<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT
PURSUANT TO SECTION 14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
----------------
ELSAG BAILEY PROCESS AUTOMATION N.V.
ELSAG BAILEY FINANCING TRUST
(Name of Subject Company)
----------------
ABB ASEA BROWN BOVERI LTD.
ABB TRANSPORTATION PARTICIPATIONS B.V.
(Bidders)
----------------
COMMON SHARES, PAR VALUE NLG1.00 PER SHARE, OF ELSAG BAILEY PROCESS AUTOMATION
N.V.
5 1/2% CONVERTIBLE TRUST ORIGINATED PREFERRED SECURITIES OF ELSAG BAILEY
FINANCING TRUST
(Title of Class of Securities)
----------------
Common Shares: N2925S101
Preferred Securities: 290205301
290205103
U28430202
(CUSIP Number of Class of Securities)
----------------
BEAT HESS, ESQ.
ABB ASEA BROWN BOVERI LTD.
AFFOLTERNSTRASSE 44
P.O. BOX 8131
CH-8050 ZURICH
SWITZERLAND
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidders)
----------------
COPY TO:
GREGORY PRYOR, ESQ.
WHITE & CASE LLP
1155 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10036
(212) 819-8200
CALCULATION OF FILING FEE
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<TABLE>
<CAPTION>
TRANSACTION VALUATION* AMOUNT OF FILING FEE**
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<S> <C>
$1,498,983,253.30 $299,796.65
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</TABLE>
* For purposes of calculating the filing fee only. This calculation assumes
the purchase of 29,201,981 Common Shares at a price of U.S. $39.30 net per
Common Share in cash and 5,740,000 Preferred Securities at a price of
U.S.$61.21 net per Preferred Security in cash.
** The amount of the filing fee, calculated in accordance with Rule 0-11 under
the Securities Exchange Act of 1934, as amended, equals 1/50 of one percent
of the aggregate of the cash offered.
[_]Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and the date of its filing.
Amount Previously Paid: Filing Party:
Form or Registration No.: Date Filed:
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<PAGE>
SCHEDULE 14D-1
CUSIP No. N2925S101
290205301
290205103
U28430202
<TABLE>
<C> <S>
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
ABB Asea Brown Boveri Ltd.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [_]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
WC; OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(a) or 2(b) [_]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Switzerland
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON*
0*
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [_]
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0.0%*
10 TYPE OF REPORTING PERSON
CO
</TABLE>
- --------
* On October 14, 1998, ABB Transportation Participations B.V., a corporation
organized under the laws of The Netherlands (the "Purchaser"), a direct,
wholly owned subsidiary of ABB Asea Brown Boveri Ltd., a corporation
organized under the laws of Switzerland (the "Parent"), entered into a
Shareholder's Agreement (the "Shareholder's Agreement") with Finmeccanica
S.p.A., a corporation organized under the laws of Italy (the "Shareholder"),
which Shareholder owns 17,813,527 common shares, par value NLG1.00 per share
(the "Company Shares"), of Elsag Bailey Process Automation N.V., a
corporation organized under the laws of The Netherlands (the "Company"), and
1,600,000 5 1/2% Convertible Trust Originated Preferred Securities of Elsag
Bailey Financing Trust ("Preferred Securities") which are convertible into
2,492,212 Company Shares. Pursuant to such Shareholder's Agreement and
subject to the terms and conditions contained therein, the Shareholder will
validly tender and not withdraw all of its Company Shares and all of its
Preferred Securities pursuant to and in accordance with the Terms of the
Offer (as defined herein), in a timely manner for acceptance by the
Purchaser in the Offer. The filing of this information by the Parent and the
Purchaser shall not be construed as an admission that either the Parent or
the Purchaser, for purposes of Section 13(d) or 13(g) of the Securities
Exchange Act of 1934, as amended, is the beneficial owner of such Company
Shares or Preferred Securities and such persons expressly disclaim any
beneficial ownership. The Shareholder's Agreement is described more fully in
Section 11 of the Offer to Purchase attached hereto as Exhibit (a)(1).
2
<PAGE>
SCHEDULE 14D-1
CUSIP No. N2925S101
290205301
290205103
U28430202
<TABLE>
<C> <S>
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSONS
ABB Transportation Participations B.V.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
(a) [_]
(b) [X]
3 SEC USE ONLY
4 SOURCE OF FUNDS
AF
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS
2(a) or 2(b) [_]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
The Netherlands
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON*
0*
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES [_]
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0.0%*
10 TYPE OF REPORTING PERSON
CO
</TABLE>
- --------
* On October 14, 1998, ABB Transportation Participations B.V., a corporation
organized under the laws of The Netherlands (the "Purchaser"), a direct,
wholly owned subsidiary of ABB Asea Brown Boveri Ltd., a corporation
organized under the laws of Switzerland (the "Parent"), entered into a
Shareholder's Agreement (the "Shareholder's Agreement") with Finmeccanica
S.p.A., a corporation organized under the laws of Italy (the "Shareholder"),
which Shareholder owns 17,813,527 common shares, par value NLG1.00 per share
(the "Company Shares"), of Elsag Bailey Process Automation N.V., a
corporation organized under the laws of The Netherlands (the "Company"), and
1,600,000 5 1/2% Convertible Trust Originated Preferred Securities of Elsag
Bailey Financing Trust ("Preferred Securities") which are convertible into
2,492,212 Company Shares. Pursuant to such Shareholder's Agreement and
subject to the terms and conditions contained therein, the Shareholder will
validly tender and not withdraw all of its Company Shares and all of its
Preferred Securities pursuant to and in accordance with the Terms of the
Offer (as defined herein), in a timely manner for acceptance by the
Purchaser in the Offer. The filing of this information by the Parent and the
Purchaser shall not be construed as an admission that either the Parent or
the Purchaser, for purposes of Section 13(d) or 13(g) of the Securities
Exchange Act of 1934, as amended, is the beneficial owner of such Company
Shares or Preferred Securities and such persons expressly disclaim any
beneficial ownership. The Shareholder's Agreement is described more fully in
Section 11 of the Offer to Purchase attached hereto as Exhibit (a)(1).
3
<PAGE>
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) This statement relates to the securities of Elsag Bailey Process
Automation N.V., a company organized under the laws of The Netherlands (the
"Company"), and of Elsag Bailey Financing Trust (the "Trust"). The principal
executive offices of the Company are located at World Trade Center Schiphol
Boulevard 157, 1118 BG Luchthaven Schiphol, The Netherlands. The principal
executive offices of the Trust are located at Elsag Bailey, Inc., at 29801
Euclid Avenue, Wickliffe, Ohio 44092.
(b) This statement relates to (i) the common shares, par value NLG 1.00 per
share (the "Company Shares"), of the Company and (ii) the 5 1/2% Convertible
Trust Originated Preferred Securities of the Trust (the "Preferred
Securities", and together with the Company Shares, the "Shares"). The
information regarding the number of Company Shares and Preferred Securities
outstanding, the exact amount of Company Shares and Preferred Securities being
sought and the consideration being offered therefor is set forth in the
Introduction and Section 1 ("Terms of the Offer") of the Offer to Purchase
annexed hereto as Exhibit (a)(1) and is incorporated herein by reference.
(c) Information concerning the principal markets in which the Shares are
traded and the sales prices for the Shares for each quarterly period during
the past two years set forth in Section 6 ("Price Range of Shares; Dividends")
of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) ABB Transportation Participations B.V. (the "Purchaser") is a
corporation organized under the laws of The Netherlands. ABB Asea Brown Boveri
Ltd. (the "Parent") is a corporation organized under the laws of Switzerland.
The information set forth in Section 8 ("Certain Information Concerning the
Purchaser and the Parent") of the Offer to Purchase is incorporated herein by
reference. The name, business addresses, present principal occupation or
employment, material occupations, positions, offices or employment during the
last five years and citizenship of the members of the Supervisory Board and
the Management Board of the Purchaser and the members of the Board of
Directors and Group Executive Committee of the Parent are set forth in
Schedule I to the Offer to Purchase and are incorporated herein by reference.
(e), (f) During the last five years, none of the Purchaser, the Parent, and,
to the best of their knowledge, none of the persons listed in Schedule I to
the Offer to Purchase, has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction as a
result of which any such person was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such law.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction, Section 10
("Background of the Offer; Contacts with the Company") and Section 11
("Purpose of the Offer; Delisting and Deregistration of Company Shares; Plans
for the Company; Certain Agreements") of the Offer to Purchase is incorporated
herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(c) The information set forth in Section 9 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the Introduction and Section 10
("Background of the Offer; Contacts with the Company"), Section 11 ("Purpose
of the Offer; Delisting and Deregistration of Company Shares; Plans for the
Company; Certain Agreements"), Section 12 ("Dividends and Distributions") and
Section 13 ("Effect of the Offer on the Market for Shares; Exchange Listing
and Exchange Act Registration") of the Offer to Purchase is incorporated
herein by reference.
4
<PAGE>
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in the Introduction, Section 8 ("Certain
Information Concerning the Purchaser and the Parent") and Section 10
("Background of the Offer; Contacts with the Company") and Schedule I of the
Offer to Purchase is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 9 ("Source and Amount
of Funds"), Section 10 ("Background of the Offer; Contacts with the Company"),
Section 11 ("Purpose of the Offer; Delisting and Deregistration of Company
Shares; Plans for the Company; Certain Agreements") and Section 15 ("Certain
Legal Matters; Regulatory Approvals") of the Offer to Purchase is incorporated
herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16 ("Fees and Expenses") of the Offer
to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information Concerning the
Purchaser and the Parent") of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 11 ("Purpose of the Offer;
Delisting and Deregistration of Company Shares; Plans for the Company; Certain
Agreements") of the Offer to Purchase is incorporated herein by reference.
(b)-(c) The information set forth in Section 15 ("Certain Legal Matters;
Regulatory Approvals") of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 13 ("Effect of the Offer on the
Market for Shares; Exchange Listing and Exchange Act Registration") of the
Offer to Purchase is incorporated herein by reference.
(e) Not applicable.
(f) The information set forth in the entire text of each of the Offer to
Purchase and the Letter of Transmittal, copies of which are attached hereto as
Exhibits (a)(1) and (a)(2), respectively, is incorporated herein by reference.
5
<PAGE>
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
<C> <S>
Exhibit (a)(1) Offer to Purchase.
Exhibit (a)(2) Letter of Transmittal.
Exhibit (a)(3) Form of letter to brokers, dealers, commercial banks, trust
companies and other nominees.
Exhibit (a)(4) Form of letter to be used by brokers, dealers, commercial
banks, trust companies and nominees to their clients.
Exhibit (a)(5) Press Release, dated October 14, 1998.
Exhibit (a)(6) Form of newspaper advertisement, dated October 20, 1998.
Exhibit (a)(7) Notice of Guaranteed Delivery.
Exhibit (a)(8) Guidelines for Substitute Form W-9.
Exhibit (c)(1) Shareholder's Agreement, dated as of October 14, 1998, by and
between ABB Transportation Participations B.V. and
Finmeccanica S.p.A.
Exhibit (c)(2) Acquisition Agreement, dated as of October 14, 1998, by and
between Elsag Bailey Process Automation N.V. and ABB
Transportation Participations B.V.
Exhibit (c)(3) Confidentiality Agreement, dated July 2, 1998, between Elsag
Bailey Process Automation N.V. and ABB Asea Brown Boveri Ltd.
Exhibit (g)(1) Annual Report of ABB Group for fiscal year ended December 31,
1997.
Exhibit (g)(2) Evidence of authority of Mats Sacklen and Eric Elzvik to sign
this Schedule 14D-1 on behalf of ABB Asea Brown Boveri Ltd.
</TABLE>
6
<PAGE>
SIGNATURE
AFTER DUE 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: October 20, 1998 ABB ASEA BROWN BOVERI LTD.
/s/ Mats Sacklen
By: _________________________________
NAME: MATS SACKLEN
TITLE: VICE PRESIDENT
/s/ Eric Elzvik
By: _________________________________
NAME: ERIC ELZVIK
TITLE: VICE PRESIDENT
Dated: October 20, 1998 ABB TRANSPORTATION PARTICIPATIONS
B.V.
/s/ J.A. De Raad
By: _________________________________
NAME: J.A. DE RAAD
TITLE: MANAGING DIRECTOR
/s/ Brian Norman van Reijn
By: _________________________________
NAME: BRIAN NORMAN VAN REIJN
TITLE: MANAGING DIRECTOR
7
<PAGE>
Exhibit (a)(1)
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING COMMON SHARES
OF
ELSAG BAILEY PROCESS AUTOMATION N.V.
AT
$39.30 NET PER SHARE
AND
ALL OF THE OUTSTANDING 5 1/2% CONVERTIBLE TRUST ORIGINATED PREFERRED
SECURITIES
OF
ELSAG BAILEY FINANCING TRUST
AT
$61.21 NET PER PREFERRED SECURITY
BY
ABB TRANSPORTATION PARTICIPATIONS B.V.
A DIRECT, WHOLLY OWNED SUBSIDIARY OF ABB ASEA BROWN BOVERI LTD.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, NOVEMBER 17, 1998, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED ON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY
TENDERED AND NOT PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER
A NUMBER OF COMMON SHARES, PAR VALUE NLG1.00 PER SHARE (THE "COMPANY
SHARES"), OF ELSAG BAILEY PROCESS AUTOMATION N.V. (THE "COMPANY")
AND A NUMBER OF 5 1/2% CONVERTIBLE TRUST ORIGINATED PREFERRED
SECURITIES OF ELSAG BAILEY FINANCING TRUST (THE "PREFERRED
SECURITIES" AND, TOGETHER WITH THE COMPANY SHARES, THE
"SHARES") WHICH, WHEN ADDED TO THE SHARES, IF ANY,
PREVIOUSLY ACQUIRED BY THE PURCHASER, CONSTITUTE AT
LEAST SEVENTY-FIVE PERCENT OF THE FULLY DILUTED
SHARE CAPITAL OF THE COMPANY AND (II) THE RECEIPT
OF CERTAIN GOVERNMENTAL APPROVALS. SEE SECTION
14--"CONDITIONS OF THE OFFER".
THE OFFER IS MADE PURSUANT TO THE ACQUISITION AGREEMENT (THE "ACQUISITION
AGREEMENT") BY AND BETWEEN ABB TRANSPORTATION PARTICIPATIONS B.V. (THE
"PURCHASER") AND THE COMPANY. THE PURCHASER HAS ALSO ENTERED INTO A
SHAREHOLDER'S AGREEMENT (THE "SHAREHOLDER'S AGREEMENT") WITH FINMECCANICA
S.P.A. (THE "SELLING SHAREHOLDER") WHICH BENEFICIALLY OWNS 17,813,527
COMPANY SHARES AND 1,600,000 PREFERRED SECURITIES (REPRESENTING, IN THE
AGGREGATE, APPROXIMATELY 53.2% OF THE FULLY DILUTED SHARE CAPITAL OF
THE COMPANY). THE SELLING SHAREHOLDER HAS AGREED TO IRREVOCABLY TENDER
PURSUANT TO THE OFFER (AND NOT WITHDRAW) ALL OF ITS SHARES PURSUANT
TO THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THE
SHAREHOLDER'S AGREEMENT. THE OBLIGATIONS OF THE PURCHASER UNDER THE
ACQUISITION AGREEMENT AND THE SHAREHOLDER'S AGREEMENT ARE
GUARANTEED BY ABB ASEA BROWN BOVERI LTD. SEE SECTION 11--"PURPOSE
OF THE OFFER; DELISTING AND DEREGISTRATION OF COMPANY SHARES;
PLANS FOR THE COMPANY; CERTAIN AGREEMENTS".
EACH OF THE SUPERVISORY BOARD AND THE MANAGEMENT BOARD OF THE COMPANY HAS
UNANIMOUSLY (I) DETERMINED THAT THE OFFER IS FAIR TO, AND IN THE
BEST INTERESTS OF, THE HOLDERS OF SHARES AND OTHER RELEVANT
CONSTITUENCIES, THE COMPANY'S SUBSIDIARIES AND THE
ENTERPRISES CARRIED ON BY THE COMPANY AND ITS
SUBSIDIARIES, (II) APPROVED THE ACQUISITION
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE OFFER, AND
(III) RECOMMENDED THAT THE
HOLDERS OF SHARES ACCEPT
THE OFFER AND TENDER
THEIR SHARES TO
THE PURCHASER.
THOSE HOLDERS OF SHARES WHO DO NOT TENDER THEIR SHARES PURSUANT TO THE OFFER
ARE NOT ENTITLED TO RECEIVE CONSIDERATION FOR THEIR SHARES FROM THE
PURCHASER AT ANY TIME SUBSEQUENT TO THE CONSUMMATION OF THE OFFER
UNLESS THE PURCHASER OTHERWISE AGREES TO ACQUIRE SUCH HOLDERS' SHARES
IN ACCORDANCE WITH APPLICABLE LAW. SEE SECTION 11--"PURPOSE OF THE
OFFER; DELISTING AND DEREGISTRATION OF COMPANY SHARES; PLANS FOR
THE COMPANY; CERTAIN AGREEMENTS".
IMPORTANT
Any Holder (as defined herein) desiring to tender Shares should either (i)
complete and sign the Letter of Transmittal or a facsimile thereof in
accordance with the instructions in the Letter of Transmittal and mail or
deliver the Letter of Transmittal, together with the certificate(s) evidencing
tendered Shares and all other required documents, to the Depositary or tender
such Shares pursuant to the procedures for book-entry transfer set forth in
Section 3--"Procedures for Tendering Shares" or (ii) request such Holder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such Holder. Holders whose Shares are registered in the name
of a broker, dealer, commercial bank, trust company or other nominee must
contact such broker, dealer, commercial bank, trust company or other nominee
if such Holder desires to tender such Shares.
Any holder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedures for book-entry transfer on a timely basis, may tender such Shares
pursuant to the guaranteed delivery procedure set forth in Section 3--
"Procedures for Tendering Shares".
Questions and requests for assistance or additional copies of this Offer to
Purchase, the Letter of Transmittal or any other tender offer materials may be
directed to the Information Agent or the Dealer Manager at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase.
The Dealer Manager for the Offer is:
CREDIT FIRST
SUISSE BOSTON
October 20, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION.............................................................. 1
THE TENDER OFFER.......................................................... 3
1. Terms of the Offer................................................... 3
2. Acceptance for Payment and Payment for Shares........................ 4
3. Procedures for Tendering Shares...................................... 5
4. Withdrawal Rights.................................................... 7
5. Certain Tax Consequences............................................. 8
6. Price Range of Shares; Dividends..................................... 11
7. Certain Information Concerning the Company and the Trust............. 12
8. Certain Information Concerning the Purchaser and the Parent.......... 15
9. Source and Amount of Funds........................................... 19
10. Background of the Offer; Contacts with the Company................... 19
11. Purpose of the Offer; Delisting and Deregistration of Company Shares;
Plans for
the Company; Certain Agreements....................................... 20
12. Dividends and Distributions.......................................... 35
13. Effect of the Offer on the Market for the Shares; Exchange Listing
and Exchange Act Registration......................................... 35
14. Conditions of the Offer.............................................. 36
15. Certain Legal Matters; Regulatory Approvals.......................... 37
16. Fees and Expenses.................................................... 41
17. Miscellaneous........................................................ 42
</TABLE>
(i)
<PAGE>
To the Holders of Common Shares of
Elsag Bailey Process Automation N.V.
and the Holders of 5 1/2% Convertible
Trust Originated Preferred Securities
of Elsag Bailey Financing Trust:
INTRODUCTION
ABB Transportation Participations B.V., a corporation organized under the
laws of The Netherlands (the "Purchaser"), and a direct, wholly owned
subsidiary of ABB Asea Brown Boveri Ltd., a corporation organized under the
laws of Switzerland (the "Parent"), hereby offers to purchase all outstanding
(i) common shares, par value NLG1.00 per share (the "Company Shares"), of
Elsag Bailey Process Automation N.V., a company organized under the laws of
The Netherlands (the "Company"), at a price of $39.30 per Company Share, net
to the seller in cash, without interest thereon (the "Share Offer Price") and
(ii) 5 1/2% Convertible Trust Originated Preferred Securities of Elsag Bailey
Financing Trust (the "Trust") guaranteed by the Company and convertible into
Company Shares (the "Preferred Securities" and, together with the Company
Shares, the "Shares"), at a price of $61.21 per Preferred Security, net to the
seller in cash, without interest thereon (the "Preferred Offer Price" and,
together with the Share Offer Price, the "Offer Price"), upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which, as may be amended and supplemented from
time to time, together constitute the "Offer"). See Section 11--"Purpose of
the Offer; Delisting and Deregistration of Company Shares; Plans for the
Company; Certain Agreements".
