultramar Diamond Shamrock, Inc. (December 1996 to present); Hearst-Argyle
Television, Inc. (August 1997 to present); and Argyle Communications, Inc.
(January 1992 to present). Mr. Marbut's term expires in 2000.
Mr. Mason is a member of the Compensation/Stock Option Committee. Since
August 1984, he has served as Managing Partner of Mason Best Company, L.P.
("Mason Best"), a merchant banking firm, and on the boards of several
privately held companies in which Mason Best was a significant shareholder. He
also has served, since December 1991, as a Director and, since February 1992,
as Chairman of the Board and Chief Executive Officer of San Jacinto Holdings,
parent company of Safeguard Business Systems, Inc., a supplier of office
management products and services for small businesses. Mr. Mason became
Chairman and Chief Executive Officer of Safeguard Business Systems, Inc. in
August 1997. Mr. Mason also serves as a Director of United Meridian
Corporation. Mr. Mason's term expires in 1999.
Mr. Floyd has been Vice President and Chief Financial Officer of the Company
since December 1990.
Mr. Campbell has been Chief Executive Officer of Tracor Systems
Technologies, Inc. since December 1997. Prior to that, he was Vice President
of the Company and President and Chief Executive Officer of Vitro Corporation
since October 1993. He has held various positions with Vitro Corporation since
1970.
Mr. Hamilton has been President of Tracor Systems Technologies, Inc. since
December 1997. Prior to that, he was Vice President of the Company and
President of Tracor Applied Sciences, Inc. since 1989.
I-5
<PAGE>
Mr. Melton has been Vice President of the Company since March 1990 and
President of Tracor Aerospace, Inc. since September 1990.
Dr. Straeter has been Vice President of the Company since December 1994 and
President and Chief Executive Officer of GDE since November 1992. From
February 1991 until November 1992, he served as Corporate Vice President and
General Manager of the Electronics Division of General Dynamics Corporation.
Mr. Endsley has been Vice President and Treasurer of the Company since April
1991. He served as Corporate Controller of the Company from January 1988
through April 1991.
Mr. Fitch has been Vice President-Government Relations since August 1995.
From April 1993 to July 1995, he served as Vice President, Corporate Strategic
Development for GDE. Between 1984 and 1993, he was the senior staff member of
the Program and Budget Authorization staff of the House Permanent Select
Committee on Intelligence.
Mr. Painton has been Vice President and General Counsel of the Company since
April 1983. He has also been Secretary of the Company since January 1991.
Mr. Rock has been Vice President-Technology and Information Systems of the
Company since September 1991. From January 1990 through September 1991, he was
President of Eagle GT, Inc.
Mr. Sadler has been Vice President-Business Development of the Company since
August 1991. From 1988 through August 1991, he worked as a private consultant.
Ms. Thompson has been Vice President-Human Resources of the Company since
October 1996.
MEETINGS OF THE BOARD OF DIRECTORS AND COMMITTEES
The Company has three classes of directors serving staggered three-year
terms. Class I and Class II each currently consists of two directors and Class
III consists of three directors. The terms of Class I, Class II and Class III
directors expire on the date of the Annual Meeting in 2000, 2001 and 1999,
respectively. The Board met five times during 1997. Each director attended
more than 75% of the aggregate of (a) the total number of meetings of the
Board held during 1997 and (b) the total number of meetings held by all
committees of the Board on which each served.
The following committees constitute the standing committees of the Board:
(i) The Audit/Ethics Committee (the "Audit Committee"), which met twice in
1997. The duties of the Audit Committee are to:
a. recommend to the Board a firm of independent auditors to perform the
audit of the annual financial statements of the Company;
b. review with the independent auditors and with financial management the
proposed scope of the annual audit, past audit experience, the Company's
internal audit program, recently completed internal audits, and other
matters bearing upon the scope of the audit;
c. review with the independent auditors and with financial management
significant matters revealed in the course of the audit of the annual
financial statements of the Company;
I-6
<PAGE>
d. review on an annual basis whether the Company's ethics policies have
been communicated by the Company to all key employees of the Company and
its subsidiaries;
e. review with financial management any suggestions and recommendations
of the independent auditors of the Company;
f. meet on a regular basis with a representative or representatives of
the Internal Audit Department of the Company and to review the Internal
Audit Department's Reports of Operations; and
g. report its activities and actions to the Board at least once each
fiscal year.
The Audit Committee consists of Anthony Grillo, William E. Conway and Thomas
P. Stafford. The Chairman of the Audit Committee is Anthony Grillo.
(ii) The Compensation/Stock Option Committee (the "Compensation Committee")
which met five times in 1997. The duties of the Compensation Committee are to:
a. administer the Company's stock option plans;
b. recommend policies dealing with compensation, position evaluations,
and personnel engagements, transfers, and terminations, including the
Company's annual incentive program;
c. review and recommend major compensation plans;
d. recommend the Company's management development programs and
procedures;
e. approve and recommend to the Board compensation for corporate
officers; and
f. review the administration of the Company's Retirement Plan.
Members of the Compensation Committee are Julian Davidson, Bob Marbut and
Elvis L. Mason. Julian Davidson is the Chairman of the Compensation Committee.
OWNERSHIP OF COMPANY COMMON STOCK
The following tables set forth as of April 6, 1998, certain information
known to the Company with respect to the beneficial ownership (as defined in
the rules of the Commission) of Shares by all directors; the Chief Executive
Officer and the other executive officers named on the Summary Compensation
Table (on page I-11); all directors and executive officers as a group; and any
person who is known by the Company to be the beneficial owner of more than
five percent of the Shares. The percentages are calculated including Shares
which are subject to outstanding warrants and options held by directors and
officers.
<TABLE>
<CAPTION>
NUMBER
NAME AND ADDRESS OF BENEFICIAL OWNER OF SHARES PERCENT
------------------------------------ --------- -------
<S> <C> <C>
William E. Conway, Jr....................................... 91,638(1) *
The Carlyle Group
1001 Pennsylvania Avenue, N.W.
Suite 220
South Washington, DC 20004
Julian Davidson............................................. 4,800(2) *
991 Discovery Drive
Huntsville, Alabama 35801
Anthony Grillo.............................................. 14,800(3) *
The Blackstone Group
345 Park Avenue
New York, New York 10154-0191
</TABLE>
I-7
<PAGE>
<TABLE>
<CAPTION>
NUMBER
NAME AND ADDRESS OF BENEFICIAL OWNER OF SHARES PERCENT
------------------------------------ --------- -------
<S> <C> <C>
Bob Marbut.............................................. 33,300(4) *
Hearst-Argyle Television, Inc.
200 Concord Plaza
Suite 700
San Antonio, Texas 78216
Elvis L. Mason.......................................... 1,415,671(5) 5.6%
Mason Best Company
2121 San Jacinto
Suite 1000
Dallas, Texas 75201
Thomas P. Stafford...................................... 8,800(6) *
Stafford, Burke and Hecker, Inc.
1006 Cameron Street
Alexandria, Virginia 22314
James B. Skaggs......................................... 521,564(7) 2.1%
Tracor, Inc.
6500 Tracor Lane
Austin, Texas 78725-2000
Barry G. Campbell....................................... 59,487(8) *
Tracor, Inc.
1601 Research Boulevard
Rockville, Maryland 20850
Robert K. Floyd......................................... 99,111(9) *
Tracor, Inc.
6500 Tracor Lane
Austin, Texas 78725-2000
George R. Melton........................................ 91,200(10) *
Tracor, Inc.
6500 Tracor Lane
Austin, Texas 78725-2000
Terry A. Straeter....................................... 211,531(11) *
Tracor, Inc.
16550 West Bernardo Drive
San Diego, California 92127
Franklin Advisors, Inc.................................. 1,321,300(12) 5.2%
777 Mariners Island Boulevard
San Mateo, California 94403-7777
Mason Best Co., L.P..................................... 1,398,067(13) 5.5%
2121 San Jacinto
Suite 1000
Dallas, Texas 75201
Gerald B. Unterman...................................... 2,010,374(14) 8.0%
70 East 55th Street
New York, New York 10022
All directors and executive officers as a group,
including those named above............................ 2,847,671(15) 11.3%
</TABLE>
I-8
<PAGE>
- - --------
* less than 1%.
(1) 15,046 Shares are held by Mr. Conway and 1,800 Shares are held pursuant
to stock options exercisable within 60 days. Mr. Conway owns more than
90% of the stock of Stupar Holdings Corporation, a private company which
owns 74,792 Shares.
(2) 3,000 Shares are held by Dr. Davidson; 1,800 Shares are held pursuant to
stock options exercisable within 60 days.
(3) 13,000 Shares are held by Mr. Grillo; 1,800 Shares are held pursuant to
stock options exercisable within 60 days.
(4) 31,500 Shares are held by Mr. Marbut; 1,800 Shares are held pursuant to
stock options exercisable within 60 days.
(5) 7,000 Shares are held by Mr. Mason; 1,800 Shares are held pursuant to
stock options exercisable within 60 days. Mr. Mason is the President of
E.L. Mason Corporation, which is the general partner of MB Partners, Ltd.
("MB Partners"), which is the general partner of the Mason Best Company,
L.P. ("Mason Best"). Mason Best directly owns 1,398,067 Shares. Mr. Mason
owns 50% of the general partner of Mason Best, MB Partners; however, Mr.
Mason holds 100% of the voting rights in the general partner of Mason
Best. In addition, Mr. Mason is the Managing Partner of Mason Best. As a
result, Mr. Mason may be deemed to beneficially own 100% of the Shares
held by Mason Best. MB Partners directly owns 8,804 Shares, and Mr. Mason
owns 100% of E.L. Mason Corporation, which is the general partner of MB
Partners, and may be deemed to beneficially own 100% of the Shares held
by MB Partners.
(6) 7,000 Shares are held by Lt. Gen. Stafford; 1,800 Shares are held
pursuant to stock options exercisable within 60 days.
(7) 47,364 Shares are held by Mr. Skaggs; 469,200 Shares are held pursuant to
stock options exercisable within 60 days. In addition, 5,000 Shares are
held pursuant to Series A Warrants which are convertible into Shares.
(8) 1,887 Shares are held by Mr. Campbell; 57,600 Shares are held pursuant to
stock options exercisable within 60 days.
(9) 3,411 Shares are held by Mr. Floyd; 94,700 Shares are held pursuant to
stock options exercisable within 60 days. In addition, 1,000 Shares are
held pursuant to Series A Warrants which are convertible into Shares.
(10) 12,600 Shares are held by Mr. Melton; 75,600 Shares are held pursuant to
stock options exercisable within 60 days. In addition, Mrs. Melton holds
3,000 Shares.
(11) 13,000 Shares are owned by Dr. Straeter; 33,200 Shares are held pursuant
to stock options exercisable within 60 days. In addition, a family trust
over which Dr. Straeter has control holds 163,331 Shares and 2,000 Shares
are held pursuant to Series A Warrants which are convertible into Shares.
(12) Shares are beneficially owned by one or more open or closed-end
investment companies or other managed accounts which are advised by
direct and indirect investment advisory subsidiaries (the "Adviser
Subsidiaries") of Franklin Resources, Inc. ("FRI"). Such advisory
contracts grant to such Adviser Subsidiaries all investment and/or voting
power over the securities owned by such advisory clients. Therefore, such
Adviser Subsidiaries may be deemed to be the beneficial owner of the
securities. Charles B. Johnson and Rupert H. Johnson, Jr. (the "Principal
Shareholders") each own in excess of 10% of the outstanding Shares of FRI
and are the principal shareholders of FRI. FRI, the Principal
Shareholders, and each of the Adviser Subsidiaries disclaim any economic
interest or beneficial ownership in the Shares. Franklin Advisors, Inc.
has sole power to vote or to direct the vote of, and to dispose or to
direct the disposition of, 1,321,300 Shares. Franklin Mutual Advisers,
Inc. has sole power to vote or to direct the vote of, and to dispose or
to direct the disposition of, 567,000 Shares. Franklin Management, Inc.
has sole power to dispose or to direct the disposition of 4,040 Shares.
(13) See footnote 5 above.
I-9
<PAGE>
(14) GBU, Inc. is the sole general partner of Oak Tree Partners, L.P. and GEM
Convertible Securities Partners, L.P. GBU, Inc. beneficially owns
1,146,424 Shares (which are directly owned by Oak Tree Partners, L.P.)
and 152,500 Shares are held pursuant to Series A Warrants which are
convertible into Shares (which are owned by GEM Convertible Securities
Partners, L.P.). Mr. Unterman is the President, majority shareholder, and
a Director of GBU, Inc. He is also the President, sole shareholder, and a
Director of GEM Capital Management, Inc. GEM Capital Management, Inc. is
a registered investment advisor whose accounts own 71,175 Shares which
Mr. Unterman may be deemed to beneficially own. Mr. Unterman is the
trustee of a profit sharing plan which owns 25,900 Shares. Mr. Unterman
owns 100,000 Shares; additionally 514,375 Shares are held pursuant to
Series A Warrants which are convertible into Shares.
With respect to the 1,146,424 Shares owned by Oak Tree Partners, L.P., GBU
owns a 19.4% interest in that partnership and Gerald B. Unterman owns 83%
of GBU, Inc. Therefore, Mr. Unterman claims beneficial ownership of only
184,597 of those Shares. With respect to the 152,500 Shares held pursuant
to the Series A Warrants owned by GEM Convertible Securities Partners,
L.P., GBU, Inc. owns a 1% interest in that partnership, and Mr. Unterman
owns 83% of GBU, Inc. Therefore, Mr. Unterman claims beneficial ownership
of only 1,266 of those Shares.
(15) Includes Shares subject to outstanding warrants and options which are
exercisable within 60 days.
DIRECTOR'S COMPENSATION
Outside (non-employee) directors of the Company are paid annual board
retainers of $22,750, plus travel and allowances where appropriate. Attendance
fees of $1,200 per meeting are also paid. Directors who also serve on a
committee of the Board receive $1,050 for each committee meeting attended.
Directors who are currently on the Board at the first of each year receive
1,000 shares of restricted Company Common Stock and are granted 2,000 stock
options at the then current market price.
I-10
<PAGE>
EXECUTIVE COMPENSATION
The following Summary Compensation Table shows the compensation of the
Company's five most highly compensated executive officers (the "Named
Executive Officers"), including the Chief Executive Officer, for the three
most recent fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
---------------------- --------------------------------------
AWARDS PAYOUTS
------------------------- ------------
RESTRICTED SECURITIES LONG TERM
NAME AND PRINCIPAL STOCK UNDERLYING INCENTIVE ALL OTHER
POSITION YEAR SALARY BONUS AWARDS OPTIONS/SAR(2) PLAN PAYOUTS COMPENSATION(1)
- - ------------------ ---- -------- -------- ---------- -------------- ------------ ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
James B. Skaggs......... 1997 $635,003 $409,140 -0- 100,000 -0- $67,882
President & CEO 1996 577,533 490,445 -0- 100,000 -0- 39,281
1995 523,921 410,987 -0- 200,000 -0- 28,687
Barry G. Campbell....... 1997 $241,308 $159,417 -0- 18,000 -0- $23,431
Vice President 1996 235,885 129,938 -0- 12,000 -0- 11,865
1995 209,244 105,074 -0- 20,000 -0- 9,699
Robert K. Floyd......... 1997 $258,232 $128,552 -0- 20,000 -0- $37,238
Vice President & Chief 1996 230,568 149,446 -0- 12,000 -0- 22,585
Financial Officer 1995 216,448 126,703 -0- 20,000 -0- 17,592
George R. Melton........ 1997 $232,419 $180,945 -0- 20,000 -0- $23,175
Vice President 1996 200,366 133,502 -0- 12,000 -0- 16,803
1995 166,675 88,069 -0- 18,000 -0- 10,973
Terry A. Straeter....... 1997 $254,128 $184,375 -0- 20,000 -0- $49,933
Vice President 1996 226,900 174,177 -0- 12,000 -0- 50,605
1995 212,019 138,273 -0- 15,000 $243,132 24,296
</TABLE>
- - --------
(1) Includes term life insurance premiums paid by the Company on behalf of
each named individual.
(2)No SARs have been issued as of the dates indicated.
I-11
<PAGE>
OPTION GRANTS IN FISCAL YEAR 1997(1)
The following table sets forth certain information on option grants in
fiscal 1997 to the Named Executive Officers.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES OF
STOCK PRICE APPRECIATION
FOR
INDIVIDUAL GRANTS FULL OPTION TERM
-------------------------------------------- ---------------------------
NUMBER OF % OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES IN OR BASE EXPIRATION
NAME GRANTED FISCAL 1997 PRICE DATE 5% 10%
---- ---------- ------------- -------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
James B. Skaggs......... 100,000 20.91% $22.38 02/12/2007 $1,407,465.80 $3,566,795.20
Barry G. Campbell....... 18,000 3.76% 22.38 02/12/2007 253,343.84 642,023.13
Robert K. Floyd......... 20,000 4.18% 22.38 02/12/2007 281,493.16 713,359.04
George R. Melton........ 20,000 4.18% 22.38 02/12/2007 281,493.16 713,359.04
Terry A. Straeter....... 20,000 4.18% 22.38 02/12/2007 281,493.16 713,359.04
</TABLE>
- - --------
(1) The per Share option exercise prices are the fair market value of the
Shares on the date of the grant, and the term of each option is 10 years.
30% of each option is exercisable one year after the date of grant, an
additional 30% is exercisable two years after the grant, and the remainder
is exercisable three years after the grant.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information with respect to the exercise of
Company Stock Options during fiscal year 1997 and certain information with
respect to unexercised Company Stock Options to the Named Executive Officers
and held by them at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR IN-THE-MONEY OPTIONS AT
NUMBER OF END FISCAL YEAR END(1)
SHARES ------------------------- -------------------------
ACQUIRED VALUE EXERCISABLE
NAME ON EXERCISE REALIZED AT 12/31/97 UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
James B. Skaggs......... 15,000 $390,000 329,200 250,000 $7,391,496 $3,187,900
Barry G. Campbell....... -0- -0- 40,600 34,400 816,110 402,740
Robert K. Floyd......... -0- -0- 77,100 36,400 1,900,105 418,740
George R. Melton........ 3,000 69,750 62,600 35,600 1,578,670 404,836
Terry A. Straeter....... -0- -0- 17,600 34,400 298,370 383,980
</TABLE>
- - --------
(1) The last sale price of the Shares on December 31, 1997, was $30.38 per
Share.
I-12
<PAGE>
EMPLOYMENT AGREEMENTS
Effective as of November 22, 1996, the Company entered into employment
agreements with certain of its officers who had not previously entered into
employment agreements with the Company and, further, entered into amended and
restated employment agreements with certain of its officers who had previously
entered into employment agreements with the Company. Each of the Named
Executive Officers has executed employment agreements with the Company. All of
the agreements provide for a termination date of December 31, 1999, or the
first day of the year following the year in which the officer reaches his/her
65th birthday. The agreements also provide for automatic renewals unless
terminated earlier by the officer or the Board.
Among other things, the employment agreements assure the continuation of
each such officer's base salary as of such date and his/her continued
participation in the Company incentive and other welfare and benefit plans, as
well as continuation of his/her then current level of job position and
responsibilities, failing which such officer may terminate his/her employment
with the Company and receive, as termination pay, stipulated amounts equal to
up to two times such officer's base salary then in effect and other benefits.
Under each employment agreement, the Company has the right to terminate an
officer for cause, under which circumstances the officer would not be entitled
to termination pay. Each agreement provides that upon termination the officer
will not compete with the Company for a period of six months after the date of
termination nor will the officer divulge confidential information or trade
secrets to third parties.
DEFINED BENEFIT RETIREMENT PLAN
The Company has a Defined Benefit Retirement Plan (the "Retirement Plan")
which provides retirement benefits for its employees and employees of
participating affiliates. The Retirement Plan has three benefit formulas as
described below for the Company, Vitro Corporation ("Vitro"), and GDE Systems,
Inc. ("GDE") employees. Employees covered under the Company formula become
vested in the Retirement Plan upon the completion of five years of vesting
service. Monthly benefits, payable at normal retirement age, are based upon an
amount equal to one percent of final "average monthly compensation" up to
"covered compensation" plus one and one-half percent of final average monthly
compensation in excess of covered compensation, multiplied by the years of
credited service with the Company, less one year. Average monthly compensation
is defined as the average monthly compensation actually paid, including
bonuses and overtime pay for the five highest successive calendar years.
Covered compensation is defined as the average of the maximum wages subject to
social security taxes for the 35 years ending in the calendar year before the
employee reached Social Security retirement age. Credited service is the
period of the employee's total employment with the Company. The monthly
benefits are not subject to deductions for Social Security or other offset
amounts.
Employees covered under the Vitro formula are provided monthly benefits,
payable at normal retirement age, which are based on the amount equal to one
and one-tenth percent of average annual compensation up to covered
compensation plus one and three-quarters percent of average annual
compensation in excess of covered compensation, multiplied by the years of
credited service. Average annual compensation means the average of annual
earnings during the employee's five consecutive highest paid years with Vitro.
Credited service generally means all the employee's years of service with
Vitro. The monthly benefits are not subject to deductions for Social Security
or other offset amounts.
Employees covered under the GDE formula are provided monthly benefits,
payable at normal retirement age, which are based on the amount equal to
approximately one and three-tenths percent of average annual compensation,
multiplied by the years of credited service. Average annual compensation means
the average of annual earnings during the employee's five consecutive highest
paid years with GDE. Credited service generally means all the employee's years
of service with GDE. The monthly benefits are not subject to deductions for
Social Security or other amounts.
I-13
<PAGE>
The following tables show the estimated annual benefits payable upon
retirement to persons in specified remuneration and years of service
classifications who would retire in 1998 at age 65. The amounts shown in the
tables were determined as normal retirement benefits at December 31, 1997, and
were based on pay limited by Section 401(a)(17) of the Internal Revenue Code
(the "Code"). Benefits are limited by Section 415 of the Code without regard
to combined plan limitations.
RETIREMENT PLAN ANNUAL BENEFITS
TRACOR, INC.
<TABLE>
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE ANNUAL -----------------------------------------
COMPENSATION 15 20 25 30 35
-------------------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
$ 100,000.................... $18,949 $25,716 $32,484 $ 39,251 $ 46,018
$ 125,000.................... 24,199 32,841 41,484 50,126 58,768
$ 150,000.................... 29,449 39,966 50,484 61,001 71,518
$ 175,000.................... 33,824 46,230 58,634 71,040 83,444
$ 200,000.................... 37,574 51,854 66,134 80,414 94,694
$ 225,000.................... 41,234 57,480 73,634 89,790 105,944
$ 250,000.................... 42,950 59,918 76,886 93,854 110,822
$ 300,000.................... 42,950 59,918 76,886 93,854 110,822
$ 350,000.................... 42,950 59,918 76,886 93,854 110,822
$ 400,000.................... 42,950 59,918 76,886 93,854 110,822
$ 450,000.................... 42,950 59,918 76,886 93,854 110,822
$ 500,000.................... 42,950 59,918 76,886 93,854 110,822
$1,252,972(1)................. 42,950 59,918 76,886 93,854 110,822
TRACOR SYSTEMS TECHNOLOGIES, INC.(2)
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE ANNUAL -----------------------------------------
COMPENSATION 15 20 25 30 35
-------------------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000...................... $23,393 $31,191 $38,988 $ 46,786 $ 54,583
$125,000...................... 29,955 39,940 49,926 59,911 69,896
$150,000...................... 36,518 48,690 60,863 73,036 85,208
$175,000...................... 42,070 56,448 70,826 85,204 99,582
$200,000...................... 46,882 63,448 80,013 96,579 113,145
$225,000...................... 53,695 70,448 89,201 107,954 125,000
$250,000...................... 53,781 73,483 93,185 112,886 125,000
$300,000...................... 53,781 73,483 93,185 112,886 125,000
$350,000...................... 53,781 73,483 93,185 112,886 125,000
$400,000...................... 53,781 73,483 93,185 112,886 125,000
$480,870(1)................... 53,781 73,483 93,185 112,886 125,000
GDE SYSTEMS, INC.
<CAPTION>
YEARS OF SERVICE
FINAL AVERAGE ANNUAL -----------------------------------------
COMPENSATION 15 20 25 30 35
-------------------- ------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000...................... $20,000 $26,667 $33,333 $ 40,000 $ 46,667
$125,000...................... 25,000 33,333 41,667 50,000 58,333
$150,000...................... 30,000 40,000 50,000 60,000 70,000
$175,000...................... 34,200 45,866 57,533 69,200 80,866
$200,000...................... 37,866 51,200 64,533 77,866 91,199
$225,000...................... 41,533 56,533 71,533 86,533 101,533
$250,000...................... 43,123 58,845 74,568 90,291 106,013
$300,000...................... 43,123 58,845 74,568 90,291 106,013
$350,000...................... 43,123 58,845 74,568 90,291 106,013
$400,000...................... 43,123 58,845 74,568 90,291 106,013
$450,000...................... 43,123 58,845 74,568 90,291 106,013
$526,204(1)................... 43,123 58,845 74,568 90,291 106,013
</TABLE>
I-14
<PAGE>
- - --------
(1) Represents 120% of covered compensation for the most highly compensated
individual who would be entitled to benefits under this particular plan.
(2) Employees of Tracor Systems Technologies, Inc. and Tracor Services
Corporation whose credited service begins on or after January 1, 1996, are
covered under the Company benefit formula. Benefits based on pay over
$160,000 are limited with a minimum benefit, as of December 31, 1993,
under prior pay plan.
As of December 31, 1997, the persons named in the Summary Compensation Table
were credited with the following years of service under the Retirement Plan:
Mr. Skaggs, 7.8; Mr. Campbell, 27.6; Mr. Floyd, 7.6; Mr. Melton, 7.8; and Dr.
Straeter, 17.8.
NON-QUALIFIED SUPPLEMENTAL RETIREMENT PROGRAM
During 1993, the Company established a Non-Qualified Supplemental Retirement
Program for certain of its officers, which was amended and restated effective
as of January 30, 1997 (the "Program"). The Program provides that upon normal
retirement or termination not for cause, Company officers covered by the
Program will receive a monthly income of up to 50% of his/her average
compensation for the 36 months immediately prior to the date of retirement or
termination, less the amount of retirement benefits which the officer would
otherwise be entitled to under the Retirement Plan. The actual amount the
participant would be entitled to receive is determined by the participant's
total number of years of service to the Company after December 21, 1991. The
Program further provides that upon the death of the participant, his or her
spouse would also be entitled to receive a monthly income equal to one-half of
the benefit which would otherwise be payable to the officer. Currently,
Messrs. Skaggs, Floyd, and Melton are participants in the Program. The Program
additionally provides that if any of the participants are terminated without
cause, they shall become immediately 100% vested in the Program, and in the
case of Messrs. Skaggs and Floyd, they may elect to receive the benefits
payable to them under the Program in a lump sum. Assuming the individuals
remain in the employ of the Company until their normal retirement age, each of
the following executives will receive an annuity, as described above, which,
on an actuarial basis, is equal to the following annual payments: Mr. Skaggs,
$490,480; Mr. Floyd, $176,384; and Mr. Melton, $233,496.
Dr. Straeter is eligible to receive benefits from the GDE Systems, Inc.
Supplemental Retirement Plan. This plan is designed to replace any pension
benefit lost to Dr. Straeter if his final average covered compensation is in
excess of the limitations for eligible compensation contained in Sections 415
or 401(a)(17) of the Code. Assuming Dr. Straeter remains employed by the
Company until his normal retirement age, he will receive an annuity with an
estimated annual payment of $150,540.
Mr. Campbell is eligible to receive benefits from the Tracor Benefit
Restoration Plan. This plan, adopted October 1, 1996, is designed to replace
any pension benefit lost to Mr. Campbell if his final average monthly covered
compensation is in excess of the limitations for eligible compensation
contained in Sections 415 or 401(a)(17) of the Code. Assuming Mr. Campbell
remains with the Company until his normal retirement age, he will receive an
estimated lump sum payment of $1,615,485.
Effective December 1, 1996, the Company adopted the Tracor Deferred
Compensation Plan designed primarily to replace 401(k) Plan benefits lost due
to the Code limitations on employee deferrals and covered compensation used to
determine benefits from the qualified Tracor, Inc. 401(k) Plan. For 1997,
matching contributions were credited in the amount of $13,287 to Mr. Skaggs;
$5,043 to Mr. Campbell; $3,427 to Mr. Floyd; and $5,262 to Mr. Melton.
On March 13, 1998, the Company entered into Amended and Restated Non-
qualified Supplemental Retirement Benefit Plans ("RBPs") with the following
individuals: James B. Skaggs, Robert K. Floyd, Russell E. Painton, John M.
Rock III, Roger W. Sadler, George R. Melton and K. Bruce Hamilton. The RBPs
provide the Company will, in consideration of services previously rendered and
to be rendered, pay to the named individuals and their respective spouses a
Supplemental Retirement Benefit (the "Benefit") upon certain
I-15
<PAGE>
conditions. The Benefit under the RBPs is equal to (i) 50% of the average
monthly eligible earnings (including compensation, deferred amounts,
commissions and contributions to deferred compensation plans) from the Company
for the 36 months immediately preceding the individual's termination of
employment, less (ii) the amount of monthly retirement income then payable to
such individual under the Tracor Retirement Plan as a single life annuity.
This amount is then multiplied by the "vested percentage" for such individual
(equal to 20% per year for each year of full time employment subsequent to
December 21, 1991), which is then multiplied by a fraction determined
utilizing years of credited service. In the event of a merger or consolidation
of the Company with any other corporation, or in the event of the sale of all
or substantially all the assets of the Company, the successor entity will be
required by the Company to assume all obligations of the Company under the
RBPs. In addition, in any such event Messrs. Skaggs and Floyd may elect to
receive their respective Benefits in a lump sum.
COMPENSATION/STOCK OPTION COMMITTEE REPORT
Executive Compensation Principles. The Company's Executive Compensation
Program is based on guiding principles designed to align executive
compensation with Company values and objectives, business strategies,
management initiatives, and business financial performance. In applying these
principles, the Compensation/Stock Option Committee (the "Committee") has
established a program to:
a. attract and retain key executives critical to the long-term success of
the Company and each of its business groups;
b. reward executives for long-term strategic management and enhancement
of shareholder values;
c. integrate compensation programs with both the Company's annual and
long-term strategic planning and measuring processes; and
d. support a performance-oriented environment that rewards performance
not only with respect to Company goals but also Company performance as
compared to that of industry performance levels.
Executive Compensation Program. The total compensation program consists of
both cash and equity-based compensation. The annual compensation consists of a
base salary and an annual incentive. The Committee determines the level of
salary for executive officers. Actual salary changes are based upon
performance and upon national industry salary surveys in related industries,
depending on the areas in which the particular executive is employed, and
supplemented by other surveys which are used to enhance the analysis. These
surveys covered essentially the same companies that are included in the graph
comparing the cumulative total returns of the Company, set forth below. The
salary levels are targeted to the median of such surveys, with variations
based upon the experience of each officer and the complexity of his/her
particular responsibilities. In considering the salary increases from 1997 to
1998, the Committee also evaluated each executive's performance in several
areas, including increases in sales and revenue from the preceding year,
increases in profits in the executive's area of responsibility, and the
success of his/her budgetary controls. No increases were required, or given,
pursuant to the terms of any employment agreements.
Incentive Compensation Program. Effective December 1991, the Company adopted
a performance incentive plan under which executive officers and other high-
level employees may receive compensation based on the achievement of
individual and Company objectives. Eligible participants include officers and
other key employees of the Company who are in a position to make substantial
contributions to the management, growth, and success of the Company. Payment
of an award is contingent upon the achievement of specified levels of
earnings, bookings, revenue, and cash generation of the Company or the
employee's unit ("performance goals") each year based upon the annual
operating plan of the Company. A smaller portion of each person's incentive
payment is based on individual and organizational goals such as increases in
efficiency of the executive's area of responsibility, adherence to budgetary
plans, and implementation of new operating procedures and programs. At the
close of each fiscal year, the performance of the operating unit in which the
employee participates is reviewed against the performance goals, division
objectives are evaluated, and awards are issued. In the event the performance
goals are not achieved, the awards are reduced or eliminated entirely. If
performance goals are
I-16
<PAGE>
exceeded, the amount of an award may be increased. In reviewing the
performance of the named executives for 1997, the Committee determined each
individual and the Company exceeded most of their respective goals for the
year. Executive officers as a group were awarded payments totaling
$1,736,257.11 and all employees as a group received payments totaling
$7,657,956.91 under this plan in 1997.
Stock Plan. The Company adopted, in December 1991, the Stock Plan for
Employees of Tracor, Inc. and its Subsidiaries (the "1991 Plan"). In April
1995, the Company adopted the 1995 Stock Plan for Employees of Tracor, Inc.
and its Subsidiaries (the "1995 Plan" or, collectively, the "Stock Plans")
pursuant to which options to purchase Company Common Stock of the Company,
stock appreciation rights ("SARs") (rights, granted in tandem with an option
(or alone), to receive cash payments equal to any appreciation in value of the
shares subject to option from the date of the option grant to the date of
exercise in lieu of the exercise of an option), and/or shares of restricted
stock may be granted to officers and other key employees of the Company and
its subsidiaries. The plans are administered by the Committee which has
authority to determine the individuals to whom and the terms pursuant to which
grants shall be made. Per share option prices are not less than the fair
market value of the Company's Common Stock on the date of the option grant,
and the term of the options cannot exceed 10 years. The two plans are
identical in all material respects, except that outside directors participate
in the 1995 Plan.
Under the Stock Plans, the Committee grants stock options, restricted
shares, and/or SARs based upon its review of surveys and publicly available
information relating to the amount and type of awards granted to executives in
the aerospace and defense industry, as well as its review of each executive's
performance, evaluated as described above. Through the award of options, the
objective of aligning executive officers' long-range interests with those of
the shareholders are met by providing the executive officers with the
opportunity to build a meaningful stake in the Company.
Officer Compensation. The Committee met for the purpose of evaluating the
performance of the Company's CEO. In accordance with the Company's Executive
Compensation program, the Committee evaluated Mr. Skaggs' performance for the
year based on both objectively evaluated quantitative criteria and on
subjectively evaluated qualitative criteria. Mr. Skaggs' base salary and total
compensation were also evaluated with respect to similar positions in the
industry using a number of compensation surveys. The goal of the Committee was
to determine whether an increase in his base salary was merited, and, if so,
how much of an increase should be recommended to the Board. The Committee
additionally determined the amount of incentive compensation and stock options
to recommend that the Board should award to Mr. Skaggs.
Quantitative and Qualitative Goals. At the beginning of each fiscal year,
the Board establishes quantitative and qualitative goals or "targets" for the
CEO of the Company. Results are evaluated at the end of the fiscal year.
For 1997, the Committee evaluated the results of three quantitative
criteria. They were:
<TABLE>
<CAPTION>
TARGET ACTUAL % OF
(IN MILLIONS) (IN MILLIONS) TARGET
------------- ------------- ------
<S> <C> <C> <C>
Earnings(1)........................... $ 99.00 $ 101.91 102.9%
Net Cash Activity..................... $ 60.00 $ 47.69 79.5%
Bookings.............................. $1,370.00 $1,505.79 109.9%
</TABLE>
- - --------
(1) Before interest, income taxes, and extraordinary item.
In addition, the Committee subjectively evaluated the results of qualitative
criteria. They include:
a. return on shareholders' equity;
b. share price increase;
c. shareholders' equity increase;
I-17
<PAGE>
d. achievement of strategic business goals;
e. the conduct of business operations;
f. board communication; and
g. quality of management team.
Base Salary and Annual Incentive Compensation. Based upon its review of Mr.
Skaggs' overall 1997 performance for base salary and annual incentive
purposes, the Committee determined that, overall, Mr. Skaggs exceeded most
quantitative and qualitative target measures. The Committee also considered
the Company's 1997 performance improvements over 1996 in determining the base
salary increase. These improvements included a 17% increase in sales; a 15%
increase in earnings before interest, income taxes, and extraordinary items
(and also excluding a nonrecurring gain in 1996); a 29% increase in income
before extraordinary item (and also excluding a nonrecurring gain in 1996); a
23% increase in firm backlog; a 20% increase in total backlog; and a 40%
increase in bookings. As a result, the Committee recommended that Mr. Skaggs
should receive a base salary increase of approximately 10%, effective for the
1998 year.
Mr. Skaggs' annual incentive compensation for 1997 was calculated using a
mathematical equation which took into account quantitative performance results
related to earnings, net cash, and bookings plus the achievement of
qualitative goals as evaluated by the Committee. Using the mathematical
equation and the evaluated incentive results described above, Mr. Skaggs'
recommended annual incentive bonus is 66.8% of his 1997 base salary.
Stock Option Grants. The stock option grants made to Mr. Skaggs under the
Company's Stock Plan were determined using the criteria described under the
Stock Plan referenced previously. Option grants received by Mr. Skaggs in
fiscal year 1997 are noted under the Executive Compensation section showing
the five most highly compensated officers.
Compensation/Stock Option Committee
Julian Davidson, Chairman
Bob Marbut
Elvis L. Mason
I-18
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN(1)
AMONG THE NASDAQ STOCK MARKET INDEX,
DOW JONES DEFENSE AND AEROSPACE INDEX, AND TRACOR, INC.
Set forth below is a line graph comparing the cumulative total shareholder
return on the Shares, based on the market price of the Shares and assuming
reinvestment of dividends, with the cumulative total return of companies on
the Nasdaq Stock Market Index and the Dow Jones Defense & Aerospace Index.
CUMULATIVE TOTAL RETURNS
[LINE GRAPH DEPICTING COMPARISON OF CUMULATIVE TOTAL RETURN AMONG THE NASDAQ
STOCK MARKET INDEX, DOW JONES DEFENSE AND AEROSPACE INDEX, AND TRACOR, INC.
APPEARS HERE]
... NASDAQ STOCK MARKET -- TRACOR, INC. - - - DJ DEFENSE & AEROSPACE
-----------------------------------------------------------------------------
/1Assumes/$100.00 invested on December 31, 1992, in the Nasdaq Stock
Market Index, Dow Jones Defense & Aerospace Index, and Tracor, Inc.
I-19
<PAGE>
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers and directors and persons who own more than 10% of a registered class
of the Company's equity securities to file reports of ownership and changes in
ownership with the Commission. Officers, directors, and greater than 10%
shareholders are required by Commission regulation to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by the
Company, or written representations from certain reporting persons that no
Form 5s were required for those persons, the Company believes that during the
fiscal year ended December 31, 1997, its officers and directors complied with
all applicable Section 16(a) filing requirements.
I-20
<PAGE>
EXHIBIT 1
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
GEC INCORPORATED
("PARENT"),
GEC ACQUISITION CORP.
("PURCHASER")
AND
TRACOR, INC.