Tendering Holders (as defined herein) whose shares are registered in their
own name and who tender directly to the Depositary (as defined herein) will
not be obligated to pay brokerage fees or commissions or, except as set forth
in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the
purchase of Shares pursuant to the Offer. Tendering Holders who hold their
Shares through a bank or broker should inquire of such institutions as to
whether they charge any service fees. The Purchaser will pay all charges and
expenses of Credit Suisse First Boston Corporation, as Dealer Manager (the
"Dealer Manager"), The Bank of New York, as Depositary (the "Depositary"), and
Morrow & Co., Inc., as Information Agent (the "Information Agent"), in each
case incurred in connection with the Offer. See Section 16--"Fees and
Expenses".
EACH OF THE SUPERVISORY BOARD AND THE MANAGEMENT BOARD OF THE COMPANY HAS
UNANIMOUSLY (I) DETERMINED THAT THE OFFER IS FAIR TO, AND IN THE BEST
INTERESTS OF, THE HOLDERS OF SHARES (COLLECTIVELY, THE "HOLDERS") AND OTHER
RELEVANT CONSTITUENCIES, THE COMPANY'S SUBSIDIARIES AND THE ENTERPRISES
CARRIED ON BY THE COMPANY AND ITS SUBSIDIARIES, (II) APPROVED THE ACQUISITION
AGREEMENT (AS DEFINED HEREIN) AND THE TRANSACTIONS CONTEMPLATED THEREBY,
INCLUDING THE OFFER, AND (III) RECOMMENDED THAT THE HOLDERS ACCEPT THE OFFER
AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Offer is made pursuant to an Acquisition Agreement, dated as of October
14, 1998 (the "Acquisition Agreement"), by and between the Purchaser and the
Company. The Purchaser has also entered into a Shareholder's Agreement, dated
as of October 14, 1998 (the "Shareholder's Agreement"), with Finmeccanica
S.p.A. (the "Selling Shareholder") which, directly or indirectly through its
subsidiaries, is the record and beneficial owner of, and has the sole right to
vote and dispose of, 17,813,527 Company Shares and 1,600,000 Preferred
Securities (representing, in the aggregate, approximately 53.2% of the share
capital of the Company, calculated on a fully diluted basis, but assuming no
exercise of outstanding options under the Company's stock option plans). The
Selling Shareholder has agreed to irrevocably tender pursuant to the Offer
(and not withdraw) all of its Shares pursuant to the terms and subject to the
conditions set forth in the Shareholder's Agreement. The obligations of the
Purchaser under the Acquisition Agreement and the Shareholder's Agreement are
guaranteed by the Parent. The Acquisition Agreement and the Shareholder's
Agreement are more fully described in Section 11--"Purpose of the Offer;
Delisting and Deregistration of Company Shares; Plans for the Company; Certain
Agreements".
1
<PAGE>
THE COMPANY HAS ADVISED THE PURCHASER AND THE PARENT THAT MERRILL LYNCH
INTERNATIONAL ("MERRILL LYNCH"), AS FINANCIAL ADVISOR TO THE COMPANY, HAS
DELIVERED TO EACH OF THE SUPERVISORY BOARD AND THE MANAGEMENT BOARD OF THE
COMPANY ITS WRITTEN OPINION DATED OCTOBER 14, 1998 THAT, AS OF SUCH DATE AND
BASED UPON ITS REVIEW AND ANALYSIS AND SUBJECT TO THE LIMITATIONS SET FORTH
THEREIN, THE SHARE OFFER PRICE TO BE RECEIVED BY THE HOLDERS OF COMPANY SHARES
PURSUANT TO THE OFFER IS FAIR FROM A FINANCIAL POINT OF VIEW TO SUCH HOLDERS.
A COPY OF THE OPINION OF MERRILL LYNCH, WHICH SETS FORTH THE ASSUMPTIONS MADE,
FACTORS CONSIDERED AND SCOPE OF REVIEW UNDERTAKEN BY MERRILL LYNCH, IS
CONTAINED IN THE SOLICITATION/RECOMMENDATION STATEMENT OF THE COMPANY ON
SCHEDULE 14D-9 (THE "SCHEDULE 14D-9"), WHICH IS BEING MAILED TO HOLDERS
CONCURRENTLY HEREWITH. HOLDERS OF COMPANY SHARES ARE URGED TO READ THE FULL
TEXT OF THAT OPINION.
THE OFFER IS CONDITIONED ON (I) THERE BEING VALIDLY TENDERED AND NOT
PROPERLY WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES
WHICH, WHEN ADDED TO SHARES, IF ANY, PREVIOUSLY ACQUIRED BY THE PURCHASER
CONSTITUTE AT LEAST SEVENTY-FIVE PERCENT OF THE FULLY DILUTED SHARE CAPITAL OF
THE COMPANY (THE "MINIMUM CONDITION") AND (II) THE RECEIPT OF THE GOVERNMENTAL
APPROVALS (AS DEFINED HEREIN). THE OFFER IS ALSO SUBJECT TO OTHER TERMS AND
CONDITIONS. SEE SECTION 14--"CONDITIONS OF THE OFFER".
The Company has informed the Purchaser that, as of October 14, 1998, there
were (i) 29,201,981 Company Shares and 5,740,000 Preferred Securities issued
and outstanding, (ii) 993,400 Company Shares reserved for issuance upon the
exercise of outstanding options granted under the Company's stock option plans
and (iii) 8,940,624 Company Shares reserved for issuance upon conversion of
the Preferred Securities at a rate of 1.5576 Company Shares for one Preferred
Security. As a result, as of such date, and assuming that no stock options
under the Company's stock option plans are exercised, the Minimum Condition
would be satisfied if, in the aggregate, a combination of Company Shares and
Preferred Securities would be tendered and not properly withdrawn prior to the
expiration of the Offer which, assuming all such tendered Preferred Securities
were converted, would result in 28,606,954 Company Shares being acquired by
the Purchaser. The Shares that the Selling Shareholder has agreed to tender
pursuant to the Offer and not withdraw total 20,305,687 Company Shares,
assuming for this purpose that all Preferred Securities so tendered are
converted into Company Shares.
If the Purchaser does not acquire the entire equity interest in the Company
upon consummation of the Offer, at such time as the Purchaser acquires at
least 95% of the share capital of the Company, the Purchaser may pursue the
Compulsory Acquisition (as defined herein) of any remaining minority Company
Shares pursuant to Dutch Law. Additionally, whether or not the Purchaser
acquires at least 95% of the share capital of the Company, the Purchaser may
otherwise determine to purchase Shares following consummation of the Offer.
There can be no assurance, however, that the Purchaser will pursue any such
acquisitions following consummation of the Offer. See Section 11--"Purpose of
the Offer; Delisting and Deregistration of Company Shares; Plans for the
Company; Certain Agreements".
"Governmental Approvals" means (i) the expiration or termination of any
applicable waiting period under (A) the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), (B) the Competition Act (Canada) and (C) the voluntary
notification under Section 721 of the Defense Production Act of 1950, as
amended ("Exon-Florio"), (ii) a decision of the Commission of the European
Community that the purchase of the Shares contemplated by the Offer is
compatible with the common market and (iii) any other material consents,
approvals, authorizations, offers or permits required to be obtained by the
Company, the Purchaser, or their respective subsidiaries in connection with
the Offer or the Acquisition Agreement from governmental agencies and
authorities. See Section 14--"Conditions of the Offer" for a complete
description of the conditions to the Offer.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
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THE TENDER OFFER
1. TERMS OF THE OFFER.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment and pay for all Shares
validly tendered prior to the Expiration Date (as defined herein) and not
properly withdrawn in accordance with Section 4--"Withdrawal Rights". The term
"Expiration Date" means 12:00 Midnight, New York City time, on November 17,
1998, unless and until the Purchaser, in its sole discretion (but subject to
the terms of the Acquisition Agreement), shall have extended the period of
time during which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire.
The Offer is conditioned upon, among other things, satisfaction of the
Minimum Condition and the receipt of the Governmental Approvals. The Offer is
also subject to certain other conditions set forth in Section 14--"Conditions
of the Offer" below. Subject to the applicable regulations of the U.S.
Securities and Exchange Commission (the "Commission"), the Purchaser expressly
reserves the right, in its sole discretion (but subject to the terms of the
Acquisition Agreement), at any time and from time to time, to delay acceptance
for payment of, or, regardless of whether or not such Shares were previously
accepted for payment, payment for any Shares if (i) any applicable waiting
period under the HSR Act, Competition Act (Canada) or Exon-Florio has not
expired or been terminated or (ii) a decision of the Commission of the
European Community that the purchase of the Shares contemplated by the Offer
is compatible with the common market has not been received. Additionally,
subject to the applicable regulations of the Commission, the Purchaser
expressly reserves the right, in its sole discretion (but subject to the terms
of the Acquisition Agreement), if any of the other conditions referred to in
Section 14--"Conditions of the Offer" are not satisfied or any of the events
specified in Section 14--"Conditions of the Offer" have occurred or are
determined by the Purchaser to have occurred prior to the acceptance for
payment of, or payment for, tendered Shares, subject to the limitations
described below, to (i) delay acceptance for payment of, or, regardless of
whether such Shares were theretofore accepted for payment, payment for, any
Shares pending satisfaction of the other conditions referred to in Section
14--"Conditions of the Offer" and terminate or amend the Offer and, if
terminated, return all such tendered Shares to the tendering Holders, (ii)
waive or amend any or all conditions to the Offer, to the extent permitted by
applicable law and the provisions of the Acquisition Agreement, and, subject
to complying with applicable rules and regulations of the Commission, purchase
all Shares validly tendered or (iii) subject to the limitations described
below, extend the Offer and, subject to the right of Holders to withdraw
Shares until the Expiration Date, retain the Shares which have been tendered
during the period or periods for which the Offer is extended.
The Purchaser expressly reserves the right, at any time and from time to
time, to extend for any reason the period of time during which the Offer is
open, including upon the occurrence of any of the events specified in Section
14--"Conditions of the Offer"; provided, that the Offer may not be extended
beyond any scheduled Expiration Date unless (i) any person has made an
Acquisition Proposal (as defined herein) or (ii) any of the conditions
specified in Section 14--"Conditions of the Offer" have not been satisfied or
waived. During any such extension, all Shares previously tendered and not
properly withdrawn will remain subject to the Offer, subject to the rights of
a tendering Holder to withdraw its Shares. See Section 4--"Withdrawal Rights".
The Purchaser has agreed, in the Acquisition Agreement, that if on the
initial scheduled Expiration Date of the Offer there is a failure of the offer
conditions relating to obtaining governmental approvals to be satisfied, it
shall, unless the Acquisition Agreement is terminated in accordance with its
terms, extend the Offer and set a subsequent scheduled Expiration Date, and
shall continue to so extend the Offer and set subsequent scheduled Expiration
Dates until the Acquisition Agreement is terminated. See Section 11--"Purpose
of the Offer; Delisting and Deregistration of Company Shares; Plans for the
Company; Certain Agreements".
The Purchaser reserves the right to modify the terms of the Offer, except
that, without the written consent of the Company, the Purchaser will not: (i)
decrease the Offer Price; (ii) change the form of consideration
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payable in the Offer (other than by increasing it); (iii) decrease the number
of Shares sought pursuant to the Offer; (iv) extend the Offer beyond any
scheduled Expiration Date; or (v) amend the offer conditions referred to in
Section 14--"Conditions of the Offer" in a manner which is materially adverse
to the holders of Company Shares or holders of Preferred Securities (including
by adding additional conditions); provided, however, that if on the Expiration
Date (as it may be extended) (x) all offer conditions referred to in Section
14--"Conditions of the Offer" shall not have been satisfied or waived or (y)
any person has made an Acquisition Proposal, the Offer may be extended by the
Purchaser from time to time. In addition, the Purchaser may, without the
consent of the Company, increase the Offer Price and in connection therewith
extend the Offer to the extent required by law.
The Purchaser acknowledges that (i) Rule 14e-1(c) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), requires the Purchaser
to pay the consideration offered or return the Shares tendered promptly after
the termination or withdrawal of the Offer, and (ii) the Purchaser may not
delay acceptance for payment of, or payment for (except as provided in the
second paragraph of this Section 1), any Shares upon the occurrence of any of
the conditions specified in Section 14--"Conditions of the Offer" without
extending the period of time during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be followed
as promptly as practicable by public announcement thereof, with such
announcement in the case of an extension to be made no later than 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
expiration date. Subject to applicable law (including Rules 14d-4(c), 14d-6(d)
and 14e-1 under the Exchange Act, which require that material changes be
promptly disseminated to Holders in a manner reasonably designed to inform
them of such changes) and without limiting the manner in which the Purchaser
may choose to make any public announcement, the Purchaser shall have no
obligation to publish, advertise or otherwise communicate any such public
announcement.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, the Purchaser will extend the Offer to the extent required by Rules
14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The minimum period during
which an offer must remain open following material changes in the terms of the
offer or information concerning the offer, other than a change in price or a
change in the percentage of securities sought, will depend upon the facts and
circumstances then existing, including the relative materiality of the changed
terms or information. With respect to a change in price or a change in the
percentage of securities sought, a minimum period of ten business days is
generally required to allow for adequate dissemination to shareholders and
investor response.
The Company has provided the Purchaser with a list of the Holders with
security position listings, for the purpose of disseminating the Offer to
Holders. This Offer to Purchase, the related Letter of Transmittal and other
relevant materials will be mailed to record Holders whose names appear on the
list of the holders of Company Shares and holders of Preferred Securities and
will be furnished, for subsequent transmittal to beneficial owners of Shares,
to brokers, dealers, commercial banks, trust companies and similar persons
whose names, or the names of whose nominees, appear on the stockholder list
or, if applicable, who are listed as participants in a clearing agency's
security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES.
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension
or amendment), the Purchaser will purchase, by accepting for payment, and will
pay for, all Shares validly tendered prior to the Expiration Date (and not
properly withdrawn in accordance with Section 4--"Withdrawal Rights") promptly
upon the later to occur of (i) the Expiration Date and (ii) the satisfaction
or waiver of the conditions set forth in Section 14--"Conditions of the
Offer". Subject to applicable rules of the Commission and the terms of the
Acquisition Agreement, the Purchaser expressly reserves the right, in its
discretion, to delay acceptance for payment of, or payment for, Shares pending
receipt of certain Governmental Approvals or fulfillment of the Minimum
Condition. See Section 14--"Conditions of the Offer".
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In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) the certificates
evidencing such Shares (the "Share Certificates") or timely confirmation of a
book-entry transfer (a "Book-Entry Confirmation") of such Shares, if such
procedure is available, into the Depositary's account at The Depository Trust
Company (the "Book-Entry Transfer Facility") pursuant to the procedures set
forth in Section 3--"Procedures for Tendering Shares", (ii) the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed with
any required signature guarantees, or an Agent's Message (as defined herein)
in connection with a book-entry transfer and (iii) any other documents
required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn if, as and when the Purchaser gives oral or written notice to the
Depositary of the Purchaser's acceptance for payment of such Shares. Payment
for Shares accepted pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering Holders for the purpose of receiving payments from the Purchaser and
transmitting payments to such tendering Holders whose Shares have been
accepted for payment. Under no circumstances will interest on the purchase
price for Shares be paid by the Purchaser, regardless of any delay in making
such payment. Upon the deposit of funds with the Depositary for the purpose of
making payments to tendering Holders, the Purchaser's obligation to make such
payment shall be satisfied, and tendering Holders must thereafter look solely
to the Depositary for payment of amounts owed to them by reason of the
acceptance for payment of Shares pursuant to the Offer.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are
submitted evidencing more Shares than are tendered, Share Certificates
evidencing unpurchased Shares will be returned, without expense to the
tendering Holder (or, in the case of Shares tendered by book-entry transfer
into the Depositary's account at the Book-Entry Transfer Facility pursuant to
the procedure set forth in Section 3--"Procedures for Tendering Shares", such
Shares will be credited to an account maintained at the Book-Entry Transfer
Facility), as promptly as practicable following the expiration, termination or
withdrawal of the Offer.
If, prior to the Expiration Date, the Purchaser increases the consideration
to be paid per Share pursuant to the Offer, the Purchaser will pay such
increased consideration for all such Shares purchased pursuant to the Offer,
whether or not such Shares were tendered prior to such increase in
consideration.
The Purchaser reserves the right to assign to an affiliate of the Purchaser
the right to purchase all or any portion of the Shares tendered pursuant to
the Offer, but any such assignment will not relieve the Purchaser of its
obligations under the Offer and will in no way prejudice the rights of
tendering Holders to receive payment for Shares validly tendered and accepted
for payment pursuant to the Offer.
3. PROCEDURES FOR TENDERING SHARES.
Valid Tender of Shares. In order for Shares to be validly tendered pursuant
to the Offer, the Letter of Transmittal (or facsimile thereof), properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message in connection with a book-entry delivery of Shares, and any
other required documents, must be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date and either (i) the Share Certificates evidencing tendered
Shares must be received by the Depositary at such address or Shares must be
tendered pursuant to the procedure for book-entry transfer described below and
a Book-Entry Confirmation must be received by the Depositary, in each case
prior to the Expiration Date, or (ii) the tendering Holder must comply with
the guaranteed delivery procedures described below.
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THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING HOLDER, AND THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase, and any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Shares by causing the Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account
at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for transfer. However, although delivery of Shares may
be effected through book-entry transfer at the Book-Entry Transfer Facility,
the Letter of Transmittal or a facsimile thereof, with any required signature
guarantees, or an Agent's Message, and any other required documents, must, in
any case, be transmitted to and received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering Holder must comply with the guaranteed
delivery procedures described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY IN ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S
PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantee. Signatures on all Letters of Transmittal must be
guaranteed by a financial institution (including most banks, savings and loan
associations and brokerage houses) which is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (an
"Eligible Institution"), unless the Shares tendered thereby are tendered (i)
by a registered holder of Shares who has not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on the Letter of Transmittal or (ii) for the account of an
Eligible Institution. See Instruction 5 of the Letter of Transmittal.
If a Share Certificate is registered in the name of a person other than the
signer of the Letter of Transmittal, or if payment is to be made, or a Share
Certificate not accepted for payment or not tendered is to be returned, to a
person other than the registered holder(s), then the Share Certificate must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear on the Share
Certificate, with the signature(s) on such Share Certificate or stock powers
guaranteed as described above. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a Holder desires to tender Shares pursuant to the
Offer and such Holder's Share Certificates are not immediately available or
time will not permit all required documents to reach the Depositary on or
prior to the Expiration Date or the procedure for book-entry transfer cannot
be completed on a timely basis, such Shares may nevertheless be tendered if
all the following conditions are satisfied:
(i) the tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser herewith, is
received by the Depositary as provided below on or prior to the Expiration
Date; and
(iii) Share Certificates for all tendered Shares, in proper form for
transfer, or a Book-Entry Confirmation, together with a properly completed
and duly executed Letter of Transmittal (or facsimile thereof) with any
required signature guarantee (or, in the case of a book-entry transfer, an
Agent's Message) and any other documents required by such Letter of
Transmittal, are received by the Depositary within three New York Stock
Exchange, Inc. ("NYSE") trading days after the date of execution of the
Notice of Guaranteed Delivery.
Any Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, facsimile transmission or mail to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in the Notice of
Guaranteed Delivery.
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Notwithstanding any other provision hereof, payment for Shares purchased
pursuant to the Offer will, in all cases, be made only after timely receipt by
the Depositary of (i) the Share Certificates evidencing such Shares, or a
Book-Entry Confirmation of the delivery of such Shares, (ii) a properly
completed and duly executed Letter of Transmittal or facsimile thereof (or, in
the case of a book-entry transfer, an Agent's Message) and (iii) any other
documents required by the Letter of Transmittal.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tendered Shares pursuant to any of the procedures described above will be
determined by the Purchaser, in its sole discretion, whose determination will
be final and binding on all parties. The Purchaser reserves the absolute right
to reject any or all tenders of any Shares determined by it not to be in
proper form or if the acceptance for payment of, or payment for, such Shares
may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser
also reserves the absolute right, in its sole discretion, to waive any of the
conditions of the Offer (subject to the terms of the Acquisition Agreement) or
any defect or irregularity in any tender with respect to Shares of any
particular Holder, whether or not similar defects or irregularities are waived
in the case of other Holders. No tender of Shares will be deemed to have been
validly made until all defects and irregularities have been cured or waived.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be
final and binding.
Appointment as Proxy. By executing a Letter of Transmittal as set forth
above, a tendering Holder irrevocably appoints designees of the Purchaser as
such Holder's proxies, each with full power of substitution, to the full
extent of such Holder's rights with respect to the Shares tendered by such
Holder and accepted for payment by the Purchaser (and any and all non-cash
dividends, distributions, rights, other Shares or other securities issued or
issuable in respect of such Shares on or after October 20, 1998). All such
proxies shall be considered coupled with an interest in the tendered Shares.
This appointment will be effective if, when, and only to the extent that, the
Purchaser accepts such Shares for payment pursuant to the Offer. Upon such
acceptance for payment, all prior proxies given by such Holder with respect to
such Shares and other securities will, without further action, be revoked, and
no subsequent proxies may be given. The designees of the Purchaser will, with
respect to the Shares and other securities for which the appointment is
effective, be empowered to exercise all rights of such Holder as they in their
sole discretion may deem proper at any annual, special, adjourned or postponed
meeting of the Holders, by written consent or otherwise.
BACKUP WITHHOLDING TAX. TO PREVENT U.S. FEDERAL BACKUP WITHHOLDING TAX WITH
RESPECT TO PAYMENT TO CERTAIN HOLDERS FOR THEIR SHARES PURSUANT TO THE OFFER,
EACH HOLDER SHOULD PROVIDE THE DEPOSITARY WITH SUCH HOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER AND CERTIFY THAT SUCH HOLDER IS NOT SUBJECT TO BACKUP
WITHHOLDING TAX BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED AS PART OF THE
LETTER OF TRANSMITTAL. IF BACKUP WITHHOLDING TAX APPLIES WITH RESPECT TO A
HOLDER, THE DEPOSITARY IS REQUIRED TO WITHHOLD 31% OF ANY PAYMENTS MADE TO
SUCH HOLDER. SEE SECTION 5--"CERTAIN TAX CONSEQUENCES" OF THIS OFFER TO
PURCHASE AND INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL.
The Purchaser's acceptance for payment of Shares tendered pursuant to the
Offer will constitute a binding agreement between the tendering Holder and the
Purchaser upon the terms and subject to the conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer are irrevocable except that
such Shares may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by the Purchaser pursuant to the
Offer, may also be withdrawn at any time after December 18, 1998, or at such
later time as may apply if the Offer is extended.
If the Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares or is unable to accept Shares for payment pursuant to the Offer for
any reason, then, without prejudice to the Purchaser's rights under
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the Offer, the Depositary may, nevertheless, on behalf of the Purchaser,
retain tendered Shares, and such Shares may not be withdrawn except to the
extent that tendering Holders are entitled to withdrawal rights as described
in this Section 4--"Withdrawal Rights". Any such delay will be an extension of
the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the name
of the registered holder, if different from that of the person who tendered
such Shares. If Share Certificates evidencing Shares to be withdrawn have been
delivered or otherwise identified to the Depositary, then, prior to the
physical release of such Share Certificates, the serial numbers shown on such
Share Certificates must be submitted to the Depositary and the signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution, unless
such Shares have been tendered for the account of an Eligible Institution. If
Shares have been tendered pursuant to the procedure for book-entry transfer as
set forth in Section 3--"Procedures for Tendering Shares", any notice of
withdrawal must also specify the name and number of the account at the Book-
Entry Transfer Facility to be credited with the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination will be final and binding. None of Parent, the
Purchaser, the Depositary, the Dealer Manager or any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn will thereafter be deemed to not have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3--"Procedures for Tendering Shares".
5. CERTAIN TAX CONSEQUENCES.
a. United States Federal Income Tax Consequences.
The following is a general summary of the principal U.S. federal income tax
consequences of the receipt of cash in exchange for Company Shares or
Preferred Securities, as the case may be, pursuant to the Offer by a U.S.
Holder thereof. This summary does not discuss all aspects of U.S. federal
income taxation which may be applicable to a particular U.S. Holder in light
of its individual circumstances. This summary applies only to Company Shares
or Preferred Securities held as capital assets and does not address aspects of
U.S. federal income taxation that may be applicable to U.S. Holders that are
subject to special tax rules, such as insurance companies, tax-exempt
organizations, banks, dealers or traders in securities or currencies, U.S.
Holders that hold Company Shares or Preferred Securities, as the case may be,
as part of a position in a "straddle" or as part of a "hedging," "conversion"
or "integrated" transaction for U.S. federal income tax purposes or U.S.
Holders that have a "functional currency" other than the U.S. dollar.
For purposes of this summary, a "U.S. Holder" is a beneficial owner of
Company Shares or Preferred Securities, as the case may be, who, for U.S.
federal income tax purposes, is (i) a citizen or resident of the United
States, (ii) a corporation or partnership organized in or under the laws of
the United States or any state thereof (including the District of Columbia),
(iii) an estate the income of which is subject to U.S. federal income taxation
regardless of its source or (iv) a trust (a) the administration over which a
United States court can exercise primary supervision and (b) all of the
substantial decisions of which one or more United States persons have the
authority to control.
This summary is based on the Internal Revenue Code of 1986, as amended to
the date hereof (the "Code"), existing and proposed Treasury Regulations,
administrative pronouncements and judicial decisions, each as available and in
effect as of the date hereof.
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Tender of Company Shares Pursuant to the Offer. The receipt of cash for
Company Shares pursuant to the Offer by a U.S. Holder will be a taxable
transaction for U.S. federal income tax purposes and may also be a taxable
transaction under applicable state, local or foreign tax laws. In general, a
U.S. Holder will recognize gain or loss for U.S. federal income tax purposes
equal to the difference, if any, between the amount realized from the sale of
Company Shares and such U.S. Holder's adjusted tax basis in such Company
Shares. Such gain or loss will be capital gain or loss and will be long-term
capital gain or loss if such U.S. Holder's holding period for such Company
Shares exceeds one year.
Tender of Preferred Securities Pursuant to the Offer. In its Registration
Statement filed on Form F-3 with the Commission on May 14, 1996, describing
the Preferred Securities, the Company, based on advice received from legal
counsel, stated that, although not free from doubt, the Preferred Securities
will be classified for U.S. federal income tax purposes as indebtedness of the
Company. The following discussion assumes that such classification is correct.
The receipt of cash for Preferred Securities pursuant to the Offer by a U.S.
Holder will be a taxable transaction for U.S. federal income tax purposes and
may also be a taxable transaction under applicable state, local or foreign tax
laws. In general, a U.S. Holder will recognize gain or loss at the time the
U.S. Holder's Preferred Securities are purchased by the Purchaser in an amount
equal to the difference, if any, between the amount of cash received and the
U.S. Holder's adjusted tax basis in the Preferred Securities tendered. A U.S.
Holder's adjusted tax basis generally will equal the cost of such Preferred
Securities increased by the amount of any original issue discount previously
included in income with respect to such Preferred Securities and decreased by
any payments previously made on such Preferred Securities. Subject to the
market discount rules discussed below, such gain or loss will be capital gain
or loss and will be long-term capital gain or loss if such U.S. Holder's
holding period for such Preferred Securities exceeds one year. U.S. Holders
should consult their own tax advisors as to the adjusted tax basis of their
Preferred Securities.
An exception to the capital gain treatment described above applies to a U.S.
Holder who holds Preferred Securities with "market discount." Market discount
is the amount, if any, by which the U.S. Holder's basis in the Preferred
Securities immediately after its acquisition is less than the stated
redemption price at maturity of the Preferred Securities. If, however, such
difference is less than 1/4 of 1% of the stated redemption price at maturity
of the Preferred Securities multiplied by the number of complete years from
the U.S. Holder's acquisition date of the Preferred Securities to maturity,
the Preferred Securities will be considered to have no market discount. The
gain, if any, realized by the U.S. Holder of market discount Preferred
Securities on the sale or exchange of such Preferred Securities will be
treated as ordinary income to the extent that market discount has accrued (on
a straight line basis or, at the election of the U.S. Holder, on a constant
interest basis) from the U.S. Holder's acquisition date to the date of sale,
unless the U.S. Holder has elected to include market discount in income
currently as it accrues. Any gain in excess of such accrued market discount
will be subject to the capital gains rules described above. Generally, market
discount obligations do not include any Preferred Securities acquired by the
tendering U.S. Holder at their original issue. If a U.S. Holder had interest
expense attributable to market discount Preferred Securities which interest
expense was not allowed as a deduction under Section 1277(a) of the Code, such
interest expense may be allowable in whole or in part upon such U.S. Holder's
disposition of the Preferred Securities. U.S. Holders having market discount
should consult their own tax advisors as to the effect to them of the market
discount rules on the tender of Preferred Securities pursuant to the Offer.
Backup Withholding Tax. As noted in Section 3--"Procedures for Tendering
Shares," a Holder (other than an "exempt recipient," including a corporation
and a non-U.S. Holder that provides appropriate certification) that receives
cash in exchange for Shares may be subject to U.S. federal backup withholding
tax at a rate equal to 31%, unless such Holder provides its taxpayer
identification number and certifies that such Holder is not subject to backup
withholding tax by submitting a completed Substitute Form W-9 to the
Depositary. Accordingly, each Holder should complete, sign and submit the
Substitute Form W-9 included as part of the Letter of Transmittal in order to
avoid the imposition of such backup withholding tax.
9
<PAGE>
THE U.S. FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND IS BASED UPON LAWS, REGULATIONS, RULINGS AND
DECISIONS NOW IN EFFECT, ALL OF WHICH ARE SUBJECT TO CHANGE (POSSIBLY
RETROACTIVELY). U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE OFFER TO THEM, INCLUDING THE
APPLICATION AND EFFECT OF THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND
FOREIGN TAX LAWS.
b. Dutch Tax Consequences.
The following general summary of material Dutch tax consequences does not
address the treatment of a Holder who has a substantial interest or deemed
substantial interest (as such terms are defined by statute) in the Company, or
the Dutch tax consequences due to the application of a special regime, such as
the tax-exempt status of qualifying pension funds. Furthermore, the summary
does not address the Dutch tax consequences of holders of stock options of the
Company, nor the Dutch tax consequences of post-closing dividends. The
description is limited to the material tax implications of the sale pursuant
to the Offer for the Holder who is not resident or is not deemed to be
resident in The Netherlands for purposes of the relevant tax codes.
The summary is based upon tax laws and published case law of The Netherlands
as in effect on the date of this Offer, which are subject to change (possibly
retroactively). This summary does not purport to be a complete analysis of all
potential Dutch tax effects in relation to the Offer. Holders are urged to
consult their tax advisors with respect to the specific tax consequences of
the Offer to them.
Tender of Company Shares Pursuant to the Offer. A holder of Company Shares
who is not resident or is not deemed to be resident in The Netherlands (a
"Non-Dutch Shareholder") will not be subject to any Dutch taxes on income or
capital gains arising on the disposal of the Company Shares pursuant to the
Offer, provided that:
(a) such Non-Dutch Shareholder does not have an enterprise or an interest in
an enterprise which is, in whole or in part, carried on through a permanent
establishment or a permanent representative in The Netherlands and to which
enterprise or part of an enterprise the Company Shares are attributable or, in
the event that the Company Shares are attributable to such enterprise, or such
part of an enterprise, the Non-Dutch Shareholder is subject to Dutch corporate
income tax and such income or capital gain is exempt under the so-called
"participation exemption"; or
(b) such Non-Dutch Shareholder is not entitled to a share in the profits of
an enterprise that is effectively managed in The Netherlands other than by way
of securities or through an employment contract, the Company Shares being
attributable to such enterprise.
The payment of cash consideration may be made free of any withholding or
deduction of, for or on account of any taxes of whatever nature imposed,
levied, withheld or assessed by The Netherlands or any political subdivision
or taxing authority thereof or therein.
No Dutch registration tax, transfer tax, stamp duty or any similar
documentary tax or duty will be payable in The Netherlands in respect of or in
connection with the disposition of the Company Shares.
Tender of Preferred Securities Pursuant to the Offer. In its Registration
Statement on Form F-3 filed with the Commission on May 14, 1996, describing
the Preferred Securities, the Company, based on advice received from legal
counsel, stated that the Trust will constitute a transparent entity for
relevant Dutch tax purposes. The following discussion assumes such
characterization is correct.
A holder of Preferred Securities who is not resident or is not deemed to be
resident in The Netherlands (a "Non-Dutch Preferred Securities Holder") will
not be subject to any Dutch taxes on income or capital gains arising on the
disposal of the Preferred Securities pursuant to the Offer, provided that:
10
<PAGE>
(a) such Non-Dutch Preferred Securities Holder does not have an enterprise
or an interest in an enterprise which is, in whole or in part, carried on
through a permanent establishment or a permanent representative in The
Netherlands and to which enterprise or part of an enterprise the Preferred
Securities are attributable; or
(b) such Non-Dutch Preferred Securities Holder is not entitled to a share in
the profits of an enterprise that is effectively managed in The Netherlands
other than by way of securities or through an employment contract, the
Preferred Securities being attributable to such enterprise.
The payment of cash consideration may be made free of any withholding or
deduction of, for or on account of any taxes of whatever nature imposed,
levied, withheld or assessed by The Netherlands or any political subdivision
or taxing authority thereof or therein.
No Dutch registration tax, transfer tax, stamp duty or any similar
documentary tax or duty will be payable in The Netherlands in respect of or in
connection with the disposition of the Preferred Securities.
6. PRICE RANGE OF SHARES; DIVIDENDS.
Company Shares. The Company Shares are listed and traded on the NYSE under
the symbol "EBY". The following table sets forth, for the periods indicated,
the high and low closing sale prices per Company Share on the NYSE as reported
by the Dow Jones News Service. The Company has not paid any cash dividends
since January 1, 1996.
<TABLE>
<CAPTION>
MARKET PRICE
-----------------
HIGH LOW
--------- -------
<S> <C> <C>
1996 FISCAL YEAR:
First Quarter............................................... $27 5/8 $20 1/4
Second Quarter.............................................. 30 21 1/2
Third Quarter............................................... 26 7/8 20 1/2
Fourth Quarter.............................................. 22 3/4 14
1997 FISCAL YEAR:
First Quarter............................................... 20 5/8 14 1/2
Second Quarter.............................................. 19 3/8 13 5/8
Third Quarter............................................... 21 3/4 14 5/8
Fourth Quarter.............................................. 19 1/4 14 3/8
1998 FISCAL YEAR:
First Quarter............................................... 19 15/16 14 7/8
Second Quarter.............................................. 26 11/16 17 1/2
Third Quarter............................................... 27 7/16 19 3/4
Fourth Quarter (through October 19, 1998)................... 36 3/4 19 1/4
</TABLE>
On October 13, 1998, the last full trading day prior to the public
announcement of the Offer, the reported closing sales price of the Company
Shares on the NYSE was $19 1/4 per Company Share. On October 19, 1998, the
last full trading day prior to the date of this Offer to Purchase, the
reported closing sales price of the Company Shares on the NYSE was $35 5/8 per
Company Share. HOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE
COMPANY SHARES.
Preferred Securities. The Purchaser and the Parent have been advised that
the Preferred Securities are traded on the over-the-counter market on a
limited and sporadic basis. The following table sets forth, for the periods
indicated, the high and low bid quotations per Preferred Security as reported
by Fact Set. Such quotations
11
<PAGE>
represent inter-dealer quotations, without adjustment for retail markets,
markdowns or commissions, and do not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
MARKET PRICE
---------------
HIGH LOW
------- -------
<S> <C> <C>
1996 FISCAL YEAR:
Fourth Quarter............................................... $43 $35 1/4
1997 FISCAL YEAR:
First Quarter................................................ 41 1/4 35 1/2
Second Quarter............................................... 41 1/2 34 3/8
Third Quarter................................................ 45 1/2 38 7/8
Fourth Quarter............................................... 45 5/8 37 3/4
1998 FISCAL YEAR:
First Quarter................................................ 42 1/4 37 1/4
Second Quarter............................................... 43 1/8 37 5/8
Third Quarter................................................ 45 5/8 37 3/4
Fourth Quarter (through October 19, 1998).................... 56 1/4 38 1/8
</TABLE>
On October 13, 1998, the last full trading day prior to the public
announcement of the Offer, the reported closing bid quotation of the Preferred
Securities on the over-the-counter market was $38 1/8 per Preferred Security.
On October 19, 1998, the last full trading day prior to the date of this Offer
to Purchase, the reported closing bid quotation of the Preferred Securities on
the over-the-counter market was $56 1/4 per Preferred Security. HOLDERS ARE
URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE PREFERRED SECURITIES.
The following table sets forth, for the periods indicated, the amount of
distributions paid on the Preferred Securities since January 1, 1996.
<TABLE>
<CAPTION>
DISTRIBUTIONS
-------------
<S> <C>
1996 FISCAL YEAR:
First Quarter................................................... $ 0
Second Quarter.................................................. $3,946,250
Third Quarter................................................... $3,946,250
Fourth Quarter.................................................. $3,946,250
1997 FISCAL YEAR:
First Quarter................................................... $3,946,250
Second Quarter.................................................. $3,946,250
Third Quarter................................................... $3,946,250
Fourth Quarter.................................................. $3,946,250
1998 FISCAL YEAR:
First Quarter................................................... $3,946,250
Second Quarter.................................................. $3,946,250
Third Quarter................................................... $3,946,250
Fourth Quarter (through October 19, 1998)....................... $ 0
</TABLE>
7. CERTAIN INFORMATION CONCERNING THE COMPANY AND THE TRUST.
The information concerning the Company contained in this Offer to Purchase,
including financial information, has been taken from or based upon publicly
available documents and records on file with the Commission and other public
sources. Neither Parent nor the Purchaser assumes any responsibility for the
accuracy or completeness of the information concerning the Company contained
in such documents and records or for any failure by the Company to disclose
events which may have occurred or may affect the significance or accuracy of
any such information but which are unknown to Parent or the Purchaser.
12
<PAGE>
The Company is a worldwide supplier of automation solutions and technologies
serving the continuous process and semi-continuous (batch) manufacturing
process industries. The Company's main lines of business are: (i) process
automation systems, which include traditional distributed control systems
integrating hardware and software products for the control and automation of
process manufacturing facilities, as well as process automation systems
integratable with enterprise management applications such as financial and
resource planning, in each case including related professional services; (ii)
instrumentation products which monitor, measure and control process variables
such as flow, pressure, level and temperature; and (iii) analytical products,
which measure the chemical and physical properties of liquids, gases and other
process materials.
The Company operates globally through more than 40 operating units in 25
countries and serves customers primarily in the electric power, chemical,
pharmaceutical, petrochemical, oil and gas, metals and minerals, pulp and
paper, water and wastewater, food and beverage and process industries. The
Company is a supplier of process automation systems to the electric power
industry in the United States, Canada, Japan and certain countries in Europe.
The Company is a provider of analytical products, gas chromatographs,
temperature measurement products and magnetic flow meters. The Company has
developed a large worldwide installed base of process automation systems and
products from which it has traditionally derived a significant portion of its
revenue through the sale of additional products and systems, upgrades,
enhancement, replacement parts and associated services.
Financial Information. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the financial statements contained in the
Company's Annual Reports on Form 20-F for the fiscal years ended December 31,
1997, December 31, 1996 and December 31, 1995 and the Reports on Form 6-K
dated July 30, 1998, July 25, 1997, and July 30, 1996 for the six month
periods ended June 25, 1998, June 25, 1997 and June 25, 1996. More
comprehensive financial information is included in these reports and other
documents filed by the Company with the Commission. The financial information
that follows is qualified in its entirety by reference to these reports and
other documents, including the financial statements and related notes
contained therein. These reports and other documents may be inspected at, and
copies may be obtained from, the same places and in the manner set forth under
"--Available Information".
ELSAG BAILEY PROCESS AUTOMATION
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT COMPANY SHARE AMOUNTS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
---------------------------------------- ---------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, JUNE 25, JUNE 25, JUNE 25,
1997 1996 1995 1998 1997 1996
------------ ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Sales................... $ 1,513,237 $ 1,606,100 $ 843,874 $ 704,352 $ 748,019 $ 788,271
Cost of sales........... 1,008,386 1,148,840 557,646 469,942 493,092 617,792
Income (loss) before
income taxes, minority
interest and
extraordinary items.... (56,861) (197,032) 22,518 19,614 (2,557) (186,479)
Net income (loss)....... (33,286) (147,306) 30,593 5,592 (9,235) (127,937)
Net (loss) income per
Company
Share--diluted......... (1.14) (5.28) 1.30 0.19 (0.32) (4.59)
Weighted average number
of Company Shares--di-
luted.................. 29,202,000 27,886,000 23,400,000 29,419,000 29,202,000 27,886,000
BALANCE SHEET DATA (AT
PERIOD END):
Total current assets.... 841,968 981,403 489,301 863,430 931,288 1,129,634
Property, plant and
equipment, net......... 280,946 342,289 151,154 271,849 316,047 361,142
Total assets............ 1,938,153 2,184,694 1,168,825 1,954,042 2,066,811 2,202,300
Total current
liabilities............ 618,107 740,199 307,116 1,121,975 689,850 674,527
Total long-term debt.... 520,968 579,072 286,789 19,050 560,625 645,447
Total other liabilities
(including minority
interest).............. 592,093 606,687 297,919 602,836 581,221 596,642
Total stockholders'
equity................. 206,985 258,736 277,001 210,181 235,115 285,684
</TABLE>
13
<PAGE>
Certain Financial Projections. In connection with the negotiation and
execution of the Acquisition Agreement, the Company made available to
prospective purchasers, including the Purchaser and the Parent, certain non-
public information concerning the Company, including certain projected
financial information (the "Projections") for fiscal years ending December 31,
1998 through 2003. The Company has advised the Purchaser and the Parent that
the Projections were prepared by the Company's management based on numerous
assumptions including, among others, projections of revenues, gross profit,
operating and other expenses, depreciation and amortization, capital
expenditure and working capital requirements. The Projections do not give
effect to the Offer or the potential combined operations of the Purchaser and
the Company.