(THE "COMPANY")
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS................................................................... 1
SECTION 1.1 Definitions............................................. 1
SECTION 1.2 Rules of Construction................................... 2
ARTICLE II
THE OFFER..................................................................... 2
SECTION 2.1 The Offer............................................... 2
SECTION 2.2 Company Actions......................................... 3
SECTION 2.3 Stockholder Lists....................................... 4
SECTION 2.4 Composition of the Board of Directors; Section 14(f).... 4
ARTICLE III
THE MERGER.................................................................... 5
SECTION 3.1 The Merger.............................................. 5
SECTION 3.2 Effective Time.......................................... 6
SECTION 3.3 Effect of the Merger.................................... 6
SECTION 3.4 Certificate of Incorporation; Bylaws.................... 6
SECTION 3.5 Directors and Officers.................................. 6
SECTION 3.6 Stock Options and Warrants.............................. 6
SECTION 3.7 Stockholders' Meeting................................... 7
ARTICLE IV
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES............................ 8
SECTION 4.1 Merger Consideration; Conversion and Cancelation of
Securities.............................................. 8
SECTION 4.2 Exchange of Certificates................................ 9
SECTION 4.3 Dissenting Shares.......................................10
SECTION 4.4 Closing.................................................11
SECTION 4.5 Stock Transfer Books....................................11
AGREEMENT AND PLAN OF MERGER
-i-
<PAGE>
Page
----
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................................11
SECTION 5.1 Organization and Qualification; Subsidiaries............11
SECTION 5.2 Certificate of Incorporation and Bylaws.................12
SECTION 5.3 Capitalization..........................................12
SECTION 5.4 Authorization of Agreement..............................14
SECTION 5.5 Approvals...............................................14
SECTION 5.6 No Violation............................................15
SECTION 5.7 Reports and Financial Statements........................15
SECTION 5.8 No Undisclosed Liabilities..............................16
SECTION 5.9 No Material Adverse Effect; Conduct.....................17
SECTION 5.10 Schedule 14D-9; Offer Documents; Proxy Statement........17
SECTION 5.11 Properties and Assets...................................18
SECTION 5.12 Material Contracts......................................18
SECTION 5.13 Litigation; Compliance with Laws........................19
SECTION 5.14 Employee Benefit Plans..................................19
SECTION 5.15 Labor Matters...........................................22
SECTION 5.16 Taxes...................................................22
SECTION 5.17 Environmental Matters...................................23
SECTION 5.18 Intellectual Property...................................24
SECTION 5.19 Brokers.................................................24
SECTION 5.20 Opinion of Financial Advisor............................24
SECTION 5.21 Year 2000...............................................25
SECTION 5.22 Insurance...............................................25
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PARENT COMPANIES........................25
SECTION 6.1 Organization and Qualification; Subsidiaries............25
SECTION 6.2 Authorization of Agreement..............................25
SECTION 6.3 Approvals...............................................26
SECTION 6.4 No Violation............................................26
SECTION 6.5 Proxy Statement; Schedule 14D-9.........................26
SECTION 6.6 Sufficient Funds........................................27
SECTION 6.7 Brokers.................................................27
ARTICLE VII
COVENANTS.....................................................................27
SECTION 7.1 Conduct of Business of the Company......................27
SECTION 7.2 Prohibited Actions by the Company.......................28
SECTION 7.3 No Solicitation.........................................30
SECTION 7.4 Access to Information...................................33
AGREEMENT AND PLAN OF MERGER
-ii-
<PAGE>
Page
----
SECTION 7.5 Confidentiality Agreement...............................33
SECTION 7.6 Reasonable Efforts......................................34
SECTION 7.7 Permits.................................................34
SECTION 7.8 HSR Act and Exon-Florio Filings.........................34
SECTION 7.9 Public Announcements....................................35
SECTION 7.10 Employee Agreements.....................................35
SECTION 7.11 Company's Rights Agreement; State Takeover Statutes.....35
SECTION 7.12 Employee Benefit Plans..................................36
SECTION 7.13 Indemnification of Directors and Officers...............37
SECTION 7.14 Event Notices and Other Actions.........................38
SECTION 7.15 Third Party Standstill Agreements;
Tortious Interference...................................39
ARTICLE VIII
CLOSING CONDITIONS............................................................39
SECTION 8.1 Conditions to Obligations of Each Party Under This
Agreement...............................................39
SECTION 8.2 Additional Conditions to Obligations of the Parent
Companies...............................................39
SECTION 8.3 Additional Condition to Obligations of the Company......40
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER.............................................41
SECTION 9.1 Termination.............................................41
SECTION 9.2 Effect of Termination...................................42
SECTION 9.3 Amendment...............................................43
SECTION 9.4 Extension; Waiver.......................................43
SECTION 9.5 Fees, Expenses and Other Payments.......................43
ARTICLE X
GENERAL PROVISIONS............................................................44
SECTION 10.1 Nonsurvival of Representations, Warranties and
Agreements..............................................44
SECTION 10.2 Notices.................................................45
SECTION 10.3 Headings................................................46
SECTION 10.4 Severability............................................46
SECTION 10.5 Entire Agreement........................................46
SECTION 10.6 Assignment..............................................46
SECTION 10.7 Parties in Interest.....................................47
SECTION 10.8 Failure or Indulgence Not Waiver; Remedies Cumulative...47
SECTION 10.9 Governing Law...........................................47
SECTION 10.10 Enforcement.............................................47
SECTION 10.11 Counterparts............................................48
AGREEMENT AND PLAN OF MERGER
-iii-
<PAGE>
ANNEXES
Annex A - Schedule of Defined Terms
Annex B - Conditions of the Offer
AGREEMENT AND PLAN OF MERGER
-iv-
<PAGE>
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of April 21, 1998 (this
"Agreement"), is by and among GEC Incorporated, a Delaware corporation
("Parent"), GEC Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("Purchaser"), and Tracor, Inc., a Delaware corporation
("the Company"). Parent and Purchaser are sometimes referred to herein as the
"Parent Companies."
RECITALS:
The respective Boards of Directors of the Company, Parent, and Purchaser
have approved the acquisition of the Company by Parent on the terms and subject
to the conditions set forth in this Agreement.
In furtherance of such acquisition, Parent proposes to cause Purchaser to
make a tender offer (as it may be amended from time to time as permitted under
this Agreement, the "Offer") to purchase all the issued and outstanding shares
of common stock, par value $0.01 per share, of the Company ("Company Common
Stock"), including the associated Company Rights, at a price per share of
Company Common Stock (including the associated Company Right) of $40.00, net to
the seller in cash, upon the terms and subject to the conditions set forth in
this Agreement.
Upon the terms and subject to the conditions of this Agreement and in
accordance with the GCL, Purchaser will merge with and into the Company and the
Company will be the Surviving Corporation.
Simultaneously with the execution and delivery of this Agreement, Parent
and Purchaser, on the one hand, and each member of the Board of Directors of the
Company and certain members of management on the other hand ("Certain
Stockholders"), are entering into an agreement (the "Stockholders Agreement")
pursuant to which Certain Stockholders have agreed to take specified actions in
furtherance of the transactions contemplated by this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Definitions. Certain capitalized and other terms used in
this Agreement are defined in Annex A hereto and are used herein with the
meanings ascribed to them therein.
SECTION 1.2 Rules of Construction. When a reference is made in this
Agreement to a Section, such reference shall be to a Section of this Agreement
unless otherwise indicated. Unless the context otherwise requires, as used in
this Agreement: (a) a term has the meaning ascribed to it; (b) "or" is not
exclusive; (c) whenever the words "include," "includes" or "including" are used,
they shall be deemed to be followed by the words "without limitation;" and (d)
words in the singular include the plural and words in the plural include the
singular.
<PAGE>
ARTICLE II
THE OFFER
SECTION 2.1 The Offer.
(a) Subject to the conditions of this Agreement, as promptly as
practicable but in no event later than five Business Days after the date of this
Agreement, Purchaser shall, and Parent shall cause Purchaser to, commence the
Offer within the meaning of the applicable Regulations of the SEC. The
obligation of Purchaser to, and of Parent to cause Purchaser to, commence the
Offer or accept for payment, or pay for, any shares of Company Common Stock
tendered pursuant to the Offer shall be subject to the conditions set forth in
Annex B (any of which may be waived by Purchaser in its sole discretion,
provided that, without the consent of the Company, Purchaser may not waive the
Minimum Tender Condition or the condition set forth in paragraph (b)(viii) of
Annex B) and to the other provisions of this Agreement. The initial expiration
date of the Offer shall be the 20th Business Day following the commencement of
the Offer (determined using Rule 14d-1(c)(6) under the Exchange Act). Purchaser
expressly reserves the right to modify the terms of the Offer, except that,
without the consent of the Company, Purchaser shall not (i) reduce the number of
shares of Company Common Stock subject to the Offer, (ii) reduce the price per
share of Company Common Stock to be paid pursuant to the Offer, (iii) modify or
add to the conditions set forth in Annex B in any manner materially adverse to
the holders of shares of Company Common Stock, (iv) except as provided in the
next sentence, extend the Offer, (v) change the form of consideration payable in
the Offer or (vi) otherwise amend the Offer in any manner materially adverse to
the holders of shares of Company Common Stock. Notwithstanding the foregoing,
Purchaser 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 Purchaser's
obligation to purchase shares of Company Common Stock are not satisfied, until
such time as such conditions are satisfied or waived, (ii) extend the Offer for
a period of not more than 10 Business Days beyond the expiration date that would
otherwise be permitted under clause (i) of this sentence, if on the date of such
extension less than 90% of the Fully Diluted Shares have been validly tendered
and not properly withdrawn pursuant to the Offer, (iii) extend the Offer for any
period required by any Regulation, interpretation or position of the SEC or the
staff thereof applicable to the Offer and (iv) extend the Offer for any reason
for a period of not more than 10 Business Days beyond the latest expiration date
that would otherwise be permitted under clause (i), (ii) or (iii) of this
sentence. On the terms and subject to the conditions of the Offer and this
Agreement, Purchaser shall, and Parent shall cause Purchaser to, pay for all
shares of Company Common Stock validly tendered and not withdrawn pursuant to
the Offer that Purchaser becomes obligated to purchase pursuant to the Offer as
soon as practicable after the expiration of the Offer.
(b) Notwithstanding anything to the contrary contained in this Agreement,
Parent and Purchaser shall not be required to commence the Offer in any
jurisdiction other than the United States of America.
(c) On the date of the commencement of the Offer, Purchaser shall file
with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the
Offer ("Schedule 14D-1") which will contain an offer to purchase and form of the
related letter of transmittal (the Schedule 14D-1 and the documents included
therein pursuant to which the Offer will be made, together with any supplements
or amendments thereto, collectively, the "Offer Documents"). Parent, Purchaser,
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
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Purchaser further agree to take all steps necessary to cause the Offer Documents
as so corrected to be filed with the SEC and be disseminated to holders of
shares of Company Common Stock, in each case, as and to the extent required by
applicable federal securities Laws. Parent and Purchaser agree to give the
Company and its counsel a reasonable opportunity to review and comment on the
Offer Documents prior to the filing of the Offer Documents with the SEC.
Purchaser agrees to provide the Company and its counsel in writing with any
comments Purchaser and its counsel may receive from the SEC or its staff with
respect to the Offer Documents promptly after the receipt thereof.
SECTION 2.2 Company Actions. The Company hereby consents to the Offer
and represents that its Board of Directors (at a meeting duly called and held)
has unanimously (a) determined that the Offer and the Merger are fair to the
stockholders of the Company and are in the best interests of the stockholders of
the Company, (b) approved this Agreement, the Offer, the Merger and the
Stockholders Agreement, including for purposes of Section 203 of the GCL, and
(c) resolved to recommend acceptance of the Offer and approval and adoption of
this Agreement and the Merger by the stockholders of the Company which approval
constitutes approval of each of the transactions contemplated by this Agreement
for purposes of the applicable provisions of the GCL. The Financial Advisor has
delivered to the Board of Directors of the Company its opinion that the
consideration to be received by the holders of shares of Company Common Stock in
the Offer and the Merger is fair to the holders of shares of Company Common
Stock from a financial point of view. The Company hereby agrees to file a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with any
amendments or supplements thereto, the "Schedule 14D-9") containing such
recommendation with the SEC (and the information required by Section 14(f) of
the Exchange Act if Parent shall have furnished such information to the Company
in a timely manner) and to mail such Schedule 14D-9 to the stockholders of the
Company; provided, that such recommendation may be withdrawn, modified or
amended by the Company's Board of Directors only to the extent permitted by
Section 7.3(b). Such Schedule 14D-9 shall be filed on the same date as
Purchaser's Schedule 14D-1 is filed and mailed together with the Offer
Documents. Each of the Company, Parent, and Purchaser 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 further agrees to take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and disseminated to the holders
of shares of Company Common Stock, in each case, as and to the extent required
by applicable federal securities Laws. The Company agrees to give Purchaser and
its counsel a reasonable opportunity to review and comment on the Schedule 14D-9
prior to the Company's filing of the Schedule 14D-9 with the SEC. The Company
agrees to provide Purchaser and its counsel in writing with any comments the
Company or its counsel may receive from the SEC or its staff with respect to the
Schedule 14D-9 promptly after the receipt thereof.
SECTION 2.3 Stockholder Lists. In connection with the Offer, the Company
will promptly furnish Purchaser with mailing labels, security position listings
and any available listing or computer file containing the names and addresses of
the record holders of shares of Company Common Stock as of a recent date and of
those Persons becoming record holders subsequent to such date (to the extent
available), together with all other information in the Company's possession or
control regarding the beneficial owners of shares of Company Common Stock and
shall furnish Purchaser with such information and assistance (including, to the
extent available, updated lists of stockholders, security position listings and
computer files) as Purchaser or its agents may reasonably request in
communicating the Offer to the record and beneficial holders of shares of
Company Common Stock.
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SECTION 2.4 Composition of the Board of Directors; Section 14(f).
Promptly upon the acceptance for payment of, and payment by Purchaser for,
any shares of Company Common Stock pursuant to the Offer, Purchaser shall be
entitled to designate such number of directors on the Board of Directors of the
Company as will give Purchaser, subject to compliance with Section 14(f) of the
Exchange Act, representation on the Board of Directors of the Company equal to
at least that number of directors, rounded up to the next whole number, which is
the product of (a) the total number of directors on the Company's Board of
Directors (giving effect to the directors elected pursuant to this sentence)
multiplied by (b) the percentage that (i) such number of shares of Company
Common Stock so accepted for payment and paid for by Purchaser plus the number
of shares of Company Common Stock otherwise owned by Purchaser or any other
Subsidiary of Parent bears to (ii) the number of such shares outstanding, and
the Company shall, at such time, cause Purchaser's designees to be so elected;
provided, however, that in the event that Purchaser's designees are appointed or
elected to the Board of Directors of the Company, until the Effective Time the
Board of the Directors of the Company shall have at least three directors who
are directors on the date of this Agreement (the "Independent Directors"); and
provided further that, in such event, if the number of Independent Directors
shall be reduced below three for any reason whatsoever, any remaining
Independent Directors (or Independent Director, if there shall be only one
remaining) shall be entitled to designate persons to fill such vacancies who
shall be deemed to be Independent Directors for purposes of this Agreement or,
if no Independent Directors then remain, the other directors promptly shall
designate three persons to fill such vacancies who shall not be officers,
stockholders or Affiliates of Parent or Purchaser, and such persons shall be
deemed to be Independent Directors for purposes of this Agreement. Subject to
applicable Law, the Company shall take all action requested by Parent necessary
to effect any such election, including mailing to its stockholders the
information statement required under Rule 14f-1 containing the information
required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder, and the Company shall make such mailing with the mailing of the
Schedule 14D-9 (provided that Purchaser shall have provided to the Company on a
timely basis all information required to be included in the information
statement required under Rule 14f-1 with respect to Purchaser's designees).
Purchaser's designees shall be divided between the classes of directors as
necessary to comply with the requirements of the Company's bylaws. In connection
with the foregoing, the Company shall promptly, at the option of Purchaser,
either increase the size of the Board of Directors of the Company or obtain the
resignation of such number of its current directors as is necessary to enable
Purchaser's designees to be elected or appointed to the Board of Directors of
the Company as provided above. The date on which Purchaser's designees
constitute a majority of the Company's Board of Directors is herein referred to
as the "Control Date."
ARTICLE III
THE MERGER
SECTION 3.1 The Merger. Subject to the terms and conditions and in
reliance upon the representations, warranties, covenants and agreements
contained herein, Purchaser shall merge with and into the Company at the
Effective Time (the "Merger"). The terms and conditions of the Merger and the
mode of carrying the same into effect shall be as set forth in this Agreement.
As a result of the Merger, the separate corporate existence of Purchaser shall
cease and the Company shall continue as the Surviving Corporation. At the
election of Parent, any direct or indirect wholly owned Subsidiary of Parent may
be substituted for Purchaser as a constituent corporation in the Merger;
provided that any such substitution could not reasonably be expected to
materially and
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adversely affect the ability of the parties to perform their obligations
hereunder, or materially delay the consummation of the Offer or the Merger. In
such event, the parties shall execute an appropriate amendment to this Agreement
in order to reflect the foregoing.
SECTION 3.2 Effective Time. As soon as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article
VIII, the parties hereto shall cause the Merger to be consummated by filing a
certificate of merger (the "Certificate of Merger") with the Secretary of State
of the State of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, the GCL.
SECTION 3.3 Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the GCL. Without
limiting the generality of the foregoing, and subject thereto, at the Effective
Time, except as otherwise provided herein, all the property, rights, privileges,
powers and franchises of Purchaser and the Company shall vest in the Surviving
Corporation, and all debts, liabilities and duties of Purchaser and the Company
shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 3.4 Certificate of Incorporation; Bylaws. (a) The certificate of
incorporation of the Company, as in effect immediately prior to the Effective
Time, shall be amended at the Effective Time so that Article IV, Section 1 of
such certificate of incorporation reads in its entirety as follows: "The total
number of shares of all classes of stock which the corporation shall have
authority to issue is 1,000 shares of Common Stock, par value $1.00 per share
("Common Stock")." and, as so amended, such certificate of incorporation shall
be the certificate of incorporation of the Surviving Corporation until
thereafter changed or amended as provided therein or by applicable Law.
(b) The bylaws of Purchaser as in effect immediately prior to the
Effective Time shall be the bylaws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable Law; provided, however,
that the bylaws of Purchaser shall be amended prior to the Effective Time to the
extent necessary to comply with Purchaser's obligations under the first sentence
of Section 7.13(a).
SECTION 3.5 Directors and Officers. The directors of Purchaser
immediately prior to the Effective Time shall be the directors of the Surviving
Corporation, each to hold office in accordance with the certificate of
incorporation and bylaws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the officers of the
Surviving Corporation, in each case until the earlier of their resignation or
removal or until their respective successors are duly elected or appointed and
qualify.
SECTION 3.6 Stock Options and Warrants.
(a) Upon consummation of the Merger, all then outstanding Company Stock
Options and all Company Common Stock subject to a vesting requirement granted to
any Company employee or director ("Restricted Stock") shall be canceled in
exchange for a cash payment to the holder of a Company Stock Option or
Restricted Stock award equal to (i) in the case of Company Stock Options, A
times B, where A equals the difference between the Per Share Merger
Consideration and the per share exercise price of the holder's Company Stock
Option and B equals the number of shares of Company Common Stock subject to the
holder's Company Stock Option and (ii) in the case of Restricted Stock, the
number of shares of the holder's Restricted Stock times the Per Share Merger
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Consideration. All applicable Taxes shall be withheld from any proceeds payable
under this Section 3.6(a).
(b) Before the commencement of the Offer, the Company shall take all
actions (including obtaining any and all consents from employees or directors)
necessary to implement Section 3.6(a); provided, the Company may not provide
additional compensation, benefits or other payments to holders of Company Stock
Options or Restricted Stock as an inducement to consent to the provisions of
Section 3.6(a).
(c) Except as provided herein or as otherwise agreed to by the parties,
(i) the Company Option Plans shall terminate as of the Effective Time and the
provisions in any other plan, program or arrangement providing for the issuance
or grant by the Company or any of its Subsidiaries of any interest in respect of
the capital stock of the Company or any of its Subsidiaries shall be terminated
as of the Effective Time, and (ii) following the Effective Time no holder of
Company Stock Options or Restricted Stock or any participant in the Company
Option Plans or any other such plans, programs or arrangements shall have any
right thereunder to acquire any equity securities of the Company, the Surviving
Corporation or any Subsidiary thereof.
(d) The Company shall take all actions necessary to comply with Section
5.1(1) of the Warrant Agreement, so that upon exercise of the Warrants at any
time on or after the Effective Time and payment of the exercise price, the
holder thereof shall be entitled to receive, and the Warrants shall thereafter
represent the right to receive, in lieu of Company Common Stock issuable upon
such exercise prior to the Effective Time, cash in an amount per share of such
Company Common Stock equal to the Per Share Merger Consideration.
SECTION 3.7 Stockholders' Meeting. (a) If the adoption of this Agreement
by the Company's stockholders is required by Law, the Company shall, at Parent's
request, as soon as practicable following the expiration of the Offer, prepare
and file with the SEC the Proxy Statement in preliminary form, and each of the
Company and Parent shall use its best efforts to respond as promptly as
practicable to any comments of the SEC or its staff with respect thereto. The
Company shall notify Parent promptly of the receipt of any comments from the SEC
or its staff and of any request by the SEC or its staff for amendments or
supplements to the Proxy Statement or for additional information and shall
supply Parent with copies of all correspondence between the Company or any of
its representatives, on the one hand, and the SEC or its staff, on the other
hand, with respect to the Proxy Statement. If at any time prior to receipt of
the Company Stockholder Approval there shall occur any event that should be set
forth in an amendment or supplement to the Proxy Statement, the Company shall
promptly prepare and mail to its stockholders such an amendment or supplement.
The Company shall not mail any Proxy Statement, or any amendment or supplement
thereto, to which Parent reasonably objects. The Company shall use its best
efforts to cause the Proxy Statement to be mailed to the Company's stockholders
as promptly as practicable after filing with the SEC.
(b) If the adoption of this Agreement by the Company's stockholders is
required by Law, the Company shall, at Parent's request, as soon as practicable
following the expiration of the Offer, duly call, give notice of, convene and
hold a meeting of its stockholders (the "Company Stockholders' Meeting") for
the purpose of seeking the Company Stockholder Approval. The Company shall,
through the Board of Directors of the Company, give the recommendation referred
to in Section 2.2. Without limiting the generality of the foregoing, the
Company agrees that its obligations pursuant to this Section 3.7(b) shall not be
affected by the commencement, public proposal, public disclosure or
communication to the Company of any Acquisition Proposal. Notwithstanding the
foregoing, if Purchaser or any other Subsidiary of Parent shall acquire at least
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90% of the outstanding shares of Company Common Stock, the parties shall, at the
request of Parent, take all necessary and appropriate action to cause the Merger
to become effective as soon as practicable after the expiration of the Offer
without a stockholders meeting in accordance with Section 253 of the GCL.
(c) Parent will provide the Company with the information concerning
Parent and Purchaser required to be included in the Proxy Statement and will
vote, or cause to be voted, all shares of Company Common Stock owned by it or
its Subsidiaries in favor of the adoption of this Agreement.
ARTICLE IV
CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
SECTION 4.1 Merger Consideration; Conversion and Cancelation of
Securities. At the Effective Time, by virtue of the Merger and without any
action on the part of the Parent Companies, the Company or the holders of any of
the following securities:
(a) Subject to Section 4.3, each share of Company Common Stock (and the
related Company Right) issued and outstanding immediately prior to the Effective
Time (excluding any shares of Company Common Stock described in Section 4.1(c))
shall be converted into the right to receive $40.00 in cash, without interest
thereon (the "Per Share Merger Consideration").
(b) All shares of Company Common Stock converted pursuant to Section
4.1(a) shall cease to be outstanding and shall automatically be canceled and
retired, and each holder of a Certificate previously evidencing such shares of
Company Common Stock shall cease to have any rights as a stockholder of the
Company, except the right to receive the Per Share Merger Consideration for each
such share.
(c) All shares of Company Common Stock that are owned by the Company as
treasury stock and each share of Company Common Stock, if any, owned by Parent
or any direct or indirect wholly owned Subsidiary of Parent or of the Company
immediately prior to the Effective Time shall cease to be outstanding and shall
be automatically canceled and retired without conversion thereof, and no
consideration shall be delivered or deliverable in exchange therefor.
(d) Each share of common stock, par value $1.00 per share, of Purchaser
issued and outstanding immediately prior to the Effective Time shall continue to
be issued and outstanding as one fully paid and nonassessable shares of common
stock, par value $1.00 per share, of the Surviving Corporation.
SECTION 4.2 Exchange of Certificates.
(a) Exchange Fund. On the day of the Effective Time, the Parent shall
deposit, or cause to be deposited, with the Exchange Agent in the Exchange Fund,
for the payment of the Merger Consideration through the Exchange Agent upon
surrender of Certificates in accordance with Section 4.2(c), cash in an amount
sufficient to make the cash payments due under Section 4.1(a). The Exchange Fund
shall not be used for any other purpose except as specified in Section 4.2(d).
(b) Letter of Transmittal. As soon as reasonably practicable after the
Effective Time, Parent will cause the Exchange Agent to send a letter of
transmittal (which shall specify that delivery
AGREEMENT AND PLAN OF MERGER
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shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent and shall be in a
form and have such other provisions as Parent may reasonably specify) to each
record holder of shares of Company Common Stock immediately prior to the
Effective Time, along with other appropriate materials for use in surrendering
Certificates to the Exchange Agent.
(c) Exchange Procedures. As soon as reasonably practicable after the
Effective Time, the Exchange Agent shall distribute to each former holder of
shares of Company Common Stock, upon surrender to the Exchange Agent for
cancelation of one or more Certificates, the Merger Consideration. If the Merger
Consideration is to be paid to a Person other than the Person in whose name the
surrendered Certificate or Certificates are registered, it shall be a condition
of payment of the Merger Consideration that the surrendered Certificate or
Certificates shall be properly endorsed, with signatures guaranteed, or
otherwise in proper form for transfer and that the Person requesting such
payment shall pay 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
surrendered Certificate or Certificates or such Person shall establish to the
satisfaction of Parent that such Tax has been paid or is not applicable. Until
surrendered as contemplated by this Section 4.2(c), each Certificate shall be
deemed from and after the Effective Time to represent only the right to receive
upon such surrender the Per Share Merger Consideration for each share of Company
Common Stock evidenced by such Certificate. In no event shall the holder of any
such surrendered Certificate be entitled to receive interest on any cash to be
received in the Merger. Neither the Exchange Agent nor any party hereto shall be
liable to a holder of shares of Company Common Stock for any amount paid to a
public official or Governmental Authority pursuant to any applicable abandoned
property, escheat, or similar Law. If any Certificate has not been surrendered
prior to the date which is five years after the Effective Time (or immediately
prior to such earlier date on which Merger Consideration in respect of such
Certificate would otherwise escheat to or become the property of any
Governmental Authority), any such cash in respect of such Certificate shall, to
the extent permitted by applicable Law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any Person previously
entitled thereto.
(d) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains unclaimed by the former holders of shares of Company Common Stock for
six months after the Effective Time shall be delivered to Parent, upon demand,
and any former holders of shares of Company Common Stock who have not
theretofore complied with this Article IV shall thereafter look only to Parent
for any cash payment to which they are entitled.
(e) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Parent, on a daily basis. Any
interest and other income resulting from such investments shall be paid to
Parent.
(f) Withholding of Tax. Parent shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
former holder of shares of Company Common Stock such amounts as Parent (or any
Affiliate thereof) is required to deduct and withhold with respect to the making
of such payment under the Code, or any provision of state, local or foreign Tax
Law. To the extent that amounts are so withheld by Parent and paid by Parent 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 of shares of
Company Common Stock in respect of which such deduction and withholding was made
by Parent.
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SECTION 4.3 Dissenting Shares. Notwithstanding anything in this
Agreement to the contrary, shares of Company Common Stock ("Dissenting Shares")
which are issued and outstanding immediately prior to the Effective Time and
that are held by any Person who is entitled to demand and properly demands
appraisal of such Dissenting Shares pursuant to, and who complies in all
respects with, Section 262 of the GCL ("Section 262") shall not be converted as
provided in Section 4.1(a), but rather the holders of Dissenting Shares shall be
entitled only to payment of the fair value of such Dissenting Shares in
accordance with Section 262; provided, however, that if any such holder shall
fail to perfect or otherwise shall waive, withdraw or lose the right to
appraisal under Section 262, then the right of such holder to be paid the fair
value of such holder's Dissenting Shares shall cease and such Dissenting Shares
shall be treated as if they had been converted as of the Effective Time into the
Merger Consideration as provided in Section 4.1(a). The Company shall serve
prompt notice to Parent of any demands received by the Company for appraisal of
any shares of Company Common Stock, and Parent shall have the right to
participate in and direct all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of Parent,
make any payment with respect to, or settle or offer to settle, any such
demands, or agree to do any of the foregoing.
SECTION 4.4 Closing. The closing (the "Closing") of the Merger shall
take place at the offices of Cravath, Swaine & Moore, at 825 Eighth Avenue, New
York, NY at 10 a.m. on a date as soon as practicable following the date on which
the conditions to the Closing (other than those that, by their terms, are to be
satisfied at the Closing) have been satisfied or waived, or at such other place,
time and date as the parties hereto may agree. At the conclusion of the Closing
on the Closing Date, the parties hereto shall cause the Certificate of Merger to
be filed with the Secretary of State of the State of Delaware.
SECTION 4.5 Stock Transfer Books. At the Effective Time, the stock
transfer books of the Company shall be closed and there shall be no further
registration of transfers of shares of Company Common Stock thereafter on the
records of the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Parent Companies that:
SECTION 5.1 Organization and Qualification; Subsidiaries. The Company
and each Subsidiary of the Company are legal entities duly organized, validly
existing and in good standing under the Laws of their respective jurisdictions
of incorporation or organization, have all requisite power and authority and
possess all governmental franchises and Permits necessary to enable them to own,
lease and operate their respective properties and assets and to carry on their
business as it is now being conducted and are duly qualified and in good
standing to do business in each jurisdiction in which the nature of the business
conducted by them or the ownership or leasing of their respective properties and
assets makes such qualification necessary, other than such franchises and
Permits and qualifications the lack of which, individually or in the aggregate,
has not had and could not reasonably be expected to have a Material Adverse
Effect on the Company. Section 5.1 of the Company's Disclosure Letter sets
forth, as of the date of this Agreement, a true and complete list of all the
Company's directly or indirectly owned Subsidiaries, together with the
jurisdiction of incorporation of each Subsidiary and the percentage of each
Subsidiary's outstanding capital stock or other equity interests owned of record
or beneficially by the Company or another Subsidiary of
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the Company. Except for such Subsidiaries and as disclosed in Section 5.1 of the
Company's Disclosure Letter, neither the Company nor any of its Subsidiaries
owns an equity interest in any partnership or joint venture arrangement or other
business entity.
SECTION 5.2 Certificate of Incorporation and Bylaws. The Company has
heretofore furnished or made available to Parent complete and correct copies of
the certificate of incorporation and the bylaws or the equivalent organizational
documents, in each case as amended or restated to the date hereof, of the
Company and each of its Subsidiaries. Neither the Company nor any of its
Subsidiaries is in violation of any of the provisions of its certificate of
incorporation or bylaws (or equivalent organizational documents).
SECTION 5.3 Capitalization.
(a) The authorized capital stock of the Company consists of (i) 53,000,000
shares of Company Common Stock of which, as of April 6, 1998, 25,206,204 shares
were issued and outstanding, all of which are duly authorized, validly issued,
fully paid and nonassessable and not subject to preemptive rights, and (ii)
1,000,000 shares of preferred stock, par value $0.01 per share, of which none is
issued but of which 500,000 shares have been designated as Series A Junior
Participating Preferred Stock in connection with the rights (the "Company
Rights") issued pursuant to the Company's Rights Agreement. As of April 6, 1998,
there were 2,452,016 shares of Company Common Stock reserved for future issuance
pursuant to outstanding Company Stock Options granted pursuant to the Company
Option Plans and 975,195 shares of Company Common Stock reserved for future
issuance pursuant to outstanding Warrants. Except as set forth in Section 5.3(a)
of the Company's Disclosure Letter, between April 6, 1998 and the date of this
Agreement, no shares of Company Common Stock have been issued by the Company.
Except as set forth in Section 5.3(a) of the Company's Disclosure Letter, since
April 6, 1998, the Company has not granted any options for, or other rights to
purchase, shares of Company Common Stock.
(b) Except as set forth in Section 5.3(a), no shares of Company Common
Stock are reserved for issuance, and, except for the Warrants, the Company
Rights, Company Stock Options, and Restricted Stock, as listed in Section 5.3(b)
of the Company's Disclosure Letter, there are no options, warrants, rights,
convertible or exchangeable securities, "phantom" stock rights, stock
appreciation rights, stock-based performance units, contracts, agreements,
commitments or arrangements obligating the Company (i) to offer, sell, issue or
grant any shares of, or any options, warrants or rights of any kind to acquire
any shares of, or any securities that are convertible into or exchangeable for
any shares of, capital stock of the Company, (ii) to redeem, purchase or
acquire, or offer to purchase or acquire, any outstanding shares of, or any
outstanding options, warrants or rights of any kind to acquire any shares of, or
any outstanding securities that are convertible into or exchangeable for any
shares of, capital stock of the Company or (iii) to grant any Lien on any shares
of capital stock of the Company.
(c) The authorized, issued and outstanding capital stock of, or other
equity interests in, each of the Company's Subsidiaries and the names and
addresses of the holders of record of the capital stock or other equity
interests of each such Subsidiary are set forth in Section 5.3(c) of the
Company's Disclosure Letter. Except as set forth in Section 5.3(c) of the
Company's Disclosure Letter, (i) the issued and outstanding shares of capital
stock of, or other equity interests in, each of the Subsidiaries of the Company
that are owned by the Company or any of its Subsidiaries have been duly
authorized and are validly issued, and, with respect to capital stock, are fully
paid and nonassessable, and were not issued in violation of any preemptive or
similar rights of any past or present equity holder of such Subsidiary; (ii) all
such issued and outstanding shares, or other equity
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interests, that are indicated as owned by the Company or one of its Subsidiaries
in Section 5.3(c) of the Company's Disclosure Letter are owned (A) beneficially
as set forth therein and (B) free and clear of all Liens except as described
therein; (iii) no shares of capital stock of, or other equity interests in, any
Subsidiary of the Company are reserved for issuance, and there are no options,
warrants, rights, convertible or exchangeable securities, "phantom" stock
rights, stock appreciation rights, stock-based performance units, contracts,
agreements, commitments or arrangements obligating the Company or any of its
Subsidiaries (A) to offer, sell, issue, grant, pledge, dispose of or encumber
any shares of capital stock of, or other equity interests in, or any options,
warrants or rights of any kind to acquire any shares of capital stock of, or
other equity interests in, or any securities that are convertible into or
exchangeable for any shares of capital stock of, or other equity interests in,
any of the Subsidiaries of the Company or (B) to redeem, purchase or acquire, or
offer to purchase or acquire, any outstanding shares of capital stock of, or
other equity interests in, or any outstanding options, warrants or rights of any
kind to acquire any shares of capital stock of, other equity interests in, or
any outstanding securities that are convertible into or exchangeable for, any
shares of capital stock of, or other equity interests in, any of the
Subsidiaries of the Company or (C) to grant any Lien on any outstanding shares
of capital stock of, or other equity interests in, any of the Subsidiaries of
the Company.
(d) Except as set forth in Section 5.3(d) of the Company's Disclosure
Letter, the Company's Rights Agreement, and the Company Option Plans listed in
Section 5.3(b) of the Company's Disclosure Letter, 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. The Company
has delivered to Parent a complete and correct copy of the Company's Rights
Agreement, as amended to the date of this Agreement.
(e) There are not any bonds, debentures, notes or other Indebtedness
of the Company 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 5.4 Authorization of Agreement. (a) The Company has all
requisite corporate power and authority to execute and deliver this Agreement
and each instrument required hereby to be executed and delivered by it prior to
or at the Closing, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by the Company of this Agreement and each instrument required hereby to
be executed and delivered by it prior to or at the Closing and the performance
of its obligations hereunder and thereunder have been duly and validly
authorized by all requisite corporate action on the part of the Company (other
than, with respect to the Merger, the adoption of this Agreement by the holders
of a majority of the outstanding shares of Company Common Stock in accordance
with the GCL). This Agreement has been duly executed and delivered by the
Company and (assuming due authorization, execution and delivery hereof by 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
the same may be limited by (i) bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance or other similar Laws relating to creditors'
rights generally, and (ii) legal principles of general applicability governing
the application and availability of equitable remedies..
(b) The only vote of holders of any class or series of capital stock of
the Company necessary to adopt or approve this Agreement and the Merger is the
adoption of this Agreement by the holders
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of a majority of the outstanding shares of Company Common Stock (the "Company
Stockholder Approval"). The affirmative vote of the holders of any capital stock
of the Company, or any of them, is not necessary to consummate the Offer or any
transaction contemplated by this Agreement other than the Merger.
SECTION 5.5 Approvals. Except for the applicable requirements, if
any, of (a) the Exchange Act, (b) state securities Laws or blue sky Laws, (c)
the HSR Act, (d) Exon-Florio, (e) the NASD, (f) the filing and recordation of
appropriate merger documents as required by the GCL, (g) the National Industrial
Security Program Operating Manual with respect to foreign ownership, control or
influence and (h) those Laws and Orders noncompliance with which could not
reasonably be expected to have a material adverse effect on the ability of the
Company to perform its obligations under this Agreement or to have a Material
Adverse Effect on the Company, no filing or registration with, no waiting period
imposed by and no Permit or Order of, any Governmental Authority is required
under any Law or Order applicable to the Company or any of its Subsidiaries to
permit the Company to execute, deliver or perform this Agreement or any
instrument required hereby to be executed and delivered by it prior to or at the
Closing.
SECTION 5.6 No Violation. Assuming effectuation of all filings and
registrations with, termination or expiration of any applicable waiting periods
imposed by and receipt of all Permits and Orders of, Governmental Authorities
indicated as required in Section 5.5 and adoption of this Agreement by the
stockholders of the Company as required by the GCL and except as set forth in
Section 5.6 of the Company's Disclosure Letter, neither the execution and
delivery by the Company of this Agreement or any instrument required hereby to
be executed and delivered by it prior to or at the Closing nor the performance
by the Company of its obligations hereunder or thereunder will (a) conflict
with, or result in any violation of or default (with or without notice or lapse
of time, or both) under, or give rise to a right of termination, cancelation or
acceleration of any obligation or to loss of a Material benefit under, or to
increased, additional, accelerated or guaranteed rights or entitlements of any
Person under, or result in the creation of any Lien upon any of the properties
or assets of the Company or any Subsidiary of the Company under, any provision
of (i) any Law or Order applicable to the Company, (ii) the certificate of
incorporation or bylaws of the Company or (iii) any contract or 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 properties or assets is
bound, or (b) with the passage of time, the giving of notice or the taking of
any action by a third Person, have any of the effects set forth in clause (a) of
this Section, except in any such case for any matters described in this Section
that could not reasonably be expected to have a Material Adverse Effect on the
Company. Prior to the execution of this Agreement, the Board of Directors of
the Company has taken all necessary action to cause this Agreement, the
Stockholders Agreement and the transactions contemplated or permitted hereby and
thereby to be exempt from the provisions of Section 203 of the GCL and to cause
any Company Rights not to be distributed or exercisable under the Company's
Rights Agreement. To the Company's Knowledge, no other state takeover statute
or similar Law or Regulation applies or purports to apply to the Company with
respect to this Agreement, the Stockholders Agreement, the Offer, the Merger or
any other transaction contemplated by this Agreement or the Stockholders
Agreement. The Company has been advised by each of its directors and executive
officers that each such Person currently intends to tender all shares of Company
Common Stock owned by such Person pursuant to the Offer, except to the extent of
any restrictions created by Section 16(b) of the Exchange Act.
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SECTION 5.7 Reports and Financial Statements.
(a) The Company has filed all SEC Reports required to be filed by the
Company with the SEC since January 1, 1997 (the "Company SEC Documents"). As of
its respective date, each Company SEC Document complied in all material respects
with the requirements of the Exchange Act or the Securities Act, as the case may
be, applicable to such Company SEC Document, and did not contain any untrue
statement of a material fact or omit 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. Except to the
extent that information contained in any Company SEC Document has been revised
or superseded by a later filed Company SEC Document, none of the Company SEC
Documents 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. No Subsidiaries of the Company are SEC reporting companies.
(b) Since December 31, 1997, the Company and its Subsidiaries have filed
all Reports required to be filed with any Governmental Authorities other than
the SEC, including state securities administrators, except where the failure to
file any such Reports of the Company would not reasonably be expected to have a
Material Adverse Effect on the Company. Such Reports of the Company, including
all those filed after the date of this Agreement and prior to the Effective
Time, were prepared in all material respects in accordance with the requirements
of applicable Law.
(c) The Company Consolidated Financial Statements and any consolidated
financial statements of the Company (including any related notes thereto)
contained in any SEC Reports of the Company filed with the SEC (i) have been or
will have been prepared in accordance with applicable accounting requirements
and the published Regulations of the SEC and in accordance with GAAP
consistently applied (except (A) to the extent required by changes in GAAP and
(B) with respect to SEC Reports of the Company filed prior to the date of this
Agreement, as may be indicated in the notes thereto) and (ii) fairly present the
consolidated financial position of the Company and its consolidated Subsidiaries
as of the respective dates thereof and the consolidated results of their
operations and cash flows for the periods indicated (and include, in the case of
any unaudited interim financial statements, reasonable accruals for normal year-
end adjustments).
SECTION 5.8 No Undisclosed Liabilities. Except as set forth in Section
5.8 of the Company's Disclosure Letter, there exist no liabilities or
obligations of the Company and its Subsidiaries that are Material to the
Company, whether accrued, absolute, contingent or otherwise, which would be
required to be reflected, reserved for or disclosed under GAAP in consolidated
financial statements of the Company (including the notes thereto) as of and for
the period ended on the date this representation and warranty is given or
required to be true to satisfy any condition to the Offer or the Merger, other
than (a) liabilities or obligations that are adequately reflected, reserved for
or disclosed in the Company's Consolidated Financial Statements and, (b)
liabilities or obligations incurred in the ordinary course of business of the
Company since the Balance Sheet Date not in violation of this Agreement. Except
as set forth in Section 5.8 of the Company's Disclosure Letter, neither the
Company nor any of its Subsidiaries has any liability for any discontinued
operations (as such term is used in accordance with GAAP) or with respect to any
business, properties or assets formerly owned or operated by the Company or any
of its Subsidiaries or with respect to any acquiree or predecessor of the
Company or any of its Subsidiaries, that would individually or in the aggregate
have a Material Adverse Effect on the Company.
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SECTION 5.9 No Material Adverse Effect; Conduct.
Except as disclosed in the Company SEC Documents filed and publicly
available prior to the date of this Agreement (the "Filed Company SEC
Documents") or in Section 5.9 of the Company Disclosure Letter, from the date of
the most recent audited financial statements included in the Filed Company SEC
Documents, the Company has conducted its business only in the ordinary course,
and during such period there has not been:
(a) any event, change, effect or development that, individually or in the
aggregate, has had or could reasonably be expected to have a Material Adverse
Effect on the Company;
(b) any declaration, setting aside or payment of any dividend on, or other
distribution in respect of (whether in cash, stock or property), any capital
stock of the Company or any repurchase for value by the Company of any capital
stock of the Company;
(c) any split, combination or reclassification of any capital stock of
the Company or of any other equity interests in the Company, or any issuance or
the authorization of any issuance of any other securities in respect of, in lieu
of or in substitution for shares of capital stock of the Company or of any other
equity interests in the Company;
(d) (i) any granting by the Company or any Subsidiary of the Company to
any director or executive officer of the Company or any Subsidiary of the
Company of any increase in compensa tion, except in the ordinary course of
business consistent with past practice or as was required under employment
agreements in effect as of the date of the most recent audited financial
statements included in the Filed Company SEC Documents, (ii) any granting by the
Company or any Subsidiary of the Company to any such director or executive
officer of any increase in severance or termination pay, except as was required
under any employment, severance or termination agreements in effect as of the
date of the most recent audited financial statements included in the Filed
Company SEC Documents, or (iii) any entry by the Company or any Subsidiary of
the Company into any employment, severance or termination agreement with any
such director or executive officer; or
(e) any change in accounting methods, principles or practices by the
Company or any Subsidiary of the Company materially affecting the consolidated
assets, liabilities or results of operations of the Company, except insofar as
may have been required by a change in GAAP.
SECTION 5.10 Schedule 14D-9; Offer Documents; Proxy Statement. None of
the information (other than information provided in writing by Parent or
Purchaser for inclusion therein) supplied or to be supplied for inclusion or
incorporation by reference in the Offer Documents, the Schedule 14D-9 or the
Proxy Statement, including any amendments or supplements thereto, at the time
such document is filed with the SEC, at any time it is amended or supplemented
or at the time it is first published or sent or given to holders of shares of
Company Common Stock, and, in the case of the Proxy Statement, at the time that
it or any amendment or supplement thereto is mailed to the Company's
stockholders, at the time of the Company Stockholders' Meeting or at the
Effective Time, 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 therein, in light of the circumstances under which they are
made, not misleading. Except for information supplied by Parent or Purchaser in
writing for inclusion therein, the Schedule 14D-9 and the Proxy Statement,
including any amendments or supplements thereto, will comply in all material
respects with the Exchange Act.
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SECTION 5.11 Properties and Assets. Except as set forth in Section 5.11
of the Company's Disclosure Letter, the Company and its Subsidiaries own or have
rights to use all properties and assets necessary to permit the Company and its
Subsidiaries to continue to conduct their businesses as currently being
conducted except where the failure to own or have the right to use such
properties and assets would not, individually or in the aggregate, have a
Material Adverse Effect on the Company. Except as set forth in Section 5.11 of
the Company Disclosure Letter, each of the Company and its Subsidiaries has good
and indefeasible fee title to, or valid leasehold interests in, all its material
real property, free and clear of all Liens except for Permitted Encumbrances.
SECTION 5.12 Material Contracts. Section 5.12 of the Company's Disclosure
Letter contains a true and complete list of the Material Contracts of the
Company and its Subsidiaries. Except as set forth in Section 5.12 of the
Company's Disclosure Letter, neither the Company nor any of its Subsidiaries is
a party to or bound by any Material Contract. All Material Contracts to which
the Company or any of its Subsidiaries is a party are in full force and effect,
the Company or the Subsidiary of the Company that is a party to or bound by such
Material Contract has performed its obligations thereunder to date and, to the
Knowledge of the Company, each other party thereto has performed its obligations
thereunder to date, other than any failure of a Material Contract to be in full
force and effect or any nonperformance thereof that could not reasonably be
expected to have a Material Adverse Effect on the Company. As of the date of
this Agreement, except where the same would not, individually or in the
aggregate, have a Material Adverse Effect on the Company, to the Company's
Knowledge, neither the Company nor any of its Subsidiaries (a) has received any
written notice of the intention of any party to terminate any Material Contract,
whether as a termination for convenience or for default of the Company or any
Subsidiary thereunder, or (b) has any pending default termination action or open
written cure notice or show cause notice (as defined in the Federal Acquisition
Regulations Part 49, (P) 49.607(a) and (b), respectively) in respect of any such
Material Contract which is a Government Contract. To the Company's Knowledge, as
of the date hereof, there is no pending written claim or request for equitable
adjustment under any Government Contract by any Governmental Authority that
would have a Material Adverse Effect on the Company. To the Company's Knowledge,
the Company and its Subsidiaries are in compliance in all material respects with
all of their obligations relating to any equipment or fixtures owned by any
Governmental Authority and loaned, bailed or otherwise furnished to or held by
the Company or any of its Subsidiaries except where the failure to so comply
would not, individually or in the aggregate, have a Material Adverse Effect on
the Company.
SECTION 5.13 Litigation; Compliance with Laws. There are no actions,
suits, investigations or proceedings (including any proceedings in arbitration)
pending or, to the Knowledge of the Company, threatened against the Company or
any of its Subsidiaries, at law or in equity, in any Court or before or by any
Governmental Authority, except actions, suits or proceedings that (a) are set
forth in Section 5.13 of the Company's Disclosure Letter, or (b) individually
or, with respect to multiple actions, suits or proceedings that allege similar
theories of recovery based on similar facts, in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on the Company. Except
as set forth in Section 5.13 of the Company's Disclosure Letter, the Company and
its Subsidiaries are in compliance with all applicable Laws and Regulations
(including the Truth-In-Negotiations-Act, the Procurement Integrity Act, the
Foreign Corrupt Practices Act, the Cost Accounting Standards, the Regulations of
applicable Governmental Entities governing foreign military sales, export
controls, illegal boycotts, national security and any other Laws or Orders
incorporated expressly, by reference or by operation of Law into, or otherwise
applicable to, any contract or other agreement made with the United States of
America (a "Government Contract")) and are not in default with respect to any
Order applicable to the Company or any of its Subsidiaries, except such events
of noncompliance or defaults that, individually or in
AGREEMENT AND PLAN OF MERGER
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the aggregate, have not and could not reasonably be expected to have a Material
Adverse Effect on the Company. Since January 1, 1993, to the date hereof,
neither the Company nor any Subsidiary of the Company has received any written
notice of any administrative or civil or criminal investigation or audit (other
than Tax audits) by any Governmental Authority (including any qui tam action
brought under the Civil False Claims Act alleging any irregularity, misstatement
or omission arising under or relating to any Government Contract) relating to
the Company or any of its Subsidiaries that, individually or in the aggregate,
would have a Material Adverse Effect on the Company. Notwithstanding the
foregoing, except as set forth in Section 5.13 of the Company's Disclosure
Letter, since January 1, 1993, to the Knowledge of the Company, neither the
Company nor any Subsidiary of the Company nor any officer or director of the
Company or any Subsidiary of the Company is or has been the subject of any
criminal investigation in respect of any Government Contract.
SECTION 5.14 Employee Benefit Plans.
(a) Each Benefit Plan of the Company and its Subsidiaries is listed in
Section 5.14 of the Company's Disclosure Letter, including, with respect to
Terminated Benefit Plans, the date of termination.
(b) No event has occurred and, to the Knowledge of the Company, there
exists no condition or set of circumstances in connection with which the Company
or any of its Subsidiaries could be subject to any liability under the terms of
any Benefit Plan, or under ERISA, or, with respect to any Benefit Plan, under
the Code or any other applicable Law, other than any condition or set of
circumstances that could not reasonably be expected to have a Material Adverse
Effect on the Company. Each of the Benefit Plans has been administered in
material compliance with its terms and with the applicable provisions of ERISA,
the Code and any other applicable Law.
(c) As to any Benefit Plan of the Company intended to be qualified under
Section 401 of the Code, such Benefit Plan has been determined by the IRS to
satisfy in form the requirements of such Section, no event has occurred that
could be reasonably expected to result in the disqualification of such Benefit
Plan and there has been no termination or partial termination of such Benefit
Plan within the meaning of Section 411(d)(3) of the Code.
(d) As to any Terminated Benefit Plan intended to have been qualified
under Section 401 of the Code, such Terminated Benefit Plan received a favorable
determination letter from the IRS with respect to its termination.
(e) There are no investigations, audits, actions, suits or claims pending
(other than routine claims for benefits) or, to the Knowledge of the Company,
threatened against, or with respect to, any Benefit Plan or its assets that
could reasonably be expected to have a Material Adverse Effect on the Company.
(f) To the Knowledge of the Company, there is no matter pending (other
than routine qualification determination filings) with respect to any Benefit
Plan before the IRS, the Department of Labor or the PBGC.
(g) All contributions required to be made by the Company or the Company's
Subsidiaries to any Benefit Plan pursuant to its terms and provisions have been
timely made.
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(h) As to any Current Benefit Plan subject to Title IV of ERISA, (i) there
has been no event or condition which presents a material risk of plan
termination, (ii) no accumulated funding deficiency, whether or not waived,
within the meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred within six years prior to date of this Agreement, (iii) no reportable
event within the meaning of Section 4043 of ERISA (for which the disclosure
requirements of Regulation section 2615.3 promulgated by the PBGC have not been
waived) has occurred within six years prior to the date of this Agreement, (iv)
no notice of intent to terminate such Benefit Plan has been given under Section
4041 of ERISA, (v) no proceeding has been instituted under Section 4042 of ERISA
to terminate such Benefit Plan, (vi) no liability to the PBGC has been incurred
(other than with respect to required premium payments) and (vii) the assets of
the Benefit Plan equal or exceed the actuarial present value of the benefit
liabilities, within the meaning of Section 4041 of ERISA, under such Benefit
Plan, based upon reasonable actuarial assumptions and the asset valuation
principles established by the PBGC.
(i) Except as set forth in Section 5.14 of the Company's Disclosure
Letter, in connection with the consummation of the transactions contemplated by
this Agreement, no payments have been or will be made under any Current Benefit
Plan or any other program, agreement, policy or arrangement which would be
nondeductible under Section 280G of the Code.
(j) Except as set forth in Section 5.14 of the Company's Disclosure
Letter, the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not (i) require the Company or any of its
Subsidiaries to pay greater compensation or make a larger contribution to, or
pay greater benefits or accelerate payment or vesting of a benefit under, any
Current Benefit Plan or any other program, agreement, policy or arrangement or
(ii) create or give rise to any additional vested rights or service credits
under any Current Benefit Plan or any other program, agreement, policy or
arrangement.
(k) Except as set forth in Section 5.14 of the Company's Disclosure
Letter, neither the Company nor any of its Subsidiaries is a party to or is
bound by any severance agreement, program or policy. True and correct copies of
all employment agreements with officers of the Company and its Subsidiaries, and
all vacation, overtime and other compensation policies of the Company and its
Subsidiaries relating to their employees have been made available to Parent.
(l) Except as set forth in Section 5.14 of the Company's Disclosure
Letter, no Benefit Plan provides retiree medical or retiree life insurance
benefits to any Person and neither the Company nor any of its Subsidiaries is
contractually or otherwise obligated (whether or not in writing) to provide any
Person with life insurance or medical benefits upon retirement or termination of
employment, other than as required by the provisions of Sections 601 through 608
of ERISA and Section 4980B of the Code.
(m) Neither the Company nor any of its Subsidiaries contributes or has
an obligation to contribute, and neither has within six years prior to the date
of this Agreement contributed or had an obligation to contribute, to a
multiemployer plan within the meaning of Section 3(37) of ERISA.
(n) Except as disclosed in Section 5.14 of the Company's Disclosure
Letter, no compensation payable by the Company or any of its Subsidiaries to any
of their employees under any Current Benefit Plan or other program, agreement,
policy or arrangement is subject to disallowance under Section 162(m) of the
Code.
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SECTION 5.15 Labor Matters. Except as set forth in Section 5.15 of
the Company's Disclosure Letter, no collective bargaining agreement to which the
Company or any of its Subsidiaries is a party is currently in effect or is being
negotiated by the Company or any of its Subsidiaries. There is no pending or,
to the Knowledge of the Company, threatened labor dispute, strike or work
stoppage against the Company or any of its Subsidiaries that could reasonably be
expected to have a Material Adverse Effect on the Company. To the Knowledge of
the Company, neither the Company or any of its Subsidiaries nor any
representative or employee of the Company or any of its Subsidiaries has
committed any unfair labor practices in connection with the operation of the
business of the Company and its Subsidiaries, and there is no pending or, to the
Knowledge of the Company, threatened charge or complaint against the Company or
any of its Subsidiaries by the National Labor Relations Board or any comparable
agency of any state of the United States. The Company and its Subsidiaries are
in material compliance with all applicable federal, state, local or foreign
labor Laws.
SECTION 5.16 Taxes.
(a) (i) All Tax Returns that are required to be filed by or with
respect to the Company or any of its Subsidiaries on or before the Effective
Time have been or will be timely filed, and all such Tax Returns are or will be
true, complete and accurate, (ii) all Taxes that are due on or before the
Effective Time have been or will be timely paid in full, (iii) all withholding
Tax requirements imposed on or with respect to the Company or any of its
Subsidiaries have been or will be satisfied in full in all respects, (iv) no
penalty, interest or other charge is or will become due with respect to the late
filing of any such Tax Return or late payment of any such Tax and (v) the most
recent financial statements contained in the Filed Company SEC Documents reflect
an adequate reserve for all Taxes of the Company and its Subsidiaries for all
taxable periods and portions thereof through the date of such financial
statements.
(b) Except as set forth in Section 5.16 of the Company's Disclosure
Letter, all income Tax Returns have been audited by the applicable Governmental
Authority or the applicable statute of limitations has expired for the period
covered by such Tax Returns.
(c) Except as set forth in Section 5.16 of the Company's Disclosure
Letter, there is not in force any extension of time with respect to the due date
for the filing of any Tax Return or any waiver or agreement for any extension of
time for the assessment or payment of any Tax due with respect to the period
covered by any Tax Return.
(d) Except as disclosed in Section 5.16 of the Company's Disclosure
Letter, there is no claim against the Company or any of its Subsidiaries for any
Taxes, and no assessment, deficiency or adjustment has been asserted or proposed
with respect to any Tax Return.
(e) Except as set forth in Section 5.16 of the Company's Disclosure
Letter, since January 1, 1988, none of the Company and its Subsidiaries, has
been a member of an Affiliated group filing a consolidated federal income Tax
Return other than the affiliated group of which the Company is the common parent
corporation.
(f) There are no material Liens for Taxes on the assets of the Company or
any of its Subsidiaries.
(g) Except as set forth in Section 5.16 of the Company's Disclosure
Letter, neither the Company nor any of its Subsidiaries is bound by any
agreement with respect to Taxes.
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(h) Except as set forth in Section 5.16 of the Company's Disclosure
Letter or as disclosed in the most recent audited financial statements included
in the Filed Company SEC Documents, neither the Company nor any of its
Subsidiaries will be required to include in a taxable period beginning after the
Effective Date taxable income attributable to income that economically accrued
in a taxable period ending on or before the Effective Date, including as a
result of the installment method of accounting, the completed contract or
percentage of completion methods of accounting (including the look-back method
under Section 460(b)(2) of the Code) or the cash method of accounting.
(i) Except as set forth in Section 5.16 of the Company's Disclosure
Letter, neither the Company nor any of its Subsidiaries will be required in a
taxable period beginning on or after the Effective Date to include any amount in
income pursuant to Section 481 of the Code (or any comparable provisions of
state, local or foreign Law), by reason of a change in accounting methods or
otherwise, as a result of actions taken prior to the Effective Date.
SECTION 5.17 Environmental Matters. Except for matters disclosed in
Section 5.17 of the Company's Disclosure Letter or as described in Reports,
copies of which have been provided to Parent, and except for matters that,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on the Company, (a) the properties, operations and
activities of the Company and its Subsidiaries are in compliance with all
Environmental Laws; (b) the Company and its Subsidiaries and the properties,
operations and activities of the Company and its Subsidiaries are not subject to
any existing, pending or, to the Knowledge of the Company, threatened action,
suit, investigation, inquiry or proceeding by or before any Court or
Governmental Authority under any Environmental Law; (c) all Permits or
applications therefor required to be obtained or filed by the Company or any of
its Subsidiaries under any Environmental Law in connection with the properties,
operations and activities of the Company and its Subsidiaries have been obtained
or filed and are valid and currently in full force and effect, and, to the
Company's Knowledge, there are no facts or circumstances that would cause such
Permits to be revoked, modified or not renewed under current conditions or in
connection with the transactions contemplated by this Agreement; (d) there has
been no release of any hazardous substance, pollutant or contaminant into the
environment by the Company or its Subsidiaries or in connection with their
properties, operations or activities; (e) there has been no exposure
(attributable to the action of the Company or its Subsidiaries) of any Person or
property to any hazardous substance, pollutant or contaminant in connection with
the properties, operations and activities of the Company and its Subsidiaries;
and (f) neither the Company nor its Subsidiaries have assumed, whether by
contract, operation of Law or otherwise, any liabilities or obligations arising
under Environmental Laws in connection with their respective formerly owned
properties, businesses, divisions, Subsidiaries, companies or other entities.
SECTION 5.18 Intellectual Property. The Company and its Subsidiaries
own, or are validly licensed or otherwise have the right to use, all patents,
patent rights, trademarks, trademark rights, trade names, trade name rights,
service marks, service mark rights, copyrights, inventions, trade secrets, mask
works and other proprietary intellectual property rights and computer programs
(collectively, "Intellectual Property Rights") which are Material to the conduct
of the business of the Company and its Subsidiaries, taken as a whole. Section
5.18 of the Company's Disclosure Letter sets forth a description of all
Intellectual Property Rights which are Material to the conduct of the business
of the Company and its Subsidiaries taken as a whole. Except as set forth in
Section 5.18 of the Company's Disclosure Letter, no claims are pending or, to
the Knowledge of the Company, threatened that the Company or any of its
Subsidiaries is infringing or otherwise adversely affecting the rights of any
Person with regard to any Intellectual Property Right. To the Knowledge of the
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Company, except as set forth in Section 5.18 of the Company's Disclosure Letter,
no Person is infringing the rights of the Company or any of its Subsidiaries
with respect to any Intellectual Property Right.
SECTION 5.19 Brokers. No broker, finder or investment banker (other than
the Financial Advisor) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Company. The estimated fees
and expenses incurred and to be incurred by the Company in connec tion with the
Offer, the Merger and the other transactions contemplated by this Agreement
(including the fees of the Financial Adviser and the fees of the Company's legal
counsel) are set forth in Section 5.19 of the Company's Disclosure Letter. The
Company has furnished to Parent a true and complete copy of all agreements
between the Company and the Financial Advisor relating to the Merger and the
other transactions contemplated hereby.
SECTION 5.20 Opinion of Financial Advisor. The Company has received the
opinion of the Financial Advisor, dated the date of this Agreement, to the
effect that, as of such date, the consideration to be received in the Offer and
the Merger by the Company's stockholders is fair to the Company's stockholders
from a financial point of view, a signed copy of which opinion has been
delivered to Parent.
SECTION 5.21 Year 2000. With respect to the "Year 2000 Problem," the
information set forth under the caption "Year 2000" on page 24 of the 1997
Annual Report of the Company is accurate. The Company has no Material exposure
to contingencies related to the "Year 2000 Problem" for the products and
services it has sold or is currently selling.
SECTION 5.22 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. As of the date
of this Agreement, except as set forth in Section 5.22 of the Company's
Disclosure Letter, all such policies are in full force and effect, all premiums
due and payable thereon have been paid, and no notice of cancelation or
termination has been received with respect to any such policy.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF THE PARENT COMPANIES
The Parent Companies hereby represent and warrant to the Company that:
SECTION 6.1 Organization and Qualification; Subsidiaries. Parent and
Purchaser are legal entities duly organized, validly existing and in good
standing under the Laws of their respective jurisdictions of incorporation or
organization, have all requisite power and authority to own, lease and operate
their respective properties and assets and to carry on their business as it is
now being conducted and are duly qualified and in good standing to do business
in each jurisdiction in which the nature of the business conducted by them or
the ownership or leasing of their respective properties and assets makes such
qualification necessary, other than such qualifications the lack of which,
individually or in the aggregate, has not had and could not reasonably be
expected to have a Material Adverse Effect on Parent.
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SECTION 6.2 Authorization of Agreement. Each of Parent and Purchaser has
all requisite corporate power and authority to execute and deliver this
Agreement and each instrument required hereby to be executed and delivered by it
prior to or at the Closing, to perform its obligations hereunder and thereunder
and to consummate the transactions contemplated hereby. The execution and
delivery by Parent and Purchaser of this Agreement and each instrument required
hereby to be executed and delivered by Parent or Purchaser prior to or at the
Closing and the performance of their respective obligations hereunder and
thereunder have been duly and validly authorized by all requisite corporate
action (including stockholder action) on the part of Parent and Purchaser,
respectively. This Agreement has been duly executed and delivered by Parent and
Purchaser and (assuming due authorization, execution and delivery hereof by the
other party hereto) constitutes a legal, valid and binding obligation of Parent
and Purchaser, enforceable against Parent and Purchaser in accordance with its
terms, except as the same may be limited by (a) bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance or other similar Laws relating
to creditors' rights generally and (b) legal principles of general applicability
governing the application and availability of equitable remedies.
SECTION 6.3 Approvals. Except for the applicable requirements, if any,
of (a) the Exchange Act, (b) state securities Laws or blue sky Laws, (c) the HSR
Act, (d) Exon-Florio, (e) the NASD, (f) the filing and recordation of
appropriate merger documents as required by the GCL (and other state Laws where
Purchaser or the Company are qualified to do business), (g) the National
Industrial Security Program Operating Manual with respect to foreign ownership,
control or influence and (h) those Laws and Orders noncompliance with which
could not reasonably be expected to have a material adverse effect on the
ability of Parent or Purchaser to perform its obligations under this Agreement,
no filing or registration with, no waiting period imposed by and no Permit or
Order of, any Governmental Authority is required under any Law or Order
applicable to Parent or Purchaser to permit Parent or Purchaser to execute,
deliver or perform this Agreement or any instrument required hereby to be
executed and delivered by it prior to or at the Closing.
SECTION 6.4 No Violation. Assuming effectuation of all filings and
registrations with, termination or expiration of any applicable waiting periods
imposed by and receipt of all Permits and Orders of, Governmental Authorities
indicated as required in Section 6.3, neither the execution and delivery by
Parent or Purchaser of this Agreement or any instrument required hereby to be
executed and delivered by Parent or Purchaser prior to or at the Closing nor the
performance by Parent or Purchaser of their respective obligations hereunder or
thereunder will (a) conflict with, or result in any violation of or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancelation or acceleration of any obligation or to loss
of a Material benefit under, or to increased, additional, accelerated or
guaranteed rights or entitlements of any Person under, or result in the creation
of any Lien upon any of the properties or assets of Parent or any Subsidiary of
Parent under, any provision of (i) any Law or Order applicable to Parent or
Purchaser, (ii) the certificate of incorporation or bylaws of Parent or
Purchaser or (iii) any contract or agreement to which Parent or any of its
Subsidiaries is a party or by which it or any of its properties or assets is
bound, or (b) with the passage of time, the giving of notice or the taking of
any action by a third Person, have any of the effects set forth in clause (a) of
this Section, except in any such case for any matters described in this Section
that could not reasonably be expected to have a material adverse effect upon the
ability of Parent or Purchaser to perform its obligations under this Agreement.
SECTION 6.5 Proxy Statement; Schedule 14D-9. None of the information
supplied or to be supplied by or on behalf of Parent or Purchaser for inclusion
or incorporation by reference in the Offer Documents, the Schedule 14D-9 or the
Proxy Statement, including any amendments or supplements thereto, at the time
such document is filed with the SEC, at any time it is amended or
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supplemented or at the time it is first published or given to holders of shares
of Company Common Stock, and, in the case of the Proxy Statement, at the time
that it or any amendment or supplement thereto is mailed to the Company's
stockholders, at the time of the Company Stockholders' Meeting or at the
Effective Time, 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 light of the circumstances under which they
were made, not misleading; provided, that the foregoing shall not apply to
information supplied by or on behalf of the Company specifically for inclusion
or incorporation by reference in any such document. The Offer Documents will
comply as to form in all material respects with the provisions of the Exchange
Act, except that no representations is made by Parent or Purchaser with respect
to statements made or incorporated by reference therein based on information
supplied by the Company for inclusion or incorporation by reference therein.
SECTION 6.6 Sufficient Funds. Parent has access to sufficient funds to
consummate the Offer and the Merger on the terms contemplated by this Agreement.
SECTION 6.7 Brokers. Except for Morgan Stanley & Co. Incorporated and
CSP Associates Inc., no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by and
on behalf of Parent or Purchaser.
ARTICLE VII
COVENANTS
SECTION 7.1 Conduct of Business of the Company. The Company hereby
covenants and agrees that, prior to the Effective Time, unless otherwise
expressly contemplated by this Agreement or consented to in writing by Parent,
it will and will cause each of its Subsidiaries to:
(a) operate its business in the usual and ordinary course consistent with
past practices;
(b) use all reasonable efforts to preserve intact its business
organization, maintain its rights and franchises, retain the services of its
respective key employees and maintain its relationships with its respective
customers and suppliers and others having business dealings with it to the end
that its goodwill and ongoing business shall be unimpaired at the Effective
Time;
(c) maintain and keep its properties and assets in as good repair and
condition as at present, ordinary wear and tear excepted, and maintain supplies
and inventories in quantities consistent with its customary business practice;
and
(d) use all reasonable efforts to keep in full force and effect insurance
and bonds comparable in amount and scope of coverage to that currently
maintained.
SECTION 7.2 Prohibited Actions by the Company.
Without limiting the generality of Section 7.1, except as set forth in
Section 7.2 of the Company's Disclosure Letter, the Company covenants and agrees
that, except as expressly contemplated by this Agreement or otherwise consented
to in writing by Parent, from the date of this
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Agreement until the Effective Time, it will not do, and will not permit any of
its Subsidiaries to do, any of the following:
(a) (i) increase the compensation payable to or to become payable to
any director or employee, except for increases in salary or wages of
employees in the ordinary course of business and consistent with past
practice; (ii) grant any severance or termination pay (other than pursuant
to the normal severance policy or practice of the Company or its
Subsidiaries as in effect on the date of this Agreement) to, or enter into
or amend in any material respect any employment or severance agreement
with, any employee; (iii) establish, adopt, enter into or amend in any
material respect any collective bargaining agreement or Benefit Plan of the
Company or its Subsidiaries except as required by applicable Law or (iv)
take any action to accelerate any rights or benefits, or make any material
determinations not in the ordinary course of business consistent with past
practice, under any collective bargaining agreement or Benefit Plan of the
Company or its Subsidiaries; provided that the Company may amend the
Company Option Plans to accelerate the vesting of any unvested Company
Stock Options and to permit employees to tender any shares of Company
Common Stock acquired upon exercise of any Company Stock Option into the
Offer;
(b) declare, set aside or pay any dividend on, or make any other
distribution in respect of (whether in cash, stock or property),
outstanding shares of capital stock, except for dividends by a wholly owned
Subsidiary of the Company to the Company or another wholly owned Subsidiary
of the Company;
(c) redeem, purchase or otherwise acquire, or offer to redeem,
purchase or otherwise acquire, any outstanding shares of capital stock of,
or other equity interests in, or any securities that are convertible into
or exchangeable for any shares of capital stock of, or other equity
interests in, or any outstanding options, warrants or rights of any kind to
acquire any shares of capital stock of, or other equity interests in, the
Company or any of its Subsidiaries (other than (i) any such acquisition by
the Company or any of its wholly owned Subsidiaries directly from any
wholly owned Subsidiary of the Company in exchange for capital
contributions or loans to such Subsidiary, (ii) any purchase, forfeiture or
retirement of shares of Company Common Stock or the Company Stock Options
occurring pursuant to the terms (as in effect on the date of this
Agreement) of any existing Benefit Plan of the Company or any of its
Subsidiaries or (iii) the repurchase of Company Rights pursuant to the
terms (as in effect on the date of this Agreement) of the Company's Rights
Agreement to the extent required by this Agreement or by a Court of
competent jurisdiction;
(d) effect any reorganization or recapitalization; or split, combine
or reclassify any of the capital stock of, or other equity interests in,
the Company or any of its Subsidiaries or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in
substitution for, shares of such capital stock or such equity interests;
(e) offer, sell, issue or grant, or authorize the offering, sale,
issuance or grant of, any shares of capital stock of, or other equity
interests in, any securities convertible into or exchangeable for any
shares of capital stock of, or other equity interests in, or any options,
warrants or rights of any kind to acquire any shares of capital stock of,
or other equity interests in, or any Voting Company Debt or other voting
securities of, the Company or any of its Subsidiaries, or any "phantom"
stock, "phantom" stock rights, stock appreciation rights or stock-based
performance units, other than issuances of shares of Company Common Stock
(and associated Company Rights) upon the exercise of the Company Stock
Options and
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Warrants outstanding at the date of this Agreement in accordance with the
terms thereof (as in effect on the date of this Agreement);
(f) acquire or agree to acquire, by merging or consolidating with, by
purchasing an equity interest in or a portion of the assets of, or in any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof or otherwise acquire any
assets of any other Person (other than the purchase of assets from
suppliers or vendors in the ordinary course of business and consistent with
past practice);
(g) sell, lease, exchange or otherwise dispose of, or grant any Lien
(other than a Permitted Encumbrance) with respect to, any of the properties
or assets of the Company or any of its Subsidiaries that are, individually
or in the aggregate, material to any of the Company's three core business
segments (information systems, aerospace and systems technologies), except
for dispositions of excess or obsolete assets and sales of inventories in
the ordinary course of business and consistent with past practice;
(h) adopt any amendments to its certificate of incorporation or bylaws
or other organizational documents;
(i) effect any change in any accounting methods, principles or
practices in effect as of December 31, 1997 materially affecting the
reported consolidated assets, liabilities or results of operations of the
Company, except as may be required by a change in GAAP, or any change in
Tax accounting;
(j) (i) incur any Indebtedness, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the Company or
any of its Subsidiaries, guarantee any debt securities of another Person,
enter into any "keep well" or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement having
the economic effect of any of the foregoing, except for short-term
borrowings incurred in the ordinary course of business consistent with past
practice, or (ii) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to or in the Company or any
direct or indirect wholly owned Subsidiary of the Company;
(k) enter into any contract which, if such contract is entered into,
would be a Material Contract; or
(l) make or agree to make any new capital expenditure or expenditures
other than the capital expenditures contemplated by the Company's annual
operating plan for 1998, a copy of which has been furnished to Parent prior
to the execution of this Agreement;
(m) make any non-routine Tax election or settle or compromise any
Material Tax liability or refund;
(n) (i) 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 consistent with past practice or in accordance
with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the
notes thereto) of the Company
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included in the Filed SEC Documents or incurred in the ordinary course of
business consistent with past practice, (ii) cancel any Material
Indebtedness (individually or in the aggregate) or waive any claims or
rights of substantial value or (iii) subject to Section 7.15, waive the
benefits of, or agree to modify in any manner, any confidentiality,
standstill or similar agreement to which the Company or any of its
Subsidiaries is a party; or
(o) agree in writing or otherwise to do any of the foregoing.
SECTION 7.3 No Solicitation.
(a) From the date of this Agreement until the Effective Time or the
termination of this Agreement pursuant to Section 9.1, the Company agrees that
it will not, and will not permit any of its Subsidiaries, or any of its or their
officers, directors, employees, representatives, agents, or Affiliates,
including any investment banker, attorney, or accountant retained by the Company
or any of its Subsidiaries (collectively, "Representatives"), to, directly or
indirectly (i) initiate, solicit or encourage or otherwise facilitate (including
by way of furnishing information), or take any other action to facilitate, any
inquiries or the making of any proposal or offer that constitutes, or may
reasonably be expected to lead to, an Acquisition Proposal, (ii) enter into or
maintain or continue discussions or negotiate with any Person regarding an
Acquisition Proposal or in furtherance of such inquiries or to obtain an
Acquisition Proposal, or (iii) agree to, approve, recommend or endorse any
Acquisition Proposal, or authorize or permit any of the Representatives of the
Company or any of its Subsidiaries to take any such action, and the Company
shall promptly notify Parent of any such inquiries and proposals hereafter
received by the Company or any of its Subsidiaries or by any such
Representative, relating to any of such matters; provided however, that nothing
contained in this Agreement shall prohibit the Board of Directors of the Company
at any time prior to the earlier to occur of acceptance for payment of shares of
Company Common Stock pursuant to the Offer or adoption of this Agreement by the
stockholders of the Company from furnishing information (pursuant to a customary
confidentiality agreement no more favorable to the party receiving information
than the Confidentiality Agreement and consistent with the Company's obligations
under this Agreement, including Section 7.3(c)) to, or engaging in discussions
or negotiations with, any Person in response to an unsolicited bona fide written
Acquisition Proposal of such Person that satisfies the requirements of a
Superior Proposal, if, and only to the extent that, (A) the Board of Directors
of the Company, after consultation with outside legal counsel to the Company,
determines in good faith that failure to do so would result in a breach of the
fiduciary duty of the Board of Directors of the Company to the stockholders of
the Company under applicable Law, and (B) prior to furnishing such information
to, or entering into discussions or negotiations with, such Person the Company
provides written notice to Parent to the effect that it is furnishing
information to, or entering into discussions or negotiations with, such Person
and the Company complies with Section 7.3(c). Taking the actions contemplated
by the proviso to the prior sentence under the circumstances described therein
will not be deemed to be a breach of this Agreement. It is understood that any
violation of the restrictions set forth in this Section 7.3 by any
Representative of the Company or any of its Subsidiaries, whether nor not such
Person is purporting to act on behalf of the Company or otherwise, shall be
deemed to be a breach of this Section 7.3 by the Company.
(b) Except as expressly permitted by this Section 7.3, neither the Board of
Directors of the Company nor any committee thereof shall (i) withdraw or modify,
or propose publicly to withdraw or modify, in a manner adverse to Parent or
Purchaser, the approval or recommendation by such Board of the Offer or the
Merger as set forth in Section 2.2, (ii) approve or recommend, or propose
publicly to approve or recommend, any Acquisition Proposal, or (iii) cause the
Company to enter into any letter of intent, agreement in principle, acquisition
agreement or other similar
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agreement (each, an "Acquisition Agreement") related to any Acquisition
Proposal. Notwithstanding the foregoing, prior to the earlier to occur of
acceptance for payment of shares of Company Common Stock pursuant to the Offer
or adoption of this Agreement by the stockholders of the Company, the Board of
Directors of the Company may terminate this Agreement but only (A) to the extent
that the Board of Directors of the Company, after consultation with outside
legal counsel to the Company, determines in good faith that failure to do so
would result in a breach of the fiduciary duty of the Board of Directors to the
stockholders of the Company under applicable Law, (B) if the Company and the
Board of Directors of the Company have complied with all the provisions of this
Section 7.3, (C) after the third day following Parent's receipt of written
notice advising Parent that the Board of Directors of the Company is prepared to
accept a Superior Proposal, specifying the principal terms and conditions of
such Superior Proposal and identifying the Person making such Superior Proposal
and (D) if concurrently with such termination, the Company enters into an
Acquisition Agreement with respect to such Superior Proposal and pays to Parent
the Termination Fee and the out-of-pocket fees and expenses incurred by Parent,
Purchaser and their Affiliates in connection with the transactions contemplated
by this Agreement pursuant to Section 9.5(b).
(c) In addition to the obligations of the Company set forth in paragraphs
(a) and (b) of this Section 7.3, the Company shall promptly advise Parent,
orally and in writing, of any request for information or of any Acquisition
Proposal, the principal terms and conditions of such request or Acquisition
Proposal and the identity of the Person making such request or Acquisition
Proposal. The Company shall keep Parent reasonably informed of the status and
details (including amendments or proposed amendments) of any such request or
Acquisition Proposal.
(d) "Acquisition Proposal" means an inquiry, offer or proposal regarding
any of the following (other than the transactions contemplated by this
Agreement) involving the Company: (i) any merger, consolidation, share exchange,
recapitalization, liquidation, dissolution, business combination or other
similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer
or other disposition of a substantial portion of the assets of the Company and
its Subsidiaries, taken as a whole, or of any Material Business or of any
Subsidiary or Subsidiaries responsible for a Material Business in a single
transaction or series of related transactions; (iii) any acquisition of 15
percent or more of the outstanding shares of capital stock of the Company or the
filing of a registration statement under the Securities Act in connection
therewith or any other acquisition or disposition the consummation of which
would prevent or materially diminish the benefits to Parent of the Merger; or
(iv) any public announcement of a proposal, plan or intention to do any of the
foregoing or any agreement to engage in any of the foregoing. "Superior
Proposal" means any proposal made by a third party to acquire, directly or
indirectly, including pursuant to a tender offer, exchange offer, merger,
consolidation, share exchange, business combination, recapitalization,
liquidation, dissolution or other similar transaction, for consideration
consisting of cash and/or marketable securities, all the shares of Company
Common Stock then outstanding or not less than 75 percent of the assets of the
Company and its Subsidiaries which the Board of Directors of the Company
determines in good faith (based on advice of a financial advisor of nationally
recognized reputation) to be superior to the Company's stockholders from a
financial point of view (taking into account any changes to the financial terms
of this Agreement proposed by Parent in response to such proposal) and to be
more favorable generally to the Company's stockholders (taking into account all
financial and strategic considerations, including relevant legal, financial,
regulatory and other aspects of such proposal and the third party making such
proposal and the conditions and prospects for completion of such proposal, and
any changes to this Agreement proposed by Parent in response to such proposal)
than the Offer, the Merger and the other transactions contemplated by this
Agreement, taken as a whole. "Material Business" means any business (or the
assets needed to carry
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out such business) that contributed or represented 15% or more of the net sales,
the net income or the assets (including equity securities) of the Company and
its Subsidiaries taken as a whole.
(e) Nothing contained in this Section 7.3 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 disclosure to the
Company's stockholders which the Board of Directors of the Company, after
consultation with outside legal counsel to the Company, determines in good faith
is required by the fiduciary duty of the Board of Directors to the stockholders
of the Company under applicable Law; provided that neither the Board of
Directors of the Company nor any committee thereof withdraws or modifies, or
proposes to withdraw or modify, the approval or recommendation of such Board of
the Offer or the Merger as set forth in Section 2.2 or approves or recommends,
or publicly proposes to approve or recommend, an Acquisition Proposal unless the
Company and the Board of Directors of the Company have complied with all the
provisions of this Section 7.3.