THE COMPANY DOES NOT AS A MATTER OF COURSE MAKE PUBLIC FORECASTS OR
PROJECTIONS AS TO ITS FUTURE FINANCIAL PERFORMANCE. THE PROJECTIONS SET FORTH
BELOW WERE PREPARED FOR INTERNAL PURPOSES AND NOT WITH A VIEW TO PUBLICATION
OR DISSEMINATION TO THE PUBLIC. SUCH PROJECTIONS WERE NOT PREPARED IN
ACCORDANCE WITH PUBLISHED GUIDELINES OF THE AMERICAN INSTITUTE OF CERTIFIED
PUBLIC ACCOUNTANTS OR THE COMMISSION REGARDING PROJECTIONS AND FORECASTS, NOR
HAVE SUCH PROJECTIONS BEEN AUDITED, EXAMINED OR OTHERWISE REVIEWED BY
INDEPENDENT AUDITORS OF THE COMPANY. SUCH PROJECTIONS NECESSARILY MAKE
NUMEROUS ASSUMPTIONS WITH RESPECT TO THE COMPANY'S PERFORMANCE, GENERAL
BUSINESS AND ECONOMIC CONDITIONS, EXCHANGE RATES, MARKET INTEREST RATES AND
OTHER MATTERS, MANY OF WHICH ARE BEYOND THE COMPANY'S ABILITY TO CONTROL AND
ARE INHERENTLY UNCERTAIN. NO ASSURANCE CAN BE GIVEN THAT SUCH PROJECTIONS WILL
PROVE, TO ANY EXTENT, TO BE ACCURATE, AND ACTUAL FUTURE PERFORMANCE MAY BE
SIGNIFICANTLY MORE FAVORABLE OR LESS FAVORABLE THAN SUCH PROJECTIONS. THE
INCLUSION OF SUCH PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS A
REPRESENTATION BY THE COMPANY, THE PURCHASER, THE PARENT OR ANY OTHER PERSON
THAT THE PROJECTIONS WILL PROVE TO BE CORRECT. SUCH PROJECTIONS ARE INCLUDED
HEREIN SOLELY BECAUSE THEY WERE MADE AVAILABLE TO THE PURCHASER AND THE
PARENT.
14
<PAGE>
ELSAG BAILEY PROCESS AUTOMATION
PROJECTED FINANCIAL PERFORMANCE
(US$ IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31,
-----------------------------------
1998 1999 2000 2001 2002 2003
----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Sales..................................... 1,490 1,575 1,660 1,770 1,880 2,000
Pre-tax income*........................... 57.2 73.0 93.0 121.0 151.0 183.0
Net income before Non-Recurring Costs and
Preferred Securities*.................... 43.0 53.0 62.0 78.0 97.0 117.0
Net income................................ 16.7 37.0 46.0 62.0 81.0 101.0
</TABLE>
- --------
* The Purchaser has been advised by the Company that for 1998 amounts are
before restructuring charges and related tax benefit, as reported in internal
management accounting which is not in conformity with US GAAP.
Available Information. The Company is subject to the information and
reporting requirements of the Exchange Act and is required to file reports and
other information with the Commission relating to its business, financial
condition and other matters. These reports and other information should be
available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
and also should be available for inspection and copying at prescribed rates at
the following regional offices of the Commission: Seven World Trade Center,
New York, New York 10048; and Citicorp Center 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of this material may also be obtained by
mail, upon payment of the Commission's customary fees, from the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Reports
and other information concerning the Company should also be available for
inspection at the offices of the NYSE, 20 Broad Street, New York, New York
10005. Electronic filings filed through the Commission's Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR") are publicly available
through the Commission's home page on the Internet at http:/www.sec.gov.
The Trust. The Purchaser has been informed that the Trust is a wholly owned
finance subsidiary of the Company, the sole purpose which is and was the
issuance of the Preferred Securities and the investment of the gross proceeds
from such issuance in debentures of the Company convertible into Company
Shares. The Company has fully and unconditionally guaranteed the obligations
of the Trust to make distribution, redemption and liquidation payments to the
holders of Preferred Securities. The guarantee obligations of the Company are
senior to any rights of the holders of Company Shares with respect to payments
on dividends and upon liquidation of the Company. The holders of Preferred
Securities may, at their sole option, convert Preferred Securities into
Company Shares at a conversion rate of 1.5576 Company Shares for each
Preferred Security, subject to adjustment in certain circumstances.
8. CERTAIN INFORMATION CONCERNING THE PURCHASER AND THE PARENT.
The Purchaser. The Purchaser is a corporation organized under the laws of
The Netherlands. The Purchaser is a wholly owned subsidiary of the Parent that
holds stock, shares and other equity interests in other subsidiaries,
partnerships and joint ventures of the Parent. The principal executive offices
of the Purchaser are located at Burgemeester Haspelslaan 45, 5HG, NL-1181 NB
Amstelveen, The Netherlands. The telephone number of the Purchaser at such
offices is 31-20-543-4444.
The Parent. The Parent is a Swiss corporation, formed on January 5, 1988.
The address of the principal executive offices of the Parent is P.O. Box 8131,
Affolternstrasse 44, CH-8050 Zurich, Switzerland. The telephone number of the
Parent at such offices is 41-1-317-7111. All of the issued and outstanding
shares of the Parent are held equally by ABB AB, a Swedish public company
listed on each of the Stockholm Stock Exchange, the London Stock Exchange, the
Copenhagen Stock Exchange and Nasdaq and ABB AG, a Swiss public company listed
on each of the Swiss Stock Exchange, the Frankfurt Stock Exchange and the
Vienna Stock Exchange (such public companies, collectively, the "Parent
Shareholders"). The Parent has guaranteed the obligations of the Purchaser
under the Acquisition Agreement and the Shareholder's Agreement.
The Parent is an engineering company with global operations. The principal
activities of the Parent and its affiliates are in the fields of electric
power generation, transmission and distribution, process automation and
control systems, oil, gas and petrochemicals, contracting and services.
Through Adtranz, the Parent's 50-50 rail joint venture with Daimler-Benz AG,
the Parent and its affiliates also serve customers in rail transportation.
15
<PAGE>
The name, citizenship, business address, present principal occupation or
employment and five-year employment history of each of the members of the
Board of Directors and the Group Executive Committee, in the case of the
Parent, and each of the members of the Management Board and the Supervisory
Board, in the case of the Purchaser, are set forth on Schedule I hereto.
During the last five years, neither the Purchaser nor the Parent nor, to the
best of their knowledge, any of the persons listed in Schedule I hereto (i)
has been convicted in a criminal proceeding (excluding traffic violations and
similar misdemeanors) or (ii) was a party to a civil proceeding of a judicial
or administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
Except for the Acquisition Agreement, the Shareholder's Agreement, the
Confidentiality Agreement and as otherwise described in this Offer to
Purchase, none of the Parent, the Purchaser nor, to the best of their
knowledge, any of the persons listed in Schedule I to this Offer to Purchase,
or any associate or majority-owned subsidiary of the Parent or the Purchaser
or any of the persons so listed, beneficially owns or has a right to acquire
any of the Shares. None of the Parent or the Purchaser nor, to the best of
their knowledge, any executive officer, director or subsidiary of any of the
foregoing, has effected any transaction in the Shares during the past 60 days.
See Sections 10--"Background of the Offer; Contacts with the Company" and 11--
"Purpose of the Offer; Delisting and Deregistration of Company Shares; Plans
for the Company; Certain Agreements".
Except as set forth in this Offer to Purchase, none of the Purchaser or the
Parent nor, to the best of their knowledge, any of the persons listed in
Schedule I hereto, has any contract, arrangement, understanding or
relationship with any other person with respect to any securities of the
Company, including, but not limited to, any contract, arrangement,
understanding or relationship concerning the transfer or voting of any such
securities, joint ventures, loan or option arrangements, puts or calls,
guaranties of loans, guaranties against loss or the giving or withholding of
proxies. Except as set forth in this Offer to Purchase, there have been no
contacts, negotiations or transactions since December 31, 1995 between the
Parent or the Purchaser, or, to the best of their knowledge, any of the
persons listed in Schedule I hereto, on the one hand, and the Company or its
affiliates, on the other hand, concerning a merger, consolidation or
acquisition, a tender offer or other transfer of a material amount of assets.
Except as set forth in this Offer to Purchase, none of the Purchaser or the
Parent nor, to the best of their knowledge, any of the persons listed in
Schedule I hereto, has since December 31, 1995 had any business relationship
or transactions with the Company or any of its executive officers, directors
or affiliates that would require disclosure herein under the rules and
regulations of the Commission applicable to the Offer.
Set forth below are certain selected consolidated financial data with
respect to the Parent and its consolidated subsidiaries for the Parent's last
two fiscal years (collectively, the "Parent Financial Statements"). The Parent
Financial Statements have been extracted or derived from the audited
consolidated financial statements contained in the Parent's annual report (the
"Annual Report") for the fiscal year ended December 31, 1997. The financial
statements contained in the Annual Report represent the published financial
statements for the Parent. The Annual Report has been filed with the
Commission as an exhibit to the Purchaser's Tender Offer Statement on Schedule
14D-1 (the "Schedule 14D-1") relating to this Offer, and the summary below is
qualified by reference to such report, which may be inspected and obtained at
the office of the Commission as set forth in Section 7--"Certain Information
Concerning the Company and the Trust". All the financial information and
related notes contained therein are incorporated herein by reference.
The Parent Financial Statements are presented in U.S. Dollars. Currencies
other than U.S. Dollars are translated at year-end rates of exchange with
respect to the balance sheet, and average rates of exchange for the year with
respect to the income statement. Translation adjustments are included in
stockholders' equity and have no effect on net income. In high inflation
countries, monetary balance sheet positions in local currency are stated at
closing values prior to conversion at the year-end U.S. Dollars rate. Fixed
assets are kept at historic U.S. Dollars values from acquisition dates.
Revenues and expenses are generally converted at the exchange rates prevailing
at the date incurred. All translation gains/losses from restatements of
balance sheet positions are
16
<PAGE>
included in net income. Transactions in foreign currencies are converted at
the rate of exchange prevailing at the transaction date. Foreign currency
receivables and payables covered by forward contracts are stated at contracted
forward rates. Other receivables and payables in foreign currencies are
translated at year-end market rates. Resulting exchange differences are
included in net income.
The Parent Financial Statements are prepared in accordance with
International Accounting Standards ("IAS"), which (as described below) differ
in certain respects from generally accepted accounting principles in the
United States ("US GAAP"). The Parent believes, however, that the differences
are not material to a decision by a Holder whether or not to sell, tender or
hold any Shares because any such differences would not affect the availability
to the Parent of sufficient funds to pay for Shares to be acquired pursuant to
the Offer.
ABB ASEA BROWN BOVERI LTD.
SELECTED CONSOLIDATED FINANCIAL DATA
(US$ IN MILLIONS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
DECEMBER 31,
----------------------
1997 1996
----------------------
<S> <C> <C>
CONSOLIDATED INCOME STATEMENT DATA
REVENUES................................................... $ 31,265 $ 33,767*
Material expenses.......................................... (14,232) (15,309)
Personnel expenses......................................... (9,498) (10,254)
Other expenses............................................. (4,973) (5,338)*
Changes in work in progress and finished goods............. 180 255
Depreciation of fixed assets............................... (997) (1,044)
Unusual items.............................................. (608) 36
--------- ---------
OPERATING EARNINGS AFTER DEPRECIATION...................... 1,137 2,113*
Earnings from equity accounted companies................... 2 6
Dividend income............................................ 10 15
Interest income............................................ 325 362
Interest expense........................................... (616) (618)
Exchange differences....................................... (5) 23
--------- ---------
INCOME BEFORE TAXES........................................ 853 1,901*
Taxes...................................................... (258) (659)*
--------- ---------
NET INCOME BEFORE MINORITY INTERESTS....................... 595 1,242
Minority interests......................................... (23) (9)
--------- ---------
NET INCOME................................................. 572 1,233
* Restated; refer to the pertinent explanations in the Consolidation Principles
(section N) and Notes contained in the Annual Report, a copy of which has
been filed as an exhibit to the Schedule 14D-1.
</TABLE>
17
<PAGE>
ABB ASEA BROWN BOVERI LTD.
SELECTED CONSOLIDATED FINANCIAL DATA
(US$ IN MILLIONS)
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1997 1996
------ ------
<S> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
ASSETS
CURRENT ASSETS
Cash and marketable securities................................... $5,790 $5,553
Trade receivables................................................ 5,656 6,152
Other current receivables........................................ 4,283 4,143
Inventories...................................................... 4,907 5,311
------ ------
TOTAL CURRENT ASSETS............................................. 20,636 21,159
FIXED ASSETS
Financing receivables............................................ 1,815 1,776
Shares and participations........................................ 385 441
Intangible assets................................................ 1,981 1,953
Construction in progress......................................... 242 192
Machinery and equipment.......................................... 2,479 2,746
Land and buildings............................................... 2,246 2,629
------ ------
TOTAL FIXED ASSETS............................................... 9,148 9,737
TOTAL ASSETS..................................................... 29,784 30,896
====== ======
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Trade payables................................................... 4,566 4,457
Provisions....................................................... 5,233 4,914
Other current liabilities........................................ 5,006 5,250
Short-term loans................................................. 1,715 2,526
------ ------
TOTAL CURRENT LIABILITIES........................................ 16,520 17,147
Advances from customers.......................................... 2,612 2,610
Medium- and long-term loans...................................... 2,511 1,823
Pension liabilities.............................................. 1,748 2,024
Deferred taxes................................................... 790 1,070
Minority interests............................................... 320 347
STOCKHOLDERS' EQUITY
Share capital.................................................... 2,087 2,087
Restricted reserves.............................................. 965 962
Other reserves and retained earnings............................. 1,659 1,593
Net income....................................................... 572 1,233
------ ------
TOTAL STOCKHOLDERS' EQUITY....................................... 5,283 5,875
TOTAL LIABILITIES AND EQUITY..................................... 29,784 30,896
====== ======
CONTINGENT LIABILITIES........................................... 195 246
</TABLE>
Summary of Significant Differences Between IAS and US GAAP. The following is
a summary of certain significant differences between IAS and US GAAP. The
summary is not to be regarded as a complete list of all of the differences
between IAS and US GAAP and does not include disclosure differences between
IAS and US GAAP:
(i) The Parent follows IAS on treatment of sale leasebacks. In US GAAP,
additional recognition criteria apply in certain of those cases;
(ii) Certain impairments of long-lived assets following FAS 121
calculations are not recognized in the accounts of the Parent;
(iii) The Parent essentially follows the pertinent U.S. standards on
pension and other employee benefit obligations. Certain differences arise
from an earlier one-time transition adjustment which according to IAS was
taken to equity and in US GAAP would lead to an additional amortization
expense;
18
<PAGE>
(iv) Certain post employment benefits to be recognized under US GAAP (FAS
12) are not considered in the accounts of the Parent;
(v) The Parent provides for all restructuring expenses firmly planned. US
GAAP permits recording of restructuring provisions only if decisions are
formalized and have been officially announced;
(vi) The Parent undertakes a more comprehensive assessment of provisions
on certain loss contracts than would normally be the case under US GAAP;
and
(vii) Certain development expenses in connection with orders expected in
the near term for designated advanced technology products are recognized as
assets of the Parent.
9. SOURCE AND AMOUNT OF FUNDS.
The Offer is not conditioned upon any financing arrangements. The amount of
funds required by the Purchaser to purchase all of the outstanding Shares
pursuant to the Offer and to pay related fees and expenses is expected to be
approximately $1.5 billion. The Purchaser will obtain all of such funds from
the Parent and/or its affiliates. The Parent has guaranteed the obligations of
the Purchaser under the Acquisition Agreement with respect to the Offer. The
Parent and/or its affiliates will obtain the necessary funds from available
cash and, if necessary, from the proceeds of the sale of commercial paper and
medium term notes. Maturities under both programs may vary and interest rates
are established at the time of issuance of instruments under a program.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY.
On May 28, 1998 the Company announced that the Selling Shareholder had
determined to dispose of its interests in the Company in a transaction that
could include the public shareholders of the Company. The Company further
announced that it would evaluate all strategic options aimed at maximizing
value for all shareholders. Subsequently, on June 4, 1998 the Company
announced that it had begun a process to seek offers for the purchase of the
entire Company.
On June 12, 1998 the Parent received a letter from Merrill Lynch outlining
the auction process and requesting an indication of interest in acquiring the
Company from the Parent. On June 25, 1998 the Parent delivered a letter to
Merrill Lynch indicating its interest in acquiring the Company subject, among
other things, to approval of the Board of Directors of the Parent.
On July 2, 1998, the Parent entered into a confidentiality agreement with
the Company. On July 17, 1998, Merrill Lynch delivered a copy of a
Confidential Offering Memorandum dated July 1998 regarding the Company for the
Parent's review together with a letter inviting the Parent to provide a
preliminary indication of the Parent's interest in pursuing an acquisition of
the Company.
On August 7, 1998 the Parent delivered to Merrill Lynch a preliminary, non-
binding indication of interest in acquiring all of the Company Shares subject
to, among other things, a detailed due diligence review of the Company.
Thereafter, Merrill Lynch contacted the Parent and invited the Parent to
participate in a more detailed due diligence review of the Company.
On September 1, 1998 representatives of the Parent attended presentations
held in London by the Company's senior management, during which the Parent's
representatives engaged in discussions with the Company's representatives
concerning the Company and its activities. Additionally, from September 14,
1998 to September 18, 1998 representatives of the Parent reviewed certain
materials regarding the Company and its business contained in a data room in
Frankfurt and thereafter were given an opportunity to visit certain facilities
of the Company. The Parent was also given an opportunity to participate in
"break out" sessions with management personnel of the Company on specific due
diligence issues. Some of these sessions were held in meetings and others were
conducted by conference telephone call. In the course of this due diligence
process, drafts of the Acquisition Agreement and the Shareholder's Agreement
were also provided by the Company and the Selling Shareholder to the Parent.
19
<PAGE>
On September 28, 1998 the Board of Directors of Parent met and, after a
presentation by certain management personnel of the Parent, approved the
making of an offer to acquire all of the Shares.
On September 29, 1998 the Parent received a letter from Merrill Lynch
inviting the Parent to submit a firm offer for the acquisition of all Shares
no later than 5:00 p.m., London time, on Friday, October 9, 1998. During the
week of October 5, 1998, representatives of the Parent's legal advisors had
two telephone calls with representatives of the Company's legal advisors
regarding certain regulatory approvals that might be involved in any
acquisition of the Company.
On October 9, 1998, the Purchaser delivered a letter (the "Offer Letter") to
the Company, care of Merrill Lynch, by which the Purchaser submitted a firm
offer to acquire all of the Shares. The Purchaser also submitted forms of the
Acquisition Agreement and Shareholder's Agreement, including required changes
to the drafts of the Acquisition Agreement and Shareholder's Agreement
prepared by the Company and the Selling Shareholder, respectively.
On October 10, 1998, representatives of the Company's financial advisor
informed the Purchaser that the Purchaser was invited to London to begin
negotiations regarding the final terms of the Acquisition Agreement and
Shareholder's Agreement and was further informed that the Company and the
Selling Shareholder would negotiate exclusively with the Purchaser to attempt
to reach agreement on the terms of an Offer.
Beginning on the evening of October 11, 1998 and over the course of the next
several days, representatives of the Company and the Selling Shareholder and
their legal and financial advisors met with representatives of the Purchaser
and its legal and financial advisors to negotiate the final terms of the
Acquisition Agreement, the Shareholder's Agreement and the final terms of the
Offer. The parties concluded these negotiations early in the morning on
October 14, 1998. The Purchaser subsequently delivered to the Company an
amended final bid letter on October 14, 1998, referencing the Acquisition
Agreement and the Shareholder's Agreement in their final agreed form.
The Purchaser has been informed that the Company's Management Board and
Supervisory Board and the Selling Shareholder's Board of Directors met
independently during the afternoon of October 14, 1998 and unanimously
approved the Offer and the Acquisition Agreement and, in the case of the
Selling Shareholder's Board of Directors, the Shareholder's Agreement. Each of
the Acquisition Agreement and the Shareholder's Agreement was executed and
delivered by the parties thereto promptly thereafter.
11. PURPOSE OF THE OFFER; DELISTING AND DEREGISTRATION OF COMPANY SHARES;
PLANS FOR THE COMPANY; CERTAIN AGREEMENTS.
Purpose of the Offer. The purpose of the Offer, the Acquisition Agreement
and the Shareholder's Agreement is to enable the Purchaser to acquire control
of the Company's Supervisory Board and Management Board and the entire equity
interest in the Company.
Delisting and Deregistration of Company Shares. Following the consummation
of the Offer, the Purchaser may seek to cause the delisting of the Company
Shares from the NYSE and the deregistration of the Company Shares and the
Preferred Securities under the Exchange Act. See Section 13--"Effect of the
Offer on the Market for the Shares; Exchange Listing and Exchange Act
Registration".