SECTION 7.4 Access to Information. Between the date of this Agreement
and the Effective Time, the Company shall, and shall cause its Subsidiaries to,
(a) afford to Parent and its officers, directors, employees, accountants,
consultants, legal counsel, agents and other representatives full access during
normal business hours and at all other reasonable times to the officers,
employees, agents, properties, offices and other facilities of the Company and
its Subsidiaries and to their books and records and (b) furnish promptly to
Parent and its Representatives a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities Laws and such other information
concerning the business, properties, contracts, records and personnel of the
Company and its Subsidiaries (including financial, operating and other data and
information) as may be reasonably requested, from time to time, by or on behalf
of Parent.
SECTION 7.5 Confidentiality Agreement. The parties agree that the
provisions of 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; provided, however, that any consents from the
Company necessary under the Confidentiality Agreement for Parent and Purchaser
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 to comply with,
all of their respective obligations under the Confidentiality Agreement until
Purchaser purchases a majority of the outstanding shares of Company Common Stock
pursuant to the Offer.
SECTION 7.6 Reasonable Efforts. Subject to the terms and conditions of
this Agreement and, including the provisions of Sections 7.7 and 7.8, each of
the parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things reasonably
necessary, proper or advisable under applicable Laws to consummate and make
effective as soon as reasonably practicable the transactions contemplated by
this Agreement including (a) cooperating in the preparation and filing of all
applications, requests, consents and other filings required by applicable
Governmental Authorities or Courts, including the Offer Documents, the Schedule
14D-9, the Proxy Statement and any amendments and supplements to any thereof;
(b) 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; (c) contesting any pending legal proceeding,
whether judicial or administrative, relating to the Offer or the Merger
including seeking to have any stay or temporary
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restraining order entered by any Court or other Governmental Authority vacated
or reversed; and (d) executing any additional instruments necessary to
consummate the transactions contemplated hereby and thereby. In case at any time
after the Effective Time any further action is necessary to carry out the
purposes of this Agreement, the proper officers and directors of each party
hereto shall use all reasonable efforts to take all such necessary action.
SECTION 7.7 Permits. Each of the Company, Parent and Purchaser shall
cooperate and use their respective reasonable efforts to make all filings, to
obtain all actions or nonactions, waivers, Permits and Orders of Governmental
Authorities necessary to consummate the transactions contemplated by this
Agreement and to take all reasonable steps as may be necessary to obtain an
approval or waiver from, or to avoid an action or proceeding by, any
Governmental Authority. Each of the parties hereto will furnish to the other
parties such necessary information and reasonable assistance as such other
parties may reasonably request in connection with the foregoing.
SECTION 7.8 HSR Act and Exon-Florio Filings.
(a) In addition to and without limiting the agreements of Parent, Purchaser
and the Company contained in Sections 7.6 and 7.7, Parent, Purchaser and the
Company will (i) take promptly all actions necessary to make the filings
required of Parent, Purchaser, the Company or any of their Affiliates under the
HSR Act and Exon-Florio, (ii) comply at the earliest practicable date with any
request for additional information or documentary material received by Parent,
Purchaser, the Company or any of their respective Affiliates from the Federal
Trade Commission or the Antitrust Division of the Department of Justice pursuant
to the HSR Act, or from CFIUS under Exon-Florio, and (iii) cooperate in
connection with resolving any investigation or other inquiry concerning the
transactions contemplated by this Agreement (A) under the HSR Act commenced by
the Federal Trade Commission or the Antitrust Division of the Department of
Justice, or (B) under Exon-Florio, commenced by CFIUS.
(b) In furtherance and not in limitation of the covenants contained in
Section 7.7 and Section 7.8(a), Parent, Purchaser and the Company shall each use
all reasonable efforts to resolve such objections, if any, as may be asserted
with respect to the Offer, the Merger or any other transactions contemplated by
this Agreement under the HSR Act or Exon-Florio; provided, that neither Parent
nor any of its Subsidiaries shall be required to divest any asset or enter into
any consent decree.
(c) Each of the Company, Parent and Purchaser shall promptly inform the
other party of any material communication received by such party from the
Federal Trade Commission, the Antitrust Division of the Department of Justice,
CFIUS, or any other Governmental Authority regarding any of the transactions
contemplated hereby.
SECTION 7.9 Public Announcements. Parent, Purchaser and the Company
will consult with each other before issuing any press release or otherwise
making any public statements with respect to the Offer or the Merger or this
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 Court process or by obligations pursuant to any listing agreement with the
NASD or any securities exchange.
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SECTION 7.10 Employee Agreements.
Parent acknowledges and agrees that all employment agreements,
severance agreements, deferred compensation agreements, and supplemental
retirement agreements with the employees of the Company and its Subsidiaries
that are listed in Section 7.10 of the Company's Disclosure Letter will be
binding and enforceable obligations of the Surviving Corporation to the same
extent as they were binding and enforceable obligations of the Company and its
Subsidiaries as of the date of this Agreement, except as the parties thereto may
otherwise agree.
SECTION 7.11 Company's Rights Agreement; State Takeover Statutes. The
Company shall take all action (including, if necessary, redeeming all the
outstanding Company Rights issued pursuant to the Company's Rights Agreement or
amending or terminating the Company's Rights Agreement) so that the execution,
delivery and performance of this Agreement and the Stockholders Agreement and
the consummation of the Merger and the other transactions contemplated or
permitted by this Agreement and the Stockholders Agreement do not and will not
result in the grant of any Company Rights to any Person under the Company's
Rights Agreement or enable or require any outstanding Company Rights to be
exercised, distributed or triggered. Except as set forth in the first sentence
of this Section 7.11 or as approved in writing by Parent, the Board of Directors
of the Company shall not (a) amend the Company's Rights Agreement or (b) take
any action with respect to, or make any determination under, the Company's
Rights Agreement. If any Distribution Date or Shares Acquisition Date occurs
under the Company's Rights Agreement at any time during the period from the date
of this Agreement to the Effective Time, the Company and Parent shall make such
adjustment to the Offer price as the Company and Parent shall mutually agree so
as to preserve the economic benefits that the Company and Parent each reasonably
expected on the date of this Agreement to receive as a result of the
consummation of the Offer, the Merger and the other transactions contemplated by
this Agreement. The Company will take all steps necessary (a) to exempt the
transactions contemplated by this Agreement and the Stockholders Agreement from
Section 203 of the GCL, (b) to ensure that no other state takeover statute or
similar Law or Regulation is or becomes applicable to this Agreement or the
Stockholders Agreement and (c) if any state takeover statute or similar Law or
Regulation becomes applicable to this Agreement or the Stockholders Agreement,
to ensure that the Offer, the Merger and the other transactions contemplated
hereby and thereby may be consummated as promptly as practicable on the terms
contemplated by this Agreement and the Stockholders Agreement and otherwise to
minimize the effect of such Law or Regulation on the Offer, the Merger and the
other transactions contemplated hereby and thereby.
SECTION 7.12 Employee Benefit Plans. Until at least December 31, 1998,
Parent shall provide, or cause to be provided, to all employees of the Company
and its Subsidiaries compensation, incentive pay and benefits that are
substantially comparable in the aggregate to the compensation, incentive pay and
benefits (without taking into account any equity-based compensation, incentive
pay or benefits) provided to such employees by the Company and its Subsidiaries
as of the Offer Closing Date. From and after the Effective Time, Parent shall
grant all employees of the Surviving Corporation and its Subsidiaries on the
Effective Time credit for vesting and eligibility purposes (but not for benefit
accrual purposes) for all service (to the same extent as service with Parent or
any Subsidiary of Parent (other than the Surviving Corporation and its
Subsidiaries) is taken into account with respect to similarly situated employees
of Parent and the Subsidiaries of Parent (other than the Surviving Corporation
and its Subsidiaries)) with the Surviving Corporation and any Subsidiary of the
Surviving Corporation and their respective predecessors prior to the Effective
Time under all Benefit Plans of Parent or its Subsidiaries (other than the
Surviving Corporation and its Subsidiaries) in which such employees shall become
eligible to participate as
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if such service with the Surviving Corporation or any Subsidiary of the
Surviving Corporation and their respective predecessors was service with Parent
or any Subsidiary of Parent (other than the Surviving Corporation and its
Subsidiaries), and, with respect to any medical or dental benefit plan in which
such employees become eligible to participate, Parent shall waive any pre-
existing condition exclusions and actively-at-work requirements (provided,
however, that no such waiver shall apply to a pre-existing condition of any
employee of the Surviving Corporation or any Subsidiary of the Surviving
Corporation who was, as of the Offer Closing Date, excluded from participation
in a Benefit Plan of the Surviving Corporation or any Subsidiary of the
Surviving Corporation by virtue of such pre-existing condition) and provided
that any covered expenses incurred (on or before the Offer Closing Date) by an
employee or an employee's covered dependent shall be taken into account for
purposes of satisfying applicable deductible, coinsurance and maximum out-of-
pocket provisions after the Offer Closing Date to the same extent as such
expenses are taken into account for the benefit of similarly situated employees
of Parent and the Subsidiaries of Parent (other than the Surviving Corporation
and its Subsidiaries).
SECTION 7.13 Indemnification of Directors and Officers.
(a) Purchaser agrees that all rights to indemnification for acts or
omissions occurring prior to the Offer Closing Date existing as of the date
hereof in favor of the current or former directors or officers of the Company
and its Subsidiaries as provided in their respective certificates of
incorporation or bylaws shall survive the Merger and shall continue in full
force and effect in accordance with their terms for a period of six years from
the Offer Closing Date. Parent shall cause to be maintained for a period of six
years from the Offer Closing Date the Company's current directors' and officers'
insurance and indemnification policy (the "D&O Insurance") and the current
fiduciary liability insurance policy (the "Fiduciary Insurance") (provided that
Parent may substitute therefor policies or financial guarantees with reputable
and financially sound carriers or other obligors of at least the same coverage
and amounts containing terms and conditions which are no less advantageous) to
the extent that such insurance policies provide coverage for events occurring
prior to the Effective Time for all persons who are directors and officers of
the Company on the date of this Agreement, so long as the aggregate amount to be
paid by the Company after the date of this Agreement for such D&O Insurance and
Fiduciary Insurance during such six-year period would not be in excess of
$350,000 and $150,000, respectively. If, during such six-year period, such
insurance coverage cannot be obtained at all or can only be obtained for an
aggregate amount (including all amounts paid by the Company after the date of
this Agreement) in excess of $350,000, in the case of D&O Insurance, and
$150,000, in the case of Fiduciary Insurance, Parent shall use all reasonable
efforts to cause to be obtained as much D&O Insurance and Fiduciary Insurance as
can be obtained for the remainder of such six-year period for an aggregate
amount (including all amounts paid by the Company after the date of this
Agreement) not in excess of $350,000 and $150,000, respectively, on terms and
conditions no less advantageous than the existing D&O Insurance and the existing
Fiduciary Insurance, respectively.
(b) If any claim or claims shall, subsequent to the Offer Closing Date and
within six years thereafter, be made in writing against any present or former
director or officer of the Company based on or arising out of the services of
such Person prior to the Offer Closing Date in the capacity of such Person as a
director or officer of the Company (and such director or officer shall have
given Parent written notice of such claim or claims within such six year
period), the provisions of subsection (a) of this Section respecting the rights
to indemnity for current or former directors or officers under the certificate
of incorporation and bylaws of the Company and its Subsidiaries shall continue
in effect until the final disposition of all such claims.
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(c) Notwithstanding anything to the contrary in this Section 7.13, neither
Parent nor the Surviving Corporation shall be liable for any settlement effected
without its written consent, which shall not be unreasonably withheld.
(d) The provisions of this Section 7.13 are intended to be for the benefit
of, and shall be enforceable by, each Person entitled to indemnification
hereunder and the heirs and representatives of such Person.
(e) Parent shall not permit the Surviving Corporation to merge or
consolidate with any other Person unless the Surviving Corporation shall ensure
that the surviving or resulting entity assumes the obligations imposed by
subsections (a) and (b) of this Section 7.13.
SECTION 7.14 Event Notices and Other Actions. (a) From and after the
date of this Agreement until the Effective Time, each party hereto shall
promptly notify the other parties hereto of (i) the occurrence or nonoccurrence
of any event, the occurrence or nonoccurrence of which has resulted in, or could
reasonably be expected to result in, any condition to the Offer set forth in
Annex B, or any condition to the Merger set forth in Article VIII, 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 B, or any condition to the Merger set forth in Article
VIII, not being satisfied and (iii) any representation or warranty made by it
contained in this Agreement that is qualified as to materiality becoming untrue
or inaccurate in any respect or any such representation or warranty that is not
so qualified becoming untrue or inaccurate in any material respect. No delivery
of any notice pursuant to this Section 7.14(a) shall cure any breach of any
representation or warranty of such party contained in this Agreement or
otherwise limit or affect the remedies available hereunder to the party or
parties receiving such notice.
(b) The Company and Parent shall not, and shall not permit any of their
respective Subsidiaries to, take any action or nonaction that would, or that
could reasonably be expected to, result in (i) any of the representations and
warranties of such party set forth in this Agreement that is qualified as to
materiality becoming untrue, (ii) any of such representations and warranties
that is not so qualified becoming untrue in any material respect or (iii) except
as otherwise permitted by Section 7.3, any condition to the Offer set forth in
Annex B, or any condition to the Merger set forth in Article VIII, not being
satisfied.
SECTION 7.15 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
to enforce specifically the terms and provisions thereof in any Court of the
United States or any state thereof having jurisdiction. Notwithstanding the
foregoing, nothing in this Section 7.15 is intended to prevent the Company from
exercising its rights under Section 7.3(a) in accordance with the provisions of
Section 7.3.
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ARTICLE VIII
CLOSING CONDITIONS
SECTION 8.1 Conditions to Obligations of Each Party Under This Agreement.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
conditions, any or all of which may be waived by the parties hereto, in whole or
in part, to the extent permitted by applicable Law:
(a) Company Stockholder Approval. This Agreement and the Merger shall
have been approved and adopted by the requisite vote of the stockholders of
the Company, if required by applicable Law.
(b) No Order. No Court or Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any Law or Order (whether
temporary, preliminary or permanent) which is in effect and which has the
effect of making the Merger illegal or otherwise prohibiting consummation
of the Merger.
(c) HSR Act. The applicable waiting period under the HSR Act shall
have expired or been terminated.
SECTION 8.2 Additional Conditions to Obligations of the Parent Companies.
The obligations of the Parent Companies to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions,
any or all of which may be waived by the Parent Companies, in whole or in part,
to the extent permitted by applicable Law:
(a) Representations and Warranties. Each of the representations and
warranties of the Company in this Agreement shall be true and correct (for
all purposes of this Section 8.2 (a) without giving effect to any Material
or Material Adverse Effect qualifiers or other qualifiers based on
materiality contained therein), as of the date of this Agreement and as of
the Effective Time as though made as of the Effective Time, (other than to
the extent such representations and warranties expressly relate to an
earlier date, in which case such representations and warranties shall be
true and correct as of such date), except to the extent the failure of such
representations and warranties to be true and correct has not had, and
could not be reasonably expected to have, in the aggregate, a Material
Adverse Effect on the Company.
(b) Agreements and Covenants. The Company shall have performed or
complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it at or
prior to the Effective Time.
(c) Certificates of Compliance. The Company shall have furnished
Parent and Purchaser with such certificates and other documents necessary
to evidence the fulfillment of the conditions set forth in this Section 8.2
as Parent or Purchaser may reasonably request.
(d) Company Stock Options. Each of the Company Option Plans shall
have been, or contemporaneously with or by virtue of the Merger will be,
terminated, all required consents shall have been obtained to cancel all
Company Stock Options and Restricted Stock awards in accordance with
Section 3.6(a), and any other program, plan or arrangement providing for
the issuance or grant by the Company or any of its Subsidiaries of any
interest
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in respect of the capital stock of the Company or any of its Subsidiaries
(and any interests outstanding under any such plan, program or arrangement)
shall have been, or contemporaneously with or by virtue of the Merger will
be, validly terminated or canceled.
(e) Exon-Florio Review. The period of time for any applicable review
process by CFIUS relating to the determination of any threat to national
security shall have expired, and CFIUS shall not have taken any action or
made any recommendation to the President of the United States to block or
prevent consummation of the Offer or the Merger.
SECTION 8.3 Additional Condition to Obligations of the Company. The
obligations of the Company to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the condition, which may be
waived by the Company, in whole or in part, to the extent permitted by
applicable Law, that the Parent Companies shall have performed or complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by them at or prior to the Effective
Time.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 Termination. This 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, Purchaser and the Company;
(b) by Parent, Purchaser or the Company if any Court of competent
jurisdiction or other Governmental Authority shall have issued a final
Order or taken any other final action restraining, enjoining or otherwise
prohibiting the consummation of the Offer or the Merger and such Order or
other action is or shall have become nonappealable;
(c) by Parent or Purchaser if due to an occurrence or circumstance
which would result in a failure to satisfy any of the conditions set forth
in Annex B hereto, Purchaser shall have (i) failed to commence the Offer
within the time required by Regulation 14D under the Exchange Act, (ii)
terminated the Offer without purchasing any shares of Company Common Stock
pursuant to the Offer or (iii) failed to accept for payment shares of
Company Common Stock pursuant to the Offer prior to July 31, 1998;
(d) by the Company if (i) there shall not have been a material breach
of any representation, warranty, covenant or agreement on the part of the
Company and Purchaser shall have (A) failed to commence the Offer within
the time required by Regulation 14D under the Exchange Act, (B) terminated
the Offer without purchasing any shares of Company Common Stock pursuant to
the Offer, or (C) failed to accept for payment shares of Company Common
Stock pursuant to the Offer prior to July 31, 1998, or (ii) prior to the
purchase of shares of Company Common Stock pursuant to the Offer,
concurrently with the execution of an Acquisition Agreement under the
circumstances permitted by Section 7.3 provided, that such termination
under this clause (ii) shall not be effective unless the Company and the
Board of Directors of the Company shall have complied with all their
obligations under Section 7.3 and until payment of the Termination Fee and
the out-of-
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pocket fees and expenses incurred by Parent, Purchaser and their Affiliates
in connection with the transactions contemplated by this Agreement pursuant
to Section 9.5(b);
(e) by Parent or Purchaser prior to the purchase of shares of Company
Common Stock pursuant to the Offer, if (i) there shall have been a material
breach of any representation or warranty on the part of the Company under
this Agreement which materially adversely affects (or materially delays)
the consummation of the Offer, (ii) there shall have been a material breach
of any covenant or agreement on the part of the Company under this
Agreement which materially adversely affects (or materially delays) the
consummation of the Offer, which shall not have been cured prior to the
earlier of (A) 10 days following notice of such breach and (B) two Business
Days prior to the date on which the Offer expires, provided, however, that
the Company shall have no right to cure and Parent and Purchaser may
immediately terminate this Agreement in the event that such breach by the
Company was wilful or intentional or in the event of a breach of Section
7.3, (iii) the Board of Directors of the Company or any committee thereof
shall have withdrawn or modified (including by amendment of Schedule 14D-9)
in a manner adverse to Purchaser its approval or recommendation of the
Offer, the Merger or this Agreement, shall have recommended to the
Company's stockholders a Third Party Acquisition, or shall have authorized
the redemption of any Company Rights, or (iv) there shall not have been
validly tendered and not withdrawn prior to the expiration of the Offer at
least 51 percent of the Fully Diluted Shares and on or prior to such
expiration an entity or group (other than Parent or Purchaser) shall have
made, or, with respect to any proposal that may be existing on the date
hereof, not withdrawn, a proposal with respect to a Third Party
Acquisition; or
(f) by the Company prior to the purchase of any shares of Company
Common Stock pursuant to the Offer if (i) there shall have been a material
breach of any representation or warranty in this Agreement on the part of
Parent or Purchaser which materially 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 on the part
of Parent or Purchaser which materially adversely affects (or materially
delays) the consummation of the Offer which shall not have been cured prior
to the earliest of (A) 10 days following notice of such breach and (B) two
Business Days prior to the date on which the Offer expires; provided,
however, that Parent and Purchaser shall have no right to cure and the
Company may immediately terminate this Agreement in the event that such
breach by Parent or Purchaser was wilful or intentional.
SECTION 9.2 Effect of Termination. In the event of the termination and
abandonment of this Agreement pursuant to Section 9.1, this Agreement shall
forthwith become void and have no effect, without any liability on the part of
any party hereto or its Affiliates, directors, officers or stockholders, other
than the provisions of this Section 9.2 and Sections 5.19, 6.7, 7.5 and 9.5 and
Article X. Nothing contained in this Section 9.2 shall relieve any party from
liability for any breach of this Agreement.
SECTION 9.3 Amendment. This Agreement may be amended by action taken by
the Company, Parent and Purchaser at any time before or after any adoption of
this Agreement by the stockholders of the Company (whether or not such adoption
is required); provided that after the date of adoption of this Agreement by the
stockholders of the Company, no amendment shall be made that by Law requires
further approval of such stockholders without the approval of such stockholders.
This Agreement may not be amended except by an instrument in writing signed on
behalf of all the parties. From and after the Control Date, if such date
occurs, and prior to the
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Effective Time, any amendment of this Agreement or the Company's certificate of
incorporation or by laws, any termination of this Agreement by the Company, any
extension of time for performance of any of the obligations of Parent or
Purchaser hereunder or any waiver thereof, any waiver of any condition to the
obligations of the Company or any of the Company's rights hereunder or other
action by the Company hereunder will require the concurrence of, and shall be
effective only if approved by, a majority of the Independent Directors, which
action shall be deemed to constitute the action of the full Board of Directors
even if such majority of Independent Directors does not constitute a majority of
all directors then in office; provided, that, if there shall be no Independent
Directors and Parent is not in breach of its obligations to designate
Independent Directors under Section 2.4, such actions may be effected by
majority vote of the entire Board of Directors of the Company, except that no
such action shall amend the terms of this Agreement in a manner materially
adverse to the stockholders of the Company (excluding Purchaser, Parent, and
their respective Affiliates) without the approval of a majority of such
stockholders.
SECTION 9.4 Extension; Waiver. At any time prior to the Effective Time,
a party may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties of the other parties contained herein or in any
document, certificate or writing delivered pursuant hereto or (c) waive
compliance with any of the agreements or conditions of the other parties hereto
contained herein; provided that (i) from and after the Control Date, no
extensions or waivers shall be made which materially adversely affect the rights
of the Company's stockholders hereunder without the approval of a majority of
the Independent Directors if at the time there shall be any Independent
Directors and (ii) after the date of adoption of the Merger by the stockholders
of the Company, no extensions or waivers shall be made that by Law requires
further approval by such stockholders without the approval of such stockholders.
Any agreement on the part of any party to any such extension or waiver shall be
valid only if set forth in an instrument in writing signed on behalf of such
party.
SECTION 9.5 Fees, Expenses and Other Payments.
(a) Except as provided in Section 9.5(b) of this Agreement, all fees and
expenses incurred by the parties hereto shall be borne solely and entirely by
the party which has incurred such fees and expenses.
(b) If:
(i) Parent or Purchaser terminates this Agreement pursuant to
Section 9.1(e)(i) or (iv) or pursuant to Section 9.1(e)(ii) other than as a
result of a breach of Section 7.3 or the Company terminates this Agreement
pursuant to Section 9.1(d)(i) under circumstances when Parent had the right
to terminate this Agreement pursuant to Section 9.1(e)(iv), and, in any
such case, within 15 months thereafter the Company enters into an agreement
with respect to the consummation of, or consummates, a Third Party
Acquisition;
(ii) Parent or Purchaser terminates this Agreement pursuant to
Section 9.1(e)(ii) as a result of a breach of Section 7.3 or pursuant to
Section 9.1(e)(iii); or
(iii) the Company terminates this Agreement pursuant to Section
9.1(d)(ii);
then, in each case, the Company (A) shall pay to Parent, within two Business
Days following the execution and delivery of such agreement or such occurrence,
as the case may be, or simultaneously with such termination pursuant to Section
9.1(d)(ii), a fee, in cash, of $40 million (a "Termination
AGREEMENT AND PLAN OF MERGER
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Fee"); provided, that the Company in no event shall be obligated to pay more
than one such $40 million fee with respect to all such agreements and
occurrences and such termination and (B) shall reimburse Parent and Purchaser,
up to a limit of $5 million, for all their reasonable out-of- pocket fees and
expenses actually incurred by Parent, Purchaser or their respective Affiliates
in connection with this Agreement, the Offer, the Merger and the other
transactions contemplated by this Agreement, including financing fees and other
expenses in connection with options on Interest Rate Protection Agreements and
Other Hedging Agreements and all reasonable fees and expenses of counsel,
accountants, investment bankers, experts and consultants to each of Parent or
Purchaser and their respective Affiliates and the expenses of the preparation,
printing, filing and mailing of the Offer Documents.
(c) Any payment required to be made pursuant to Section 9.5(b) of this
Agreement shall be made to Parent by wire transfer of immediately available
funds to an account designated by Parent.
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Nonsurvival of Representations, Warranties and Agreements.
None of the representations and warranties in this Agreement or in any
instrument delivered pursuant to this Agreement shall survive the Effective
Time. This Section 10.1 shall not limit any covenant or agreement of the parties
which by its terms contemplates performance after the Effective Time.
SECTION 10.2 Notices. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed to have been duly given
upon receipt, if delivered personally, mailed by registered or certified mail
(postage prepaid, return receipt requested) to the parties at the following
addresses or sent by electronic transmission to the telecopier number specified
below:
(a) If to either of the Parent Companies, to:
GEC Incorporated and
GEC Acquisition Corp.
c/o GEC Marconi N.A., Inc.
Mail Stop 11 CO1
164 Totowa Road
Wayne, NJ 07474-0975
Attention: John Currier
Telecopier No.: (973) 633-6431
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with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Attention: Melvin L. Bedrick
Telecopier No.: (212) 474-3700
(b) If to the Company, to:
Tracor, Inc.
6500 Tracor Lane
Austin, TX 78725-2000
Attention: Russell E. Painton
Telecopier No.: (512) 929-2257
with a copy to:
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, TX 75270
Attention: Darrel A. Rice
Telecopier No.: (214) 745-5390
or to such other address or telecopier number as any party may, from time to
time, designate in a written notice given in a like manner. Notice given by
telecopier shall be deemed received on the day the sender receives telecopier
confirmation that such notice was received at the telecopier number of the
addressee. Notice given by mail as set out above shall be deemed received three
days after the date the same is postmarked.
SECTION 10.3 Headings. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 10.4 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of Law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner to
the end that transactions contemplated hereby are fulfilled to the extent
possible.
SECTION 10.5 Entire Agreement. This Agreement (together with the
Annexes, the Company's Disclosure Letter and the Confidentiality Agreement)
constitutes the entire agreement
AGREEMENT AND PLAN OF MERGER
-37-
<PAGE>
of the parties, and supersedes all prior agreements and undertakings, both
written and oral, among the parties, with respect to the subject matter hereof.
SECTION 10.6 Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned, in whole or in
part, by operation of Law or otherwise by any of the parties without the prior
written consent of the other parties, except that Purchaser may assign, in its
sole discretion (but subject to the provisions of Section 3.1), any of or all
its rights, interests and obligations under this Agreement to Parent or to an
Affiliate of Parent, but no such assignment shall relieve Purchaser of any of
its obligations under this Agreement. Any attempted assignment in violation of
this Section 10.6 shall be void. Subject to the preceding sentences, this
Agreement will be binding upon, inure to the benefit of, and be enforceable by,
the parties and their respective successors and assigns.
SECTION 10.7 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns.
SECTION 10.8 Failure or Indulgence Not Waiver; Remedies Cumulative. No
failure or delay on the part of any party hereto in the exercise of any right
hereunder shall impair such right or be construed to be a waiver of, or
acquiescence in, any breach of any representation, warranty or agreement herein,
nor shall any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right.
SECTION 10.9 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware, regardless of
the Laws that might otherwise govern under applicable principles of conflicts of
Law.
SECTION 10.10 ENFORCEMENT. THE PARTIES AGREE THAT IRREPARABLE DAMAGE
WOULD OCCUR IN THE EVENT THAT ANY OF THE PROVISIONS OF THIS AGREEMENT WERE NOT
PERFORMED IN ACCORDANCE WITH THEIR SPECIFIC TERMS OR WERE OTHERWISE BREACHED.
IT IS ACCORDINGLY AGREED THAT THE PARTIES SHALL BE ENTITLED TO AN INJUNCTION OR
INJUNCTIONS TO PREVENT BREACHES OF THIS AGREEMENT AND TO ENFORCE SPECIFICALLY
THE TERMS AND PROVISIONS OF THIS AGREEMENT IN ANY DELAWARE STATE COURT OR ANY
FEDERAL COURT LOCATED IN THE STATE OF DELAWARE, THIS BEING IN ADDITION TO ANY
OTHER REMEDY TO WHICH THEY ARE ENTITLED AT LAW OR IN EQUITY. IN ADDITION, EACH
OF THE PARTIES HERETO (A) CONSENTS TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION
OF ANY DELAWARE STATE COURT OR ANY FEDERAL COURT LOCATED IN THE STATE OF
DELAWARE IN THE EVENT ANY DISPUTE ARISES OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED BY THIS AGREEMENT, (B) AGREES THAT IT WILL NOT ATTEMPT
TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST FOR
LEAVE FROM ANY SUCH COURT, (C) AGREES THAT IT WILL NOT BRING ANY ACTION RELATING
TO THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED BY THIS AGREEMENT IN ANY COURT
OTHER THAN ANY DELAWARE STATE COURT OR ANY FEDERAL COURT SITTING IN THE STATE OF
DELAWARE AND (D) WAIVES ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY ACTION
RELATED TO OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED BY
THIS AGREEMENT. THE PARTIES IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY OBJECTION
TO THE LAYING OF VENUE OF ANY ACTION, SUIT OR PROCEEDING ARISING OUT OF THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN THE COURTS OF THE STATE OF
DELAWARE OR OF THE UNITED STATES OF AMERICA LOCATED IN THE STATE OF DELAWARE,
AND HEREBY FURTHER IRREVOCABLY AND UNCONDITIONALLY WAIVE AND AGREE NOT TO PLEAD
OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION, SUIT OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
AGREEMENT AND PLAN OF MERGER
-38-
<PAGE>
SECTION 10.11 Counterparts. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed as of the date first written above by their respective officers or
directors thereunto duly authorized.
GEC INCORPORATED
By: /s/ MICHAEL LESTER
-------------------------------------
Name: Michael Lester
Title: Director
GEC ACQUISITION CORP.
By: /s/ JOHN CURRIER
-------------------------------------
Name: John Currier
Title: Secrectary and Vice President
TRACOR, INC.
By: /s/ JAMES B. SKAGGS
-------------------------------------
Name: James B. Skaggs
Title: President and Chief Executive
Officer
AGREEMENT AND PLAN OF MERGER
-39-
<PAGE>
ANNEX A
SCHEDULE OF DEFINED TERMS
The following terms when used in the Agreement shall have the meanings set
forth below unless the context shall otherwise require:
"Acquisition Agreement" shall have the meaning ascribed to such term in
Section 7.3(b).
"Acquisition Proposal" shall have the meaning ascribed to such term in
Section 7.3(d).
"Affiliate" shall mean, with respect to any Person, any other Person that
controls, is controlled by or is under common control with the former Person.
"Agreement" shall mean the Agreement and Plan of Merger dated as of April
21, 1998 among Parent, Purchaser and the Company, including any amendments
thereto and each Annex (including this Annex A) and Schedule thereto (including
the Company's Disclosure Letter).
"Balance Sheet Date" shall mean December 31, 1997.
"Benefit Plans" shall mean any employee pension benefit plan (whether or
not insured), as defined in Section 3(2) of ERISA, any employee welfare benefit
plan (whether or not insured) as defined in Section 3(1) of ERISA, any plans
that would be employee pension benefit plans or employee welfare benefit plans
if they were subject to ERISA, such as foreign plans and plans for directors,
any employment contracts, severance or termination pay arrangements, any stock
bonus, stock ownership, stock option, stock purchase, stock appreciation rights,
phantom stock or other stock plan (whether qualified or nonqualified), and any
bonus or incentive compensation plan sponsored, maintained or contributed to by
the Company or any of its Subsidiaries for the benefit of any of the present or
former directors, officers, employees, agents, consultants or other similar
representatives providing services to or for the Company or any of its
Subsidiaries in connection with such services or any such plans which have been
so sponsored, maintained, or contributed to within six years prior to the date
of this Agreement; provided, however, that such term shall not include (a)
routine employment policies and procedures developed and applied in the ordinary
course of business and consistent with past practice, including wage, vacation,
holiday and sick or other leave policies, (b) workers compensation insurance and
(c) directors and officers liability insurance.
"Business Day" means any day other than a day on which banks in New York
are authorized or obligated to be closed.
"Capitalized Lease Obligations" shall mean, with respect to any Person, all
rental obligations of such Person which, under GAAP, are or will be required to
be capitalized on the books of such Person, in each case taken at the amount
thereof accounted for as indebtedness in accordance with GAAP.
"Certificate" shall mean an outstanding stock certificate which immediately
prior to the Effective Time represented shares of Company Common Stock.
"Certain Stockholders" shall have the meaning ascribed to such term in the
recitals to the Agreement.
<PAGE>
"Certificate of Merger" shall have the meaning ascribed to such term in
Section 3.2.
"CFIUS" means Committee on Foreign Investment in the United States, an
interagency committee chaired by a representative of the United States Secretary
of the Treasury.
"Closing" shall have the meaning ascribed to such term in Section 4.4.
"Closing Date" shall mean the date of the Closing as determined pursuant to
Section 4.4.
"Code" shall mean the Internal Revenue Code of 1986, as amended, and the
Regulations promulgated thereunder.
"Company" shall mean Tracor, Inc., a Delaware corporation.
"Company Common Stock" shall have the meaning ascribed to such term in the
recitals to the Agreement.
"Company Option Plans" shall mean the 1995 Stock Plan for Employees and
Subsidiaries and the 1991 Stock Plan for Employees of Tracor, Inc. and
Subsidiaries and any other arrangement pursuant to which options to acquire
Company Common Stock have been granted to current or former directors or
employees.
"Company Rights" shall have the meaning ascribed to such term in Section
5.3(a).
"Company SEC Documents" shall have the meaning ascribed to such term in
Section 5.7(a).
"Company Stock Options" shall mean stock options granted pursuant to the
Company Option Plans.
"Company Stockholder Approval" shall have the meaning ascribed to such term
in Section 5.4(b).
"Company Stockholders' Meeting" shall have the meaning ascribed to such
term in Section 3.7(b).
"Company's Consolidated Balance Sheet" shall mean the consolidated balance
sheet of the Company as of December 31, 1997 included in the Company's Audited
Consolidated Financial Statements.
"Company's Audited Consolidated Financial Statements" shall mean the
consolidated balance sheets of the Company and its Subsidiaries as of December
31, 1997 and December 31, 1996 and the related consolidated statements of income
and cash flows for the fiscal years ended December 31, 1997, 1996 and 1995,
together with the notes thereto, all as audited by Ernst & Young, under their
report with respect thereto dated January 30, 1998 and included in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1997 filed
with the SEC.
"Company's Consolidated Financial Statements" shall mean the Company's
Audited Consolidated Financial Statements and the Company's Unaudited
Consolidated Financial Statements.
AGREEMENT AND PLAN OF MERGER
ANNEX A-2
<PAGE>
"Company's Disclosure Letter" shall mean a letter dated the date of the
Agreement delivered by the Company to the Parent Companies concurrently with the
execution of the Agreement, which, among other things, shall identify exceptions
to the Company's representations and warranties contained in Article V and
covenants contained in Article VII by specific section and subsection
references.
"Company's Rights Agreement" shall mean that certain Rights Agreement dated
as of February 17, 1997 between the Company and Harris Trust and Savings Bank,
as Rights Agent.
"Company's Unaudited Consolidated Financial Statements" shall mean the
unaudited consolidated balance sheet of the Company and its Subsidiaries as of
March 31, 1998, and the related consolidated statements of income and cash flows
for the three-month periods ended March 31, 1998 and March 31, 1997, attached to
Section 5.7 of the Company's Disclosure Letter.
"Confidentiality Agreement" shall mean that certain confidentiality
agreement between GEC Marconi N.A., Inc. and the Company dated March 6, 1998.
"Contingent Obligation" shall mean, as to any Person, any obligation of
such Person guaranteeing or intended to guarantee any Indebtedness, leases,
dividends or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including any
obligation of any Person, whether or not contingent, (a) to purchase any such
primary obligation or any property constituting direct or indirect security
therefor, (b) to advance or supply funds (i) for the purchase or payment of any
such primary obligation or (ii) to maintain working capital or equity capital of
the primary obligor or otherwise to maintain the net worth or insolvency of the
primary obligor, (c) to purchase property, securities or services primarily for
the purpose of assuring the owner of any such primary obligation of the ability
of the primary obligor to make payment of such primary obligation or (d)
otherwise to assure or hold harmless the holder of such primary obligation
against loss in respect thereof; provided, however, that the term Contingent
Obligation shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any Contingent
Obligation shall be deemed to be an amount equal to the stated or determinable
amount of the primary obligation in respect of which such Contingent Obligation
is made or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by such Person in good faith.
"control" (including the terms "controlled," "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 or
policies of a Person, whether through the ownership of stock or as trustee or
executor, by contract or credit arrangement or otherwise.
"Control Date" shall have the meaning ascribed to such term in Section 2.4.
"Court" shall mean any court of the United States, any foreign country or
any domestic or foreign state, and any political subdivision thereof, or any
arbitration tribunal and shall include the European Court of Justice.
"Current Benefit Plans" shall mean Benefit Plans that are sponsored,
maintained, or contributed to by the Company or any of its Subsidiaries as of
the date of this Agreement.
"D&O Insurance" shall have the meaning ascribed to such term in Section
7.13(a).
AGREEMENT AND PLAN OF MERGER
ANNEX A-3
<PAGE>
"Dissenting Shares" shall have the meaning ascribed to such term in Section
4.3.
"Effective Time" shall mean the date and time of the completion of the
filing of the Certificate of Merger with the Secretary of State of the State of
Delaware in accordance with Section 3.2 or such later time as Parent and the
Company may agree and specify in such certificate.
"Environmental Law or Laws" shall mean any and all Laws, enforceable
requirements or Orders of any Governmental Authority pertaining to health or the
environment currently in effect and applicable to a specified Person and its
Subsidiaries, including the Clean Air Act, as amended, the Comprehensive
Environmental, Response, Compensation, and Liability Act of 1980 ("CERCLA"), as
amended, the Federal Water Pollution Control Act, as amended, the Occupational
Safety and Health Act of 1970, as amended, the Resource Conservation and
Recovery Act of 1976 ("RCRA"), as amended, the Hazardous & Solid Waste
Amendments Act of 1984, as amended, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended,
the Oil Pollution Act of 1990, as amended ("OPA"), any state or local Laws
implementing the foregoing federal Laws, and all other environmental
conservation or protection Laws. For purposes of the Agreement, the terms
"hazardous substance" and "release" have the meanings specified in CERCLA;
provided, however, that, to the extent the Laws of the state or locality in
which the property is located establish a meaning for "hazardous substance" or
"release" that is broader than that specified in CERCLA, such broader meaning
shall apply within the jurisdiction of such state or locality, and the term
"hazardous substance" shall include all dehydration and treating wastes, waste
(or spilled) oil, and waste (or spilled) petroleum products, and radioactive
material, even if such are specifically exempt from classification as hazardous
substances or hazardous wastes pursuant to CERCLA or RCRA or the analogous
statutes of any jurisdiction applicable to the specified Person or its
Subsidiaries or any of their respective properties or assets.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended, and the Regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended,
and the Regulations promulgated thereunder.
"Exchange Agent" shall mean a bank or trust company having a net worth in
excess of $100 million designated and appointed to act in the capacities
required thereof under Section 4.2.
"Exchange Fund" shall mean the fund of cash deposited with the Exchange
Agent pursuant to Section 4.2.
"Exon-Florio" shall mean Section 721 of the Defense Production Act, 50 App.
U.S.C.A. (Section) 2170 (West 1991 & Supp. 1997).
"Fiduciary Insurance" shall have the meaning ascribed to such term in
Section 7.13(a).
"Filed Company SEC Documents" shall have the meaning ascribed to such term
in Section 5.9.
"Financial Advisor" shall mean BT Wolfensohn, the financial advisor to the
Company with respect to the transactions contemplated by the Agreement.
AGREEMENT AND PLAN OF MERGER
ANNEX A-4
<PAGE>
"Fully Diluted Shares" shall have the meaning ascribed to such term in
Annex B.
"GAAP" shall mean accounting principles generally accepted in the United
States consistently applied by a specified Person.
"GCL" shall mean the General Corporation Law of the State of Delaware.
"Governmental Authority" shall mean any governmental agency or authority
(other than a Court) of the United States, any foreign country, or any domestic
or foreign state, and any political subdivision or agency thereof, and shall
include any multinational authority having governmental or quasi-governmental
powers.
"Government Contract" shall have the meaning ascribed to such term in
Section 5.13.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the Regulations promulgated thereunder.
"Indebtedness" shall mean, as to any Person, (a) all indebtedness
(including principal, interest, fees and charges) of such Person for borrowed
money or for the deferred purchase price of property or services, (b) the
maximum amount available to be drawn under all letters of credit issued for the
account of such Person and all unpaid drawings in respect of such letters of
credit, (c) all Indebtedness of the types described in clause (a), (b), (d),
(e), (f) or (g) of this definition secured by any Lien on any property owned by
such Person, whether or not to be capitalized under leases under which such
Person is the lessee, (d) all Capitalized Lease Obligations of such Person, (e)
all obligations of such Person to pay a specified purchase price for goods or
services, whether or not delivered or accepted, (i.e., take-or-pay and similar
obligations), (f) all Contingent Obligations of such Person and (g) all
obligations under any Interest Rate Protection Agreement or any Other Hedging
Agreement or under any similar type of agreement.
"Independent Directors" shall have the meaning ascribed to such term in
Section 2.4.
"Intellectual Property Rights" shall have the meaning ascribed to such term
in Section 5.18.
"Interest Rate Protection Agreements" shall mean any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement, interest
rate hedge agreement or other similar agreement.
"IRS" shall mean the Internal Revenue Service.
"Knowledge" shall mean, with respect to either the Company or Parent, the
actual knowledge (after reasonable inquiry) of, in the case of the Company, any
officer of the Company listed in such party's 1997 annual report to stockholders
and, in the case of Parent, any executive officer of Parent.
"Laws" shall mean all laws, statutes, ordinances and Regulations of the
United States, any foreign country, or any domestic or foreign state, and any
political subdivision or agency thereof, including all decisions of Courts
having the effect of Law in each such jurisdiction.
"Leaseholds" shall mean, with respect to any Person, all the right, title
and interest of such Person as lessee or licensee, in, to and under leases,
licenses, improvements and/or fixtures.
AGREEMENT AND PLAN OF MERGER
ANNEX A-5
<PAGE>
"Lien" shall mean any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any agreement to give any of the
foregoing), any conditional sale or other title retention agreement, any lease
in the nature thereof or the filing of or agreement to give any financing
statement under the Uniform Commercial Code of any jurisdiction.
"Loan Agreement" shall mean that certain Credit Agreement, dated as of
March 14, 1997, among the Company and various banks, Credit Lyonnais, New York
branch, The First National Bank of Chicago and Wells Fargo Bank (Texas),
National Association (as co-agents) and Bankers Trust Company (as agent), as
amended.
"Material" shall mean is or will be material to the business, properties,
assets, condition (financial and other) or results of operations of a specified
Person and its Subsidiaries, if any, taken as a whole.
"Material Adverse Effect" shall mean any change or effect that is or will
be material and adverse to the business, properties, assets, condition
(financial and other) or results of operations of a specified Person and its
Subsidiaries, if any, taken as a whole, including a material adverse effect on
the ability of a specified Person to perform its obligations under the Agreement
and, in the case of the Company, (i) a reduction in fair market value
(determined on a discounted cash flow basis) of the Company and its
Subsidiaries, taken as a whole, of $40 million or more or (ii) a material
increase in the aggregate cost to Purchaser of the acquisition of the Company.
"Material Business" shall have the meaning ascribed to such term in Section
7.3(d).
"Material Contract" shall mean each contract, lease, indenture, agreement,
arrangement or understanding to which the Company or any of its Subsidiaries is
a party or to which any of the properties, assets or operations of the Company
or any of its Subsidiaries is subject that is or will be material to the
business, properties, assets, condition (financial and other) or results of
operations of the Company and its Subsidiaries, taken as a whole.
"Merger" shall have the meaning ascribed to such term in Section 3.1.
"Merger Consideration" shall mean, as to any Certificate, the amount to be
paid to the holder thereof pursuant to the Merger, which amount shall be equal
to the product of the number of shares of Company Common Stock evidenced by such
Certificate, multiplied by the Per Share Merger Consideration.
"Minimum Tender Condition" shall have the meaning ascribed to such term in
Annex B.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"National Industrial Security Program Operating Manual" shall mean the
manual promulgated pursuant to the National Industrial Security Program,
established by Executive Order 12829, dated January 6, 1993.
"Offer" shall have the meaning ascribed to such term in the recitals to the
Agreement.
"Offer Closing Date" shall mean the date on which the acceptance for
payment and payment by Purchaser for shares of Company Common Stock tendered
pursuant to the Offer occurs.
AGREEMENT AND PLAN OF MERGER
ANNEX A-6
<PAGE>
"Offer Documents" shall have the meaning ascribed to such term in Section
2.1(c).
"Order" shall mean any judgment, order or decree of any Court or
Governmental Authority, federal, foreign, state or local.
"Other Hedging Agreement" shall mean any foreign exchange contract,
currency swap agreement, commodity agreement or other similar agreement or
arrangement designed to protect against the fluctuations in currency values.
"Parent" shall mean GEC Incorporated, a Delaware corporation.
"Parent Companies" shall have the meaning ascribed to such term in the
first paragraph of the Agreement.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Per Share Merger Consideration" shall have the meaning ascribed to such
term in Section 4.1(a).
"Permits" shall mean any and all permits, licenses, authorizations, orders,
certificates, registrations or other approvals granted by any Governmental
Authority.
"Permitted Encumbrances" shall mean the following:
(a) inchoate Liens for Taxes, assessments or governmental charges or
levies not yet due or Liens for Taxes, assessments or governmental charges or
levies being contested in good faith and by appropriate proceedings for which
adequate reserves have been established in accordance with GAAP;
(b) Liens in respect of property or assets of the Company or any of its
Subsidiaries imposed by law, which were incurred in the ordinary course of
business and do not secure indebtedness for borrowed money, such as carriers',
warehousemen's, materialmen's and mechanics' Liens and other similar Liens
arising in the ordinary course of business and (i) which do not in the aggregate
materially detract from the value of the Company's or such Subsidiary's
properties or assets or materially impair the use thereof in the operation of
the business of the Company or such Subsidiary or (ii) which are being contested
in good faith by appropriate proceedings, which proceedings have the effect of
preventing the forfeiture or sale of the properties or assets subject to any
such Lien;
(c) Liens in existence on the Effective Date (as defined in the Loan
Agreement) which are listed, and the property subject thereto described, in
Schedule VII to the Loan Agreement, but only to the respective date, if any, set
forth in such Schedule VII, or the removal and termination of any such Liens,
plus renewals and extensions of such Liens, to the extent set forth in such
Schedule VII provided that (i) the aggregate principal amount of the
Indebtedness, if any, secured by such Liens is not increased from that amount
outstanding at the time of any such renewal or extension, and (ii) any such
renewals or extensions do not encumber any additional assets or properties of
the Company or any of its Subsidiaries;
(d) Liens created pursuant to the pledge agreement in favor of the banks
pursuant to the Loan Agreement.
AGREEMENT AND PLAN OF MERGER
ANNEX A-7
<PAGE>
(e) leases or subleases granted to other Persons not materially
interfering with the conduct of the business of the Company and its
Subsidiaries, taken as a whole;
(f) Liens upon assets subject to Capitalized Lease Obligations existing on
the date hereof or permitted under Section 7.2; provided that (i) such Liens
only serve to secure the payment of Indebtedness arising under such Capitalized
Lease Obligation and (ii) the Lien encumbering the asset giving rise to the
Capitalized Lease Obligation does not encumber any other asset of the Company or
any Subsidiary of the Company;
(g) Liens placed upon (i) equipment or machinery used in the ordinary
course of business of the Company or any of its Subsidiaries or (ii) Real
Property (as defined in the Loan Agreement) of the Company or any of its
Subsidiaries, in each case at the time of acquisition thereof by the Company or
any such Subsidiary or within sixty days thereafter to secure Indebtedness
incurred to pay all or a portion of the purchase price thereof; provided that
(A) the aggregate principal amount of all Indebtedness secured by Liens
permitted by this clause (g) incurred in any fiscal year of the Company,
together with the amount of all Capitalized Lease Obligations incurred in such
fiscal year, does not exceed that aggregate amount permitted by Section
9.04(vii) of the Loan Agreement and (B) in all events, the Lien encumbering the
equipment, machinery or Real Property so acquired does not encumber any other
asset of the Company or such Subsidiary;
(h) easements, rights-of-way, restrictions, encroachments and other
similar charges or encumbrances, and minor title deficiencies, in each case not
securing Indebtedness and not materially interfering with the conduct of the
business of the Company or any of its Subsidiaries;
(i) Liens arising from precautionary UCC financing statement filings
regarding operating leases;
(j) Liens arising out of judgments or awards in respect of which the
Company or any of its Subsidiaries shall in good faith be prosecuting an appeal
or proceedings for review in respect of which there shall have been secured a
subsisting stay of execution pending such appeal or proceedings; provided that
the aggregate amount of all such judgments or awards does not exceed $15,000,000
at any time outstanding;
(k) statutory and common law landlords' Liens under leases to which the
Company or any of its Subsidiaries is a party; and
(l) Liens resulting from pledges or deposits to secure payments of
workmen's compensation, unemployment insurance or other social security programs
or securing the performance of surety and bid and performance bonds, tenders,
leases and other obligations of similar nature, in each case incurred in the
ordinary course of business (exclusive of obligations in respect of the payment
for borrowed money).
"Person" shall mean an individual, partnership, limited liability company,
corporation, joint stock company, trust, estate, joint venture, association or
unincorporated organization, or any other form of business or professional
entity, but shall not include a Governmental Authority.
"Proxy Statement" shall mean a proxy statement conforming to the
requirements of the Exchange Act and relating to the adoption of this Agreement
by the Company's stockholders, if such adoption is required by Law.
AGREEMENT AND PLAN OF MERGER
ANNEX A-8
<PAGE>
"Purchaser" shall mean GEC Acquisition Corp., a Delaware corporation and a
wholly owned Subsidiary of Parent.
"Regulation" shall mean any rule or regulation of any Governmental
Authority having the effect of Law.
"Reports" shall mean, with respect to a specified Person, all reports,
registrations, filings and other documents and instruments required to be filed
by the specified Person or any of its Subsidiaries with any Governmental
Authority (other than the SEC).
"Representatives" shall have the meaning ascribed to such term in Section
7.3(a).
"Restricted Stock" shall have the meaning ascribed to such term in Section
3.6(a).
"Schedule 14D-1" shall have the meaning ascribed to such term in Section
2.1(c).
"Schedule 14D-9" shall have the meaning ascribed to such term in Section
2.2.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Reports" shall mean (a) all Annual Reports on Form 10-K, (b) all
Quarterly Reports on Form 10-Q, (c) all proxy statements relating to meetings of
stockholders (whether annual or special), (d) all Current Reports on Form 8-K
and (e) all other reports, schedules, registration statements or other documents
required to be filed during a specified period by a Person with the SEC pursuant
to the Securities Act or the Exchange Act.
"Section 262" shall have the meaning ascribed to such term in Section 4.3.
"Securities Act" shall mean the Securities Act of 1933, as amended, and the
Regulations promulgated thereunder.
"Stockholders Agreement" shall have the meaning ascribed to such term in
the recitals to the Agreement.
A "Subsidiary" of a specified Person shall mean any corporation,
partnership, limited liability company, joint venture or other legal entity of
which the specified Person (either alone or through or together with any other
Subsidiary) owns, directly or indirectly, 50 percent or more of the stock or
other equity or partnership interests the holders of which are generally
entitled to vote for the election of the board of directors or other governing
body of such corporation or other legal entity.
"Superior Proposal" shall have the meaning ascribed to such term in Section
7.3(d).
"Surviving Corporation" shall mean the Company as the corporation surviving
the Merger.
"Tax Returns" shall mean all returns and Reports of or with respect to any
Tax which are required to be filed by or with respect to the Company or any of
its Subsidiaries.
"Taxes" shall mean all taxes, charges, imposts, tariffs, fees, levies or
other similar assessments or liabilities, including income taxes, ad valorem
taxes, excise taxes, withholding taxes, stamp taxes or other taxes of or with
respect to gross receipts, premiums, Real Property, personal
AGREEMENT AND PLAN OF MERGER
ANNEX A-9
<PAGE>
property, windfall profits, sales, use, transfers, licensing, employment,
payroll and franchises imposed by or under any Law; and such terms shall include
any interest, fines, penalties, assessments or additions to tax resulting from,
attributable to or incurred in connection with any such tax or any contest or
dispute thereof.
"Terminated Benefit Plans" shall mean Benefit Plans that were sponsored,
maintained, or contributed to by the Company or any of its Subsidiaries within
six years prior to the date of the Agreement but which have been terminated
prior to the date of the Agreement.
"Termination Fee" shall have the meaning ascribed to such term in Section
9.5(b).
"Third Party Acquisition" shall mean (a) the acquisition of the Company by
merger, consolidation, share exchange, recapitalization, liquidation,
dissolution, business combination or other similar transaction by any Person
(which includes for these purposes a "person" as defined in Section 13(d)(3) of
the Exchange Act) other than Parent, Purchaser or any Affiliate thereof (a
"Third Party"); (b) the acquisition by a Third Party of more than 50% of the
assets of the Company and its Subsidiaries, taken as a whole; (c) the
acquisition by a Third Party of 50% or more of the outstanding Company Common
Stock or 50% or more of the aggregate ordinary voting power represented by the
issued and outstanding capital stock of the Company; (d) the adoption by the
Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend; or (e) the purchase by the Company or any of its
Subsidiaries of more than 30 percent of the outstanding shares of Company Common
Stock.
"Voting Company Debt" shall have the meaning ascribed to such term in
Section 5.3(e).
"Warrant Agreement" shall mean the Warrant Agreement, dated as of December
20, 1991, between the Company and Ameritrust Company National Association, as
Warrant Agent.
"Warrants" shall mean the Company's Series A Warrants to purchase shares of
Company Common Stock at an exercise price of $2.54 per share, which were issued
pursuant to the Warrant Agreement.
AGREEMENT AND PLAN OF MERGER
ANNEX A-10
<PAGE>
ANNEX B
CONDITIONS OF THE OFFER
(a) Notwithstanding any other term of the Offer or the Agreement,
Purchaser shall not be required to accept for payment or, subject to any
applicable rules and regulations of the SEC, including Rule 14e-l(c) under the
Exchange Act (relating to Purchaser's obligation to pay for or return tendered
shares of Company Common Stock promptly after the termination or withdrawal of
the Offer), to pay for any shares of Company Common Stock tendered pursuant to
the Offer unless (i) there shall have been validly tendered and not withdrawn
prior to the expiration of the Offer that number of shares of Company Common
Stock which would represent at least 51% of the Fully Diluted Shares (the
"Minimum Tender Condition"), (ii) any waiting period under the HSR Act
applicable to the purchase of shares of Company Common Stock pursuant to the
Offer shall have expired or been terminated and (iii) the period of time for any
applicable review process by CFIUS relating to the determination of any threat
to national security shall have expired, and CFIUS shall not have taken any
action or made any recommendation to the President of the United States to block
or prevent consummation of the Offer or the Merger. The term "Fully Diluted
Shares" means all outstanding securities entitled generally to vote in the
election of directors of the Company on a fully diluted basis, after giving
effect to the exercise or conversion of all options, warrants, rights and
securities exercisable or convertible into such voting securities, other than
potential dilution attributable to any Company Rights associated therewith.
(b) Furthermore, notwithstanding any other term of the Offer or the
Agreement, Purchaser shall not be required to commence the Offer, accept for
payment or, subject as aforesaid, pay for any shares of Company Common Stock not
theretofore accepted for payment or paid for, and may terminate or amend the
Offer, with the consent of the Company or if, at any time on or after the date
of the Agreement and before the acceptance of such shares for payment or the
payment therefor, any of the following conditions exists:
(i) any representations and warranties of the Company in the
Agreement shall not be true and correct (for all purposes of this
paragraph (i) without giving effect to any Material or Material
Adverse Effect qualifiers or other qualifiers based on materiality
that are contained therein) as of such time (other than to the extent
such representations and warranties expressly relate to an earlier
date, in which case such representations and warranties shall not be
true and correct as of such date), except to the extent the failure of
such representations and warranties to be true and correct has not
had, and could not be reasonably expected to have, in the aggregate, a
Material Adverse Effect on the Company;
(ii) the Company shall have breached in any material respect any
of its covenants or agreements contained in the Agreement; or
(iii) there shall be threatened or pending any suit, action or
proceeding by any Governmental Authority, or any suit, action or
proceeding by any other Person that has a reasonable likelihood of
success, (A) challenging the acquisition by Parent or Purchaser of any
Company Common Stock, 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
AGREEMENT AND PLAN OF MERGER
ANNEX B-1
<PAGE>
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, as a result of
the Offer, the Merger or any of the other transactions contemplated by
the Agreement, (C) seeking to impose limitations on the ability of
Parent or any of its Subsidiaries or Affiliates to acquire or hold, or
exercise full rights of ownership of, any shares of Company Common
Stock, including the right to vote Company Common Stock purchased by
it on all matters properly presented to the stockholders of the
Company, (D) seeking to prohibit Parent or any of its Subsidiaries or
Affiliates from effectively controlling in any material respect the
business or operations of the Company and its Subsidiaries, or (E)
which otherwise is reasonably likely to have a Material Adverse Effect
on the Company;
(iv) there shall be any statute, rule, regulation, legislation,
interpretation, judgment, order or injunction threatened, proposed,
sought, enacted, entered, enforced, promulgated, amended or issued
with respect to, or deemed applicable to, or any consent or approval
withheld with respect 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 (iii) above;
(v) except as disclosed in the Company Disclosure Letter, since
the date of the Agreement there shall have occurred any event, change,
effect or development that, individually or in the aggregate, has had
or is reasonably likely to have, a Material Adverse Effect on the
Company;
(vi) there shall have occurred and be continuing (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 in
the United States or in the United Kingdom, (B) any material adverse
change in the financial markets or major stock exchange indices in the
United States or in the United Kingdom, (C) any material adverse
change in United States currency exchange rates or in the United
Kingdom currency exchange rate with respect to the United States
dollar or a suspension of, or limitation on, the markets therefor, (D)
a declaration of a banking moratorium by any Governmental Authority or
any suspension of payments by any Governmental Authority in respect of
banks in the United States or in the United Kingdom, (E) any
limitation (whether or not mandatory) by any Governmental Authority in
the United States or in the United Kingdom on, or other event that
might materially affect, the extension of credit by banks or other
lending institutions, (F) a commencement of a war or armed hostilities
or other national or international calamity directly or indirectly
involving the United States or the United Kingdom or (G) in the case
of any of the foregoing existing on the date of the Agreement, a
material acceleration or worsening thereof;
(vii) any Person (which includes a "person" as such term is
defined in Section 13(d)(3) of the Exchange Act) other than Purchaser,
any of its Affiliates, or any group of which any of them is a member
shall have acquired beneficial
AGREEMENT AND PLAN OF MERGER
ANNEX B-2
<PAGE>
ownership of more than 10 percent of the outstanding shares of Company
Common Stock or shall have entered into a definitive agreement or an
agreement in principle with the Company with respect to a tender offer
or exchange offer for any shares of Company Common Stock or a merger,
consolidation or other business combination with or involving the
Company or any of its Subsidiaries; or
(viii) the Agreement shall have been terminated in accordance
with its terms.
which, in the sole judgment of Purchaser or Parent, in any such case, and
regardless of the circumstances giving rise to any such condition (including any
action or inaction by Parent or any of its Affiliates), makes it inadvisable to
proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Purchaser and
Parent and may be asserted by Purchaser or Parent regardless of the
circumstances giving rise to such condition or may be waived by Purchaser and
Parent in whole or in part at any time and from time to time in their sole
discretion; provided that the condition set forth in clause (b)(viii) above and
the Minimum Tender Condition may be waived or modified only by the mutual
consent of Purchaser and the Company. The failure by Parent, Purchaser or any
other Affiliate of Parent 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 and circumstances shall not be deemed a waiver
with respect to any other facts and circumstances and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
AGREEMENT AND PLAN OF MERGER
ANNEX B-3
<PAGE>
EXHIBIT 2
STOCKHOLDER AGREEMENT, dated as of April 21,
1998, among GEC INCORPORATED, a Delaware corporation
("Parent"), GEC ACQUISITION CORP., a Delaware
corporation and a wholly owned subsidiary of Parent
("Purchaser"), and the persons listed on Schedule A
hereto (each a "Stockholder" and, collectively, the
"Stockholders").
WHEREAS, Parent, Purchaser and Tracor, Inc., a Delaware corporation
(the "Company"), propose to enter into an Agreement and Plan of Merger dated as
of the date hereof (as the same may be amended or supplemented, the "Merger
Agreement") providing for the making of a cash tender offer (as such offer may
be amended from time to time as permitted under the Merger Agreement, the
"Offer") by Purchaser for shares of Common Stock, par value $.01 per share, of
the Company (the "Common Stock") and the merger of the Company and Purchaser
(the "Merger");
WHEREAS, each Stockholder is the beneficial owner of the shares of
Common Stock set forth opposite such Stockholder's name on Schedule A hereto;
such shares of Common Stock, as such shares may be adjusted by stock dividend,
stock split, recapitalization, combination or exchange of shares, merger,
consolidation, reorganization or other change or transaction of or by the
Company, together with shares of Common Stock that may be acquired after the
date hereof by such Stockholder, including shares of Common Stock issuable upon
the exercise of options or warrants to purchase Common Stock (as the same may be
adjusted as aforesaid), being collectively referred to herein as the "Shares" of
such Stockholder; and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Parent and Purchaser have requested that the Stockholders enter into
this Agreement;
NOW, THEREFORE, to induce Parent and Purchaser to enter into, and in
consideration of their entering into, the Merger Agreement, and in consideration
of the premises and the representations, warranties and agreements contained
herein, the parties agree as follows:
1. Grant of Purchase Option.
(a) Each Stockholder hereby severally and not jointly agrees that it
shall tender the Shares it owns as of the date hereof and any Shares it may
acquire
<PAGE>
2
prior to the expiration of the Offer and that it shall not withdraw any
Shares so tendered (it being understood that the obligation contained in
this sentence is unconditional, subject to Section 8). In addition, each
Stockholder hereby severally and not jointly grants to Purchaser an
irrevocable option (as to each Stockholder, the "Option") to purchase any
of or all the Shares owned by such Stockholder and any of or all the Shares
for which any stock options and warrants owned by such Stockholder are then
exercisable on the date the Option is exercised by Purchaser (on any date,
the "Vested Options and Warrants") in each case at a price per Share equal
to $40.00 (the "Original Offer Price"). Subject to Section 8, the Option
may be exercised at any time and from time to time after the date hereof,
in whole or in part. If Purchaser shall for any reason have increased the
price per share payable in the Offer over the Original Offer Price (and
Purchaser accepts Shares for payment pursuant to the Offer), then,
immediately following Purchaser's payment for the Shares pursuant to the
Offer, each Stockholder shall pay to Purchaser on demand an amount in cash
equal to the product of (x) the number of such Stockholder's Shares
purchased pursuant to the Offer and (y) the excess of (A) the per share
cash consideration received by the Stockholder as a result of the Offer, as
amended, over (B) the Original Offer Price.
(b) In the event that Purchaser wishes to exercise the Option as to a
Stockholder, Purchaser shall give written notice (the date of such notice
being called the "Notice Date") to such Stockholder and to the Company
specifying the number (if less than all) of such Stockholder's Shares,
including shares of Common Stock underlying Vested Options and Warrants,
and a place, time and date not later than 10 Business Days (as defined in
the Merger Agreement) from the Notice Date for the closing of such
purchase. Prior to the closing, such Stockholder will take all action
necessary to exercise the Vested Options and Warrants and obtain possession
of the underlying Shares.
2. Representations and Warranties of the Stockholders. Each
Stockholder hereby, severally and not jointly, represents and warrants to Parent
and Purchaser as follows:
<PAGE>
3
(a) Authority. The Stockholder has all requisite power and authority
to execute and deliver this Agreement 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 authorized by the Stockholder. This Agreement has been duly
executed and delivered by the Stockholder and constitutes a valid and
binding obligation of the Stockholder enforceable against the Stockholder
in accordance with its terms, except as the same may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance
or other similar Laws (as defined in the Merger Agreement) relating to
creditors' rights generally and (b) legal principles of general
applicability governing the application and availability of equitable
remedies. Except for the expiration or termination of any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), neither the execution, delivery or
performance of this Agreement by the Stockholder nor the consummation by
the Stockholder of the transactions contemplated hereby will (i) require
any filing with, or permit, authorization, consent or approval of, any
Governmental Authority (as defined in the Merger Agreement), (ii) result in
a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default under, or give rise to any right of
termination, amendment, cancelation or acceleration under, or result in the
creation of any Lien (as defined in the Merger Agreement) other than a
Permitted Encumbrance (as defined in the Merger Agreement) upon any of the
properties or assets of the Stockholder under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, license,
permit, concession, franchise, contract, agreement or other instrument or
obligation (a "Contract") to which the Stockholder is a party or by which
the Stockholder or any of the Stockholder's properties or assets, including
the Stockholder's Shares, may be bound or (iii) violate any Order (as
defined in the Merger Agreement) or any Law applicable to the Stockholder
or any of the Stockholder's properties or assets, including the
Stockholder's Shares, other than, in the case of clause (ii) above, such
items that, individually or in the aggregate, have not and could not
reasonably be expected to have a material adverse
<PAGE>
4
effect on the ability of the Stockholder to perform its
obligations under this Agreement.
(b) The Shares. The Stockholder's Shares and the certificates
representing such Shares are now, and at all times during the term hereof
will be, held by such Stockholder, or by a nominee or custodian for the
benefit of such Stockholder, and the Stockholder has good and marketable
title to such Shares, free and clear of any Liens, proxies, voting trusts
or agreements, understandings or arrangements, except for any such Liens or
proxies arising hereunder.
(c) Brokers. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf
of the Stockholder.
(d) Merger Agreement. The Stockholder understands and acknowledges
that Parent is entering into, and causing Purchaser to enter into, the
Merger Agreement in reliance upon the Stockholder's execution and delivery
of this Agreement.
3. Representations and Warranties of Parent and Purchaser. Parent
and Purchaser hereby represent and warrant to the Stockholders as follows:
(a) Authority. Each of Parent and Purchaser has the requisite
corporate power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby. The execution, delivery
and performance of this Agreement by Parent and Purchaser and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and
Purchaser. This Agreement has been duly executed and delivered by Parent
and Purchaser and constitutes a valid and binding obligation of Parent and
Purchaser enforceable in accordance with its terms, except as the same may
be limited by (a) bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar Laws relating to creditors' rights
generally and (b) legal principles of general applicability governing the
application and availability of equitable remedies.
<PAGE>
5
(b) Securities Act. The Shares will be acquired in compliance with,
and Purchaser will not offer to sell or otherwise dispose of any Shares so
acquired by it in violation of the registration requirements of, the
Securities Act of 1933, as amended.
4. Covenants of the Stockholders. Each Stockholder, severally and
not jointly, agrees as follows:
(a) The Stockholder shall not, except as contemplated by the terms of
this Agreement, (i) sell, transfer, pledge, assign or otherwise dispose of,
or enter into any Contract, option or other arrangement (including any
profit sharing arrangement) or understanding with respect to the sale,
transfer, pledge, assignment or other disposition of, the Shares to any
person other than Purchaser or Purchaser's designee, (ii) enter into any
voting arrangement, whether by proxy, voting agreement, voting trust,
power-of-attorney or otherwise, with respect to the Shares 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.
(b) Subject to Section 11 hereof, until the Merger is consummated or
the Merger Agreement is terminated, the Stockholder shall not, nor shall
the Stockholder permit any investment banker, financial adviser, attorney,
accountant or other representative or agent of the Stockholder to, directly
or indirectly (i) solicit, initiate or encourage (including by way of
furnishing information), or take any other action designed or reasonably
likely to facilitate, any inquiries or the making of any proposal which
constitutes, or may reasonably be expected to lead to, any Acquisition
Proposal (as defined in the Merger Agreement) or (ii) participate in any
discussions or negotiations regarding any Acquisition Proposal. 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
the Stockholder shall be deemed to be a violation of this Section 4(b) by
the Stockholder.
(c) At any meeting of stockholders of the Company called to vote upon
the Merger and the Merger Agreement or at any adjournment thereof or in any
other
<PAGE>
6
circumstances upon which a vote, consent or other approval (including by
written consent) with respect to the Merger and the Merger Agreement is
sought, the Stockholder shall vote (or cause to be voted) the Stockholder's
Shares in favor of the Merger, the adoption by the Company of the Merger
Agreement and the approval of the other transactions contemplated by the
Merger Agreement. At any meeting of stockholders of the Company or at any
adjournment thereof or in any other circumstances upon which the
Stockholder's vote, consent or other approval is sought, the Stockholder
shall vote (or cause to be voted) the Stockholder's Shares against (i) any
merger agreement or merger (other than the Merger Agreement and the
Merger), consolidation, combination, sale of substantial assets,
reorganization, recapitalization, dissolution, liquidation or winding up of
or by the Company or any other Acquisition Proposal (collectively,
"Alternative Transactions") or (ii) any amendment of the Company's
certificate of incorporation or bylaws or other proposal or transaction
involving the Company or any of its subsidiaries, which amendment or other
proposal or transaction would in any manner impede, frustrate, prevent or
nullify the Offer, the Merger, the Merger Agreement or any of the other
transactions contemplated by the Merger Agreement (collectively,
"Frustrating Transactions").
5. Grant of Irrevocable Proxy; Appointment of Proxy. (a) Each
Stockholder hereby irrevocably grants to, and appoints, Mark Ronald and John
Currier and any other individual who shall hereafter be designated by Parent,
and each of them, such Stockholder's proxy and attorney-in-fact (with full power
of substitution), for and in the name, place and stead of such Stockholder, to
vote such Stockholder's Shares, or grant a consent or approval in respect of
such Shares, 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, in favor of the Merger, the adoption 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 against any Alternative
Transaction or Frustrating Transaction.
(b) Each Stockholder represents that any proxies heretofore given in
respect of such Stockholder's Shares are not irrevocable, and that any such
proxies are hereby revoked.
<PAGE>
7
(c) Each Stockholder hereby affirms that the irrevocable proxy set
forth in this Section 5 is given in connection with the execution of the Merger
Agreement, and that such irrevocable proxy is given to secure the performance of
the duties of such Stockholder under this Agreement. Such Stockholder hereby
further affirms that the irrevocable proxy is coupled with an interest and may
under no circumstances be revoked, subject to Section 8. Such Stockholder
hereby ratifies and confirms all that such irrevocable proxy may lawfully do or
cause to be done by virtue hereof. Such irrevocable proxy is executed and
intended to be irrevocable in accordance with the provisions of the General
Corporation Law of the State of Delaware. Such irrevocable proxy shall be valid
until the earlier of (i) December 31, 1998 or (ii) the termination of this
Agreement pursuant to Section 8.
6. Further Assurances. Each Stockholder will, from time to time,
execute and deliver, or cause to be executed and delivered, such additional or
further transfers, assignments, endorsements, consents and other instruments as
Parent or Purchaser may reasonably request for the purpose of effectively
carrying out the transactions contemplated by this Agreement and to vest the
power to vote such Stockholder's Shares as contemplated by Section 5. Parent and
Purchaser jointly and severally agree to use reasonable efforts to take, or
cause to be taken, all actions necessary to comply promptly with all legal
requirements that may be imposed with respect to the transactions contemplated
by this Agreement (including any applicable legal requirements of the HSR Act).
7. Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
without the prior written consent of the other parties, except that Purchaser
may assign, in its sole discretion, any or all of its rights, interests and
obligations hereunder to Parent or to any direct or indirect wholly owned
subsidiary of Parent. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by, the parties and
their respective successors and 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.
<PAGE>
8
8. Termination. This Agreement, and all rights and obligations of
the parties hereunder, shall terminate upon the earlier of (a) the date upon
which the Merger Agreement is terminated pursuant to Section 9.1(a) or (f)
thereof or pursuant to Section 9.1(d)(i) thereof under circumstances when Parent
did not have the right to terminate the Merger Agreement pursuant to Section
9.1(e)(iv) thereof and (b) December 31, 1998; provided, however, that Sections
1, 4(a), 6, 7, 10 and 13 hereof and this Section 8 shall survive any termination
until the date that is 75 days after the date of termination of the Merger
Agreement (other than any termination referred to in clause (a) above).
9. Stop Transfer. The Company agrees with, and covenants to, Parent
and Purchaser that the Company shall not register the transfer of any
certificate representing any Stockholder's Shares unless such transfer is made
in accordance with the terms of this Agreement.
10. General Provisions.
(a) Payments. All payments required to be made to any party to this
Agreement shall be made by wire transfer of immediately available funds to
an account designated by such party at least one trading day prior to such
payment.
(b) Expenses. All costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expense.
(c) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
(d) Notice. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally, telecopied
(which is confirmed), sent by overnight courier (providing proof of
delivery) or mailed by registered or certified mail (return receipt
requested) to the parties at the
<PAGE>
9
following addresses (or at such other address for a party as shall be
specified by like notice):
(i) if to Parent or Purchaser, to:
GEC Incorporated and
GEC Acquisition Corp.
c/o GEC Marconi N.A., Inc.
Mail Stop 11 CO1
164 Totowa Road
Wayne, NJ 07474-0975
Attention: John Currier
Telecopier No.: (973) 633-6431
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, NY 10019-7475
Attention: Melvin L. Bedrick, Esq.
Telecopy No: (212) 474-3700
and
(ii) if to a Stockholder, to the address set forth under the name of
such Stockholder on Schedule A hereto
with a copy to:
Winstead Sechrest & Minick P.C.
5400 Renaissance Tower
1201 Elm Street
Dallas, TX 75270
Attention: Darrel A. Rice
Telecopier No.: (214) 745-5390
(e) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless
otherwise indicated. The headings contained in this Agreement are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Wherever the words "include", "includes"
or "including"
<PAGE>
10
are used in this Agreement, they shall be deemed to be followed by the
words "without limitation". Words in the singular include the plural, and
words in the plural include the singular.
(f) Counterparts. This Agreement may be executed in multiple
counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
(g) Entire Agreement; No Third-Party Beneficiaries. This Agreement
(including the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to
the subject matter hereof and (ii) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
(h) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the Laws of the State of Delaware, regardless
of the Laws that might otherwise govern under applicable principles of
conflict of Law.
(i) Publicity. Except as otherwise required by Law, court process or
the rules of a national securities exchange or the Nasdaq National Market
or as contemplated or provided in the Merger Agreement, for so long as this
Agreement is in effect, no Stockholder shall issue or cause the publication
of any press release or other public announcement with respect to the
transactions contemplated by this Agreement or the Merger Agreement without
the consent of Parent, which consent shall not be unreasonably withheld.
11. Stockholder Capacity. No person executing this Agreement makes
any agreement or understanding herein in his or her capacity as a director or
officer of the Company or any subsidiary of the Company. Each Stockholder signs
solely in his or her capacity as the beneficial owner of such Stockholder's
Shares and nothing herein shall limit or affect any actions taken by a
Stockholder in its capacity as an officer or director of the Company or any
subsidiary of the Company to the extent specifically permitted by the Merger
Agreement.
<PAGE>
11
12. Performance by Purchaser. Parent covenants and agrees for the
benefit of the Stockholders that it shall cause Purchaser to perform in full
each obligation of Purchaser set forth in this Agreement.
13. Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any federal court located in the
State of Delaware or in any Delaware state court, this being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (i) consents to submit such party to the personal
jurisdiction of any Federal court located in the State of Delaware or any
Delaware state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated hereby, (ii) agrees that such party will
not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court, (iii) agrees that such party will not
bring any action relating to this Agreement or any of the transactions
contemplated hereby in any court other than a Federal court located in the state
of Delaware or a Delaware state court and (iv) waives any right to trial by jury
with respect to any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby. The parties
irrevocably and unconditionally waive any objection to the laying of venue of
any action, suit or proceeding arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of Delaware or of the United
States of America located in the State of Delaware, and hereby further
irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such action, suit or proceeding brought in any such court
has been brought in an inconvenient forum.
<PAGE>
IN WITNESS WHEREOF, each of Parent and Purchaser has caused this
Agreement to be signed by its officer or director thereunto duly authorized and
each Stockholder has signed this Agreement, all as of the date first written
above.
GEC INCORPORATED
By /s/ MICHAEL LESTER
-------------------------------------
Name: Michael Lester
Title: Director
GEC ACQUISITION CORP.
By /s/ JOHN CURRIER
-------------------------------------
Name: John Currier
Title: Vice President
and Secretary
<PAGE>
STOCKHOLDERS
/s/ JAMES B. SKAGGS
---------------------------------------
James B. Skaggs
/s/ WILLIAM E. CONWAY, JR.
---------------------------------------
William E. Conway, Jr.
/s/ JULIAN DAVIDSON
---------------------------------------
Julian Davidson
/s/ ANTHONY GRILLO
---------------------------------------
Anthony Grillo
/s/ BOB MARBUT
---------------------------------------
Bob Marbut
<PAGE>
/s/ ELVIS L. MASON
---------------------------------------
Elvis L. Mason
/s/ THOMAS P. STAFFORD
---------------------------------------
Thomas P. Stafford
/s/ K. BRUCE HAMILTON
---------------------------------------
K. Bruce Hamilton
/s/ BARRY G. CAMPBELL
---------------------------------------
Barry G. Campbell
/s/ GEORGE R. MELTON
---------------------------------------
George R. Melton
/s/ TERRY A. STRAETER
---------------------------------------
Terry A. Straeter
<PAGE>
ACKNOWLEDGED AND AGREED
TO AS TO SECTION 9:
TRACOR, INC.
By /s/ JAMES B. SKAGGS
-------------------------------------
Name: James B. Skaggs
Title: President and
Chief Executive
Officer
<PAGE>
16
Schedule A
-----------
Total number Total number Total number
of shares of shares of shares
underlying underlying
stock options warrants
------------ ------------- ------------
James B. Skaggs 43,364 663,700 4,000
4700 Toreador Drive
Austin, TX 78746
William E. Conway, Jr. 15,046 6,000 N/A
The Carlyle Group
Suite 220 South
1001 Pennsylvania Ave, N.W.
Washington, DC 20004
Julian Davidson 3,000 6,000 N/A
Davidson Enterprises
991 Discovery Dr.
Huntsville, AL 35806
Anthony Grillo 13,000 6,000 N/A
Pleasantville Road
New Vernon, NJ 07976
Bob Marbut 27,500 6,000 N/A
200 Concord Plaza, Suite 700
San Antonio, TX 78216
Elvis L. Mason 7,000 6,000 N/A
Mason Best
2121 San Jacinto Suite 1000
Dallas, TX 75201
Thomas P. Stafford 7,000 6,000 N/A
Stafford, Burke and Hecker, Inc.
1006 Cameron Street
Alexandria, VA 22314
K. Bruce Hamilton 0 98,000 N/A
Tracor Systems Technologies, Inc.
1601 Research Blvd.
Rockville, MD 20850
Barry G. Campbell 1,887 99,000 N/A
Tracor Systems Technologies, Inc.