Plans for the Company. The Purchaser will continue to evaluate the business
and operations of the Company during the pendency and after the consummation
of the Offer. As a result of such continuing evaluation, the Purchaser may
take further actions as it deems appropriate under the circumstances then
existing. Such actions could include, among other things, changes in the
Company's corporate structure, capitalization or dividend policy and other
actions which the Purchaser deems necessary to integrate the Company's
business and operations into the Purchaser (including changes in management
and the Supervisory Board).
20
<PAGE>
If the Purchaser does not acquire the entire equity interest in the Company
upon consummation of the Offer, at such time as the Purchaser acquires at
least 95% of the share capital of the Company, the Purchaser may pursue a
Compulsory Acquisition of any remaining minority Company Shares pursuant to
Dutch Law, as described below.
In addition to a Compulsory Acquisition, the Purchaser may, concurrently
with or as soon as possible after the consummation of the Offer, pursue
further integration transactions of the Company into the Parent's corporate
structure which may include, without limitation, (i) the sale and transfer by
the Company or any of its subsidiaries of all or part of the assets of the
Company or any of its subsidiaries to the Purchaser or any affiliates of the
Purchaser and (ii) the consummation by the Company and one or more Dutch
subsidiaries of the Purchaser of a legal merger within the meaning of Section
2:309 of the Dutch Civil Code (the "DCC").
In furtherance of the Purchaser's possible desire to pursue a Compulsory
Acquisition or any of the other corporate reorganizations described herein,
each of the Purchaser and the Company have agreed in the Acquisition Agreement
to take actions, subject to certain exceptions, effective no earlier than the
consummation of the Offer, that are reasonably necessary or desirable to
accomplish the Compulsory Acquisition or such other corporate reorganizations.
Following the consummation of the Offer, the Purchaser may from time to time
purchase Shares, subject to Dutch Law and other applicable law, in regular
stock exchange trading at market prices then prevailing. Such prices may be
higher or lower than the Offer Price.
There can be no assurance, however, that the Purchaser will undertake any of
the actions described above or that Holders who do not tender their Shares
pursuant to the Offer will receive any consideration for their Shares from the
Purchaser at any subsequent time.
Section 2:92a of the DCC contains a procedure for the compulsory acquisition
of shares owned by minority shareholders of a "naamloze vennootschap" or
"N.V.", a limited liability company such as the Company. As soon as the
Purchaser and its affiliates, other than the Company, hold for their own
account at least 95% of the issued share capital of the Company, the Purchaser
and such affiliates may institute proceedings against the other shareholders
(the "minority shareholders") of the Company, in accordance with Section 2:92a
of the DCC, in order to force those minority shareholders to transfer their
Company Shares to the Purchaser (a "Compulsory Acquisition"). The Compulsory
Acquisition may be initiated at any time upon fulfillment of the 95% ownership
condition. The proceedings are instituted by means of a writ of summons served
upon each of the minority shareholders in accordance with the provisions of
the Dutch Code of Civil Procedure. The proceedings are held before the
Enterprise Division of the Court of Appeals in Amsterdam, The Netherlands (the
"Enterprise Division"). The Enterprise Division may render the following
judgments:
(i) deny the claim for compulsory acquisition in relation to all minority
shareholders if it is established that (a) one or more minority
shareholders will incur considerable financial loss by the forced transfer
of their Company Shares that would not be compensated by the fixed price
for their Company Shares, (b) one or more minority shareholders holds one
or more shares in which, according to the Company's articles of association
(the "Company Articles"), a special control right regarding the Company is
vested, or (c) the plaintiffs have waived their rights to institute these
proceedings vis-a-vis one or more of the minority shareholders; or
(ii) if the claim is not denied, (a) appoint one or three auditors to
advise the Enterprise Division as to the price to be paid for the minority
shareholders' Company Shares after which the Enterprise Division will fix
such price or (b) fix the price to be paid for the Company Shares of the
minority shareholders if the Enterprise Division does not deem it necessary
to appoint auditors (for instance, if the plaintiffs have already provided
the Enterprise Division with sufficient evidence that the price offered is
reasonable); or
(iii) if the claim is not denied, award the claim for compulsory
acquisition by way of an order to the minority shareholders to transfer
their shares, as well as an order to the plaintiffs to pay the minority
shareholders the price fixed (with interest) against transfer of their
unencumbered shares.
21
<PAGE>
If the Enterprise Division fixes the price to be paid for the Company Shares
of the minority shareholders, such price shall be increased by the statutory
interest rate applicable in The Netherlands (at present 6% per annum) for the
period from a date determined by the Enterprise Division to the date of
payment of the price. However, any dividends or other distributions made by
the Company to its shareholders during that period will be deemed to be
partial payments towards the price fixed.
The minority shareholders will only be required to transfer their Company
Shares, against payment of the price set by the Enterprise Division, once a
final, nonappealable judgment described in clause (iii) above has been
obtained. The plaintiffs will notify the minority shareholders of the date and
place of payment for the Company Shares and the price to be paid for the
Company Shares by notification sent directly to the minority shareholders
whose addresses are known and by means of an advertisement in a national daily
newspaper in The Netherlands. The plaintiffs may also pay the price for the
minority shareholders' Company Shares, inclusive of interest accrued thereon,
in escrow to the State of The Netherlands. By this payment, the plaintiffs
become the holders of the Company Shares by operation of law subject to the
same notice obligations. Any encumbrance on any Company Shares for which
payment in escrow has been made will be released from such Company Shares and
will transfer to the funds paid for such shares. At such time, the minority
shareholders would cease to have any rights in their Company Shares, including
with respect to voting thereof. Their only right will be the right to receive
payment therefor upon proper transfer of their Company Shares.
BECAUSE THE COMPULSORY ACQUISITION WOULD REQUIRE A COURT PROCEEDING AND
POSSIBLE EXPERT VALUATION, RECEIPT OF FUNDS COULD BE SUBSTANTIALLY DELAYED,
AND THE PRICE PAID IN A COMPULSORY ACQUISITION COULD BE MORE OR LESS THAN THE
OFFER PRICE.
Priority Shares. The Selling Shareholder is party to an Option Agreement
(the "Option Agreement") with the Company which grants to the Selling
Shareholder an option (the "Option") to purchase 1,000 Priority Shares, par
value NLG 1.00 each (the "Priority Shares") of the Company, constituting all
the authorized Priority Shares, for an aggregate price of NLG 1,000. The
Option is exercisable at any time after the first to occur of either of the
following: (i) when a tender or exchange offer for at least 20% of the
outstanding Company Shares is first published, sent or given to the Company's
shareholders and (ii) when any person, alone or together with its affiliates
and associates, becomes the beneficial owner of at least 20% of the
outstanding Company Shares. The meeting of holders of the Priority Shares, if
any such shares are issued, will be able to exercise a substantial measure of
control over the Company. The most far reaching rights of control granted by
the Company Articles to the meeting of the holders of Priority Shares are the
rights to submit to the meeting of Holders of Company Shares (after having
consulted with the Supervisory Board), lists of two or more nominees for each
position on the Management Board and the Supervisory Board of the Company.
Such nominations shall be binding to the extent that it creates the obligation
to appoint Management Board and Supervisory Board members only from the lists
of nominees so submitted by the holders of Priority Shares, except if a
majority of at least two thirds of the Holders of Company Shares representing
more than one half of the issued share capital resolve to set aside the
binding nature of the nominations. Other rights of control of the holders of
Priority Shares include the right to approve or otherwise influence certain
proposals, including for instance the ability to influence the size of the
majority needed to approve certain resolutions of the meeting of Holders of
Company Shares, to issue new shares, to exclude rights of first refusal of
Holders of Company Shares upon issuance of new shares, to suspend or dismiss
Management Board members, to dismiss Supervisory Board members, to amend the
Company Articles or to allow the Company to engage in a legal merger.
The Selling Shareholder agreed in the Shareholder's Agreement to not, until
termination of the Acquisition Agreement by the Purchaser in accordance with
its terms, exercise or Transfer (as defined herein) the Option unless
requested in writing by the Purchaser and then in accordance with the terms of
the Option Agreement. The Selling Shareholder has also, subject to the
required consent of the Company, agreed to assign the Option Agreement to the
Purchaser with effect from the date the Offer is consummated. The Company has
consented to such assignment in the Acquisition Agreement, as required by the
terms of the Option Agreement. Upon consummation of the Offer, therefore, the
Purchaser will be entitled to exercise the Option as set forth above.
22
<PAGE>
Except as otherwise discussed in this Offer to Purchase, neither the Parent
nor the Purchaser have any present plans or proposals that would result in an
extraordinary corporate transaction, such as a merger, reorganization,
liquidation, or sale or transfer of a material amount of assets of the Company
or any of its subsidiaries, or in any other material changes to the Company's
capitalization, dividend policy, corporate structure or business.
ACQUISITION AGREEMENT. THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF
THE ACQUISITION AGREEMENT. THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE ACQUISITION AGREEMENT, A COPY OF WHICH HAS BEEN FILED WITH
THE COMMISSION AS AN EXHIBIT TO THE SCHEDULE 14D-1. THE ACQUISITION AGREEMENT
MAY BE INSPECTED AT, AND COPIES MAY BE OBTAINED FROM, THE SAME PLACES AND IN
THE MANNER SET FORTH IN SECTION 7--"CERTAIN INFORMATION CONCERNING THE COMPANY
AND THE TRUST".
The Offer. The Acquisition Agreement provides that, subject to the
occurrence of any of the events set forth in Annex A to the Acquisition
Agreement (the "Offer Conditions"), as promptly as practicable following the
execution of the Acquisition Agreement the Purchaser shall make a public
announcement pursuant to Rule 14d-2(b) under the Exchange Act, and promptly
thereafter, but in no event later than the fifth business day following such
announcement, the Purchaser shall commence the Offer. The obligation of the
Purchaser to accept for payment Shares validly tendered pursuant to the Offer
and not properly withdrawn (the "Tendered Shares") is subject only to the
satisfaction or waiver by the Purchaser of the Offer Conditions. Subject to
the provisions of the Acquisition Agreement, the Purchaser will keep the Offer
open until at least midnight, New York City time, on the date 20 days from the
date of its commencement. The Offer will be made by means of an offer to
purchase (the "Offer to Purchase") containing the Offer Conditions. Without
the written consent of the Company, the Purchaser shall not (i) decrease the
Preferred Securities Price or the Share Offer Price (the "Offer
Consideration"); (ii) change the form of Offer Consideration (other than by
increasing it); (iii) decrease the number of Shares sought pursuant to the
Offer; (iv) extend the Offer beyond any scheduled expiration date; or (v)
amend the Offer Conditions in a manner which is materially adverse to the
Holders (including imposing any additional conditions); provided, however,
that if on the scheduled expiration date of the Offer (as it may be extended)
(x) all Offer Conditions shall not have been satisfied or waived or (y) any
Person has made an Acquisition Proposal (as defined under "--No Solicitation"
below), the Offer may be extended by the Purchaser from time to time. The
Purchaser agrees that, if on the initial scheduled date on which the Offer
expires (the "Termination Date") there is a failure of the Offer Conditions
set forth in clause (i) or (ii) of the first sentence of the Offer Conditions
or paragraph (f) of the second sentence thereof to be satisfied, it shall,
unless the Acquisition Agreement is terminated pursuant to provisions set
forth under "--Termination of the Acquisition Agreement" below, extend the
Offer and set a subsequent scheduled Termination Date, and shall continue to
so extend the Offer and set subsequent scheduled Termination Dates until April
15, 1999 or, if the only Offer Conditions remaining to be fulfilled are those
set forth in clause (i) or (ii) of the first sentence of the Offer Conditions,
May 31, 1999. In addition, the Purchaser may, without the consent of the
Company, increase the Offer Consideration and in connection therewith extend
the Offer to the extent required by law. Upon the terms of the Acquisition
Agreement, and subject to the Offer Conditions, the Offer will commit the
Purchaser to acquire (i) each Company Share validly tendered and not withdrawn
for the Share Offer Price and (ii) each of the Preferred Securities validly
tendered for the Preferred Securities Offer Price.
Recommendation. In the Acquisition Agreement, the Company consents to the
Offer and represents that each of its Management Board and its Supervisory
Board, in each case in accordance with the Company Articles and applicable
law, has (i) determined that the Offer, upon the terms and subject to the
conditions set forth in the Acquisition Agreement, is fair to, and in the best
interests of, the Holders and other relevant constituencies, its subsidiaries,
and the enterprises carried on by the Company and its subsidiaries, (ii)
approved the Acquisition Agreement and transactions contemplated by the
Acquisition Agreement, including the Offer, and (iii) resolved to recommend
that the shareholders of the Company and the holders of the Preferred
Securities accept the Offer and tender their Company Shares and Preferred
Securities thereunder to the Purchaser. Merrill Lynch has delivered to the
Management Board and the Supervisory Board of the Company its opinion that the
Share Offer Price to be received by the holders of Company Shares pursuant to
the Offer is fair to such holders from a financial point of view.
23
<PAGE>
Termination of the Acquisition Agreement. The Acquisition Agreement may be
terminated and the Offer may be abandoned at any time prior to the date on
which the Purchaser shall acquire the Tendered Shares (the "Closing Date"),
(a) by mutual consent of the Purchaser and the Company; or (b) by action of
either the Supervisory Board or Management Board of the Purchaser or the
Supervisory Board and Management Board of the Company if (i) the Closing Date
shall not have occurred on or before April 15, 1999 or, if the only conditions
remaining to be satisfied as of such date shall be a condition set forth in
either clause (i) or clause (ii) of the second sentence of the Offer
Conditions, May 31, 1999; provided that the right to terminate the Acquisition
Agreement under this clause shall not be available to (A) the Purchaser, if
(1) the failure of the Purchaser to perform its obligations under the
Acquisition Agreement or (2) the failure of the representations and warranties
contained in Article III of the Acquisition Agreement to be true and correct
has to any material extent been the cause of, or resulted in, the failure of
the consummation of the Offer and acquisition of all Tendered Shares (the
"Closing") to occur on or before such date or (B) the Company, if (1) the
failure of the Company to perform its obligations under the Acquisition
Agreement or (2) the failure of the representations and warranties contained
in Article II of the Acquisition Agreement to be true and correct has to any
material extent been the cause of, or resulted in, the failure of the Closing
to occur on or before such date; or (ii) a Governmental Entity (A) shall have
issued an order, decree or ruling or taken any other action (which the parties
shall have used all commercially reasonable efforts to resist, resolve or
lift, as applicable, in accordance with the "--Further Actions" section below)
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by the Acquisition Agreement and such order, decree, ruling or
other action shall have become final and non-appealable or (B) shall have
failed to issue an order, decree or ruling or to take any other action (which
order, decree, ruling or other action the parties shall have used all
commercially reasonable efforts to obtain, in accordance with the "--Further
Actions" section below), which is necessary to fulfill the Offer Conditions
and such denial of a request to issue such order, decree or ruling or take
such other action shall have become final and nonappealable; provided,
however, that the right to terminate the Acquisition Agreement under this
clause shall not be available to any party whose failure to comply with the
"--Further Actions" section below has to any material extent been the cause of
such action or inaction; or (c) by action of the Supervisory Board of the
Company on five days' prior written notice to the Purchaser if the Supervisory
Board of the Company, without violation of the obligations as described below
under "--No Solicitation," withdraws its approval or recommendation of the
Offer or the Acquisition Agreement and the Company pays to the Purchaser all
expenses and other amounts as provided below in "--Effect of Termination"; or
(d) by action of the Supervisory Board or Management Board of Purchaser, if
the Supervisory Board or Management Board of the Company shall have determined
that an Acquisition Proposal is a Superior Proposal (as defined under "--No
Solicitation" below) or shall not have issued, or shall have withdrawn or
modified (including by amendment of the Schedule 14D-9) in a manner adverse to
the Purchaser, its approval or recommendation of the Offer or the Acquisition
Agreement or shall have recommended an alternative transaction proposal to the
shareholders of the Company, or shall have adopted any resolution to effect
any of the foregoing; or any corporation, partnership, person or other entity
or group 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 Company Shares or Preferred Securities or an Acquisition Proposal; or
(e) by the Purchaser, if the Offer is terminated (or expires in accordance
with its terms) without the Purchaser having purchased any Shares thereunder
due to an occurrence which would result in a failure to satisfy any of the
Offer Conditions, unless any such failure shall have been caused by or
resulted from a failure of the Purchaser to perform in any material respect
any covenant or agreement contained in the Acquisition Agreement or the
failure of any representations or warranties contained in Article III of the
Acquisition Agreement to be true and correct in any material respect; or (f)
by the Purchaser, if any of the representations and warranties of the Company
contained in Article II of the Acquisition Agreement is or becomes untrue or
incorrect or the Company breaches any of its obligations under the Acquisition
Agreement which (A) in either case would give rise to the failure of a
condition set forth in clause (c) of the Offer Conditions to be met and (B)
cannot or has not been cured prior to the earlier of (i) 15 days after the
giving of written notice to the Company of such untruth, incorrectness or, as
the case may be, breach and (ii) two business days prior to the date on which
the Offer expires; or (g) by the Purchaser, if (i) any of the representations
and warranties of the Selling Shareholder contained in the Shareholder's
Agreement that are qualified by reference to any effect that, individually or
in the aggregate, is materially adverse to the condition, business, assets,
24
<PAGE>
liabilities or results of operations of the Company and its subsidiaries taken
as a whole, other than any effect resulting from (i) changes in general
economic conditions, (ii) the announcement and performance of the Acquisition
Agreement and the transactions contemplated thereby and compliance with the
covenants set forth in the Acquisition Agreement and (iii) changes or
developments in the industrial process control industry generally or its
markets and (iv) subject to Section 4.5 of the Acquisition Agreement, any
actions required under the Acquisition Agreement to obtain any approval or
authorization under any Antitrust Law (as defined under "--Further Actions"
below) or from the Australian Foreign Investment Review Board for the
Consummation of the Offer (a "Company Material Adverse Effect") is or becomes
untrue or incorrect or any such representation and warranty that is not so
qualified is or becomes untrue or incorrect in any respect that would be
reasonably likely to have a Company Material Adverse Effect or to prevent the
Selling Shareholder from consummating the transactions contemplated by the
Shareholder's Agreement, or (ii) the Selling Shareholder breaches any of its
obligations under the Shareholder's Agreement; or (h) by the Company, if the
Offer has been terminated by the Purchaser and if (i) any of the
representations and warranties of the Purchaser contained in Article III of
the Acquisition Agreement or in the Shareholder's Agreement is or becomes, and
at the time of termination remains, untrue or incorrect in any material
respect or (ii) the Purchaser shall have breached or failed to comply in any
material respect with any of its obligations under the Acquisition Agreement
or in the Shareholder's Agreement which breach shall not have been cured
within 15 days following notice from the Company to the Purchaser of such
breach and the Company's intent to terminate pursuant to this provision.