1601 Research Blvd.
Rockville, MD 20850
George R. Melton 12,600 119,400 N/A
Tracor Aerospace, Inc.
6500 Tracor Lane
Austin, TX 78725
Terry A. Straeter 176,331 82,000 2,000
GDE System, Inc.
16550 W. Bernardo Dr.
San Diego, CA 92127
<PAGE>
EXHIBIT 3
March 6, 1998
Mr. Mark Ronald
GEC-Marconi North America Inc.
164 Totowa Road
Wayne, New Jersey 07474-0975
Dear Mr. Ronald:
We have agreed to exchange information regarding Tracor, Inc. (hereinafter the
"Company") and GEC-Marconi North America Inc. ("GEC") in connection with your
consideration of the possible acquisition of the Company ("Possible
Transaction") by GEC. In consideration of our exchanging the Evaluation
Materials (as defined below) we agree as follows:
Confidentiality of Evaluation Materials
Each of us will treat confidentially any information (whether written or oral)
that each of us or our representatives furnish to the other in connection with a
Possible Transaction, together with analyses, compilations, studies, or other
documents prepared by us or GEC which contain or otherwise reflect such
information (collectively, the "Evaluation Materials"). We each recognize and
acknowledge the competitive value of the Evaluation Materials and the damage
that could result to either party if the Evaluation Materials were used or
disclosed except as authorized by this Agreement.
The term "Evaluation Materials" includes information furnished by either party
to the other, orally or in writing (whatever the form or storage medium) or
gathered by inspection, and regardless of whether such information is
specifically identified as confidential. The term "Evaluation Materials" does
not include information which (i) is or becomes generally available to the
public other than as a result of a disclosure by either party or our
representatives; (ii) was or becomes available to either party on a non-
confidential basis from a source other than the other party or its
representatives, provided that, to the best of such receiving party's knowledge,
such source is not prohibited from disclosing such information by a contractual,
legal or fiduciary obligation; (iii) is independently developed by a party
without further reference to or benefit from the information received from the
other party or its representatives; (iv) is possessed by a party without such
restrictions prior to receipt from the other party or its representatives; (v)
is disclosed on a non-confidential basis by a party or its representatives to a
business or entity other than the other party; or (vi) is disclosed to the other
party without any confidentiality restrictions in connection with any other
business dealings or potential dealings of the parties, past, present, and
future, including those related to teaming agreements, joint ventures,
contracts, subcontracts, or business pursuits or dealings of any kind not
related to a Possible Transaction.
<PAGE>
Mr. Mark Ronald
March 6, 1998
Page 2 of 6
Use of Evaluation Materials
Neither GEC nor the Company will use any of the Evaluation Materials for any
purpose other than the exclusive purpose of evaluating a Possible Transaction.
Each of GEC and the Company will keep the Evaluation Materials completely
confidential; provided, however, that (i) any of such information may be
disclosed to those of each us of our or our affiliates' directors, officers,
employees, agents, representatives (including attorneys, accountants, and
financial advisors), and lenders and other sources of financing (collectively,
"our representatives") who need to know such information for the purpose of
evaluating a Possible Transaction (it being understood that each of our or our
affiliates' representatives shall be informed of the confidential nature of such
information and shall be directed by each of us, and shall each expressly agree,
to treat such information confidentially in accordance with this Agreement) and
(ii) any other disclosure of such information may only be made if the other
party consents in writing prior to any such disclosure. Without limiting the
generality of the foregoing, in the event that a Possible Transaction is not
consummated neither the Company nor GEC shall use any of the Evaluation
Materials for any purpose.
In the event that either party shall receive a request or be required (by
deposition, interrogatory, request for documents, subpoena, civil investigative
demand or similar process) to disclose all or any part of the Evaluation
Materials, the party receiving such request shall (i) immediately notify the
other of the existence, terms, and circumstances surrounding such a request;
(ii) consult with the other on the advisability of taking legally available
steps to resist or narrow such request; and (iii) assist such party, at such
party's expense, in seeking a protective order or other appropriate remedy. In
the event that such protective order or other remedy is not obtained or that
either party waives compliance with the provisions hereof, (i) the other party
may disclose to any tribunal only that portion of the Evaluation Materials which
it is advised by counsel is legally required to be disclosed, and (ii) the
disclosing party shall not be liable for such disclosure unless disclosure to
any such tribunal was caused by or resulted from a previous disclosure by such
party not permitted by this Agreement.
Non-Disclosure
The disclosure of your possible interest in purchasing the Company could have a
material adverse effect on your or the Company's business if for any reason an
agreement of purchase and sale is not consummated. Accordingly, unless required
by applicable law, prior to the closing of a Possible Transaction, without the
prior written consent of the other party hereto, neither party will, and will
direct its representatives not to, disclose to any person either the fact that
discussions or negotiations are taking place concerning a Possible Transaction
or any of the terms, conditions or other facts with respect to any such Possible
Transaction, including the status thereof, otherwise than as required by law or
the rules of any relevant stock exchange and each will, in any event, consult
with the other prior to making any announcement. The term "person"
<PAGE>
Mr. Mark Ronald
March 6, 1998
Page 3 of 6
as used in this letter shall be broadly interpreted to include, without
limitation, any corporation, the Company, GEC, or governmental agency or body,
stock exchange, partnership, association or individual.
No Representation or Warranty
Although the Company has endeavored and will endeavor to include in the
Evaluation Materials information known to it which it believes to be relevant
for the purpose of your investigation, you acknowledge and agree that none of
the Company or any of the Company's representatives or agents is making any
representation or warranty, expressed or implied, as to the accuracy or
completeness of the Evaluation Materials, and none of the Company, or any of the
Company's representatives, stockholders, owners, affiliates, advisors, or
agents, will have any liability under this Letter Agreement or otherwise to you
or any other person resulting from the use of Evaluation Materials by you or any
of your representatives. Only those representations or warranties that are made
to a purchaser in a definitive sale agreement for the Company ("Sale Agreement")
when, as, and if it is executed, and subject to such limitations and
restrictions as may be specified in such Sale Agreement, will have any legal
effect.
It is also acknowledged and agreed that no contract or agreement providing for
the sale of the Company shall be deemed to exist between you and the Company
unless and until a Sale Agreement has been executed and delivered by you and
each of the other parties thereto, and the parties hereby waive, in advance, any
claims (including, without limitation, breach of contract) in connection with
the sale of the Company unless and until a Sale Agreement has been executed and
delivered by you and each of the other parties thereto. It is also agreed that
unless and until a Sale Agreement between the Company and you with respect to
the acquisition of the Company has been executed and delivered by you and each
of the other parties thereto, there shall not be any legal obligation of any
kind whatsoever with respect to any such transaction by virtue of this agreement
or any other written or oral expression with respect to such transaction except,
in the case of this Agreement, for the matters specifically agreed to herein.
For purposes of this Agreement, the term "Sale Agreement" does not include an
executed letter of intent or any other preliminary written agreement, nor does
it include any oral acceptance of an offer or bid by you.
Return of Documents
Upon either party's request, the other party shall promptly either deliver to
such party or, at such other party's option, destroy and certify in writing the
destruction of all written Evaluation Materials without (except as provided
below) retaining, in whole or in part, any copies, extracts or other
reproductions (whatever the form or storage medium) of such materials. Provided
that we each may retain one copy of the Evaluation Materials for archival
purposes.
<PAGE>
Mr. Mark Ronald
March 6, 1998
Page 4 of 6
No Authorized Contact or Solicitation
During the course of our evaluation, all inquiries and other communications are
to be made directly to James B. Skaggs, President, or employees or
representatives of the Company specified thereby. Accordingly, we each agree
not to directly or indirectly contact or communicate with any executive or other
employee of the other concerning a Possible Transaction, or to seek any
information in connection therewith from such person, without the other's
express consent. You also agree not to discuss with or offer to any third party
an equity participation in a Possible Transaction or any other form of joint
acquisition by you and such third party without the Company's prior written
consent.
Without the Company's prior written consent, you will not for a period of two
years from the date of this Agreement directly solicit for employment any person
who is now employed by the Company (or whose activities are dedicated to the
Company) in an executive or management level position or otherwise considered by
the Company to be a key employee. It is understood and agreed that the above
provisions against direct solicitation shall not prohibit any general
solicitation not directed specifically to such employees and shall also not
prohibit contact through a search firm which is not aware of this Agreement and
which is not told by you to target company employees.
Standstill
You agree that until one year from the date of this Agreement, you will not
without the prior approval of the Board of Directors of the Company, or unless
(a) a third party makes an offer to acquire 20% or more of the stock of the
Company, or (b) an announcement is made of a proposal to merge the Company with
a third party or of any other proposal to acquire the Company, in each respect
such offer or proposal not having been endorsed by the board of directors of the
Company (i) acquire or make any proposal to acquire any securities or property
of the Company; (ii) propose to enter into any merger or business combination
involving the Company or purchase a material portion of the assets of the
Company; (iii) make or participate in any solicitation of proxies to vote, or
seek to advise or influence any person with respect to the voting of any
securities of the Company; (iv) form, join, or participate in a "group" (within
the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934) with
respect to any voting securities of the Company; (v) otherwise act or seek to
control or influence the management, Board of Directors or policies of the
Company; (vi) disclose any intention, plan or arrangement inconsistent with the
foregoing; or (vii) take any action which might require the Company to make a
public announcement regarding the possibility of a business combination or
merger. Except as provided above, you also agree during such period not to
request the Company (or its directors, officers, employees, agents, or
representatives) to amend or waive any provision of this paragraph. Provided,
however that if the Company enters into an agreement comparable to this one with
any third party, wherein the standstill provisions are more favorable
<PAGE>
Mr. Mark Ronald
March 6, 1998
Page 5 of 6
to the third party than this Agreement is to you, you will automatically receive
the benefit of the more favorable standstill provisions, it being the intent of
the parties to this Agreement that you and such third party be subject to the
same standstill provisions.
Legal Remedy
Money damages would not be a sufficient remedy for any breach of this Agreement
by either party hereto and each party will be entitled to specific performance
and injunctive relief as remedies for any such breach. Such remedies shall not
be deemed to be the exclusive remedies for a breach of this Agreement but shall
be in addition to all other remedies available at law or equity.
Other
This Agreement constitutes the entire agreement between the parties thereto
regarding the subject matter hereof. This Agreement may be changed only by a
written agreement signed by the parties hereto or their authorized
representatives.
This Agreement shall be governed and construed in accordance with the laws of
the State of Delaware, without regard to the conflicts of law principles
thereof. The parties agree that any and all disputes with respect to this
Agreement shall be litigated only in the State of Delaware. Each party hereby
consents to jurisdiction and venue in the State of Delaware and hereby waives
any jury trial.
If you are in agreement with the foregoing, please sign and return one copy of
this letter, it being understood that all counterpart copies will constitute but
one agreement with respect to the subject matter of this letter.
Very truly yours,
/s/ JAMES B. SKAGGS
James B. Skaggs
President
JBS:cdm
<PAGE>
Mr. Mark Ronald
March 6, 1998
Page 6 of 6
ACCEPTED AND AGREED TO AS OF THE DATE HEREOF:
GEC-Marconi North America Inc.
("GEC")
By:/s/ MARK H. RONALD
------------------------------------
Mark H. Ronald
------------------------------------
Printed Name
President & CEO
------------------------------------
Title
<PAGE>
EXHIBIT 4(a)
TRACOR DEFERRED COMPENSATION PLAN
---------------------------------
Tracor, Inc., a Delaware corporation, by resolution of its Board of
Directors adopted the Tracor Deferred Compensation Plan (the "Plan"), effective
December 1, 1996, for the benefit of its eligible employees.
The Plan is a nonqualified deferred compensation plan pursuant to
which certain eligible Employees of the Company (as hereinafter defined) may
elect to defer compensation. The Plan is maintained primarily for the purpose
of providing deferred compensation for a select group of management or highly
compensated employees, within the meaning of Sections 201(2); 301(3); and
401(a)(1) of the Employee Retirement Income Security Act of 1974, as amended.
The Plan is unfunded for tax purposes and for purposes of Title I of ERISA. The
Participants have the status of general unsecured creditors of the Company and
the Plan constitutes a mere promise by the employer to make benefit payments in
the future.
ARTICLE I
DEFINITIONS
Whenever the following terms are used in the Plan with the first letter
capitalized, they shall have the meaning specified below unless the context
clearly indicates to the contrary.
"ACCOUNTING DATE" shall mean the end of each day that the New York
Stock Exchange and the Trustee are open and conducting business, or such other
date or dates as may be established by the committee during the Plan Year to
make the adjustments described in Section 7.1 of the Qualified Plan.
"ADMINISTRATOR" shall mean the Company, acting through the Retirement
Committee. The Administrator shall have all the duties and responsibilities
imposed by ERISA, except as specifically assigned, delegated to or reserved to
the Board under the Plan.
"AFFILIATE" shall mean any employer which, at the time of reference,
was, with the Company, a member of a controlled group of corporations or trades
or businesses under common control, or a member of an affiliated service group,
as determined under regulations issued by the Secretary of the Treasury or his
delegate under Code Sections 414(b), (c), and (m), and 415(h) and any other
entity required to be aggregated with the Company pursuant to regulations issued
under Code Section 414(o).
"BENEFICIARY" shall mean the person or person on whose behalf benefits
may payable hereunder after his death in accordance with the terms of the
Qualified Plan.
"BOARD" shall mean the board of directors of the Company. The Board
may delegate any power or duty otherwise allocated to the Administrator to any
other person or persons.
<PAGE>
Tracor Deferred Compensation Plan
Page 2 of 14
"CAUSE" shall mean termination of a Participant by the Company or any
Affiliate, as the case may be, for "cause," "good cause," or other similar
circumstances, pursuant to the then current termination policy thereof.
"CHANGE IN CONTROL" shall mean, with respect to the Company or any
Affiliate
(a) a change of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A, or any
successor provision thereto, promulgated under the Securities Exchange
Act of 1934 (the "Exchange Act"); provided that, without limitation, a
change of control shall be deemed to have occurred if (i) any "person"
or "group" (as those terms are used in Sections 13(d) and 14(d),
respectively, of the Exchange Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 issued under the Exchange Act),
directly or indirectly, of securities of the Company entitled to cast
20% or more of the votes entitled to be cast for the election of
directors of the Company by the holders of its then outstanding
securities; and (ii) at any time during the period of 36 months
subsequent to the securities acquisition described above, individuals
who at the beginning of such period constitute the Board cease for any
reason to constitute at least the majority thereof unless the
election, or the nomination for election by the Company's
shareholders, of each new Director was approved by a vote of at least
two-thirds of the directors still in office who were directors at the
beginning of such 36-month period; or
(b) any "person" or group," as described above, is or becomes the
"beneficial owner," directly or indirectly, of securities of the
Company entitled to cast 40% or more of votes entitled to be cast for
the election of directors of the Company by the holders of its then
outstanding securities.
"CODE" shall mean the Internal Revenue Code of 1986, as amended.
"COMPANY" shall mean Tracor, Inc. and any Affiliate which subsequently
adopts the Plan as a whole or as to any one or more divisions, in accordance
with Section 12.3(b), and any successor company which continues the Plan under
Section 12.3(a), acting in each case through its board of directors.
"COMPENSATION" of a Participant for any Plan Year shall mean his total
taxable remuneration received from the Company and all Affiliates in that Plan
Year for services rendered as an Employee (including those items not reported on
Form W-2 as determined under Treasury Regulation (S)1.415-2(d)(2)(iii)-(iv)),
including deferred compensation under the Plan and amounts not includable in
gross income by reason of Code Sections 125 (cafeteria plans); 402(a)(8)
(401(k) plans); 402(h); or 403(b), but exclusive of
(a) Company and Affiliate contributions to a deferred compensation
plan (to the extent includable in the Participant's gross income
solely by reason of Code
<PAGE>
Tracor Deferred Compensation Plan
Page 3 of 14
Section 415) and any distribution from a deferred compensation plan
(other than a nonqualified plan);
(b) amounts realized from the exercise of a nonqualified stock option
or taxable by reason of restricted property becoming freely tradable
or free of a substantial risk of forfeiture, as described in Code
Section 83;
(c) amounts realized from the sale, exchange or other disposition of
stock acquired under a qualified stock option;
(d) other amounts which receive special tax benefits such as Company
or Affiliate contributions toward the purchase of an annuity contract
described in Code Section 403(b) (whether or not excludable from the
Participant's gross income);
(e) all reimbursements or other expense allowances, fringe benefits
(cash and non-cash), moving expenses, deferred compensation, and
welfare benefits (including severance benefits) (even if includable in
gross income).
"DISABILITY" shall mean a Participant's disability, as defined by the
then current policies of the Company or its Affiliates, as the case may be.
"EMPLOYEE" shall mean any person who renders services to a Company in
the status of an employee as that term is defined in Code Section 3121(d),
including officers but not including
(a) directors who serve solely in that capacity;
(b) attorneys, accountants, and other persons doing independent work
for the Company or an Affiliate where the relationship of employer and
employee does not exist between said person and the Company or
Affiliate; and
(c) leased employees treated as Employees of the Company pursuant to
Code Sections 414(n) and (o) or employees of an Affiliate.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"HARDSHIP" of a Participant is determined by the Administrator in its
discretion on the basis of all relevant facts and circumstances and in
accordance with nondiscriminatory and objective standards, uniformly interpreted
and consistently applied, and with regard to the existence of other resources
which are reasonably available to the Participant in question, shall mean an
unforeseeable financial emergency or extreme hardship affecting the personal or
family affairs of the Participant and having a significant financial effect.
The Administrator may find that financial emergency or extreme hardship exists
in
<PAGE>
Tracor Deferred Compensation Plan
Page 4 of 14
situations in which distribution is necessary for purposes such as, but not
limited to the following: (i) for the purposes of enabling a Participant to
meet unforeseeable financial requirements of an illness or disability of the
Participant or a member of his family; (ii) loss of Participants property due
to casualty; and (iii) other similar extraordinary circumstances arising as a
result of events beyond the control of the Participant. A financial need shall
not constitute a Hardship unless it is for at least $1,000.00 (or the entire
principal amount of the Participant's Nonqualified Deferred Compensation
Account, if less).
"INVESTMENT FUND" shall have the meaning set forth in Section
1.1(A)(25) of the Qualified Plan.
"NONQUALIFIED ACCOUNT" or "NONQUALIFIED ACCOUNTS" of a Participant
shall mean, as the context indicates, any of his Nonqualified Deferred
Compensation Account, Nonqualified Company Matching Account, or Nonqualified
Company Profit Sharing Account.
"NONQUALIFIED COMPANY MATCHING ACCOUNT" of a Participant shall mean
the account, if any, established on behalf of the Participant in accordance with
Section 2.1.
"NONQUALIFIED COMPANY PROFIT SHARING ACCOUNT" of a Participant shall
mean the account, if any, established on behalf of the Participant in accordance
with Section 2.1.
"NONQUALIFIED DEFERRED COMPENSATION" of a Participant shall mean the
amounts deferred by such Participant under Section 4.1 of the Plan.
"NONQUALIFIED DEFERRED COMPENSATION ACCOUNT" of a Participant shall
mean the account, if any, established on behalf of the Participant in accordance
with Section 5.1(a).
"PARTICIPANT" shall mean any person included in the Plan as provided
in Article III.
"PLAN" shall mean this Tracor Deferred Compensation Plan.
"PLAN QUARTER" shall mean the three-month periods ending on March 31;
June 30; September 30; and December 31 of each Plan Year.
"PLAN YEAR" shall mean the twelve-month period commencing on January 1
and ending on December 31 (except that the first Plan Year shall begin on
November 15, 1996, and end on December 31, 1996).
"QUALIFIED ACCOUNTS" of a Participant shall mean his accounts in the
Qualified Plan.
"QUALIFIED PLAN" shall mean the Tracor, Inc. 401(k) Savings Plan or,
if appropriate,
<PAGE>
Tracor Deferred Compensation Plan
Page 5 of 14
the equivalent Qualified Plan of an Affiliate, as such may be hereafter amended
from time to time, or any successor thereto.
"SEPARATION FROM SERVICE" of an Employee shall mean his resignation
from or discharge by the Company or an Affiliate, or his death, but shall not
include his transfer among the Company and Affiliates. A leave of absence or
sick leave authorized by the Company or an Affiliate in accordance with
established policies, a vacation period, a temporary layoff for lack of work, or
a military leave shall not constitute a Separation from Service; provided,
however, that
(a) continuation upon a temporary layoff for lack of work for a period
in excess of three months shall be considered a discharge effective as
of the commencement of the third month of such period; and
(b) failure to return to work upon expiration of any leave of absence,
sick leave, or vacation or within three days after recall from a
temporary layoff for lack of work or before expiration of a military
leave shall be considered a resignation effective as of the date of
commencement of such leave of absence, sick leave, military leave,
vacation, or temporary layoff.
"SERVICE" of an Employee, expressed in days, shall mean his "Service"
as defined under the Qualified Plan.
"TRUST AGREEMENT" shall mean the Tracor, Inc. Nonqualified Trust, a
"Rabbi Trust" created in connection with the execution of this Plan, as set
forth in Exhibit A hereto, as amended.
"TRUST FUND" shall mean the trust fund established pursuant to the
terms of the Trust Agreement.
"TRUSTEE" shall mean the corporate trustee or trustees or the
individual trustee or trustees, as the case may be, appointed from time to time
pursuant to the provisions of the Trust Agreement to administer the Trust Fund.
"VESTED," when used with reference to Nonqualified Accounts, shall
mean not subject to forfeiture, except as provided in the Plan.
ARTICLE II
NONQUALIFIED ACCOUNTS
Section 2.1 - Nonqualified Accounts. The Administrator shall establish and
maintain (or cause to be established and maintained) for each Participant's
Nonqualified Accounts to which shall be credited the amounts determined under
Section 5.1 and credited or debited the amounts determined under Article VI.
<PAGE>
Tracor Deferred Compensation Plan
Page 6 of 14
Section 2.2 - Assignments, etc., Prohibited. No part of the Nonqualified
Deferred Compensation Account, Nonqualified Company Matching Account, and
Nonqualified Profit Sharing Account of a Participant shall be liable for the
debts, contracts, or engagements of any Participant, his Beneficiaries or
successors in interest, or be taken in execution by levy, attachment, or
garnishment or by any other legal or equitable proceeding, nor shall any such
person have any rights to alienate, anticipate, commute, pledge, encumber, or
assign any benefits or payments hereunder in any manner whatsoever, except to
designate a Beneficiary as provided herein.
ARTICLE III
ELIGIBILITY
Section 3.1 - Requirements for Participation. Any Employee who qualifies for
the definition of "highly compensated" employee in the Qualified Plan, according
to Section 414(q) of the Code (indexed at $80,000.00 per annum for calendar year
1997), and who is selected by the Administrator shall be eligible to be a
Participant for such Plan Year on such date. Such employees shall be (i)
officers and executives of the Company; or (ii) in management positions which
report directly to a Company President or Corporate Officer; or (iii) marketing
managers with responsibility for the acquisition of new business; or (iv)
program managers and other P&L managers who have overall performance
responsibilities for significant contracts; or (v) other key employees of the
Company who have a job assignment with significant impact on profits, operating
effectiveness, and overall success of the Company.
Section 3.2 - Deferral Election Form. Participants who elect to defer their
Compensation pursuant to this Plan shall submit a form (the "Deferral Election
Form") to the Administrator which shall contain the following:
(a) the consent of the Participant that he, his successors in interest and
assigns, and all persons claiming under him shall be bound, to the extent
authorized by law, by the statements contained therein and by the
provisions of the Plan;
(b) the amount of Compensation to be deferred and his authorization for the
Company to reduce his Compensation accordingly;
(c) the date on which the Participant wishes to receive the deferred
amounts, and the form in which he wishes to receive same; and
(d) such other information as may be required by the Administrator.
ARTICLE IV
PARTICIPANTS' DEFERRALS
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Tracor Deferred Compensation Plan
Page 7 of 14
Section 4.1 - Deferral Eligibility. Each Participant who has elected to defer
the maximum amount permitted for him under Sections 3.6 and 4.2 of the Qualified
Plan may elect to defer to his Nonqualified Deferred Compensation Account for
any Plan Year an amount which is any whole number percentage (not greater than
50% of his base compensation or 100% of his incentive compensation) of his
Compensation, to the extent that such amount exceeds the amount to be credited
to his Qualified Amounts for such Plan Year.
Such election shall be made by submission of the Deferral Election Form to the
Administrator (not later than the earlier of (i) ten days prior to the last day
of the next preceding Plan Year or (ii) 30 days after the date on which the
Employee becomes eligible to be a Participant) and shall remain in effect for
each Plan Year during which an Employee is a Participant or until earlier
discontinued pursuant to Section 4.2 below.
Section 4.2 - Discontinuance of Deferral. A Participant may elect, upon 30 days
prior written notice, to discontinue deferral of his Compensation for any Plan
Year commencing after receipt of such notice.
Section 4.3 - Deferral Period. Participants may elect to defer Compensation for
any period in excess of one Plan Year (a "Deferral Period"), provided, however,
that a Participant may designate only one Deferral Period. The Deferral Period
may be specified as
(a) a period of years;
(b) a period of years or a period ending on the date of the Participant's
termination of Service with the Company, whichever first occurs; or
(c) a period ending on the participant's date of his termination from
Service.
In each event, the Participant shall begin receiving payments in the manner
provided herein.
ARTICLE V
CREDITING OF DEFERRALS AND
COMPANY MATCHING CONTRIBUTIONS
Section 5.1 - Determination of Credits.
(a) Each Participant's Nonqualified Deferred Compensation Account shall be
credited from time to time with an amount which is equal to the amount of
Compensation such Participant elected to defer under Section 4.1 above.
(b) The Nonqualified Company Matching Account of each Participant who
elected to defer Compensation shall be credited with matching contributions
up
<PAGE>
Tracor Deferred Compensation Plan
Page 8 of 14
to the extent of the scheduled match rate in Section 1.1(A)(18) of the
Qualified Plan, offset by any matching contributions credited to such
Participant in the Qualified Plan.
(c) The Nonqualified Company Profit Sharing Account of each Participant
shall be credited with an amount which is equal to the contribution rate
specified in schedule of Section 1.1(A)(39) of the Qualified Plan, offset
by any amounts credited in the Qualified Plan.
ARTICLE VI
INVESTMENT OPTIONS;
VALUATION OF NONQUALIFIED ACCOUNTS
Section 6.1 - Investment Credits and Debits.
(a) Compensation deferred by a Participant, Company matching contributions
(as provided for in Section 5.1(b) above), and Employer profit sharing
amounts, if any, shall be credited to Participant's Nonqualified Accounts
on the next following Accounting Date after deduction from his Compensation
and deposited in the Trust Fund and shall be allocated among the Investment
Funds (as defined in the Qualified Plan) as directed by the Participant
from time to time.
(b) Each Nonqualified Account is valued as of each Accounting Date
following the effective date of the Plan, based upon the fair market value
of the assets of each Nonqualified Account, as determined by the Trustee.
In determining such fair market value, each Nonqualified Account shall
include adjustments regarding all dividends, interest income, other
investment income and expenses, investment management fees and expenses,
administrative fees and expenses, applicable taxes, and authorized
withdrawals.
ARTICLE VII
VESTING OF NONQUALIFIED ACCOUNTS
Section 7.1 - Vesting of Accounts.
(a) Each Participant's interest in his Nonqualified Deferred Compensation
Account shall be Vested at all times.
(b) The Vested portion of a Participant's Nonqualified Company Matching
Account and his Nonqualified Company Profit Sharing Account shall be
calculated as provided for in Sections 1.1(A)(59) and 1.1(A)(60) of the
Qualified Plan; provided that, in any event, the interest of a Participant
in his Nonqualified Company Matching Account and his Nonqualified Company
Profit Sharing Account shall become fully Vested upon the earliest to occur
of
<PAGE>
Tracor Deferred Compensation Plan
Page 9 of 14
(i) his death;
(ii) his Termination for other than Cause;
(iii) his 65th birthday;
(iv) his Disability;
(v) a Change in Control; or
(vi) termination of the Plan.
ARTICLE VIII
BENEFITS
Section 8.1 - Manner and Time of Distributions. A Participant may elect to
receive the Vested amounts credited to his Nonqualified Accounts either in a
lump sum or in five- or ten-year annual installment payments. Such lump sum
payment shall be made, and the installment payments shall begin, not later than
the date which is 15 days after the first day of the Plan Year following the
Deferral Period. In the event of five- or ten-year installment payments, each
annual payment to be made will be equal to an amount determined by dividing the
total number of payments remaining to be made into the total amount of funds
then available in such Participant's Nonqualified Accounts.
Section 8.2 - Effect of Failure to Locate Distributee. If the person to whom
deferred Compensation is payable hereunder has not been ascertained or located
within one year after expiration of the Deferral Period, the amount of his
Nonqualified Accounts shall be forfeited.
Section 8.3 - Forfeitures. If a Participant has a Separation from Service due
to resignation or discharge for Cause, the portions of his Nonqualified Company
Matching Account and Nonqualified Company Profit Sharing Account which are not
Vested shall be forfeited on the date of such Separation from Service.
Forfeitures under Section 8.2 above, shall be used, first, to offset the
Company's matching contributions to the Nonqualified Company Matching Account
and, second, to the extent available, to offset the Company's matching
contributions to the Nonqualified Company Profit Sharing Account.
ARTICLE IX
BENEFITS UPON DEATH
Section 9.1 - Distribution on Death.
<PAGE>
Tracor Deferred Compensation Plan
Page 10 of 14
(a) Upon the death of a Participant or former Participant, prior to
his Separation from Service, the Vested amount credited to his Nonqualified
Accounts as of the last Accounting Date, less any amounts required to be
withheld by law, shall be paid in five annual installments to the former
Participant's Beneficiaries.
(b) Upon the death of a Participant or former Participant, subsequent to
his Separation from Service, the Vested amount credited to his Nonqualified
Accounts as of the last Accounting Date, less any amounts required to be
withheld by law, shall be paid in in a lump sum to the former Participant's
Beneficiaries.
(c) Such Payment shall be made not later than 30 days after the end of
the calendar quarter in which the Participant's or former Participant's
death occurs.
ARTICLE X
OTHER DISTRIBUTIONS FROM NONQUALIFIED ACCOUNTS
Section 10.1 - Hardship Distributions from Nonqualified Deferred Compensation
Accounts. A Participant may apply for a distribution from the Vested portions
of his Nonqualified Accounts on account of a Hardship, subject to the following
requirements:
(a) The Participant's Hardship distribution shall not exceed the amount
which is necessary to satisfy the Hardship.
(b) The decision of the Administrator regarding the existence or
nonexistence of a hardship of a Participant shall be final and binding.
(c) The Participant has not received a Hardship distribution within the 12
month period preceding the distribution.
(d) The Administrator shall have the authority to require a Participant to
provide such proof as it deems necessary to establish the existence and
significant nature of the Participant's hardship, including, but not
limited to the lack of existing insurance or other assets that may be
liquidated without incurring additional financial hardship, or the absence
of an opportunity to terminate other deferral elections.
Section 10.3 - Distribution Upon Disability. Upon a Participant's Separation
from Service due to a Disability, he shall begin receiving distributions from
his Nonqualified Accounts, payable in five annual installments.
Section 10.4 - Distributions in the Event of Taxation. Should any amounts
contained in a Participant's Nonqualified Accounts become subject to taxation by
the Internal Revenue Service of the U.S. Government prior to the actual receipt
thereof by the Participant, or his Beneficiary, then such amounts shall become
immediately payable thereto in a lump
<PAGE>
Tracor Deferred Compensation Plan
Page 11 of 14
sum distribution(s).
ARTICLE XI
ADMINISTRATIVE PROVISIONS
Section 11.1 - Administrator's Duties and Powers.
(a) The Administrator shall conduct the general administration of the Plan
in accordance with the Plan and shall have all the necessary power and
authority to carry out that function. Among its necessary powers and
duties, are the following:
(i) to delegate all or part of its function as Administrator to
others and to revoke any such delegation;
(ii) to determine questions of eligibility and vesting of
Participants and their entitlement to benefits;
(iii) to select and engage attorneys, accountants, actuaries,
trustees, appraisers, brokers, consultants, administrators,
physicians, or other persons to render service or advice with regard
to any responsibility the Administrator or the board has under the
Plan, or otherwise, to designate such persons to carry out
responsibilities, and (with the Company, the Board, and its officers,
trustees, and Employees) to rely upon the advice, opinions or
valuations of any such persons, to the extent permitted by law, being
fully protected in acting or relying thereon in good faith;
(iv) to interpret the Plan for purpose of the administration and
application of the Plan, in a manner not inconsistent with the Plan or
applicable law and to amend or revoke any such interpretation; and
(v) to adopt Rules of the Plan that are not inconsistent with the
Plan or applicable law and to amend or revoke any such rules.
(b) Every finding, decision, and determination made by the Administrator
shall, to the full extent permitted by law, be final and binding upon all
parties.
Section 11.2 - Limitations Upon Powers. The Plan shall be uniformly and
consistently administered, interpreted, and applied with regard to all
Participants in similar circumstances.
Section 11.3 - Indemnification by the Company; Liability Insurance.
(a) The Company shall pay or reimburse the Administrator for all expenses
incurred thereby and shall indemnify and hold it harmless from, all claims,
<PAGE>
Tracor Deferred Compensation Plan
Page 12 of 14
liabilities, and costs (including reasonable attorneys' fees) arising out
of the good faith performance of its Plan functions.
(b) The Company shall obtain and provide for any such person, at the
Company's expense, liability insurance against liabilities imposed on him
by law.
Section 11.4 - Recordkeeping.
(a) The Administrator shall maintain, or cause to be maintained, suitable
records as follows:
(i) records of each Participant's Nonqualified Accounts which shall
show, separately, among other things, deferrals, Company matching
amounts, and Company profit sharing amounts, plus any forfeitures and
the gains and losses within such accounts; and
(ii) records of its deliberations and decisions.
(b) The Administrator may appoint a secretary to keep records of
proceedings, to transmit its decisions, instructions, consents, or
directions to any interested party, and to execute and file, on behalf of
the Administrator, such documents, reports, or other matters as may be
necessary or appropriate under ERISA and to perform other ministerial acts.
(c) The Administrator shall not be required to maintain any records or
accounts which duplicate any records or accounts maintained by the Company.
Section 11.5 - Statement to Participants. Within 30 days after the last day of
each Plan Quarter, the Administrator shall furnish (or cause to be furnished) to
each Participant a statement setting forth the value of his Nonqualified
Accounts and the Vested percentage thereof and such other information as the
Administrator shall deem appropriate.
Section 11.6 - Inspection of Records. Copies of the Plan and records of a
Participant's Nonqualified Accounts shall be open to inspection by him or his
duly authorized representatives at the office of the Company at any reasonable
business hour.
Section 11.7 - Service in More than One Capacity. Any person or group of
persons may serve more than one capacity with respect to the Plan.
Section 11.8 - Accounting for Distributions. Records for each Nonqualified
Account shall be maintained by the Trustee.
ARTICLE XII
MISCELLANEOUS PROVISIONS
<PAGE>
Tracor Deferred Compensation Plan
Page 13 of 14
Section 12.1 - Termination or Amendment of the Plan.
(a) The Board shall have the right at any time to declare the Plan
terminated completely as to the Company or as to any division, facility, or
other operational unit thereof, and may amend same from time to time,
provided that no termination or amendment shall reduce or terminate any
benefit to or in respect of any Participant.
(b) In the event of any such termination, the Administrator shall continue
to maintain Participants' Nonqualified Accounts and payment from, and
vesting under, such Nonqualified Accounts shall be made in accordance with
the Plan.
Section 12.2 - Limitation of Rights. Nothing contained in the Plan shall give
any Employee the right to be retained in the service of the Company or to
interfere with or restrict the right to the Company, which is hereby expressly
reserved, to discharge or retire any Employee, except as provided by law, at any
time without notice and with or without cause. Inclusion under the Plan will
not give any Employee any right or claim to any benefit hereunder except to the
extent such right has specifically become fixed under the terms of this Plan.
Section 12.3 - Consolidation or Merger; Adoption of Plan by Other Companies.
(a) There shall be no merger, consolidation with, transfer, or sale of the
assets of liabilities of the Plan to any other plan unless each Participant
in this Plan would have, following such event, accounts which are equal to
or greater than his corresponding Nonqualified Accounts had the Plan been
terminated immediately before such merger, consolidation, transfer, or
sale.
(b) An Affiliate may, with the approval of the Administrator, adopt the
Plan as a whole company or as to any one or more divisions effective as of
the first day of any Plan Year by resolution of its own board of directors.
Such Affiliate shall give written notice of such adoption to the
Administrator.
Section 12.4 - Payment on Behalf of Minor, etc. In the event any amount
becomes payable under the Plan to a minor or a person who, in the sole judgment
of the Administrator is considered by reason of physical or mental condition to
be unable to give a valid receipt therefor, the Administrator may direct that
such payment be made to any person found by the administrator its sole judgment,
to have assumed the care of such minor or other person. Any payment made
pursuant to such determination shall constitute a full release and discharge of
the Company, the Board, the Administrator, and their officers, directors, and
employees.
Section 12.5 - Governing Law. This Plan shall be construed, administered, and
governed in all respects under the laws of the State of Texas.
<PAGE>
Tracor Deferred Compensation Plan
Page 14 of 14
Section 12.6 - Pronouns and Plurality. The masculine pronoun shall include the
feminine pronoun, and the singular the plural where the context so indicates.
Section 12.7 - Titles. Titles are provided herein for convenience only and are
not to serve as a basis for interpretation or construction of the Plan.
Section 12.8 - References. Unless the context clearly indicates to the
contrary, a reference to a statute, regulation or document shall be construed as
referring to any subsequently enacted, adopted or executed statute, regulation
or document.
Section 12.9 - No Tax Guarantee. Neither this Plan nor any representations made
in connection with it shall be construed to be assurance or guarantee of a
deferral of income for income tax purposes of any amount to be paid pursuant to
this Plan.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed on this 1st day of December, 1996.
TRACOR, INC.
By: /s/ James B. Skaggs
--------------------------------
James B. Skaggs
President
<PAGE>
Amendment 1 to
Tracor Deferred Compensation Plan
WHEREAS, Tracor, Inc. ("Tracor") presently maintains the Tracor
Deferred Compensation Plan (the "Plan") for the benefit of its eligible
employees and the eligible employees of certain of its affiliates, and
WHEREAS, pursuant to Section 12.1 of the Plan, the Plan may be amended
by Tracor, and
WHEREAS, Tracor has determined that the Plan shall be amended as set
forth below to include the Quality Systems, Inc. Money Purchase Pension Plan as
a Qualified Plan in the Tracor Deferred Compensation Plan;
NOW, THEREFORE, the Plan is hereby amended, effective as of January 1,
1997, as follows:
1. Article 1 of the Plan is amended to include the following definition:
"Nonqualified Account" or "Nonqualified Accounts" or a Participant shall
mean, as the context indicates, any of his Nonqualified Deferred
Compensation Account, Nonqualified Company Matching Account, Nonqualified
Company Profit Sharing Account, or Nonqualified Money Purchase Plan
Account.
"Nonqualified Money Purchase Plan Account" of a Participant shall mean
the account, if any, established on behalf of the Participant in accordance
with Section 2.1."
2. The definition of "Qualified Plan" in Article 1 of the plan is amended
to read in its entirety as follows:
"Qualified Plan" shall mean the Tracor, inc. 401(k) Savings Plan or, if
appropriate, the equivalent qualified Plan of an Affiliate and the Quality
Systems, Inc. Money Purchase Pension Plan, as such may be hereafter amended
from time to time, or any successor thereto."
3. Section 2.2 of the plan is amended to read in its entirety as follows:
"Section 2.2 - Assignments, etc., Prohibit. No part of the Nonqualified
Deferred Compensation Account, Nonqualified Company Matching Account,
Nonqualified Profit Sharing Account and nonqualified Money Purchase Plan
Account of a Participant shall be liable for debts, contracts or
engagements of any Participant, his Beneficiaries or successors in
interest, or be taken in execution by levy, attachment, or garnishment or
by any other legal or equitable proceeding, nor shall any such person have
any rights to alienate, anticipate, commute, pledge, encumber, or assign
any benefits or payments hereunder in any manner whatsoever, except to
designate a Beneficiary as provided herein."
4. Section 5.1 Determination of Credits shall be amended to add the
following:
<PAGE>
"(d) The Nonqualified Money Purchase Plan Account of each Participant
shall annually be credited with an amount which is equal to the
contribution rate specified in Article V of the Quality Systems, Inc. Money
Purchase Pension Plan, without regard to any limitations or caps on the
amounts payable under the plan, offset by any amounts credited to the
account of the Participant in the Quality Systems, inc. Money Purchase
Pension Plan."
5. Section 7.1(b) shall be amended to read in its entirety as follows:
"(b) The Vested portion of a Participant Nonqualified Company Matching
Account, his Nonqualified Company Profit Sharing Account and his
Nonqualified Money Purchase plan Account shall be calculated as provided
for in Section 1.1(A)(59) and (1.1(A)(60) of the Qualified Plan or Section
9.2 of the Quality Systems, Inc. Money Purchase Pension Plan, whichever is
applicable; provided that, in any event, the interest of a Participant in
his Nonqualified Company Matching Account, his Nonqualified Profit Sharing
Account or his Nonqualified Money Purchase Plan Account shall become fully
Vested upon the earliest to occur of
(i) his death;
(ii) his termination for other than Cause;
(iii) his 65th birthday;
(iv) his disability;
(v) a Change in Control; or
(vi) termination of the Plan."
IN WITNESS WHEREOF, TRACOR, INC. has caused this instrument to be
executed by its duly authorized officers on this ___ day of December 1997, to be
effective January 1, 1997.
ATTEST: TRACOR, INC.
/s/ Carla D. Marshall /s/ Russell E. Painton
- - ---------------------------- -----------------------------
Carla D. Marshall Russell E. Painton
Assistant Secretary Vice President
<PAGE>
EXHIBIT 4(b)
GDE SYSTEMS, INC.
DEFERRED COMPENSATION PLAN
AMENDED AND RESTATED EFFECTIVE AS OF APRIL 1, 1994
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
Purpose...................................................... 1
ARTICLE 1 Definitions....................................... 1
ARTICLE 2 Selection, Enrollment, Eligibility................ 5
2.1 Selection by Committee............................ 5
2.2 Enrollment Requirements........................... 5
2.3 Eligibility; Commencement of Participation........ 5
ARTICLE 3 Deferral Commitments/Interest Crediting........... 6
3.1 Minimum Deferral.................................. 6
3.2 Maximum Deferral.................................. 6
3.3 Election to Defer; Effect of Election Form........ 6
3.4 Withholding of Annual Deferral Amounts............ 7
3.5 Company Matching Contribution..................... 7
3.6 Interest Crediting Prior to Distribution.......... 7
3.7 Interest Crediting for Installment Distributions.. 7
3.8 FICA Taxes........................................ 8
3.9 Vesting........................................... 8
ARTICLE 4 Short-Term Payout and Unforeseeable Financial
Emergencies....................................... 8
4.1 Short-Term Payout................................. 8
4.2 Withdrawal Payout/Suspensions for Unforeseeable
Emergencies Financial............................ 8
4.3 Withdrawal Election............................... 8
ARTICLE 5 Retirement Benefit................................ 9
5.1 Retirement Benefit................................ 9
5.2 Payment of Retirement Benefits.................... 9
5.3 Death Prior to Completion of Retirement Benefits.. 9
5.4 Death Prior Within One Year of Retirement......... 9
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 6 Survivor Benefit.................................. 9
6.1 Survivor Benefit.................................. 9
6.2 Payment of Survivor Benefits...................... 10
6.3 Restriction in the Event of Suicide or Falsely
Provided Information.............................. 10
ARTICLE 7 Termination Benefit............................... 10
7.1 Termination Benefits.............................. 10
7.2 Payment of Termination Benefit.................... 10
ARTICLE 8 Disability Waiver and Benefit..................... 11
8.1 Disability Waiver................................. 11
8.2 Disability Benefit................................ 11
ARTICLE 9 Beneficiary Designation........................... 12
9.1 Beneficiary....................................... 12
9.2 Beneficiary Designation; Change; Spousal Consent.. 12
9.3 Acknowledgment.................................... 12
9.4 No Beneficiary Designation........................ 12
9.5 Doubt as to Beneficiary........................... 12
9.6 Discharge of Obligations.......................... 12
ARTICLE 10 Leave of Absence.................................. 13
10.1 Paid Leave of Absence............................. 13
10.2 Unpaid Leave of Absence........................... 13
ARTICLE 11 Termination, Amendment or Modification............ 13
11.1 Termination....................................... 13
11.2 Amendment......................................... 13
11.3 Interest Rate in the Event of a Change in
Control........................................... 14
11.4 Effect of Payment................................. 14
ARTICLE 12 Administration.................................... 14
12.1 Committee Duties.................................. 14
12.2 Agents............................................ 14
12.3 Binding Effect of Decisions....................... 14
12.4 Indemnity of Committee............................ 15
12.5 Company Information............................... 15
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE 13 Other Benefits and Agreements.................... 15
13.1 Coordination with Other Benefits................. 15
ARTICLE 14 Claims Procedures................................ 15
14.1 Presentation of Claim............................ 15
14.2 Notification of Decision......................... 15
14.3 Review of a Denied Claim......................... 16
14.4 Decision on Review............................... 16
14.5 Legal Action..................................... 16
ARTICLE 15 Trust............................................ 17
15.1 Establishment of Trust........................... 17
15.2 Interrelationship of the Plan and the Trust...... 17
ARTICLE 16 Miscellaneous.................................... 17
16.1 Unsecured General Creditor....................... 17
16.2 Company's Liability.............................. 17
16.3 Nonassignability................................. 17
16.4 Not a Contract of Employment..................... 17
16.5 Furnishing Information........................... 18
16.6 Terms............................................ 18
16.7 Captions......................................... 18
16.8 Governing Law.................................... 18
16.9 Notice........................................... 18
16.10 Successors....................................... 18
16.11 Spouse's Interest................................ 19
16.12 Validity......................................... 19
16.13 Incompetent...................................... 19
16.14 Distribution in the Event of Taxation............ 19
16.15 Legal Fees To Enforce Rights After Change in
Control.......................................... 19
</TABLE>
iii
<PAGE>
GENERAL DYNAMICS ELECTRONICS SYSTEMS, INC.
DEFERRED COMPENSATION PLAN
Amended and Restated Effective as of April 1, 1994
PURPOSE
The purpose of this plan is to provide specified benefits to a select
group of management, highly compensated employees and Directors who all
contribute materially to the continued growth, development and future business
success of GDE Systems, Inc., a Delaware corporation. This Plan is amended and
restated effective as of April 1, 1994.
ARTICLE I.
DEFINITIONS
-----------
For purposes hereof, unless otherwise clearly apparent from the
context, the following phrases or terms shall have the following indicated
meanings:
1.1 "Account Balance" shall mean, with respect to a Participant, his or her (i)
Elective Deferral Account, plus (ii) Employer Matching Contribution
Account, minus (iii) all distributions made to the Participant. This
balance shall be a bookkeeping entry only and shall be utilized solely as a
device for the measurement and determination of the amounts to be paid to
the Participant pursuant to this Plan.
1.2 "Annual Bonus" shall mean any compensation, in addition to Base Annual
Salary, paid annually (or would have been paid annually if a deferral
election under this Plan had not been made) to a Participant as an employee
under the Company's bonus and incentive plans.
1.3 "Annual Deferral Amount" shall mean that portion of a Participant's Base
Annual Salary, Annual Bonus and/or Directors Fees that a Participant elects
to have, and is, deferred in accordance with Article 3, for any one Plan
Year. In the event of Retirement, Disability, death or a Termination of
Employment prior to the end of a Plan Year, such year's Annual Deferral
Amount shall be the actual amount withheld prior to such event.
1.4 "Base Annual Salary" shall mean the annual compensation, excluding bonuses,
commissions, incentive payments, overtime, non-monetary awards, directors
fees and other fees, paid to a Participant for employment services rendered
to the Company, before reduction for compensation deferred pursuant to all
qualified, non-qualified compensation and Code Section 125 plans of the
Company.
<PAGE>
1.5 "Beneficiary" shall mean one or more persons, trusts, estates or other
entities, designated in accordance with Article 9, that are entitled to
receive benefits under this Plan upon the death of a Participant.
1.6 "Beneficiary Designation Form" shall mean the form established from time to
time by the Committee that a Participant completes, signs and returns to
the Committee to designate one or more Beneficiaries.
1.7 "Board" shall mean the Board of Directors of the Company.
1.8 "Change in Control" shall mean the first of any of the following events:
(a) Any "person" (as that term is used in Section 13 and 14(d)(2) of the
Securities Exchange Act of 1934 ("Exchange Act")), other than the
Carlyle Group, L.P., Carlyle Partners Leveraged Capital Fund I, L.P.,
or any of their affiliates, becomes the beneficial owner (as that term
is used in Section 13(d) of the Exchange Act), directly or indirectly,
of 50% or more of the Company's capital stock entitled to vote in the
election of directors;
(b) Any consolidation or merger of the Company, other than a merger of the
Company in which the holders of the common stock of the Company
immediately prior to the merger hold more than 50% of the common stock
of the surviving corporation immediately after the merger;
(c) The shareholders of the Company approve any plan or proposal for the
liquidation or dissolution of the Company; or
(d) Substantially all of the assets of the Company are sold or otherwise
transferred to parties that are not within a "controlled group of
corporations" (as defined in Section 1563 of the Internal Revenue Code
of 1986, as amended) in which the Company is a member.
1.9 "Claimant" shall have the meaning set forth in Section 14.1.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as amended.
1.11 "Committee" shall mean the administrative committee appointed to manage and
administer the Plan in accordance with its provisions pursuant to Article
12.
1.12 "Company" shall mean GDE Systems, Inc., a Delaware corporation.
1.13 "Company Matching Contribution" shall mean any contribution made to the
Trust by the Company in accordance with Section 3.5 below that is credited
to a Participant's Employer Matching Contribution Account.
-2-
<PAGE>
1.14 "Crediting Rate" shall mean an interest rate determined each year by the
Committee, in its sole discretion, that is equal to the "Moody's Seasoned
Corporate Bond" rate that is the most recently published rate prior to the
last day of the month of December of the Plan Year that precedes the Plan
Year for which the rate will be used. The Moody's Seasoned Corporate Bond
rate is an arithmetic average of yields of representative bonds, including
industriales, public utilities, Aaa, Aa, A and Baa bonds, published by
Moody's Investors Service, Inc. or any successor to that service.
1.15 "Director" shall mean any member of the Board.
1.16 "Directors Fees" shall mean the annual fees paid by the Company, including
retainer fees and meetings fees, as compensation for serving on the Board.
1.17 "Disability" shall mean a period of disability during which a Participant
qualifies for benefits under the Company's long-term disability plan or, if
a Participant does not participate in such a plan, a period of disability
during which the Participant would have qualified for benefits under such a
plan, as determined in the sole discretion of the Committee, had the
Participant been a participant in such a plan.
1.18 "Disability Benefit" shall mean the benefit set forth in Article 8.
1.19 "Election Form" shall mean the form established from time to time by the
Committee that a Participant completes, signs and returns to the Committee
to make an election under the Plan.
1.20 "Elective Deferral Account" shall mean (i) the sum of a Participant's
Annual Deferral Amounts, plus (ii) interest thereon credited in accordance
with all the applicable interest crediting provisions of the Plan, reduced
(iii) by distributions of all or any portion of the Participant's Annual
Deferral Amounts plus interest thereon. This account shall be a
bookkeeping entry only and shall be utilized solely as a device for the
measurement and determination of the amounts to be paid to the Participant
pursuant to this Plan.
1.21 "Employer Matching Contribution Account" shall mean (i) all Employer
Matching Contributions allocated to a Participant, plus (ii) interest
credited thereon in accordance with all the applicable interest crediting
provisions of the Plan, reduced (iii) by distributions of all or any
portion of the Participant's Employer Matching Contributions plus interest
thereon. This account shall be a bookkeeping entry only and shall be
utilized solely as a device for the measurement and determination of the
amounts to be paid to the Participant pursuant to this Plan.
1.22 "Participant" shall mean any employee or Director of the Company (i) who is
selected to participate in the Plan, (ii) who elects to participate in the
Plan, (iii) who signs a Plan Agreement, an Election Form and a Beneficiary
Designation Form, (iv) whose
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signed Plan Agreement, Election Form and Beneficiary Designation Form are
accepted by the Committee, (v) who commences participation in the Plan on
his or her Plan Entry Date, and (vi) whose Plan Agreement has not
terminated.
1.23 "Plan" shall mean the Company's 1992 Deferred Compensation Plan, which
shall be evidenced by this instrument and by each Plan Agreement, as
amended from time to time.
1.24 "Plan Agreement" shall mean a written agreement, as may be amended from
time to time, which is entered into by and between the Company and a
Participant. Each Plan Agreement executed by a Participant shall provide
for the entire benefit to which such Participant is entitled to under the
Plan, and the Plan Agreement bearing the latest date of acceptance by the
Committee shall govern such entitlement.
1.25 "Plan Year" shall, for the first Plan Year, begin on December 5, 1992, and
end on December 31, 1993. That Plan Year shall be referred to as the
"1992-1993 Plan Year." For each Plan Year thereafter, the Plan Year shall
begin on January I of each year and continue through December 31.
1.26 "Preferred Rate" for a Plan Year shall be 130% of the Crediting Rate.
1.27 "Retirement", "Retires" or "Retired" shall mean, with respect to an
employee, severance from employment with the Company for any reason other
than a leave of absence, death or Disability on or after the earlier of the
attainment of (a) age sixty-five (65) or (b) age fifty-five (55) with five
(5) Years of Service; and shall mean, with respect to a Director who is not
an employee, severance of his or her directorship with the Company on or
after the earlier of the attainment of (y) age sixty-five (65) or (z) age
fifty-five (55) with five (5) years of board service. If a Participant is
both an employee and a Director, Retirement shall not occur until he or she
retires as both an employee and a Director, provided, however, that such a
Participant may elect prior to retirement, in accordance with the policies
and procedures established by the Committee, to retire for purposes of this
Plan at the time he or she retires as an employee of the Company.
1.28 "Retirement Benefit" shall mean the benefit set forth in Article 5.
1.29 "Short-Term Payout" shall mean the payout set forth in Section 4.1.
1.30 "Survivor Benefit" shall mean the benefit set forth in Article 6.
1.31 "Termination Benefit" shall mean the benefit set forth in Article 7.
1.32 "Termination of Employment" shall mean the ceasing of employment with or
service as a Director of the Company, voluntarily or involuntarily, for any
reason other than
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Retirement, Disability, leave of absence or death. If a Participant is
both an employee and a Director, a Termination of Employment shall occur
only upon the termination of the last position held; provided, however,
that such a Participant may elect, in accordance with the policies and
procedures established by the Committee, to be treated for purposes of this
Plan as having experienced a Termination of Employment at the time he or
she ceases employment with the Company as an employee.
1.33 "Trust" shall mean the trust established pursuant to that certain Trust
Agreement, dated as of December 5, 1992, between the Company and the
Trustee named therein, as amended from time to time.
1.34 "Unforeseeable Financial Emergency" shall mean an unanticipated emergency
that is caused by an event beyond the control of the Participant that would
result in severe financial hardship to the Participant resulting from (i) a
sudden and unexpected illness or accident of the Participant or a dependent
of the Participant, (ii) a loss of the Participant's property due to
casualty, or (iii) such other extraordinary and unforeseeable circumstances
arising as a result of events beyond the control of the Participant, all as
determined in the sole discretion of the Committee.
1.35 "Years of Plan Participation" shall mean the total number of full Plan
Years a Participant has been a participant in the Plan. For purposes of a
Participant's first Plan Year of participation only, any partial Plan Year
of participation shall be treated as a full Plan Year.
1.36 "Years of Service" shall mean the total number of years in which a
Participant has been employed by the Company and has completed in each of
those years 1,000 hours of service. For purposes of this definition only,
a year of employment shall be a 365 day period (or 366 day period in the
case of a leap year) that, for the first year of employment, commences on
the employee's date of hiring and that, for any subsequent year, commences
on an anniversary of that hiring date.
ARTICLE II.
SELECTION, ENROLLMENT, ELIGIBILITY
----------------------------------
2.1 SELECTION BY COMMITTEE. Participation in the Plan shall be limited to a
select group of management, highly compensated employees and Directors of
the Company. From that group, the Committee shall select, in its sole
discretion, employees and Directors of the Company to participate in the
Plan.
2.2 ENROLLMENT REQUIREMENTS. As a condition to participation, each selected
employee or Director shall complete, execute and return to the Committee
within 30 days of selection a Plan Agreement, an Election Form and a
Beneficiary Designation Form. In
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addition, the Committee shall establish from time to time such other
enrollment requirements as it determines in its sole discretion are
necessary.
2.3 ELIGIBILITY; COMMENCEMENT OF PARTICIPATION. Provided an employee or a
Director selected to participate in the Plan has met all enrollment
requirements set forth in this Plan and required by the Committee,
including returning all required documents to the Committee within 30 days
of selection, that employee or Director shall commence participation in the
Plan upon the timely completion of those requirements and the Committee's
acceptance of all submitted documents. If the employee or Director fails
to meet all such requirements within the required 30 day period, that
employee or Director shall not be eligible to participate in the Plan until
the first day of the Plan Year following the delivery to and acceptance by
the Committee of the required documents.
ARTICLE III.
DEFERRAL COMMITMENTS/INTEREST CREDITING
---------------------------------------
3.1 MINIMUM DEFERRAL.
(a) MINIMUM. For each Plan Year, a Participant may elect to defer Base
Annual Salary, Annual Bonus and/or Directors Fees, provided that he or
she must defer, as a minimum, at least $2,000 of each type of deferral
that is elected. For example, if the Participant elects to defer Base
Annual Salary and Directors Fees, he must defer at least $2,000 of
Base Annual Salary and $2,000 of Directors Fees. If no deferral
election is timely made, the amount deferred for a Plan Year shall be
zero.
(b) SHORT PLAN YEAR. If a Participant first becomes a Participant after
the first day of a Plan Year, and if he or she so elects on the
Election Form, the minimum Base Annual Salary, Annual Bonus and/or
Directors Fees deferral shall be an amount equal to $2,000 for each
type of deferral that is elected, multiplied by a fraction, the
numerator of which is the number of complete months remaining in the
Plan Year and the denominator of which is 12.
3.2 MAXIMUM DEFERRAL.
(a) BASE ANNUAL SALARY. A Participant may defer up to one hundred percent
(100%) of his or her Base Annual Salary for the 1992-1993 Plan Year
and up to seventy-five percent (75%) of his or her Base Annual Salary
for each Plan Year thereafter.
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(b) ANNUAL BONUS AND DIRECTORS FEES. For each Plan Year, a Participant
may defer up to one hundred percent (100%) of his or her Annual Bonus
and/or Directors Fees.
3.3 ELECTION TO DEFER; EFFECT OF ELECTION FORM. In connection with a
Participant's commencement of participation in the Plan, the Participant
shall make a deferral election by delivering to the Committee a completed
and signed Election Form, which election and form must be accepted by the
Committee for a valid election to exist. For each succeeding Plan Year, a
new Election Form must be delivered to the Committee, in accordance with
its rules and procedures, before the end of the Plan Year preceding the
Plan Year for which the election is made. If no Election Form is timely
delivered for a Plan Year, no Annual Deferral Amount shall be withheld for
that Plan Year.
3.4 WITHHOLDING OF ANNUAL DEFERRAL AMOUNTS. For each Plan Year, the Base
Annual Salary portion of the Annual Deferral Amount shall be withheld each
payroll period in equal amounts from the Participant's Base Annual Salary.
The Annual Bonus and Directors Fees portion of the Annual Deferral Amount
shall be withheld at the time the Annual Bonus and/or Directors Fees are or
otherwise would be paid to the Participant.
3.5 COMPANY MATCHING CONTRIBUTION. For each Plan Year, and in the sole
discretion of the Company, the Company may make contributions to the Trust
based on a Participant's deferral elections. These matching contributions
shall be credited to the Participant's Employer Matching Contribution
Account in accordance with rules and procedures established from time to
time by the Committee in its sole discretion.
3.6 INTEREST CREDITING PRIOR TO DISTRIBUTION. Prior to any distribution of
benefits under Articles 4, 5, 6, 7 or 8, interest shall be credited and
compounded annually on a Participant's Account Balance as though the Annual
Deferral Amount and the Employer Matching Contribution for that Plan Year
was withheld at the beginning of the Plan Year or, in the case of the first
year of Plan participation, were withheld on the date that the Participant
commenced participation in the Plan. The rate of interest for crediting
shall be the Preferred Rate, unless otherwise provided in this Plan. In
the event of Retirement, Disability, death or a Termination of Employment
prior to the end of a Plan Year, the basis for that year's interest
crediting will be a fraction of the full year's interest, based on the
number of full months that the Participant was employed with the Company
during the Plan Year prior to the occurrence of such event. If a
distribution is made in accordance with the terms and provisions of this
Plan, for purposes of crediting interest, the Account Balance shall be
reduced as of the first day of the month in which the distribution is made.
3.7 INTEREST CREDITING FOR INSTALLMENT DISTRIBUTIONS. In the event a benefit
is paid in installments under Articles 5, 6 or 8, interest shall be
credited and compounded on the
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undistributed portion of the Participant's Account Balance commencing on
the first day of the month in which the Participant terminates employment,
using a fixed interest rate that is determined by averaging the Preferred
Rates for the Plan Year in which installment payments commence and the four
(4) preceding Plan Years. If a Participant has completed fewer than five
(5) Plan Years, this average shall be determined using the Preferred Rates
for the Plan Years during which the Participant participated in the Plan.
In the event a benefit is paid in installments under Article 7, interest
shall be credited and compounded on the undistributed portion of the
Participant's Account Balance in the manner described above, except that
the fixed interest rate shall be determined by averaging Crediting Rates
(rather than Preferred Rates) if, at the time of Termination of Employment,
the Participant had completed fewer than five Years of Plan Participation.
3.8 FICA TAXES. For each Plan Year in which an Annual Deferral Amount is being
withheld, the Company shall ratably withhold from that portion of the
Participant's Base Annual Salary that is not being deferred, the
Participant's share of FICA taxes based on an amount equal to his or her
Base Annual Salary before reduction by the Annual Deferral Amount. In
addition, if a Participant vests in any portion of his or her Company
Matching Contribution, the applicable FICA taxes on that vested portion
shall be withheld from the Participant's Base Annual Salary that is not
being deferred in accordance with the rules and procedures of the
Committee. If necessary, the Committee shall reduce the Annual Deferral
Amount in order to comply with this Section 3.8.
3.9 VESTING. A Participant shall always be 100% vested in his or her Elective
Deferral Account and shall vest in his or her Employer Matching
Contribution Account as determined by the Company in its sole discretion.
ARTICLE IV.
SHORT-TERM PAYOUT AND UNFORESEEABLE FINANCIAL EMERGENCIES
---------------------------------------------------------
4.1 SHORT-TERM PAYOUT. In connection with each election to defer an Annual
Deferral Amount, a Participant may elect to receive a future "Short-Term
Payout" from the Plan with respect to that Annual Deferral Amount and the
Employer Matching Contributions, if any, made as a result of that deferral
Annual Deferral Amount. The Short-Term Payout shall be a lump sum payment
in an amount that is equal to sum of (i) the Annual Deferral Amount, (ii)
the related Employer Matching Contribution, and (iii) interest on those
amounts credited at the Preferred Rate, and it shall be paid within 60 days
of the first day of the Plan Year that is 8 years after the first day of
the Plan Year in which the Annual Deferral Amount is actually deferred.
4.2 WITHDRAWAL PAYOUT/SUSPENSIONS FOR UNFORESEEABLE FINANCIAL EMERGENCIES. If
the Participant experiences an Unforeseeable Financial Emergency, the
Participant may
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petition the Committee to (i) suspend any deferrals required to be made by
a Participant and/or (ii) receive a partial or full payout from the Plan.
The payout shall not exceed the lesser of the Participant's Account
Balance, calculated as if such Participant were receiving a Termination
Benefit, or the amount reasonably needed to satisfy the Unforeseeable
Financial Emergency. If, subject to the sole discretion of the Committee,
the petition for a suspension and/or payout is approved, suspension shall
take effect upon the date of approval and any payout shall be made within
60 days of the date of approval.
4.3 WITHDRAWAL ELECTION. A Participant may elect, at any time, to withdraw all
of his or her Account Balance less a 10% withdrawal penalty (the net amount
shall be referred to as the "Withdrawal Amount"). No partial withdrawals
of that balance shall be allowed. The Participant shall make this election
by giving the Committee advance written notice of the election in a form
determined from time to time by the Committee. The penalty shall be equal
to 10% of the Participant's Account Balance determined immediately prior to
the withdrawal. The Participant shall be paid the Withdrawal Amount within
60 days of his or her election. Once the Withdrawal Amount is paid, the
Participant's participation in the Plan shall terminate and the Participant
shall not be eligible to participate in the Plan in the future.
ARTICLE V.
RETIREMENT BENEFIT
------------------
5.1 RETIREMENT BENEFIT. A Participant who Retires shall receive, as a
Retirement Benefit, his or her Account Balance.
5.2 PAYMENT OF RETIREMENT BENEFITS. A Participant, in connection with his or
her commencement of participation in the Plan, shall elect on an Election
Form to receive the Retirement Benefit in a lump sum or in equal monthly
payments over a period of 60, 120 or 180 months. The Participant may
change this election to an allowable alternative payout period by
submitting a new Election Form to the Committee, provided that any such
Election Form is submitted at least one (1) year prior to the Participant's
Retirement. The Election Form most recently accepted by the Committee
shall govern the payout of the Retirement Benefit. The lump sum payment
shall be made, or installment payments shall commence, no later than 60
days from the date the Participant Retires.
5.3 DEATH PRIOR TO COMPLETION OF RETIREMENT BENEFITS. If a Participant dies
after Retirement but before the Retirement Benefit is paid in full, the
Participant's unpaid Retirement Benefit payments shall continue and shall
be paid to the Participant's Beneficiary (a) over the remaining number of
months and in the same amounts as that benefit would have been paid to the
Participant had the Participant survived, or (b) in a lump sum, if allowed
in the sole discretion of the Committee, that is the present
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value equivalent of the remaining unpaid benefits, using the interest rate
described in Section 3.7 above as the discount rate.
5.4 DEATH PRIOR WITHIN ONE YEAR OF RETIREMENT. Despite the foregoing, if the
Participant dies within one year after his or her Retirement, the
Retirement Benefit under this Article 5 shall terminate, and his or her
Beneficiary will be paid the Survivor Benefit in accordance with Article 6
below.
ARTICLE VI.
SURVIVOR BENEFIT
----------------
6.1 SURVIVOR BENEFIT. Except as provided in Section 6.3 below, if a
Participant dies before he or she Retires, experiences a Termination of
Employment or suffers a Disability, or dies within one year after his or
her Retirement, the Participant's Beneficiary shall receive a Survivor
Benefit equal to:
(a) the greater of (i) the Participant's vested Account Balance at
the time of his or her death, or (ii) 10 times the cash and other
amounts deferred within the last 12 months before the
Participant's death pursuant to all of the Company's deferral
plans (not to exceed $2,000,000) less any distributions from such
plans in the 12 months preceding the Participant's death, reduced
(but not below zero) by
(b) the benefits, if any, paid to a Participant under Article 5 above
prior to his or her death.
6.2 PAYMENT OF SURVIVOR BENEFITS. The Survivor Benefit shall be paid in a lump
sum. However, if the Survivor Benefit exceeds $25,000, payment may, at the
sole discretion of the Committee, be made in equal monthly payments over a
period of time. In no event, however, shall that period of time exceed the
payment period previously elected by the Participant for the payment of the
Retirement Benefit, or, if no election was made, 15 years. The first (or
only payment, if made in lump sum) shall be made within 60 days of the
Committee's receiving proof of the Participant's death.
6.3 RESTRICTION IN THE EVENT OF SUICIDE OR FALSELY PROVIDED INFORMATION. In
the event of a Participant's suicide within 2 years after the Participant
first becomes a Participant, or in the event the Participant's death is
determined to be from a bodily or mental cause or causes, the information
about which was withheld, knowingly concealed, or falsely provided by the
Participant if requested to furnish evidence of good health, the Survivor
Benefit shall be equal to the sum of the Participant's Annual Deferral
Amounts, without interest, all determined as of his or her date of death.
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ARTICLE VII.
TERMINATION BENEFIT
-------------------
7.1 TERMINATION BENEFITS. If a Participant experiences a Termination of
Employment prior to his or her Retirement, death or Disability, the
Participant shall receive a Termination Benefit, which shall be equal to
the Participant's vested Account Balance, with interest credited in the
manner provided in Section 3.6 above, but using the applicable interest
rate set forth in the following schedule:
COMPLETION OF YEARS OF PLAN PARTICIPATION APPLICABLE RATE
Less than five years Crediting Rate
Five or more years Preferred Rate
7.2 PAYMENT OF TERMINATION BENEFIT. The Termination Benefit shall be paid in a
lump sum within 60 days of the Termination of Employment or (at the sole
discretion of the Company) in equal monthly payments over a period of time.
In no event, however, shall that period of time exceed fifteen (15) years.
If equal monthly payments are made, the first shall be made within 60 days
of Termination of Employment from the Company. The withdrawal election
discussed in Article 4.3 above shall be available to receive any remaining
Account Balance of a Termination Benefit.
ARTICLE VIII.
DISABILITY WAIVER AND BENEFIT
-----------------------------
8.1 DISABILITY WAIVER.
(a) ELIGIBILITY. By participating in the Plan, all Participants are
eligible for this waiver.
(b) WAIVER OF DEFERRAL; CREDIT FOR PLAN YEAR OF DISABILITY. A Participant
who is determined by the Committee to be suffering from a Disability
shall be excused from fulfilling that portion of the Annual Deferral
Amount commitment that would otherwise have been withheld from a
Participant's Base Annual Salary, Annual Bonus and/or Directors Fees
for the Plan Year during which the Participant first suffers a
Disability. In addition, the Participant's Account Balance shall be
credited with that portion of the Annual Deferral Amount commitment
that is excused in accordance with the preceding sentence, unless the
Disability ceases in the Plan Year that it commences, in which case,
the crediting shall apply only for the period of Disability.
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(c) RETURN TO WORK. If a Participant returns to employment with the
Company after a Disability ceases, the Participant may elect to defer
an Annual Deferral Amount for the Plan Year following his or her
return to employment and for every Plan Year thereafter; provided such
deferral elections are otherwise allowed and an Election Form is
delivered to and accepted by the Committee for each such election in
accordance with Section 3.3 above.
8.2 DISABILITY BENEFIT. A Participant suffering a Disability shall, for
benefit purposes under this Plan, continue to be considered to be employed
and shall be eligible for the benefits provided for in Articles 4, 5, 6 or
7 in accordance with the provisions of those Articles. Notwithstanding the
above, the Committee shall have the right, in its sole and absolute
discretion and for purposes of this Plan only, to terminate a Participant's
employment or directorship at any time after such Participant is determined
to be permanently disabled under the Company's long-term disability plan or
would have been determined to be permanently disabled had he or she
participated in that plan. In determining the Participant's Account
Balance for purposes of the Disability Benefit described in the previous
sentence, the Preferred Rate shall be used in lieu of the rates specified
in Section 7.1.
ARTICLE IX.
BENEFICIARY DESIGNATION
-----------------------
9.1 BENEFICIARY. Each Participant shall have the right, at any time, to
designate his or her Beneficiary (both primary as well as contingent) to
receive any benefits payable under the Plan to a Beneficiary upon the death
of a Participant. The Beneficiary designated under this Plan may be the
same as or different from the Beneficiary designation under any other plan
of the Company in which the Participant participates in.
9.2 BENEFICIARY DESIGNATION; CHANGE; SPOUSAL CONSENT. A Participant shall
designate his or her Beneficiary by completing and signing the Beneficiary
Designation Form, and returning it to the Committee or its designated
agent. A Participant shall have the right to change a Beneficiary by
completing, signing and otherwise complying with the terms of the
Beneficiary Designation Form and the Committee's rules and procedures, as
in effect from time to time. If the Participant names someone other than
his or her spouse as a Beneficiary, a spousal consent, in the form
designated by the Committee, must be signed by that Participant's spouse
and returned to the Committee. Upon the acceptance by the Committee of a
new Beneficiary Designation Form, all Beneficiary designations previously
filed shall be cancelled. The Committee shall be entitled to rely on the
last Beneficiary Designation Form filed by the Participant and accepted by
the Committee prior to his or her death.
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9.3 ACKNOWLEDGMENT. No designation or change in designation of a Beneficiary
shall be effective until received, accepted and acknowledged in writing by
the Committee or its designated agent.
9.4 NO BENEFICIARY DESIGNATION. If a Participant fails to designate a
Beneficiary as provided in Sections 9.1, 9.2 and 9.3 above or, if all
designated Beneficiaries predecease the Participant or die prior to
complete distribution of the Participant's benefits, then the Participant's
designated Beneficiary shall be deemed to be his or her surviving spouse.
If the Participant has no surviving spouse, the benefits remaining under
the Plan to be paid to a Beneficiary shall be payable to the executor or
personal representative of the Participant's estate.
9.5 DOUBT AS TO BENEFICIARY. If the Committee has any doubt as to the proper
Beneficiary to receive payments pursuant to this Plan, the Committee shall
have the right, exercisable in its discretion, to cause the Company to
withhold such payments until this matter is resolved to the Committee's
satisfaction.
9.6 DISCHARGE OF OBLIGATIONS. The payment of benefits under the Plan to a
Beneficiary shall fully and completely discharge the Company and the
Committee from all further obligations under this Plan with respect to the
Participant, and that Participant's Plan Agreement shall terminate upon
such full payment of benefits.
ARTICLE X.
LEAVE OF ABSENCE
----------------
10.1 PAID LEAVE OF ABSENCE. If a Participant is authorized by the Company for
any reason to take a paid leave of absence from the employment of the
Company, the Participant shall continue to be considered employed by the
Company and the Annual Deferral Amount shall continue to be withheld during
such paid leave of absence in accordance with Section 3.3.
10.2 UNPAID LEAVE OF ABSENCE. If a Participant is authorized by the Company for
any reason to take an unpaid leave of absence from the employment of the
Company, the Participant shall continue to be considered employed by the
Company and the Participant shall be excused from making deferrals until
the earlier of the date the leave of absence expires or the Participant
returns to a paid employment status. Upon such expiration or return,
deferrals shall resume for the remaining portion of the Plan Year in which
the expiration or return occurs, based on the deferral election, if any,
made for that Plan Year. If no election was made for that Plan Year, no
deferral shall be withheld.
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ARTICLE XI.
TERMINATION, AMENDMENT OR MODIFICATION
--------------------------------------
11.1 TERMINATION. The Company reserves the right to terminate the Plan at any
time. Action by the Company hereunder shall be taken by a Committee of
members selected by the Company. Upon the termination of the Plan, all
Plan Agreements shall terminate and a Participant's Account Balance shall
be paid out in accordance with the benefits that the Participant would have
received if the Participant had experienced a Termination of Employment on
the date of Plan termination or, if Plan termination occurs after the date
upon which the Participant was eligible to Retire, the Participant had
Retired on the date of Plan termination. Prior to a Change in Control, the
Company shall have the right, at its sole discretion, and notwithstanding
any elections made by the Participant, to pay such benefits in a lump sum
or in monthly installments for up to 15 years, with interest credited
during the installment period as provided in Section 3.7, but utilizing an
average of Crediting Rates instead of an average of Preferred Rates. After
a Change in Control, the Company shall be required to pay such benefits in
a lump sum. The termination of the Plan shall not adversely affect any
Participant or Beneficiary who has become entitled to the payment of any
benefits under the Plan as of the date of termination; provided however,
that the Company shall have the right to accelerate installment payments by
paying the present value equivalent of such payments, using the Crediting
Rate for the Plan Year in which the termination occurs as the discount
rate, in a lump sum or pursuant to a different payment schedule.
11.2 AMENDMENT. The Company may, at any time, amend or modify the Plan in whole
or in part, provided, however, that no amendment or modification shall be
effective to decrease or restrict the present value equivalent, using the
Crediting Rate for the Plan Year of the amendment or modification as the
discount rate, of a Participant's Account Balance in existence at the time
the amendment or modification is made, calculated as if the Participant had
experienced a Termination of Employment as of the effective date of the
amendment or modification, or, if the amendment or modification occurs
after the date upon which the Participant was eligible to Retire, the
Participant had Retired as of the effective date of the amendment or
modification. Action by the Company hereunder shall be taken by a
Committee of members selected by the Company. The amendment or
modification of the Plan shall not affect any Participant or Beneficiary
who has become entitled to the payment of benefits under the Plan as of the
date of the amendment or modification; provided however, that the Company
shall have the right to accelerate installment payments by paying the
present value equivalent of such payments, using the Crediting Rate for the
Plan Year of the amendment or modification as the discount rate, in a lump
sum or pursuant to a different payment schedule.
11.3 INTEREST RATE IN THE EVENT OF A CHANGE IN CONTROL. If a Change in Control
occurs, the applicable interest rate to be used in determining a
Participant's benefit in
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connection with a Termination of Employment after the Change in Control, or
a Plan termination, amendment or modification under Sections 11.1 and 11.2,
shall be the Preferred Rate. However, the Crediting Rate for the Plan Year
in which the Change in Control occurs, and not the Preferred Rate, shall be
used as the discount rate for determining present value.
11.4 EFFECT OF PAYMENT. The full payment of the applicable benefit under
Articles 5, 6, 7 or 8 of the Plan shall completely discharge all
obligations to a Participant under this Plan and the Participant's Plan
Agreement shall terminate.
ARTICLE XII.
ADMINISTRATION
--------------
12.1 COMMITTEE DUTIES. This Plan shall be administered by a Committee which
shall consist of persons approved by the Board of the Company. Members of
the Committee may be Participants under this Plan. The Committee shall
also have the discretion and authority to make, amend, interpret, and
enforce all appropriate rules and regulations for the administration of
this Plan and decide or resolve any and all questions including
interpretations of this Plan, as may arise in connection with the Plan.
12.2 AGENTS. In the administration of this Plan, the Committee may, from time
to time, employ agents and delegate to them such administrative duties as
it sees fit and may from time to time consult with counsel who may be
counsel to the Company.
12.3 BINDING EFFECT OF DECISIONS. The decision or action of the Committee with
respect to any question arising out of or in connection with the
administration, interpretation and application of the Plan and the rules
and regulations promulgated hereunder shall be final and conclusive and
binding upon all persons having any interest in the Plan.
12.4 INDEMNITY OF COMMITTEE. The Company shall indemnify and hold harmless the
members of the Committee against any and all claims, losses, damages,
expenses or liabilities arising from any action or failure to act with
respect to this Plan, except in the case of willful misconduct by the
Committee or any of its members.
12.5 COMPANY INFORMATION. To enable the Committee to perform its functions, the
Company shall supply full and timely information to the Committee on all
matters relating to the compensation of its Participants, the date and
circumstances of the Retirement, Disability, death or Termination of
Employment of its Participants, and such other pertinent information as the
Committee may reasonably require.
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<PAGE>
ARTICLE XIII.
OTHER BENEFITS AND AGREEMENTS
-----------------------------
13.1 COORDINATION WITH OTHER BENEFITS. Except as provided in this Section, the
benefits provided for a Participant and Participant's Beneficiary under the
Plan are in addition to any other benefits available to such Participant
under any other plan or program for employees or directors of the Company.
The Plan shall supplement and shall not supersede, modify or amend any
other such plan or program except as may otherwise be expressly provided.
ARTICLE XIV.
CLAIMS PROCEDURES
-----------------
14.1 PRESENTATION OF CLAIM. Any Participant or Beneficiary of a deceased
Participant (such Participant or Beneficiary being referred to below as a
"Claimant") may deliver to the Committee a written claim for a
determination with respect to the amounts distributable to such Claimant
from the Plan. If such a claim relates to the contents of a notice
received by the Claimant, the claim must be made within 60 days after such
notice was received by the Claimant. All other claims must be made within
180 days of the date on which the event that caused the claim to arise
occurred. The claim must state with particularity the determination
desired by the Claimant.