Interim Operations. The Acquisition Agreement provides that from the date of
the Acquisition Agreement until the Closing Date, except as set forth in
Section 4.1 of the Company Disclosure Schedule to the Acquisition Agreement or
as expressly contemplated by any other provision of the Acquisition Agreement,
unless the Purchaser has consented thereto, the Company shall, and shall cause
each of its subsidiaries to, (a) conduct its business and operations only in
the ordinary course of business consistent with past practices; (b) use
reasonable efforts to preserve intact the business organizations, rights,
licenses, permits and franchises of the Company and its subsidiaries, maintain
their existing relationships with customers, suppliers and other natural
persons, corporations, limited liability companies, partnerships,
associations, trusts, unincorporated organizations, unions or other employee
groups, governmental entities, or other entities or groups (as such latter
term is defined in the Exchange Act) (each, a "Person") having business
dealings with them and keep available the services of its officers and
employees; (c) use reasonable efforts to keep in full force and effect
adequate insurance coverages and maintain and keep its properties and assets
in good repair, working order and condition, normal wear and tear excepted;
(d) not amend or modify its articles of association, certificate of
incorporation, by-laws or comparable governing documents; (e) not authorize
for issuance, issue, sell, grant, deliver, pledge or encumber or agree or
commit to issue, sell, grant, deliver, pledge or encumber (to or with any
party other than the Company and any of its wholly owned subsidiaries) any
shares of any class or series of capital stock of the Company or any of its
subsidiaries or any other equity or voting security or equity or voting
interest of the Company or any of its subsidiaries, any securities convertible
into or exercisable or exchangeable for any such shares, securities or
interests, or any options, warrants, calls, commitments, subscriptions or
rights to purchase or acquire any such shares, securities or interests (other
than issuances of Company Shares (i) upon exercise of outstanding Stock
Options (as such term is defined below under "--Stock Options") granted to
directors, officers, employees and consultants of the Company in accordance
with the Option Plans (as such term is defined below under "--Stock Options")
as currently in effect or (ii) pursuant to conversion of the Preferred
Securities); (f) not, except for conversion of the Preferred Securities in
accordance with their terms, (i) split, combine or reclassify any shares of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of, or in substitution for, shares of its
capital stock, (ii) in the case of the Company or any subsidiary of the
Company that is not wholly owned by the Company, declare, set aside or pay any
dividends on, or make other distributions in respect of, any capital stock or
(iii) repurchase, redeem or otherwise acquire, or agree or commit to
repurchase, redeem or otherwise acquire, any shares of capital stock or other
equity or debt securities or equity interests of the Company or any of its
subsidiaries (other than to fulfill its obligations under the Option Plans as
currently in effect); (g) except as otherwise provided in the Acquisition
Agreement, not amend or otherwise modify the terms of any Stock Options or any
Option Plan the effect of which would be to make such terms more favorable to
the holders thereof or Persons eligible for participation therein; or reserve
any additional Company Shares for
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issuance under any such Plan; (h) except as required by law or existing
written agreements, enter into, adopt or materially amend any incentive,
compensation, option or severance plan or arrangement (including, without
limitation, any employee benefit plan, agreement or program, or management
employment agreement (including any employee benefit plan within the meaning
of Section 33 of the Employee Retirement Income Security Act of 1974, as
amended) (each, a "Benefit Plan")) for the benefit or welfare of any current
or former director, officer or employee of the Company or any of its
subsidiaries, or (except for normal increases in the ordinary course of
business that are consistent with past practices) increase the compensation or
benefits of any persons or pay any benefit not required by any existing plan
or arrangement; (i) not acquire or agree to acquire (by merger, consolidation,
acquisition of stock or assets or otherwise) from any Person, corporation,
partnership, joint venture, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets of
another Person other than the purchase of assets in the ordinary course of
business consistent with past practice or in an aggregate amount of less than
$5,000,000; (j) not, except as an intercompany transaction between the Company
and any of its wholly owned subsidiaries, incur, assume, prepay or become
liable for or guarantee any long term, or material short term, indebtedness
(including draw-downs on letters or lines of credit, other than letters of
credit in support of ordinary course transactions with trade creditors),
refinance any such indebtedness or issue or sell any notes, bonds, debentures,
debt instruments, evidences of indebtedness or other debt securities of the
Company or any of its subsidiaries or any options, warrants or rights to
purchase or acquire any of the same, except for (i) advances, loans or other
financial indebtedness; including refinancing of its existing lines of credit,
in an aggregate amount (together with all other such financial indebtedness of
the Company and its subsidiaries outstanding) of net financial indebtedness at
any time outstanding not exceeding a specified amount; provided, however that
any refinancing permitted above shall be (A) on commercially reasonable terms
and (B) prepayable without penalty on no more than 90 days advance written
notice and (ii) obtaining, extending or renewing existing guarantees, bonds
and letters of credit issued by financial institutions in the ordinary course
of business in an aggregate amount (together with all other such items
outstanding) at any time outstanding not exceeding 1.25 times the aggregate of
such guarantees, bonds and letters of credit outstanding as of June 25, 1998,
which amount the Company represents to be $426.2 million; (k) not sell, lease,
license, encumber or otherwise dispose of, or agree to sell, lease, license,
encumber or otherwise dispose of, any properties or assets of the Company or
any of its subsidiaries, except as intercompany transactions between the
Company and any of its wholly-owned subsidiaries or in transactions with any
other Person in the ordinary course of business, consistent with past practice
and in an aggregate amount of less than $5,000,000; (l) not authorize or make
any capital expenditures, other than capital expenditures (i) authorized or
incurred in the ordinary course of business consistent with past practice
during the period up to and including December 31, 1998 not exceeding, in the
aggregate for the Company and all of its subsidiaries, a specified amount and
(ii) if the Closing Date has not occurred prior to January 1, 1999, authorized
or incurred in the ordinary course of business consistent with past practice
during any subsequent fiscal quarter of the Company, in each case not
exceeding, in the aggregate for the Company and all of its subsidiaries, a
specified amount; (m) not make any material change in any of its accounting or
financial reporting methods, principles or practices, except as may be
required by GAAP; (n) except in the ordinary course of business consistent
with past practices, not amend, modify or terminate any material contract or
waive, release or assign any material rights or claims thereunder or
authorize, execute or deliver any material agreement, arrangement or
understanding; (o) not adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its subsidiaries; (p) not take any
action that would, or would be reasonably likely to, result in any of the
Offer Conditions not being satisfied or the satisfaction of any of the Offer
Conditions being delayed beyond the Expiration Date; and (q) not make any
loans, advances or capital contributions to any Person other than as required
by existing agreements or in the ordinary course of business consistent with
past practice; (r) not agree or commit in writing or otherwise to do or, in
the case of clauses (a) through (c), to do anything inconsistent with, any of
the foregoing. For purposes of this section, the term "wholly owned
subsidiary" shall be deemed to include any subsidiary of which the Company or
any such subsidiary owns at least 99% of the outstanding capital stock or
other equity interests.
No Solicitation. Prior to the Closing Date, the Company agrees that neither
it nor any of its subsidiaries shall, nor shall the Company nor any of its
subsidiaries authorize or permit any of their respective officers,
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directors, managing directors, employees or agents, including any investment
bankers, financial advisers, attorneys, accountants, consultants or other
advisors, agent, representatives or experts (collectively, "Representatives")
or affiliates to, directly or indirectly, (a) solicit, initiate, encourage, or
take any other action to facilitate, any inquiry or the making of any proposal
or offer (i) with respect to or that could reasonably be expected to result in
any acquisition or sale of all or any significant portion of the assets of, or
any equity interest in (whether newly issued equity interests or outstanding
equity interests), the Company or any of its subsidiaries or any tender offer
(including a self tender offer) or exchange offer, merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of the Company's subsidiaries (each
such proposal or offer, an "Acquisition Proposal") or (ii) which could
reasonably be expected to impede, frustrate, prevent, delay or nullify any of
the transactions contemplated by the Acquisition Agreement or to materially
diminish the benefits to the Purchaser of the transactions contemplated by the
Acquisition Agreement, (b) take any action to enter into an agreement for the
sale or other disposition by the Company or any of its subsidiaries of any
significant portion of the assets of or a sale of shares of capital stock
whether by merger or other business combination or tender or exchange offer or
(c) enter into or participate in any discussions or negotiations regarding any
of the foregoing, or in the furtherance of any inquiries regarding any of the
foregoing, or furnish to any other Person (other than the Purchaser and its
Representatives) any information with respect to its business, properties or
assets or any of the foregoing; provided that the foregoing clauses (a), (b)
and (c) shall not prohibit the Company's Supervisory Board or Management Board
from (i) furnishing information concerning the Company and its business,
properties or assets to a third party who has made a bona fide written
transaction proposal to acquire all of the outstanding Company Shares and
Preferred Securities or all of the assets of the Company and its subsidiaries,
which is not subject to any material contingencies relating to financing (it
being acknowledged that a highly confident letter or commitment letter shall
not be deemed to have resolved any such material contingency), in response to
a request for such information, pursuant to a confidentiality agreement on
terms no less favorable to the Company than the Confidentiality Agreement (as
defined herein), so long as neither such request for information nor such
transaction proposal was solicited, initiated, encouraged or facilitated in
violation of clause (a) above, (ii) engaging in discussions or negotiations
with such a third party who has made such a transaction proposal or (iii)
following receipt of such a transaction proposal, taking and disclosing to its
shareholders a position contemplated by Rule 14e-2(a) under the Exchange Act
or disclosing to its shareholders information required by Schedule 14D-9;
provided further, that any such action referred to in the foregoing clauses
(i), (ii) and (iii) may be taken by the Company only if its Management Board
or Supervisory Board, as applicable, shall have concluded in good faith and on
the basis of advice (x) from the Company's financial advisors, that such
transaction proposal involves consideration to the holders of Company Shares
and Preferred Securities that is superior to the Offer Consideration and is
otherwise superior to the Offer ("Superior Proposal"), and (y) from
independent outside counsel that failure to take such action would constitute
a breach of the fiduciary duties of such Boards under Dutch Law; and provided
further, that the Company shall not, and shall not authorize or permit any
other such Persons to, take any of the foregoing actions referred to in
clauses (i) through (iii) until after providing prior written notice to the
Purchaser. If the Company or its Representatives or affiliates or the
Company's Supervisory Board or Management Board receives any request for
information or an inquiry, proposal or offer relating to any of the foregoing,
then the Company shall orally (as promptly as practicable and no later than
one day) and in writing (as promptly as practicable) inform the Purchaser of
the terms and conditions of such proposal, inquiry or offer and the identity
of the Person making it. The Company agrees that it will and will cause its
affiliates and their respective Representatives to immediately cease and cause
to be terminated any activities, discussions or negotiations existing at the
date of the Acquisition Agreement with any parties conducted heretofore with
respect to any of the foregoing. The Company agrees that it will take the
necessary steps to promptly inform its Representatives of the obligations
undertaken in this Section. Immediately following the execution of the
Acquisition Agreement, the Company shall request each Person which has
heretofore executed a confidentiality agreement in connection with its
consideration of acquiring the Company or any portion thereof to return all
confidential information heretofore furnished to such Person by or on behalf
of the Company. Neither the Management Board nor the Supervisory Board of the
Company shall, except as expressly permitted by the Acquisition Agreement (A)
withdraw or modify, in any manner adverse to the Purchaser, or take any public
position inconsistent with, their approval and recommendation of the Offer or
the Acquisition Agreement or (B) approve or recommend any Acquisition Proposal
and shall not resolve to do any of the foregoing.
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<PAGE>
Expenses. Whether or not the transactions contemplated by the Acquisition
Agreement are consummated, subject to the "--Effect of Termination" section
below, all costs and expenses incurred in connection with the Acquisition
Agreement, including fees and disbursements of Representatives, shall be borne
by the party which incurs such cost or expense; provided, however, that all
out-of-pocket costs and expenses related to the printing, filing and mailing
of the Offer Documents shall be borne by the Purchaser.
Effect of Termination. In the event that any Person shall have made an
Acquisition Proposal and the Acquisition Agreement is terminated by either
Party, or in the event the Acquisition Agreement is terminated pursuant to
Section (c), (d), (f) or (g) of "--Termination of the Acquisition Agreement"
above, the Company shall, within two days after termination has occurred, pay
to the Purchaser in same day funds all of the Purchaser's reasonably
documented out-of-pocket expenses (including the fees and expenses of counsel
and other advisors). In the event that the Acquisition Agreement is terminated
by the Company pursuant to Section (c) of "--Termination of the Acquisition
Agreement" or by the Purchaser pursuant to either (i) Section (d) or (e) of
"--Termination of the Acquisition Agreement" because of an event described in
paragraph (e) of the Offer Conditions, the Company shall, within two days
after termination has occurred, pay to the Purchaser in same day funds an
amount equal to the sum of (i) $1.57 for each Company Share outstanding as of
the date of the Acquisition Agreement, and (ii) $2.45 for each Preferred
Securities outstanding as of such date. Any payment pursuant to this sentence
shall be in addition to any reimbursement pursuant to the first sentence of
this Section. In the event the Acquisition Agreement is terminated pursuant to
the provisions contained in "--Termination of the Acquisition Agreement", all
future obligations and liabilities of the parties to the Acquisition Agreement
shall terminate, except the obligations of the parties to brokers, finders or
investment bankers and those described under "--Expenses" and in this Section.
Nothing in this Section shall relieve any party to the Acquisition Agreement
of liability for breach of the Acquisition Agreement.
Post-Closing Restructuring. The Purchaser may, simultaneous with or as soon
as possible after the Closing, consummate a corporate reorganization of the
Company and its subsidiaries which may include, without limitation, (i) the
sale or transfer by the Company or any of its subsidiaries of all or part of
the assets of the Company or any of its subsidiaries to the Purchaser or any
affiliates of the Purchaser, (ii) the consummation by the Company and one or
more Dutch subsidiaries of the Purchaser of a legal merger within the meaning
of Section 2:309 of the DCC and (iii) the commencement of the compulsory
acquisition by the Purchaser of Company Shares from any remaining minority
shareholder, in accordance with Section 2:92a of the DCC. The Company has
agreed with the Purchaser that, at the Purchaser's request and to the extent
permitted by law, it shall take all actions reasonably necessary or desirable
to accomplish the corporate reorganizations referred to in this Section
including, without limitation, (i) the convening of the necessary meetings of
the Holders, the Management Board and the Supervisory Board of the Company,
(ii) the consideration of any and all necessary or desirable resolutions by
the Management Board or the Supervisory Board of the Company for the purpose
of consummating such corporate reorganizations and (iii) the execution of any
and all reasonably requested documents, agreements or deeds that are necessary
or desirable to consummate any of such corporate reorganizations and the
filing or registration of any or all of such documents, agreements or deeds
with the appropriate authorities or agencies.
Stock Options. Upon the consummation of the Offer, all outstanding options
and other rights to acquire shares under the Company's 1993 Long-Term Stock
Incentive Plan and the Company's Global Employee Stock Purchase Plan (the
"Option Plans" and such options and rights, "Stock Options") whether or not
such Stock Options are then exercisable or vested, shall vest in full, and as
soon as practicable after the Closing Date, but in any event within 5 business
days thereafter, the Purchaser shall pay to the holder of each outstanding
Stock Option an amount in cash equal to the difference between the Share Offer
Price and the exercise price per share of each Stock Option, less applicable
withholding taxes; except in the case of certain Italian and German executives
identified by the Company in writing to the Purchaser prior to the date of the
Acquisition Agreement with respect to whom arrangements shall be made (subject
to applicable law) as described on Schedule 1.2 of the Acquisition Agreement.
If and to the extent required by the terms of the Option Plans or the terms of
any Stock Option granted thereunder, the Company shall use its best efforts to
obtain the consent of each holder of outstanding Stock Options to the
foregoing treatment of such Stock Options and to take any other action
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<PAGE>
necessary to effectuate the foregoing provisions. Except as provided in the
first sentence of this paragraph, the Option Plans shall terminate as of the
Closing Date and any rights under any provisions in any other plan, program or
arrangement (other than the option agreement (the "Option Agreement") dated as
of November 15, 1993 between the Selling Shareholder (or the Purchaser as
assignee of the Option Agreement) and the Company giving the Selling
Shareholder (or the Purchaser as assignee of the Option Agreement) an option,
subject to the fulfillment of certain conditions, to purchase all of the 1,000
priority shares, par value NLG 1.00 per share, of the Company (the "Priority
Shares") providing for the issuance or grant by the Company of any interest in
respect of the capital stock of the Company shall be canceled as of the
Closing Date. The Company has consented and agreed to the assignment and
transfer by the Selling Shareholder to the Purchaser, at the Closing, of all
rights and obligations of the Selling Shareholder under the Option Agreement.
Notwithstanding the provisions of Section 9--"Source and Amount of Funds" of
the Option Agreement, the Company has acknowledged and agreed that the Option
Agreement shall remain in full force and effect and be unaffected by the
transactions contemplated by the Acquisition Agreement and the Shareholder's
Agreement.
Directors' and Officers' Indemnification Insurance. For a period of six
years from and after the Closing Date, the Purchaser shall, or shall cause the
Company to, exculpate, indemnify and hold harmless certain officers and
directors of the Company to the same extent as such persons are currently
exculpated and indemnified by the Company pursuant to those certain indemnity
agreements identified in Section 4.8(a) of the Company Disclosure Schedule to
the Acquisition Agreement (the "Indemnified Parties") for acts or omissions
occurring prior to the Closing Date. For six years from the Closing Date, the
Purchaser shall either (x) cause the Company to maintain in effect the
Company's current directors' and officers' liability insurance covering those
persons who are currently covered on the date of the Acquisition Agreement by
the Company's directors' and officers' liability insurance policy (the
"Insured Parties"); provided, however, that in no event shall the Purchaser or
the Company be required to expend in any one year an amount in excess of 150%
of the annual premiums currently paid by the Company for such insurance which
the Company represents to be $395,000 for the twelve month period ending on
November 19, 1998; and provided further, that if the annual premiums of such
insurance coverage exceed such amount, the Purchaser shall cause the Company
to obtain a policy with the greatest coverage available for a cost not
exceeding such amount; provided further, that the Purchaser may substitute for
such Company policies, policies with at least the same coverage containing
terms and conditions which are no less advantageous and provided that said
substitution does not result in any gaps or lapses in coverage with respect to
matters occurring prior to the Closing Date or (y) cause the Purchaser's
directors' and officers' liability insurance then in effect to cover those
persons who are covered on the date of the Acquisition Agreement by the
Company's directors' and officers' liability insurance policy with respect to
those matters covered by the Company's directors' and officers' liability
policy. The covenants set forth in this Section shall survive the Closing
Date, shall be binding on the Purchaser and all its successors and assigns,
and are intended for the benefit of, and shall be enforceable by, each of the
Company, the Indemnified Parties and the Insured Parties, and their respective
heirs and legal representatives.
Waiver of Personal Liability. The parties to the Acquisition Agreement have
acknowledged and agreed that the representations and warranties contained in
the Acquisition Agreement are made on behalf of the parties to the Acquisition
Agreement and are not made by the officers or members of the Management Board
or Supervisory Board of the Purchaser or any Indemnified Party or Insured
Party. The parties to the Acquisition Agreement have acknowledged and agreed
that no such Person shall have any personal liability, in law or in equity, of
any kind with regard to the representations and warranties of the Purchaser or
the Company, as applicable, contained in the Acquisition Agreement or in any
agreement, document or certificate contemplated by the Acquisition Agreement,
and each party to the Acquisition Agreement irrevocably waives any such claim
regarding the validity or enforceability of this Section, and agree not to
challenge or otherwise reject the terms of described in this Section. The
parties also waive any claim regarding the validity or enforceability of the
provisions of this Section and agree not to challenge or otherwise reject the
terms hereof. The Persons designated in the first sentence of this Section are
intended, and shall be deemed, to be third-party beneficiaries of the
provisions described in this Section, and shall be entitled to directly claim
and enforce the rights and benefits described in this Section.
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Further Actions. Each of the parties to the Acquisition Agreement shall use
all commercially reasonable efforts to take or cause to be taken all actions,
do or cause to be done all things necessary, proper or advisable under
applicable laws and regulations, and fully cooperate with and provide
reasonable assistance to the other and its Representatives, as may be required
to consummate the transactions contemplated by the Acquisition Agreement as
promptly as practicable, including (i) making all filings, applications,
notifications, reports, submissions and registrations with, and obtaining all
consents, approvals, authorizations or permits of any supranational, national,
provincial, state, municipal or local government, any instrumentality,
subdivision, court, arbitrator, administrative agency or commission or other
authority thereof, or any quasi-governmental or private body exercising any
regulatory, taxing, importing or other governmental or quasi-governmental
authority (any such entity, a "Governmental Entity") or other Persons or
entities necessary for the consummation of the transactions contemplated by
the Acquisition Agreement, including pursuant to the (i) pre-merger
notification and reporting requirements of the HSR Act, (ii) the prior
notification and reporting requirements of the European Community pursuant to
Council Regulation 4064/89, as amended as well as any other antitrust filings/
notifications which must or may be effected at the national level in countries
having jurisdiction and (iii) the notification requirements under the
Competition Act (Canada) (the laws, statutes or regulations described in
clauses (i), (ii) and (iii), collectively, the "Antitrust Laws"), the
voluntary notification under Exon-Florio, the Exchange Act, securities or blue
sky laws of the states of the United States ("Blue Sky Laws"), labor laws and
regulations, foreign investment laws and regulations and other applicable laws
and regulations in effect in the United States, the European Community, The
Netherlands or any other jurisdiction, and (ii) taking such actions and doing
such things as the other party to the Acquisition Agreement may reasonably
request in order to cause any of the Offer Conditions to be fully satisfied.
Prior to making any application to or filing with any Governmental Entity or
other Person or entity in connection with the Acquisition Agreement, the
Company, on the one hand, and the Purchaser, on the other hand, shall provide
the other with drafts thereof and afford the other a reasonable opportunity to
comment on such drafts. Without limiting the generality of the foregoing, each
of the Purchaser and the Company agrees to cooperate and use all commercially
reasonable efforts vigorously to contest and resist any action, suit,
proceeding or claim, and to have vacated, lifted, reversed or overturned any
injunction, order, judgment or decree (whether temporary, preliminary or
permanent), that delays, prevents or otherwise restricts the consummation of
the transactions contemplated by the Acquisition Agreement, and to take any
and all actions (including the disposition of assets, divestiture of
businesses, or the withdrawal from doing business in particular jurisdictions)
and to enter into such agreements and undertakings (including with respect to
the conduct of the business of the Company and its subsidiaries after the
Closing as may be required by foreign investment laws and labor laws and
regulations), as may be required by Governmental Entities or other Persons as
a condition to the granting of any such necessary approvals or as may be
required to avoid, vacate, lift, reverse or overturn any injunction, order,
judgment, decree or regulatory action; provided, however, that in no event
shall any party to the Acquisition Agreement be required to take any action
that would be reasonably likely to have a Company Material Adverse Effect or
any effect that, individually or in the aggregate, is materially adverse to
the condition, business, assets, liabilities or results of operations of the
Purchaser and its subsidiaries taken as a whole, other than any effect
resulting from (i) changes in general economic conditions, (ii) the
announcement and performance of the Acquisition Agreement and the transactions
contemplated thereby and compliance with the covenants set forth in the
Acquisition Agreement, (iii) changes or developments in the industrial process
control industry generally or its markets and (iv) subject to Section 4.5 of
the Acquisition Agreement, any actions required under the Acquisition
Agreement to obtain any approval or authorization under any Antitrust Law or
from the Australian Foreign Investment Review Board for the consummation of
the Offer (a "Purchaser Material Adverse Effect") or that would not be
required in accordance with the following sentence. Notwithstanding anything
to the contrary contained in the Acquisition Agreement, the Company shall not
and shall cause its affiliates not to, and neither the Purchaser nor any of
its affiliates shall be required to divest any assets or business of the
Purchaser or any of its affiliates or of the Company or its subsidiaries or
hold separate or otherwise take or commit to take any action that materially
limits its freedom of action with respect to any of their respective assets or
businesses, if in the aggregate such assets and/or businesses are material to
the condition, business, assets, liabilities or results of operations of, in
the case of the Purchaser, the process control and instrumentation operations
of the Purchaser and its affiliates, taken as a whole (with estimated annual
revenues of $3 billion), or in the case of the Company, to the Company and its
subsidiaries taken as a whole, respectively.