14.2 NOTIFICATION OF DECISION. The Committee shall consider a Claimant's claim
within a reasonable time, and shall notify the Claimant in writing:
(a) that the Claimant's requested determination has been made, and that
the claim has been allowed in full; or
(b) that the Committee has reached a conclusion contrary, in whole or in
part, to the Claimant's requested determination, and such notice must
set forth in a manner calculated to be understood by the Claimant:
(i) the specific reason(s) for the denial of the claim, or any
part of it;
(ii) specific reference(s) to pertinent provisions of the Plan
upon which such denial was based;
(iii) a description of any additional material or information
necessary for the Claimant to perfect the claim, and an
explanation of why such material or information is
necessary; and
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<PAGE>
(iv) an explanation of the claim review procedure set forth in
Section 14.3 below.
14.3 REVIEW OF A DENIED CLAIM. Within 60 days after receiving a notice from the
Committee that a claim has been denied, in whole or in part, a Claimant (or
the Claimant's duly authorized representative) may file with the Committee
a written request for a review of the denial of the claim. Thereafter, but
not later than 30 days after the review procedure began, the Claimant (or
the Claimant's duly authorized representative):
(a) may review pertinent documents;
(b) may submit written comments or other documents; and/or
(c) may request a hearing, which the Committee, in its sole discretion,
may grant.
14.4 DECISION ON REVIEW. The Committee shall render its decision on review
promptly, and not later than 60 days after the filing of a written request
for review of the denial, unless a hearing is held or other special
circumstances require additional time, in which case the Committee's
decision must be rendered within 120 days after such date. Such decision
must be written in a manner calculated to be understood by the Claimant,
and it must contain:
(1) specific reasons for the decision;
(2) specific reference(s) to the pertinent Plan provisions upon which the
decision was based; and
(3) such other matters as the Committee deems relevant.
14.5 LEGAL ACTION. A Claimant's compliance with the foregoing provisions of
this Article 14 is a mandatory prerequisite to a Participant's right to
commence any legal action with respect to any claim for benefits under this
Plan.
ARTICLE XV.
TRUST
-----
15.1 ESTABLISHMENT OF TRUST. The Company shall establish the Trust and shall at
least annually transfer over to the Trust such assets as the Committee
determines, in its sole discretion, are necessary to provide for the
Company's future liabilities created with respect to the Annual Deferral
Amounts, Employer Matching Contributions and interest credits for that
year.
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<PAGE>
15.2 INTERRELATIONSHIP OF THE PLAN AND THE TRUST. The provisions of the Plan
and the Plan Agreement shall govern the rights of a Participant to receive
distributions pursuant to the Plan. The provisions of the Trust shall
govern the rights of the Participant and the creditors of the Company to
the assets transferred to the Trust. The Company shall at all times remain
liable to carry out its obligations under the Plan. The Company's
obligations under the Plan may be satisfied with Trust assets distributed
pursuant to the terms of the Trust.
ARTICLE XVI.
MISCELLANEOUS
-------------
16.1 UNSECURED GENERAL CREDITOR. Participants and their Beneficiaries, heirs,
successors and assigns shall have no legal or equitable rights, interest or
claims in any property or assets of the Company. Any and all of the
Company's assets shall be, and remain, the general, unpledged unrestricted
assets of the Company. The Company's obligation under the Plan shall be
merely that of an unfunded and unsecured promise to pay money in the
future. Amounts payable to a Participant or his or her Beneficiary shall
be paid from the general assets of the Company exclusively.
16.2 COMPANY'S LIABILITY. The Company's liability for the payment of benefits
shall be defined only by the Plan and the Plan Agreement, as entered into
between the Company and a Participant. The Company shall have no
obligation to a Participant under the Plan except as expressly provided in
the Plan and his or her Plan Agreement.
16.3 NONASSIGNABILITY. Neither a Participant nor any other person shall have
any right to commute, sell, assign, transfer, pledge, anticipate, mortgage
or otherwise encumber, transfer, hypothecate or convey in advance of actual
receipt, the amounts, if any, payable hereunder, or any part thereof, which
are, and all rights to which are expressly declared to be unassignable and
nontransferable, except that the foregoing shall not apply to any family
support obligations set forth in a court order. No part of the amounts
payable shall, prior to actual payment, be subject to seizure or
sequestration for the payment of any debts, judgments, alimony or separate
maintenance owed by a Participant or any other person, nor be transferable
by operation of law in the event of a Participant's or any other person's
bankruptcy or insolvency.
16.4 NOT A CONTRACT OF EMPLOYMENT. The terms and conditions of this Plan shall
not be deemed to constitute a contract of employment between the Company
and the Participant. Such employment is hereby acknowledged to be an "at
will" employment relationship that can be terminated at any time for any
reason, with or without cause, unless expressly provided in a written
employment agreement. Nothing in this Plan shall be deemed to give a
Participant the right to be retained in the service of the
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<PAGE>
Company or to be retained as a Director, or to interfere with the right of
the Company to discipline or discharge the Participant at any time.
16.5 FURNISHING INFORMATION. A Participant will cooperate with the Committee by
furnishing any and all information requested by the Committee and take
such other actions as may be requested in order to facilitate the
administration of the Plan and the payments of benefits hereunder,
including but not limited to taking such physical examinations as the
Committee may deem necessary.
16.6 TERMS. Whenever any words are used herein in the singular or in the
plural, they shall be construed as though they were used in the plural or
the singular, as the case may be, in all cases where they would so apply.
16.7 CAPTIONS. The captions of the articles, sections and paragraphs of this
Plan are for convenience only and shall not control or affect the meaning
or construction of any of its provisions.
16.8 GOVERNING LAW. The provisions of this Plan shall be construed and
interpreted according to the laws of the State of California.
16.9 NOTICE. Any notice or filing required or permitted to be given to the
Committee under this Plan shall be sufficient if in writing and hand-
delivered, or sent by registered or certified mail, to:
Compensation Committee
GDE Systems, Inc.
5011 Kearny Villa Road
San Diego, California 92123-1447
Such notice shall be deemed given as of the date of delivery or, if
delivery is made by mail, as of the date shown on the postmark on the
receipt for registration or certification.
Any notice or filing required or permitted to be given to a Participant
under this Plan shall be sufficient if in writing and hand-delivered, or
sent by mail, to the last known address of the Participant.
16.10 SUCCESSORS. The provisions of this Plan shall bind and inure to the
benefit of the Company and its successors and assigns and the Participant,
the Participant's Beneficiaries, and their permitted successors and
assigns.
16.11 SPOUSE'S INTEREST. The interest in the benefits hereunder of a spouse of
a Participant who has predeceased the Participant shall automatically pass
to the Participant and
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<PAGE>
shall not be transferable by such spouse in any manner, including but not
limited to such spouse's will, nor shall such interest pass under the laws
of intestate succession.
16.12 VALIDITY. In case any provision of this Plan shall be illegal or invalid
for any reason, said illegality or invalidly shall not affect the
remaining parts hereof, but this Plan shall be construed and enforced as
if such illegal or invalid provision had never been inserted herein.
16.13 INCOMPETENT. If the Committee determines in its discretion that a
benefit under this Plan is to be paid to a minor, a person declared
incompetent or to a person incapable of handling the disposition of that
person's property, the Committee may direct payment of such benefit to the
guardian, legal representative or person having the care and custody of
such minor, incompetent or incapable person. The Committee may require
proof of minority, incompetency, incapacity or guardianship, as it may
deem appropriate prior to distribution of the benefit. Any payment of a
benefit shall be a payment for the account of the Participant and the
Participant's Beneficiary, as the case may be, and shall be a complete
discharge of any liability under the Plan for such payment amount.
16.14 DISTRIBUTION IN THE EVENT OF TAXATION. If, for any reason, all or any
portion of a Participant's benefit under this Plan becomes taxable to the
Participant prior to receipt, a Participant may petition the Committee for
a distribution of assets sufficient to meet the Participant's tax
liability (including additions to tax, penalties and interest). Upon the
grant of such a petition, which grant shall not be unreasonably withheld,
the Company shall distribute to the Participant immediately available
funds in an amount equal to that Participant's federal, state and local
tax liability associated with such taxation (which amount shall not exceed
a Participant's accrued benefit under the Plan), which liability shall be
measured by using that Participant's then current highest federal, state
and local marginal tax rate, plus the rates or amounts for the applicable
additions to tax, penalties and interest. If the petition is granted, the
tax liability distribution shall be made within 90 days of the date when
the Participant's petition is granted. Such a distribution shall affect
and reduce the benefits to be paid under this Plan.
16.15 LEGAL FEES TO ENFORCE RIGHTS AFTER CHANGE IN CONTROL. The Company is aware
that upon the occurrence of a Change in Control, the Board (which might
then be composed of new members) or a shareholder of the Company, or of
any successor corporation might then cause or attempt to cause the Company
or such successor to refuse to comply with its obligations under the Plan
and might cause or attempt to cause the Company to institute, or may
institute, litigation seeking to deny Participants the benefits intended
under the Plan. In these circumstances, the purpose of the Plan could be
frustrated. Accordingly, if, following a Change in Control, it should
appear to any Participant that the Company or the Company has failed to
comply with any of its obligations under the Plan or any agreement
thereunder or, if the Company or any
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<PAGE>
other person takes any action to declare the Plan void or unenforceable or
institutes any litigation or other legal action designed to deny, diminish
or to recover from any Participant the benefits intended to be provided,
then the Company irrevocably authorize such Participant to retain counsel
of his or her choice at the expense of the Company to represent such
Participant in connection with the initiation or defense of any litigation
or other legal action, whether by or against the Company or any director,
officer, shareholder or other person affiliated with the Company or any
successor thereto in any jurisdiction.
IN WITNESS WHEREOF, the Company has signed this amended and restated
Plan document on April 1, 1994.
GDE SYSTEMS, INC.,
a Delaware corporation
By: /s/ Joel J. Winblood
-------------------------------------
Its: Vice President - Human Resources
------------------------------------
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<PAGE>
AMENDMENT NO. 1
TO
GDE SYSTEMS, INC.
DEFERRED COMPENSATION PLAN
GDE Systems, Inc., a Delaware corporation (the "Company"), pursuant to the
power granted to it by Section 11.2 of the GDE Systems, Inc. Deferred
Compensation Plan (the "Plan"), hereby amends the Plan, as follows, effective as
of November 20, 1996.
1. The stated Purpose of the Plan is amended by inserting the phrase ", and
its subsidiaries, if any, that sponsor this Plan" at the end of the first
sentence thereof.
2. Section 1.12 is amended in its entirety to read as follows:
""Company" shall mean GDE Systems, a Delaware corporation, or,
where the context so requires, any of its subsidiaries (now in
existence or hereafter formed or acquired) that have adopted the
Plan as a sponsor."
The Company has caused this Amendment to be signed by its duly authorized
officer as of the date written below.
GDE SYSTEMS, INC.
By: /s/ T.S. Woodlan
-------------------------------------
Its: VP & CFO
------------------------------------
Date: 11/20/96
-----------------------------------
<PAGE>
AMENDMENT NO. 1997-1
TO
GDE SYSTEMS, INC.
DEFERRED CONDENSATION PLAN
GDE Systems, Inc., a Delaware corporation (the "Company"), pursuant to the
power granted to it by Section 11.2 of the GDE Systems, Inc. Deferred
Compensation Plan (the "Plan"), hereby amends the Plan, as follows, effective as
of January, 1998:
3. Existing Sections 1.8 through 1.36 are renumbered as Sections 1.9 through
1.37, respectively, and a new Section 1.8 is added as follows:
"1.8 "Bonus Rate(s)" shall mean, for a Plan Year, one or more interest
rates, if any, determined by the Committee, in it sole discretion,
which rate(s) shall be determined and announced before the
commencement of the Plan Year for which the Bonus Rate(s) apply. The
Bonus Rate(s) may be zero for any Plan Year and may be higher or
lower than the Bonus Rate, if any, for any other Plan Year."
4. Existing Section 1.26 (renumbered Section 1.27) is amended in its entirety,
as follows:
"1.27 "Preferred Rate" shall mean, for each Plan Year, an interest rate
that is the sum of the Crediting Rate and the Bonus Rate for that
Plan Year."
5. Section 4.1 is amended in its entirety to read as follows:
"4.1 SHORT-TERM PAYOUT. In connection with each election to defer an
Annual Deferral Amount, a Participant may irrevocably elect to
receive a future "Short-Term Payout" from the Plan with respect to
such Annual Deferral Amount and the Employer Matching Contributions,
if any, made as a result of that Annual Deferral Amount. The Short-
Term Payout shall be a lump sum payment in an amount that is equal to
the sum of (i) the Annual Deferral Amount, (ii) the related Employer
Matching Contribution, and (iii) interest on those amounts credited
at the Preferred Rate. Subject to the other terms and conditions of
this Plan, each Short-Term Payout elected shall be paid during the
first 60 days of any Plan Year designated by the Participant that is
at least five Plan Years after the Plan Year in which the Annual
Deferral Amount is actually deferred. By way of example, if a five
year Short-Term Payout is elected for Annual Deferral Amounts that
are deferred in the Plan Year commencing January 1, 1997, the five
year Short-Term Payout would become payable during a 60 day period
commencing January 1, 2002. Should an event occur that triggers a
benefit under Article 5, 6, 7 or 8, any Annual Deferral
<PAGE>
Amount, plus interest thereon, that is subject to a Short-Term Payout
election, the benefit shall not be paid in accordance with this
Section 4.1, but shall be paid in accordance with the other
applicable Article."
The Company has caused this Amendment to be signed by its duly authorized
officer as of the date written below.
GDE Systems, Inc.
By: /s/ Dana P. Dorsey
--------------------------------------
Its: VP, CFO
-------------------------------------
Date: 9/8/97
------------------------------------
<PAGE>
EXHIBIT 4(c)
March 13, 1998
Mr. Robert K. Floyd
8404 Burkwood Cove
Austin, Texas 78735
RE: Amended and Restated Non-qualified Supplemental Retirement Benefit
Dear Mr. Floyd:
You and the Company have previously entered into an Amended and Restated Non-
Qualified Supplemental Retirement Plan dated as of May 1, 1995 (the "Plan"), and
the Company and you now are desirous of amending and restating the Plan in its
entirety, as follows:
In consideration of services rendered and to be rendered by you to the Company,
the Company hereby agrees to pay a Non-qualified Supplemental Retirement Benefit
("Benefit") to you and your spouse upon the following terms and conditions:
1. The Terms defined in this Paragraph 1. shall, for all purposes of this
Agreement, have the meanings herein specified unless the context otherwise
specifies or requires:
a. "AGREEMENT" shall mean this amended and restated Agreement and
subsequent written amendments.
b. "ACTUARIAL EQUIVALENT" shall mean a benefit of equivalent value to the
benefit it replaces hereunder and shall be determined using the
mortality table and interest assumptions used for determining
actuarial equivalent benefits under the Retirement Plan as of a given
date.
c. "BONUS" shall mean if your termination should occur prior to December
1/st/ of any year, the amount of bonus payable pursuant to the
provisions of subsection h. shall be calculated based upon the average
bonus actually earned by you during the two calendar years immediately
preceding the year of your termination or, if such termination should
occur thereafter, such bonus shall be equal to the actual amount of
bonus calculated to be payable to you during the year of your
termination.
d. "BENEFIT" shall mean a monthly retirement income payable in the form
of a single life annuity, commencing at your Normal Retirement Date,
and shall be equal to:
(i) fifty percent (50%) of your Final Average Monthly
Compensation (derived from your Eligible Earnings, as
defined at paragraph h.) at such given date, less
<PAGE>
Mr. Robert K. Floyd
March 13, 1998
Page 2 of 6
(ii) the amount of monthly retirement income then payable to you
under the Retirement Plan as a single life annuity, but not
less than zero;
multiplied by your Vested Percentage, multiplied by a fraction (not to
exceed one) in which the numerator is your years of Credited Service
at the first day of the month coincidental with or next following the
date of your retirement or termination of employment, or the 62nd
anniversary of your date of birth, whichever is earlier, and the
denominator is the years of Credit Service that you would accrue at
the first day of the month coincidental with or next following the
62nd anniversary of your date of birth, assuming in each case that you
had begun your employment with the Company on December 21, 1991.
e. "CAUSE" shall mean termination of employment with the Company for your
conviction of a crime involving misconduct or moral turpitude, whether
or not directed against the Company.
f. "COMPANY" shall mean Tracor, Inc., or its subsidiaries and their
respective successors and assigns.
g. "EARLY RETIREMENT" shall mean retirement prior to your sixty-fifth
(65th) birthday so long as it occurs not before the first day of the
month coincident with or next following your fifty-fifth (55th)
birthday, and after you have been a full-time employee with the
Company for at least five (5) years subsequent to December 27, 1991.
h. "ELIGIBLE EARNINGS" shall mean the following items paid or payable by
the Company to you: (i) all compensation classified as base pay
including any amounts deferred pursuant to the provisions of Sections
401(k) or 125 of the Internal Revenue Code, PLUS (ii) Bonuses (as
defined herein); (iii) commissions; (iv) contributions made by you
and/or the Company on your behalf (excluding matching contributions)
to any deferred compensation plan.
i. "EMPLOYMENT AGREEMENT" shall mean that certain Amended and Restated
Employment Agreement between you and the Company dated November 22,
1996.
j. "FINAL AVERAGE MONTHLY COMPENSATION" shall mean your average monthly
Eligible Earnings from the Company for the thirty-six (36) months
immediately preceding your termination of employment.
k. "NORMAL RETIREMENT DATE" shall mean the first day of the month
coincident with or next following your retirement from full-time
employment with the Company, or your sixty-fifth (65th) birthday,
whichever occurs later.
<PAGE>
Mr. Robert K. Floyd
March 13, 1998
Page 3 of 6
l. "RETIREMENT PLAN" shall mean the Retirement Plan for Employees of
Tracor, Inc. and Its Affiliates, as amended from time to time, or any
successor pension plan which is qualified under Section 401(a) of the
Internal Revenue Code of 1986, as amended, and which is maintained by
Tracor, Inc. and in effect on the date of your retirement or
termination of employment.
m. "SPOUSE" shall mean your undersigned spouse only.
n. "VESTED PERCENTAGE" shall mean twenty percent (20%) per year, for each
year of full time employment with the Company subsequent to December
21, 1991, not to exceed 100%.
2. On your Normal Retirement Date, you shall be eligible to receive your
Benefit, payable monthly beginning on the first day of the month coincident
with or next following your Normal Retirement Date, and ending as of the
payment made immediately preceding your death. After your death, your
Spouse, if living, shall be entitled to one half of your Benefit until
his/her death.
3. If and when you qualify for Early Retirement, the Benefit payable to you
hereunder commencing on the first day of the month coincident with or next
following the date of your Early Retirement shall be an amount equal to
your Benefit payable pursuant to Paragraph 2. hereof except that such
Benefit shall be reduced by an amount equal to the factor specified below,
based upon your attained age (to the nearest month) at your Early
Retirement date (using straight line interpolation if your Early Retirement
date is not a whole number of years):
Attained Age on early retirement Reduction Factor
---------------------------------- ----------------
62 or older 1.000
61 .933
60 .867
59 .833
58 .800
57 .760
56 .700
55 .640
After your death, your Spouse, if living, shall be entitled to one-half of
your benefit until his/her death.
4. If you die subsequent to the date hereof and are still an employee of the
Company at your date of death, your Vested Percentage will be deemed to be
100%, and your Spouse, if living, shall be entitled to receive, commencing
on the first day of the month coincident with or next following the date of
your death, either:
<PAGE>
Mr. Robert K. Floyd
March 13, 1998
Page 4 of 6
a. if you had attained age fifty-five (55) as of the date of your death,
a monthly benefit equal to the product of fifty percent (50%) of the
Benefit that would have been payable to you if you had retired under
the provisions of Paragraph 2. or 3. above, whichever is applicable,
or
b. if you had not attained age fifty-five (55) as of the date of your
death, an amount that is the Actuarial Equivalent, based upon the
earlier date of the commencement of payments, of fifty percent (50%)
of the Benefit that would have been payable to you if you had retired
pursuant to the provisions of Paragraph 3. above.
5. Any provisions in this Agreement to the contrary notwithstanding, if your
employment with the Company is terminated by the Company without Cause at
any time subsequent to your date of initial employment with the Company, or
if during the term of the Employment Agreement your employment should be
terminated by you for Good Reason (as defined in the Employment Agreement),
you shall be entitled to one of the following: (a) the monthly benefits
for normal retirement or Early Retirement as provided under Paragraph 2. or
Paragraph 3., respectively, whichever is applicable, determined as of your
date of termination of employment, payable commencing on the first day of
the month coincident with or next following such date of termination; (b)
if you have not yet reached your Normal Retirement Date, and you so elect,
the monthly benefits determined under Paragraph 2. as if your employment
continued to your Normal Retirement Date payable beginning as of your
Normal Retirement Date; or (c) an amount payable immediately upon your
termination in the form of a lump sum in the amount equal to the Actuarial
Equivalent of the benefit set forth in clause (a) above (including the
Actuarial Equivalent of the contingent annuity payable to your Spouse after
your death which is equal to one-half of such Benefit). Your Vested
Percentage will be deemed to be 100%. If you do not elect to receive a
lump sum payment, then, after your death, your Spouse, if living, shall be
entitled to one-half of your Benefit until her death.
6. No Benefits under this Agreement shall be payable to your heirs, executors,
administrators, or estate subsequent to the date of your death (other than
the Benefits your Spouse is entitled to receive hereunder) and no Benefits
under this Agreement will be payable to your Spouse's heirs, executors,
administrators, or estate subsequent to the date of his/her death.
7. The Company shall not be obligated hereunder to make any contributions to
or to pay to any trustee any cash or other property of any kind for the
purpose of funding its obligation under this Agreement. All amounts paid
hereunder shall be paid in cash from the general accounts of the Company or
in the form of such other funding vehicle as the Company shall provide,
provided that all assets paid into any funding vehicle hereunder shall
remain subject to the general creditors of the employer and neither you nor
your spouse shall acquire any interest greater than that of an unsecured
creditor in any assets of the Company or in any investment reserves,
accounts, or funds that the Company may
<PAGE>
Mr. Robert K. Floyd
March 13, 1998
Page 5 of 6
purchase, establish, or accumulate for the purpose of paying benefits
hereunder. You shall not have any right, title, or interest whatever in or
to, or any preferred claim in or to, any investment reserves, accounts, or
funds that the company may purchase, establish, or accumulate to aid in
providing the payments described herein. Nothing contained herein and no
action taken pursuant to the provisions hereof shall create or be construed
to create a trust or a fiduciary relationship of any kind between the
Company and you or any other person.
8. Nothing herein contained shall be construed to give you the right to be
retained in the employ of the Company or to interfere with the right of the
Company to terminate your employment at any time.
9. No right or interest of any kind in the Agreement shall be transferable or
assignable by you or your Spouse, or subject to alienation, encumbrance,
garnishment, attachment, execution, or levy of any kind, voluntary or
involuntary.
10. The Company hereby agrees that in the event of a merger or consolidation of
the Company with any other corporation, or in the event of the sale of all
or substantially all the assets of the Company, the successor corporation
shall be required by the Company to assume the obligations of the Company
hereunder.
11. This Agreement constitutes the entire Agreement pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements and
understandings of the parties in connection therewith. No covenant,
representation, or condition not expressed in this Agreement shall effect
or be effective to interpret, change, or restrict the express provisions of
this Agreement.
If the foregoing accurately reflects your understanding or your agreement with
the Company with respect to the matters to which it pertains, please acknowledge
and accept same with your Spouse in the spaces below provided for this purpose
on the enclosed copy of this letter and return it to the Company for its
records, at which time this Agreement shall become effective, as of the date
hereof.
Very truly yours,
James B. Skaggs
President
JBS:cdm
<PAGE>
Mr. Robert K. Floyd
March 13, 1998
Page 6 of 6
AGREED:
- - ---------------------------------------
Robert K. Floyd
- - ---------------------------------------
Spouse
<PAGE>
EXHIBIT 5
BT Wolfensohn
April 21, 1998
Board of Directors
Tracor, Inc.
6500 Tracor Lane
Austin, TX 78725
Dear Members of the Board:
BT Wolfensohn has acted as financial advisor to Tracor, Inc. ("Tracor") in
connection with the proposed merger of Tracor and GEC Incorporated ("Parent")
pursuant to the Agreement and Plan of Merger, dated April 21, 1998, among
Parent, Tracor and GEC Acquisition Corp., a wholly-owned subsidiary of Parent
("Sub") (the "Merger Agreement"), which provides for, among other things, a cash
tender offer by Sub for all outstanding shares of Common Stock, par value $0.01
per share, of Tracor (Tracor Common Stock) at a price of $40.00 per share (the
"Tender Offer"), and for a subsequent merger of Sub with and into Tracor (the
"Merger") as a result of which Tracor will become a wholly-owned subsidiary of
Parent, and each outstanding share of Tracor Common Stock (other than shares
directly or indirectly owned by Tracor or by Parent and shares as to which
dissenters' rights have been perfected) will be converted into the right to
receive $40.00 in cash. The terms and conditions of the Tender Offer and of the
Merger (together, the "Transaction") are more fully set forth in the Merger
Agreement.
You have requested BT Wolfensohn's opinion, as investment bankers, as to the
fairness, from a financial point of view, to the holders of Tracor Common Stock
of the cash consideration to be received by them in the Transaction.
In connection with BT Wolfensohn's role as financial advisor to Tracor, and in
arriving at its opinion, BT Wolfensohn has reviewed certain publicly available
financial and other information concerning Tracor and certain internal analyses
and other information furnished to it by Tracor. BT Wolfensohn has also held
discussions with members of the senior management of Tracor regarding the
business and prospects of Tracor. In addition, BT Wolfensohn has (i) reviewed
the reported prices and trading activity for Tracor Common Stock, (ii) compared
certain financial and stock market information for Tracor with similar
information for certain other companies whose securities are publicly traded,
(iii) reviewed the financial terms of certain recent business combinations which
it deemed comparable in whole or in part, (iv) reviewed the terms of the Merger
Agreement and certain related
<PAGE>
documents, and (v) performed such other studies and analyses and considered such
other factors as it deemed appropriate.
BT Wolfensohn has not assumed responsibility for independent verification of,
and has not independently verified, any information, whether publicly available
or furnished to it, concerning Tracor, including, without limitation, any
financial information, forecasts or projections considered in connection with
the rendering of its opinion. Accordingly, for purposes of its opinion, BT
Wolfensohn has assumed and relied upon the accuracy and completeness of all such
information and BT Wolfensohn has not conducted a physical inspection of any of
the properties or assets, and has not prepared or obtained any independent
evaluation or appraisal of any of the assets or liabilities, of Tracor. With
respect to the financial forecasts and projections made available to BT
Wolfensohn and used in its analyses, BT Wolfensohn has assumed that they have
been reasonably prepared on bases reflecting the best currently available
estimates and judgments of the management of Tracor as to the matters covered
thereby. In rendering its opinion, BT Wolfensohn expresses no view as to the
reasonableness of such forecasts and projections or the assumptions on which
they are based. BT Wolfensohn's opinion is necessarily based upon economic,
market and other conditions as in effect on, and the information made available
to it as of, the date hereof. We undertake no obligation to update this opinion
to reflect any development occurring after the date hereof.
For purposes of rendering its opinion, BT Wolfensohn has assumed that, in all
respects material to its analysis, the representations and warranties of Tracor,
Parent and Sub contained in the Merger Agreement are true and correct, Tracor,
Parent and Sub will each perform all of the covenants and agreements to be
performed by it under the Merger Agreement and all conditions to the obligations
of each of Tracor, Parent and Sub to consummate the Merger will be satisfied
without any waiver thereof. BT Wolfensohn has also assumed that all material
governmental, regulatory or other approvals and consents required in connection
with the consummation of the Merger will be obtained and that in connection with
obtaining any necessary governmental, regulatory or other approvals and
consents, or any amendments, modifications or waivers to any agreements,
instruments or orders to which either Tracor or Parent is a party or is subject
or by which it is bound, no limitations, restrictions or conditions will be
imposed or amendments, modifications or waivers made that would have a material
adverse effect on Tracor or Parent or materially reduce the contemplated
benefits of the Merger to Parent.
This opinion is addressed to, and for the use and benefit of, the Board of
Directors of Tracor. This opinion does not constitute a recommendation to any
stockholder with respect to whether such holder should tender shares pursuant to
the Tender Offer or as to how such holder should vote with respect to the
Merger. This
<PAGE>
Tracor, Inc.
April 21, 1998
Page 3
opinion is limited to the fairness, from a financial point of view, to holders
of Tracor Common Stock of the $40.00 per share cash consideration to be paid to
them in the Transaction. BT Wolfensohn expresses no opinion as to the merits of
the underlying decision by Tracor to engage in the Merger.
BT Wolfensohn is engaged in the merger and acquisition and advisory business of
Bankers Trust (together with its affiliates the "BT Group") and, for legal and
regulatory purposes, is a division of BT Alex. Brown Incorporated, a registered
broker-dealer and member of the New York Stock Exchange. BT Wolfensohn will be
paid a fee for its services as financial advisor to Tracor in connection with
the Merger, a significant portion of which is contingent upon consummation of
the Merger. One or more members of the BT Group have, from time to time,
provided investment banking, commercial banking (including extension of credit)
and other financial services to Tracor or its affiliates for which it has
received compensation. In 1997, a member of the BT Group acted as sole manager
on a Rule 144A offering by Tracor of $250 million senior subordinated notes and
concurrently as arranger for a $200 million reducing revolver and also acted as
a tender agent to retire an existing bond issue. In 1996, a member of the BT
Group, as agent bank, underwrote and syndicated $270 million of senior credit
facilities for Tracor and also acted as co-manager on a secondary offering of
5.7million shares issued pursuant to a warrant conversion. In the ordinary
course of business, members of the BT Group may actively trade in the securities
and other instruments and obligations of Tracor, Parent and General Electric
Company, p.l.c. for their own accounts and for the accounts of their customers.
Accordingly, the BT Group may at any time hold a long or short position in such
securities, instruments and obligations.
Based upon and subject to the foregoing, it is BT Wolfensohn's opinion as
investment bankers that, as of the date hereof, the $40.00 per share cash
consideration to be paid to the holders of Tracor Common Stock in the
Transaction is fair to such stockholders from a financial point of view.
Very truly yours,
BT WOLFENSOHN
/s/ BT Wolfensohn
<PAGE>
EXHIBIT 6
FIRST AMENDMENT
TO
RIGHTS AGREEMENT
BY AND BETWEEN
TRACOR, INC.
AND
HARRIS TRUST AND SAVINGS BANK
AS
RIGHTS AGENT
This First Amendment (the "First Amendment"), dated as of April 24, 1998,
evidences the amendment of that certain Rights Agreement (herein so called) by
and between Tracor, Inc. (the "Company") and Harris Trust and Savings Bank as
Rights Agent, dated as of February 17, 1997.
RECITALS
WHEREAS, Section 27 of the Rights Agreement provides that the Board of
Directors of the Company (the "Board") may, from time to time, supplement or
amend the Rights Agreement in such manner as the Board deems necessary or
desirable; and
WHEREAS, the Company, GEC Incorporated, a Delaware corporation ("Parent"),
and GEC Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary
of Parent ("Purchaser"), have entered into that certain Agreement and Plan of
Merger (as it may be amended from time to time, the "Agreement and Plan of
Merger"), dated as of April 21, 1998, pursuant to which Purchaser will be merged
with and into the Company and thereby the Company would become a wholly owned
subsidiary of Parent; and
WHEREAS, Parent and Purchaser, on the one hand, and each member of the
Board and certain members of management on the other hand ("Certain
Stockholders"), have entered into an agreement (the "Stockholder Agreement"),
dated as of April 21, 1998, pursuant to which Certain Stockholders have agreed
to take specified actions in furtherance of the transactions contemplated by th
Agreement; and
WHEREAS, the Board has unanimously approved this First Amendment.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
<PAGE>
1. Section 1(i) of the Rights Agreement is hereby amended to modify the
definition of "Exempt Person" by substituting the definition with the following
language:
"Exempt Person" shall mean (i) the Company, (ii) any Subsidiary of the
Company, (iii) any employee benefit plan or employee stock plan of the
Company, or any trust or other entity organized, appointed, established or
holding Common Stock for or pursuant to the terms of any such plan, or (iv)
Parent, Purchaser and their respective Affiliates and Associates; provided,
however, Parent, Purchaser and their respective Affiliates and Associates
shall not be treated as an Exempt Person with respect to and to the extent
of any acquisition of Common Shares, or in the event of any commencement of
a tender offer or public disclosure of an intent to commence a tender offer
that, in each case, is not contemplated or permitted by the Agreement and
Plan of Merger or the Stockholder Agreement, and shall instead in such
circumstances be treated as a "Person" under this Agreement.
2. Section 1 of the Rights Agreement shall be further revised by adding
the following additional definitions thereto:
"AGREEMENT AND PLAN OF MERGER" shall mean that certain Agreement and Plan
of Merger, dated as of April 21, 1998, by and among Parent, Purchaser and
the Company.
"PARENT" shall mean GEC Incorporated, a Delaware corporation.
"PURCHASER" shall mean GEC Acquisition Corp., a Delaware corporation.
"STOCKHOLDER AGREEMENT" shall mean that certain Stockholder Agreement,
dated as of April 21, 1998, by and among Parent, Purchaser, each member of
the Board of Directors of the Company and certain members of the Company's
management named therein.
3. This First Amendment shall be deemed to be a contract made under the
laws of the State of Texas and for all purposes shall be governed by and
construed in accordance with the laws of the State of Texas applicable to
contracts to be made and performed entirely within the State of Texas.
4. This First Amendment may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an original,
and all such counterparts shall together constitute but one and the same
instrument.
5. Except to the extent expressly amended by the First Amendment, the
Rights Agreement shall remain in full force and effect.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and attested, all as of the day and year first above written.
TRACOR, INC.
Attest:
/s/ Carla Marshall /s/ James B. Skaggs
By: _________________________________ By: _________________________________
Asst. Corp. Secretary President
Title: ______________________________ Title: ______________________________
HARRIS TRUST AND SAVINGS BANK, as
Rights Agent
Attest:
/s/ Lorraine Rodgerwald /s/ Ray G. Rosenbaum
By: _________________________________ By: _________________________________
Assistant Vice President Vice President
Title: ______________________________ Title: ______________________________
3
<PAGE>
EXHIBIT 7
[LOGO OF TRACOR APPEARS HERE]
April 27, 1998
Dear Stockholder:
We are pleased to report that Tracor, Inc. (the "Company") has entered into
a merger agreement (the "Merger Agreement") with GEC Incorporated ("Parent"),
which is a wholly-owned subsidiary of The General Electric Company, p.l.c.
(not affiliated with the U.S. based corporation with a similar name), and with
a subsidiary of Parent ("GEC"), which provides for the acquisition of the
Company by GEC at a price of $40.00 in cash for each share of common stock of
the Company. Under the terms of the proposed transaction, GEC is today
commencing a cash tender offer for all outstanding shares of the Company's
common stock at $40.00 per share. Following the closing of the tender offer,
GEC will be merged into the Company and any shares of Company common stock not
purchased by GEC in the tender offer will be automatically converted into the
right to receive $40.00 per share in cash in the merger, subject to applicable
dissenters rights.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER
AND DETERMINED THAT THE TERMS OF THE OFFER AND MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY. THE BOARD OF DIRECTORS
UNANIMOUSLY RECOMMENDS THAT ALL HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER
THEIR SHARES PURSUANT TO THE OFFER.
In arriving at its recommendation the Board of Directors gave careful
consideration to a number of factors. These factors included the opinion,
dated April 21, 1998, of BT Wolfensohn, financial advisor to the Company, to
the effect that the cash consideration of $40.00 per share to be received in
the offer and the merger is fair from a financial point of view to the
stockholders of the Company.
Accompanying this letter is a copy of the Company's
Solicitation/Recommendation Statement on Schedule 14D-9. Also enclosed is
GEC's Offer to Purchase and related materials, including a Letter of
Transmittal for use in tendering shares. We urge you to read carefully the
enclosed materials, including BT Wolfensohn's opinion, which is attached to
the Schedule 14D-9.
The management and directors of Tracor thank you for the support you have
given the Company.
Sincerely,
James B. Skaggs
Chairman of the Board, President and
Chief Executive Officer
<PAGE>
EXHIBIT 8
MONDAY APRIL 27, 11:00 A.M. EASTERN TIME
COMPANY PRESS RELEASE
SOURCE: Tracor, Inc.
GEC COMMENCES TENDER OFFER FOR TRACOR SHARES
LONDON and AUSTIN, Texas, April 27/PRNewswire/--On April 21, 1998, The General
Electric Company, p.l.c. (GEC) announced a GEC subsidiary in the United States
had entered into definitive merger agreement with Tracor, Inc. (Nasdaq: TTRR -
news).
That subsidiary has today commenced a tender offer at $40 in cash per share
for all of the shares of Tracor. The initial expiration date for the tender
offer is May 22, 1998.
Morgan Stanley & Co. Incorporated is the Dealer Manager, and Georgeson &
Company is the Information Agent for the tender offer.
The General Electric Company, p.l.c. is not affiliated with the similarly
named company which is based in the United States.
Tracor, Inc., based in Austin, Texas, is the 15th largest defense company in
the United States with 1997 sales of more than $1.2 billion. The company
provides leading-edge technology to government and commercial customers
worldwide in the areas of information systems, aerospace, and systems
engineering. As one of America's fastest growing defense companies, Tracor
employs more than 10,700 people at approximately 150 locations. For more
information, please visit Tracor's web site at www.tracor.com.
1
<PAGE>
EXHIBIT 9
For more information:
From:
Tracor, Inc.: Marian Kelley, 512/929-2273
email: [email protected]
The General Electric Company, p.l.c.: +44 171 493 8484 (Switchboard)
Ben Brewerton (Press Officer), +44 171 306 1352
Alasdair Jeffrey (Investor RElations Manager), +44 171 306 1330
TRACOR BOARD RECOMMENDS GEC TENDER OFFER
AUSTIN, TEXAS, April 27, 1998 -- The Board of Directors of Tracor, Inc.
(Nasdaq - TTRR) has unanimously approved the tender offer commenced today by a
U.S. subsidiary of The General Electric Company, p.l.c. (GEC) for all
outstanding shares of Tracor's common stock at a price of $40 per share in cash.
The Board determined that the terms of the offer are fair to, and in the best
interests of, the shareholders of Tracor and recommends that all holders of
Tracor common stock accept the offer and tender their shares prusuant to the
offer.
Earlier today, the GEC subsidiary commenced the tender offer at $40 in
cash per share for all outstanding shares of Tracor's common stock. The initial
expiration date for the tender offer is May 22, 1998. Following the close of
the tender offer, the GEC subsidiary will be merged into Tracor and any shares
of Tracor common stock not purchased by GEC in the tender offer will be
automatically converted into the right to receive $40 per share in cash in the
merger, subject to applicable dissenters' rights.
In arriving at its recommendation, the Tracor Board of Directors gave
careful consideration to a number of factors, including the opinion, dated April
21, 1998, of BT Wolfensohn, financial adviser to Tracor, to the effect the cash
consideration of $40 per share to be received in the offer and the merger is
fair from a financial point of view to Tracor's shareholders.
Morgan Stanley & Co. Incorporated is the Dealer Manager, and Georgeson &
Company is the Information Agent for the tender offer.
The General Electric Company, p.l.c. is not affiliated with the
similarly named company which is based in the United States.
<PAGE>
Tracor, Inc., based in Austin, Texas, is the 15th largest defense
company in the United States with 1997 sales of more than $1.2 billion. The
company provides leading-edge technology to government and commercial customers
worldwide in the areas of information systems, aerospace, and systems
engineering. As one of America's fastest growing defense companies, Tracor
employs more than 10,700 people at approximately 150 locations.
For more information, please visit Tracor's web site at www.tracor.com.