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Notice of Certain Matters. The Company shall give prompt notice to the
Purchaser, and the Purchaser shall give prompt notice to the Company, of (a)
the occurrence or non-occurrence of any event which would cause (i) any
representation or warranty contained in the Acquisition Agreement to be untrue
or inaccurate in any material respect or (ii) any covenant, condition or
agreement contained in the Acquisition Agreement or any Offer Condition not to
be complied with or satisfied in any material respect, (b) any failure of the
Company or of the Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
the Acquisition Agreement in any material respect, and (c) any notice or other
communication from any third party alleging that the consent of such third
party is or may be required in connection with the transactions contemplated
by the Acquisition Agreement; provided that the delivery of any such notice
shall not limit or otherwise affect any representations and warranties
contained in the Acquisition Agreement or the remedies available under the
Acquisition Agreement to the party receiving such notice.
Representations and Warranties. In the Acquisition Agreement, the Company
has made customary representations and warranties to the Purchaser with
respect to, among other things, its due organization, capitalization,
subsidiaries, corporate authority, absence of conflicts with other
obligations, consents and approvals, financial statements, filings with the
Commission, absence of certain changes concerning the Company's business since
December 31, 1997, litigation, compliance with laws, employee benefit plans,
labor matters, tax matters, property, environmental matters, material
contracts and commitments, intellectual property, opinion of the Company's
financial advisor, brokers and guarantees.
Extension; Waiver. At any time prior to the Closing Date, any party to the
Acquisition Agreement, by action taken by the Supervisory Board of the Company
or the Supervisory Board or Management Board of the Purchaser, may, to the
extent permitted by law, (a) extend the time for the performance of any of the
obligations or other acts of the other party to the Acquisition Agreement, (b)
waive any inaccuracies in the representations and warranties made to such
party contained in the Acquisition Agreement or in any document delivered
pursuant to the Acquisition Agreement and (c) waive compliance with any of the
agreements or conditions for the benefit of such party contained in the
Acquisition Agreement. Any such extension or waiver shall be valid only if set
forth in an instrument in writing signed by or on behalf of the party or
parties to be bound thereby.
Guaranty of Parent. Pursuant to the Acquisition Agreement, the Parent
undertakes to insure that the Purchaser will duly perform its obligations
thereunder and guarantees any and all liabilities and amounts which become
payable by the Purchaser thereunder.
THE SHAREHOLDER'S AGREEMENT. AS AN INDUCEMENT AND A CONDITION TO ENTERING
INTO THE ACQUISITION AGREEMENT, THE PURCHASER REQUIRED THAT THE SELLING
SHAREHOLDER ENTER INTO THE SHAREHOLDER'S AGREEMENT WITH THE PURCHASER. THE
FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS OF THE SHAREHOLDER'S AGREEMENT.
THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE SHAREHOLDER'S
AGREEMENT, A COPY OF WHICH HAS BEEN FILED WITH THE COMMISSION AS AN EXHIBIT TO
THE SCHEDULE 14D-1. THE SHAREHOLDER'S AGREEMENT MAY BE INSPECTED AT, AND
COPIES MAY BE OBTAINED FROM, THE SAME PLACES AND IN THE MANNER SET FORTH IN
SECTION 7--"CERTAIN INFORMATION CONCERNING THE COMPANY AND THE TRUST".
Tender. Pursuant to the Shareholder's Agreement, the Selling Shareholder has
agreed to validly and irrevocably tender in accordance with the terms thereof
(or to cause the record owner to so validly tender), pursuant to Rule 14d-2
under the Exchange Act, and in accordance with the terms of the Offer, not
later than (i) in the case of Shares owned by the Selling Shareholder on the
date of the Shareholder's Agreement (such securities, the "Existing
Securities"), the fifth Business Day following the commencement of the Offer
and (ii) in the case of the Shares acquired after the date of the
Shareholder's Agreement and prior to the termination of the Shareholder's
Agreement, whether upon the exercise of options, warrants or rights, the
conversion or exchange of convertible or exchangeable securities, or by means
of purchase, dividend distribution or otherwise (such securities, together
with the Existing Securities, the "Securities"), the next succeeding Business
Day after acquisition thereof, any and all of the Securities beneficially
owned (as determined pursuant to Rule 13d-3 under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing, including securities beneficially owned by all Persons with whom such
Person would constitute a group
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for purposes of Section 13d-3 of the Exchange Act (any such ownership,
"Beneficially Owned") by the Selling Shareholder at any time during such
period, and shall not withdraw any such tender before consummation of the
Offer or the Expiration Date. The Selling Shareholder has acknowledged and
agreed that the obligation of the Purchaser to accept for payment Shares
tendered pursuant to the Offer, including any Shares tendered by the Selling
Shareholder and its Affiliates, shall be subject to the terms and conditions
of the Offer. The parties have agreed that the Selling Shareholder will, for
all Shares tendered by the Selling Shareholder in the Offer and accepted for
payment and paid for by Purchaser, receive the same amount per Share as is
paid to other holders of such securities who have tendered into, and whose
securities are accepted for payment in, the Offer.
Voting. The Selling Shareholder has agreed that during the period commencing
on the date of the Shareholder's Agreement and continuing until the Expiration
Date (such period being referred to as the "Voting Period"), at any meeting
(whether annual or special, and whether or not an adjourned or postponed
meeting) of the Company's shareholders or holders of Preferred Securities,
however called, or in connection with any written consent of the Company's
shareholders or holders of Preferred Securities, unless there shall be in
effect at such time a preliminary or permanent injunction or other final order
by any court of competent jurisdiction barring such action, the Selling
Shareholder shall vote (or cause to be voted) (i) all Securities and (ii) all
other securities of the Company then Beneficially Owned by the Selling
Shareholder and entitled to vote generally in the election of directors of the
Company or otherwise entitled to vote with respect to any matter or proposal
submitted for vote or consent of the shareholders of the Company or holders of
Preferred Securities (a) in favor of the Offer, the execution, delivery and
performance by the Company of the Acquisition Agreement and the approval and
acceptance of the Offer and the terms thereof; and (b) against any action or
agreement that would (1) result in a breach of any covenant, representation or
warranty or any other obligation or agreement of the Selling Shareholder under
the Shareholder's Agreement or of the Company under the Acquisition Agreement
or (2) prevent, impede, interfere with, delay, postpone or attempt to
discourage the Offer or the transactions contemplated by the Acquisition
Agreement, including without limitation: (u) any extraordinary corporate
transaction (other than with the Purchaser as contemplated by the Acquisition
Agreement), such as a merger, other business combination, reorganization or
liquidation involving the Company or any of its subsidiaries; (v) a sale or
transfer of material assets of the Company or any of its subsidiaries; (w) any
change in the membership of the Supervisory Board or the Management Board of
the Company, except as otherwise agreed to or requested in writing by the
Purchaser in accordance with the terms of the Shareholder's Agreement; (x) any
change in the present capitalization or dividend policy of the Company or any
of its subsidiaries or (y) any other change in the Company's corporate
structure or business or operations. The Selling Shareholder shall not enter
into any agreement with any Person which would violate the provisions of this
Section. As soon as practicable after commencement of the Offer, the Purchaser
shall provide the Company and the Selling Shareholder with the names of the
individuals the Purchaser wishes to be appointed to the Supervisory Board and
the Management Board of the Company effective as of the Closing. Following
receipt by the Selling Shareholder and the Company of the names of such
individuals (and any further information regarding these individuals as
reasonably requested by the Selling Shareholder and the Company), at a general
meeting of shareholders convened by the Company for the purpose of appointing
such individuals to the Supervisory Board and the Management Board of the
Company, as the case may be, the Selling Shareholder shall cause such
appointments to take place effective as of, and conditional upon the
occurrence of, the Closing.
Restrictions During the Voting Period. The Selling Shareholder shall not,
until the termination of the Voting Period, exercise or Transfer the option
granted to it by the Option Agreement unless requested in writing by the
Purchaser and then, in accordance with the terms of the Option Agreement.
Subject to the required consent of the Company, the Selling Shareholder has
assigned, transferred and conveyed to the Purchaser, effective upon the
consummation of the transactions contemplated by the Acquisition Agreement,
all of its rights and entitlement under the Option Agreement, and the
Purchaser has assumed, effective upon the consummation of the transactions
contemplated by the Acquisition Agreement, all of the rights and obligations
of the Selling Shareholder thereunder. In the Acquisition Agreement, the
Company has consented to such assignment and has acknowledged and agreed that,
notwithstanding the provisions of the Option Agreement, the Option Agreement
shall remain in full force and effect and be unaffected by the transactions
contemplated by the Acquisition
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Agreement and the Shareholder's Agreement. The Selling Shareholder shall not,
until the termination of the Voting Period, directly or indirectly: (i) except
as otherwise provided under "--Tender" above, Transfer any securities of an
affiliate (whether by merger, consolidation or similar change of control
transaction) which is then a record or beneficial Holder if, as the result of
such Transfer, such Person would cease to be an affiliate of the Selling
Shareholder; (ii) Transfer to any Person any Securities; (iii) grant any
proxies or powers of attorney in respect of any Securities, deposit any
Securities into a voting trust or enter into a voting agreement, understanding
or arrangement (except, to the extent applicable, the Financing Trust, as may
be required by the terms pursuant to which the Preferred Securities have been
issued) with respect thereto; (iv) take any action that would make any
representation or warranty of the Selling Shareholder contained in the
Shareholder's Agreement untrue or incorrect or would result in a breach by the
Selling Shareholder of its obligations under the Shareholder's Agreement; or
(v) vote any of the Securities in a manner which would make any representation
or warranty of the Company in the Acquisition Agreement untrue or incorrect or
would result in a breach by the Company of its obligation under the
Acquisition Agreement. Until the termination of the Voting Period, the Selling
Shareholder shall not, and shall cause its Representatives and affiliates not
to, directly or indirectly, (x) solicit, initiate, encourage, or take any
other action (i) to facilitate any inquiry or the making of any Acquisition
Proposal or (ii) which could reasonably be expected to impede, frustrate,
prevent, delay or nullify any of the transactions contemplated by the
Shareholder's Agreement or the Acquisition Agreement or to materially diminish
the benefits to Purchaser of the transactions contemplated by the
Shareholder's Agreement or the Acquisition Agreement, (y) take any action to
enter into an agreement for the sale or other disposition by the Company or
any of its subsidiaries of any significant portion of the assets of or a sale
by the Company or any of its subsidiaries or by the Selling Shareholder of
shares of capital stock of the Company or any of its subsidiaries whether by
merger or other business combination or tender or exchange offer or (z) enter
into or participate in any discussions or negotiations regarding any of the
foregoing, or in furtherance of any inquiries regarding any of the foregoing,
or furnish to any other Person (other than the Purchaser and its
Representatives) any information with respect to the business, properties or
assets of the Company or any of its subsidiaries or any of the foregoing. If
the Selling Shareholder or any of its affiliates or Representatives receives
any request for information or an inquiry, proposal or offer relating to any
of the foregoing, then the Selling Shareholder shall orally (as promptly as
practicable and no later than one day) and in writing (as promptly as
practicable) inform the Purchaser of the terms and the conditions of such
proposal, inquiry or offer and the identity of the Person making it. The
Selling Shareholder agrees that it will and will cause its affiliates and
their respective Representatives to immediately cease and cause to be
terminated any existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing. The Selling
Shareholder agrees that it will take the necessary steps to promptly inform
its Representatives and affiliates of the obligations undertaken in this
section.
Representations, Warranties, and Other Agreements of the Selling
Shareholder. The Selling Shareholder has made certain customary
representations and warranties, including with respect to, among other things,
(i) its organization, (ii) its corporate authority, (iii) ownership of the
Shares to be tendered by it, (iv) the absence of conflicts with other
obligations.
Expiration. The Shareholder's Agreement and the Selling Shareholder's
obligation to tender, and not withdraw, pursuant to the Shareholder's
Agreement and any obligation of the Parent and the Purchaser under the
Shareholder's Agreement shall terminate on the Expiration Date. As used
therein, the term "Expiration Date" means the date on which the Acquisition
Agreement is terminated by the Purchaser in accordance with its terms. In the
event of termination of the Shareholder's Agreement, the Shareholder's
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of the Purchaser or the Selling Shareholder or their
respective officers or directors; provided, however, the foregoing shall not
relieve either party for any breach of any representation, warranty, covenant
or agreement in the Shareholder's Agreement. The Purchaser has acknowledged
that, in the event of termination of the Shareholder's Agreement in accordance
with its terms, the Selling Shareholder shall no longer have the obligation to
tender, and may withdraw, the Securities; provided, that if the Company
terminates the Acquisition Agreement in accordance with Section 5.1(c), the
Purchaser shall, within five business days, either (i) terminate the Offer or
(ii) waive the Minimum Condition and the condition
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set forth in Paragraph (C) of the Offer Conditions set forth in Annex A of the
Acquisition Agreement (except that the portion of such condition related to
performance or compliance as to covenants and agreements shall only be waived
as to breaches actually known by the Purchaser as of the date of such
election) and, to the extent all other Offer Conditions are satisfied, shall
accept for payment and pay for at the next scheduled Expiration Date of the
Offer (subject to applicable law) all Company Shares and Preferred Securities
then validly tendered and not withdrawn in the Offer.
Guaranty of Parent; Other Provisions. Pursuant to the Shareholder's
Agreement, the Parent undertakes to insure that the Purchaser will duly
perform its obligations thereunder and guarantees any and all liabilities and
amounts which become payable by the Purchaser thereunder. The Purchaser has
agreed, as of the Closing, to indemnify and hold harmless the Selling
Shareholder and its affiliates from all damages, losses, costs and expenses
incurred as a result of or arising from, and to as promptly as possible
following the Closing use its commercially reasonable efforts to cause the
Selling Shareholder and its affiliates to be released from their obligations
under performance bonds, guarantees, indemnities or other obligations of the
Selling Shareholder and any affiliate outstanding on behalf of the Company or
any of its subsidiaries, as previously disclosed to or as otherwise agreed in
writing by the Purchaser. Neither the Selling Shareholder nor any of its
affiliates will be entitled to receive any fees or other compensation in
connection with such performance bonds, guarantees, indemnities or other
obligations accrued for any period after the later of the Closing and the
effectiveness of any such release or counter indemnity. Effective upon the
Closing, the Purchaser has also undertaken for a period of no less than 36
months from the Closing, except for good cause, not to terminate or lay off
employees of the Company's Italian affiliates, unless an appropriate agreement
has been entered into with the relevant unions in Italy. In addition, the
Purchaser has agreed to endeavor to capitalize on the opportunities and
resources available within the Company's Italian affiliates.
CONFIDENTIALITY AGREEMENT. THE FOLLOWING IS A SUMMARY OF THE MATERIAL TERMS
OF THE CONFIDENTIALITY AGREEMENT. THE SUMMARY IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE CONFIDENTIALITY AGREEMENT, A COPY OF WHICH HAS BEEN FILED
WITH THE COMMISSION AS AN EXHIBIT TO THE SCHEDULE 14D-1. THE CONFIDENTIALITY
AGREEMENT MAY BE INSPECTED AT, AND COPIES MAY BE OBTAINED FROM, THE SAME
PLACES AND IN THE MANNER SET FORTH IN SECTION 7--"CERTAIN INFORMATION
CONCERNING THE COMPANY AND THE TRUST".
Pursuant to a Confidentiality Agreement dated July 2, 1998, between the
Parent and the Company (the "Confidentiality Agreement"), the Parent agreed,
among other things, to keep confidential and not disclose or reveal (other
than to any person or affiliate of such person and any director, officer,
employee, agent, advisor (including, without limitation, any financial
advisor, counsel or accountant) or controlling person of such person or such
person's affiliate) certain information and documents concerning the Company
or concerning the proposed acquisition provided to the Parent in connection
with the transactions contemplated by the Acquisition Agreement and not to use
such information for any purpose other than in connection with the Parent's
evaluation of the proposed acquisition. The Parent also agreed that for a
period of one year from the date of the Confidentiality Agreement, neither it
nor its Representatives would, without the prior written consent of the
Company, (i) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities or direct or
indirect rights to acquire any voting securities of the Company or any
subsidiary thereof, or of any successor to or person in control of the
Company, or any assets of the Company or any subsidiary or division thereof or
of any such successor or controlling person, except that the provisions of
this item (i) shall not apply to a financial advisor engaged by the Parent,
any part of which is acting in the ordinary course of business; (ii) make, or
in any way participate, directly or indirectly, in any solicitation of proxies
to vote, or seek to advise or influence any person or entity with respect to
the voting of any voting securities of the Company; (iii) make any public
announcement with respect to, or submit a proposal for, or offer of (with or
without conditions) any extraordinary transaction involving the Company or any
of its securities or assets; (iv) form, join or in anyway participate in a
"group", as defined in Section 13(d)(3) of the Exchange Act, in connection
with any of the foregoing; or (v) request the Company or any of its
Representatives, directly or indirectly, to amend or waive any provision of
this paragraph. The Parent also agreed to promptly advise the Company of any
inquiry or proposal made to Parent with respect to any of the foregoing. In
addition, the Parent
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agreed that, without the prior written consent of the Company, it would not
for a period of two years from the date of the Confidentiality Agreement
directly or indirectly solicit for employment or employ any person employed by
the Company or its subsidiaries (i) in an executive or management position,
(ii) in sales or marketing or (iii) with access to certain technology of the
Company. As used in the Confidentiality Agreement, "Representative" means, as
to any person, such person's affiliates and its and their directors, officers,
employees, agents, advisors and controlling persons.
12. DIVIDENDS AND DISTRIBUTIONS.
As described above, the Acquisition Agreement provides that prior to the
Closing Date, the Company and each of its subsidiaries will not (i) split,
combine or reclassify any shares of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of, or in
substitution for, shares of its capital stock, (ii) in the case of the Company
or any subsidiary of the Company that is not wholly owned by the Company,
declare, set aside or pay any dividends on, or make other distributions in
respect of, any capital stock or (iii) repurchase, redeem or otherwise
acquire, or agree to commit to repurchase, redeem or otherwise acquire, any
shares of capital stock or other equity or debt securities or equity interests
of the Company or any of its subsidiaries (other than to fulfill its
obligations under the Company's stock option plans as currently in effect).
Pursuant to the terms of the Acquisition Agreement, the Company is
prohibited from taking any of the actions described in the preceding paragraph
and nothing therein shall constitute a waiver by the Purchaser of any of its
rights under the Acquisition Agreement or a limitation of remedies available
to the Purchaser for any breach of the Acquisition Agreement, including
termination thereof.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and could reduce the number of
holders of Shares, which could adversely affect the liquidity and market value
of the remaining Shares held by the public.
The Company Shares are listed on the NYSE. Depending on the number of
Company Shares purchased pursuant to the Offer, the Company Shares may no
longer meet the requirements for continued listing on the NYSE and may
therefore be delisted from the NYSE. According to the NYSE's published
guidelines, the NYSE would consider delisting the Company Shares if, among
other things, (i) the number of holders of Company Shares (including
beneficial holders of Company Shares held in the names of NYSE member
organizations in addition to holders of record) should fall below 1,200 and
the average monthly trading value of Company Shares for the most recent 12
months should be less than 100,000 shares, (ii) the number of publicly held
Company Shares should fall below 600,000 (exclusive of the holdings of
officers, directors or their immediate families and other concentrated
holdings of 10% or more), (iii) the aggregate market value of publicly held
Company Shares should drop below $8,000,000 or (iv) the Company Shares are no
longer registered under the Exchange Act, as described below.
If the NYSE were to delist the Company Shares, it is possible that the
Company Shares would continue to trade on other securities exchanges or in the
over-the-counter market and that price quotations would be reported by such
exchanges or through the Nasdaq Stock Market, Inc.'s National Market System
("Nasdaq") or other sources. However, the extent of the public market for the
Company Shares and the availability of such quotations would depend upon such
factors as the number of shareholders and/or the aggregate market value of the
Company Shares remaining at such time, the interest in maintaining a market in
the Company Shares on the part of securities firms, the possible termination
of registration under the Exchange Act (as described below) and other factors.
The Preferred Securities are not margin securities. The Company Shares are
currently "margin securities," as such term is defined under the rules of the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to
extend credit on the collateral of such securities. Depending upon factors
similar to those described above regarding listing and market
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quotations, following the Offer it is possible that the Company Shares might
no longer constitute "margin securities" for purposes of the margin
regulations of the Federal Reserve Board, in which event such Company Shares
could no longer be used as collateral for loans made by brokers.
Each of the Company Shares and the Preferred Securities are currently
registered under the Exchange Act. Such registration may be terminated upon
application of the Company to the Commission if the Company Shares, or, as the
case may be, the Preferred Securities are not listed on a national securities
exchange and there are fewer than 300 record holders of the Company Shares or,
as the case may be, the Preferred Securities resident in the United States.
The termination of registration of the Company Shares or, as the case may be,
the Preferred Securities under the Exchange Act would substantially reduce the
information required to be furnished by the Company to holders of Company
Shares or, as the case may be, Preferred Securities and to the Commission and
would make certain provisions of the Exchange Act, such as the requirements of
Rule 13e-3 under the Exchange Act with respect to "going private"
transactions, no longer applicable to the Company Shares or, as the case may
be, the Preferred Securities. In addition, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of such securities pursuant to Rule 144 promulgated under
the Securities Act of 1933, as amended. If registration of the Company Shares
under the Exchange Act were terminated, the Company Shares would no longer be
"margin securities" or eligible for Nasdaq reporting. The Purchaser currently
intends to cause the Company to make an application for termination of
registration of the Company Shares and the Preferred Securities as soon as
possible after successful completion of the Offer.
14. CONDITIONS OF THE OFFER.
Notwithstanding any other provisions of the Offer, the Purchaser shall not
be required to accept for payment, purchase or, subject to any applicable
rules and regulations of the Commission including Rule 14e-1(c) under the
Exchange Act, pay for any Tendered Shares and may postpone the acceptance for
payment of or, subject to the restrictions referred to above, the payment for,
any Tendered Shares, if (i) any applicable waiting period under the HSR Act,
the Competition Act (Canada) or Exon-Florio has not expired or been terminated
prior to the expiration of the Offer or (ii) a decision of the Commission of
the European Community that the purchase of the Company Shares and Preferred
Securities contemplated by the Offer are compatible with the common market has
not been received prior to the expiration of the Offer. In addition to and not
limiting the foregoing, notwithstanding any other provision of the Offer, the
Purchaser shall not be required to accept for payment or, subject to
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act, pay for any Tendered Shares and may terminate or amend
the Offer and may postpone the acceptance of, and payment for, Tendered Shares
if there shall not have been validly tendered and not validly withdrawn
pursuant to the Offer a number of Company Shares and Preferred Securities
which, when added to the Company Shares and Preferred Securities, if any,
previously acquired by the Purchaser, constitute at least 75% of the fully
diluted share capital of the Company or at any time at or before the time of
acceptance of Tendered Shares for payment pursuant to the Offer or payment
therefor (whether or not any Tendered Shares have been accepted for payment or
paid for), any of the following events shall occur:
(a) there shall have occurred any event or circumstance that has a
Company Material Adverse Effect;
(b) any Governmental Entity or court of competent jurisdiction shall have
taken any action or enacted, issued, promulgated, enforced, amended or
entered any statute, rule, regulation, executive order, decree,
interpretation, injunction or other order (whether temporary, preliminary
or permanent) which is in effect and which would reasonably be expected to
(i) make the acceptance for payment of, or the payment for, the Tendered
Shares illegal or otherwise prohibit or restrict consummation of the Offer,
(ii) impose material limitations on the ability of the Purchaser to acquire
or hold or to exercise any rights of ownership of the Tendered Shares, or
effectively to manage or control or operate the Company and its business,
assets and properties or (iii) have a Company Material Adverse Effect;
(c) any of the representations and warranties of the Company set forth in
the Acquisition Agreement that are qualified by reference to a Company
Material Adverse Effect shall not be true and correct, or any
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such representation and warranty that is not so qualified shall not be true
and correct in any respect which would be reasonably likely to have a
Company Material Adverse Effect, in each case as if such representation and
warranty were made at the time of determination (except to the extent any
such representation and warranty speaks as of an earlier date) or the
Company shall have failed to perform or comply with, in any material
respect, any covenant, agreement or obligation to be performed or complied
with by it under the Acquisition Agreement;
(d) the Acquisition Agreement shall have been terminated in accordance
with its terms;
(e) the Supervisory Board of the Company or the Management Board of the
Company shall have withdrawn or modified in a manner adverse to the
Purchaser its approval or recommendation of the Offer, or shall have
approved or recommended to the Company's shareholders or holders of
Preferred Securities another offer or Acquisition Proposal or shall have
adopted a resolution to effect either of the foregoing or any corporation,
partnership, person or other entity or group 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 Company Shares or
Preferred Securities or a merger, consolidation or other business
combination or Acquisition Proposal with or involving the Company or any of
its subsidiaries;
(f) any of the material consents, approvals, authorizations, orders or
permits required to be obtained by the Company, the Purchaser, or their
respective subsidiaries in connection with the Offer or Acquisition
Agreement from, or filings or registrations required to be made by any of
the same prior to the Closing Date with, any Governmental Entity in
connection with the consummation of the transactions contemplated by the
Acquisition Agreement or the Offer shall not have been obtained or made or
can only be obtained or made subject to conditions or requirements which
the Purchaser and the Company are not required to meet pursuant to the
"Further Actions" section described above in Section 11 --"Purpose of the
Offer; Delisting and Deregistration of Company Shares; Plans for the
Company; Certain Agreements";
(g) there shall have occurred (i) any general suspension for at least
three Business Days of trading in, or limitation on prices for, securities
on the NYSE, (ii) the declaration of a banking moratorium or any suspension
of payments in respect of banks in the United States, The Netherlands, or
Switzerland (whether or not mandatory), (iii) the commencement or material
escalation of a war or armed hostilities having had or being reasonably
likely to have a material adverse effect on the condition, business,
assets, liabilities or results of operations of the Company and its
subsidiaries taken as a whole or (iv) any limitation or proposed limitation
(whether or not mandatory) by any Governmental Entity, or any other event,
that materially adversely affects generally the extension of credit by
banks or other financial institutions; or
(h) any of the representations and warranties of the Selling Shareholder
in the Shareholder's Agreement that are qualified by reference to
materiality shall not be true and correct or any such representation or
warranty that is not so qualified shall not be true and correct in any
respect which would be reasonably likely to have a Company Material Adverse
Effect, in each case as if such representation and warranty were made at
the time of determination (except to the extent any such representation and
warranty speaks as of an earlier date) or the Selling Shareholder shall
have failed in any material respect to perform, or comply with, any
covenant, agreement or obligation to be performed or complied with by it
under the Shareholder's Agreement.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser or may be waived by the Purchaser, in whole or in
part, at any time and from time to time in its sole discretion (subject to the
terms of the Acquisition Agreement). Failure by the Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
15. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
General. Except as otherwise disclosed herein, based on a review of publicly
available information filed by the Company with the Commission, the Purchaser
is not aware of (i) any license or regulatory permit that appears to be
material to the business of the Company and its subsidiaries, taken as a
whole, that might be
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adversely affected by the acquisition of Shares by the Purchaser pursuant to
the Offer or (ii) any approval or other action by any governmental,
administrative or regulatory agency or authority, domestic or foreign, that
would be required for the acquisition or ownership of Shares by the Purchaser
as contemplated herein. Should any such approval or other action be required,
the Purchaser currently contemplates that it would seek such approval or
action. The Purchaser's obligation under the Offer to accept for payment and
pay for Shares is subject to certain conditions. See Section 14--"Conditions
of the Offer". While the Purchaser does not currently intend to delay the
acceptance for payment of Shares tendered pursuant to the Offer pending the
outcome of any such matter, there can be no assurance that any such approval
or action, if needed, would be obtained or would be obtained without
substantial conditions or that adverse consequences might not result to the
business of the Company or the Purchaser or that certain parts of the
businesses of the Company or the Purchaser might not have to be disposed of in
the event that such approvals were not obtained or any other actions were not
taken.
Going Private Transactions. Rule 13e-3 under the Exchange Act is applicable
to certain "going private" transactions. The Purchaser does not believe that
Rule 13e-3 will be applicable to the Compulsory Acquisition or any open-market
purchase subsequent to the consummation of the Offer if, at the time of such
action, the Company is no longer registered under the Exchange Act or the
consideration paid for any Shares pursuant to such action is not less than
that paid pursuant to the Offer or, in the case of the Compulsory Acquisition,
the Compulsory Acquisition is completed not later than one year after
termination of the Offer. If applicable, Rule 13e-3 would require, among other
things, that certain financial information regarding the Company and certain
information regarding the fairness of the Compulsory Acquisition and the
consideration offered to stockholders of the Company therein be filed with the
Commission and disclosed to stockholders of the Company prior to consummation
of the Compulsory Acquisition.
Antitrust--U.S. Under the HSR Act and the rules that have been promulgated
thereunder by the Federal Trade Commission ("FTC"), certain mergers and
acquisitions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The acquisition of Shares by the Purchaser pursuant to the
Offer is subject to the HSR Act requirements.
Under the provisions of the HSR Act applicable to the purchase of Shares
pursuant to the Offer, such purchase may not be made until the expiration of a
15-calendar day waiting period following the required filing of a Notification
and Report Form under the HSR Act by the Parent Shareholders, which the Parent
Shareholders will submit as soon as reasonably possible. Accordingly, the
waiting period under the HSR Act will expire at 11:59 P.M., New York City
time, on the fifteenth calendar day following filing of the Notification and
Report Form by the Parent Shareholders, unless early termination of the
waiting period is granted or Parent receives a request for additional
information or documentary material prior thereto. If either the FTC or the
Antitrust Division were to request additional information or documentary
material from the Parent Shareholders prior to the expiration of the 15-day
waiting period, the waiting period would be extended and would expire at 11:59
P.M., New York City time, on the tenth calendar day after the date of
substantial compliance by the Parent Shareholders with such request.
Thereafter, the waiting period could be extended only by court order or by
consent of the Parent Shareholders. If the acquisition of Shares is delayed
pursuant to a request by the FTC or the Antitrust Division for additional
information or documentary material pursuant to the HSR Act, the purchase of
and payment for Shares pursuant to the Offer will be deferred until 10 days
after the request is substantially complied with unless the waiting period is
terminated sooner by the FTC or the Antitrust Division (and assuming all of
the other Offer Conditions have been satisfied or waived). See Section 2--
"Acceptance for Payment and Payment for Shares". Only one extension of such
waiting period pursuant to a request for additional information or documentary
material is authorized by the rules promulgated under the HSR Act, except by
court order or by consent. Although the Company is required to file certain
information and documentary material with the Antitrust Division and the FTC
in connection with the Offer, neither the Company's failure to make such
filings nor a request to the Company from the Antitrust Division or the FTC
for additional information or documentary material will extend the waiting
period. However, if the Antitrust Division or the FTC raises substantive
issues in connection with a proposed transaction, the parties frequently
engage in negotiations with the relevant
38
<PAGE>
governmental agency concerning possible means of addressing these issues and
may agree to delay consummation of the transaction while such negotiations
continue.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares
by the Purchaser pursuant to the Offer. At any time before or after the
Purchaser's purchase of Shares, either the Antitrust Division or the FTC could
take such action under the antitrust laws as it deems necessary or desirable
in the public interest, including seeking to enjoin the acquisition of Shares
pursuant to the Offer or seeking divestiture of Shares acquired by the
Purchaser or divestiture of substantial assets of the Parent, the Company or
any of their respective subsidiaries. State attorneys general may also bring
legal action under the antitrust laws, and private parties may bring such
action under certain circumstances. Parent and the Purchaser believe that the
acquisition of Shares by the Purchaser will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made or, if a challenge is made, what the result
will be. See Section 14--"Conditions of the Offer" for certain conditions to
the Offer, including conditions with respect to litigation and certain
governmental actions.
Pursuant to the Acquisition Agreement, the Company, the Parent and the
Purchaser are committed to use commercially reasonable efforts if necessary or
appropriate to complete the Offer as quickly as possible. See Section 11--
"Purpose of the Offer; Delisting and Deregistration of Company Shares; Plans
for the Company; Certain Agreements".
Antitrust--EC. The EC Merger Regulation (Council Regulation No. 4064/89 of
December 21, 1989, as amended) requires notification to the European
Commission, within seven days of the conclusion of an agreement to acquire a
controlling interest or the launch of a cash tender offer therefor, of all
concentrations between companies which are deemed to have a "Community
dimension" because they exceed certain global and European turnover
thresholds. Such concentrations may not be consummated until the European
Commission, acting within fixed deadlines, approves them as being "compatible
with the common market". A concentration is compatible with the common market
if it does not create or strengthen a dominant position as a result of which
effective competition would be significantly impeded in the European Economic
Area (the "EEA"), or in a substantial part of it.
The European Commission has exclusive competence for approving or
prohibiting concentrations with a Community dimension--however, it may, upon
request, refer the case to the national antitrust authority of a particular
Member State if the concentration has a specific effect on the territory of
the requesting Member State.
The notification involves the disclosure to the European Commission of
detailed information, especially regarding the structure of the relevant
markets and the parties' competitive position. Upon receipt of a notification,
the European Commission conducts a preliminary review with a maximum duration
of one month from notification, which may be extended to six weeks in certain
circumstances. This preliminary review concludes with a decision either to
approve the notified concentration (with or without conditions) or to initiate
an in-depth investigation if the concentration raises serious doubts as to its
compatibility with the common market. Such an in-depth investigation has a
maximum duration of four months, and must end with a European Commission
decision either approving the concentration (with or without conditions) or
prohibiting it. If the European Commission raises substantive issues in
connection with the proposed concentration, the parties may negotiate with the
European Commission to find a solution, which may take the form of an
undertaking to make structural modifications to the entity resulting from the
concentration on conditions and within a timeframe agreed with the European
Commission.
The Parent, the Purchaser and the Company, including their respective
affiliates, each conduct substantial operations within the EEA and satisfy the
applicable turnover thresholds, with the result that the acquisition of Shares
will amount to a concentration with a Community dimension and, therefore, be
subject to the requirement of notification to, and approval by, the European
Commission.
39
<PAGE>
The Parent and the Purchaser believe that the concentration effected by the
acquisition of the Shares by the Purchaser will be considered to be compatible
with the common market, and approved by the European Commission during the
preliminary review phase. However, it cannot be ruled out that the European
Commission might seek to require structural undertakings as a condition to its
approval, and/or to open a second phase investigation to examine serious
doubts as regards compatibility with the common market.
Pursuant to the Acquisition Agreement, the Company, the Parent and the
Purchaser are committed to use commercially reasonable efforts if necessary
and appropriate to complete the Offer as quickly as possible. See Section 11--
"Purpose of the Offer; Delisting and Deregistration of Company Shares; Plans
for the Company; Certain Agreements".
Antitrust; Investment Review--Canada. Canada's Competition Act (the
"Competition Act") requires pre-notification to the Director of Investigation
and Research appointed under the Competition Act (the "Canadian Director") of
significant corporate transactions, such as the acquisition of a large
percentage of the stock of a public company which has Canadian operations, or
a merger or consolidation involving such entity. Pre-notification is generally
required with respect to transactions in which the parties to the transactions
and their affiliates have assets in Canada, or annual gross revenues from
sales in, from or into Canada, in excess of Cdn. $400 million and which
involve the direct or indirect acquisition of an operating business, the value
of the assets of which, or the gross revenues from sales in or from Canada
generated from these assets, exceed Cdn. $35 million per year. For
transactions subject to the pre-notification requirements, notice must be
given seven or 21 days prior to the completion of the transaction depending on
the information provided to the Canadian Director. Under the Competition Act,
a pre-notifiable transaction may not be completed prior to the expiration of
the applicable waiting period. After the applicable waiting period expires,
the transaction may be completed if the Canadian Director determines that the
proposed transaction does not prevent or lessen, or is not reasonably likely
to prevent or lessen, competition substantially in a definable market. The
Canadian Director may apply to the Competition Tribunal, a special purpose
Canadian tribunal, to, among other things, prohibit the completion of the
transaction or require the disposition of the Canadian assets acquired in such
transaction where the Canadian Director is of the view that the proposed
transaction prevents or lessens, or is reasonably likely to prevent or lessen,
competition substantially in a definable market. Proceedings under the merger
provisions of the Competition Act may be instituted by the Canadian Director
for a period of three years after a merger transaction has been substantially
completed.
The acquisition of the Shares contemplated by the Offer exceeds the
foregoing thresholds and thus pre-notification is required. A pre-notification
filing will be made as soon as practicable.
The obligation of the Purchaser to accept for payment, purchase or pay for
any Tendered Shares pursuant to the Offer is conditional upon, among other
things, the applicable waiting period under the Competition Act having
expired. See Section 14--"Conditions of the Offer".
Under the Investment Canada Act (the "ICA"), the acquisition of control by a
non-Canadian of a Canadian business, the value of which exceeds certain
monetary thresholds, is subject to approval ("Pre-Closing Review") by the
federal Minister of Industry (the "Minister"). Such approval is to be granted
where the Minister is satisfied that the acquisition is likely to be of net
benefit to Canada. The acquisition of control by a non-Canadian of a Canadian
business, the value of which does not exceed certain monetary thresholds, is
subject to a notification filing which must be filed no later than thirty days
following implementation of the acquisition ("Post-Closing Filing").
Exon-Florio. As part of the Omnibus Trade and Competitiveness Act of 1988, a
new Section (the "Exon-Florio Amendment") was added to Title VII of the
Defense Production Act of 1950, 50 U.S.C. App. 2158, et seq. (the "DPA Act"),
to empower the President or his designee to take certain actions in relation
to mergers, acquisitions and takeovers by foreign persons which could result
in foreign control of a person engaged in interstate commerce in the United
States. In particular, the Exon-Florio Amendment enables the President to
40
<PAGE>
suspend or prohibit any acquisitions by foreign persons which threaten to
impair the national security of the United States, and to divest such
transactions that have been concluded.
Under the terms of the Exon-Florio Amendment, a foreign company or U.S.
subsidiary of a foreign company acquiring a U.S. company may notify the
Committee on Foreign Investment in the United States ("CFIUS") of the proposed
transaction, whereupon the CFIUS or the President must decide within 30 days
whether to investigate the transaction. The Purchaser will prepare a
notification for endorsement by the Purchaser and the Company and filing with
CFIUS pursuant to Section 721 of the DPA Act. CFIUS has 30 days from the date
of filing of the completed notice to make a determination as to whether an
investigation is necessary. If an investigation is undertaken of the proposed
transaction and CFIUS determines that U.S. national security may be impaired
by the proposed transaction, then CFIUS may recommend to the President that he
suspend or prohibit the transaction, or direct the U.S. Attorney General to
seek divestment relief in U.S. district court. The Purchaser does not believe
that the Offer threatens to impair the national security of the United States.
Australian Foreign Investment Review Board. Australia's foreign investment
policy is administered by the Federal Treasurer under the Foreign Acquisitions
and Takeovers Act 1975 and guidelines and other requirements established by
government statement. Under current government directives, proposals to take
over an offshore company with Australian subsidiaries or assets valued below
$50 million and not exceeding half the global asset value (once notified) will
not normally be examined or subject to objection unless the business or assets
concerned are located in a strategic or sensitive industry. An informal
notification should also be made to the Australian Competition and Consumer
Commission, who will analyze the effect of the proposal on competition using
their Merger Guidelines. These Guidelines consider factors such as market
share, the spread of market power and the impact imports have on the market.
The Purchaser may, after reviewing relevant information regarding the Company,
determine to make such notifications.
16. FEES AND EXPENSES.
Except as set forth below, the Purchaser will not pay any fees or
commissions to any broker, dealer or other person for soliciting tenders of
Shares pursuant to the Offer.
Credit Suisse First Boston Corporation ("Credit Suisse First Boston" or
"CSFB") is acting as Dealer Manager in connection with the Offer and as
financial advisor to the Purchaser in connection with the Purchaser's proposed
acquisition of the Company, for which services CSFB will receive customary
compensation. The Purchaser also has agreed to reimburse CSFB for its out-of-
pocket expenses, including the fees and expenses of legal counsel and other
advisors, incurred in connection with its engagement, and to indemnify CSFB
and certain related persons against certain liabilities and expenses in
connection with its engagement, including certain liabilities under the U.S.
federal securities laws. In the ordinary course of business, CSFB and its
affiliates may actively trade the debt and equity securities of the Company
for their own account and for the accounts of customers and, accordingly, may
at any time hold a long or short position in such securities.
The Purchaser has also retained The Bank of New York as the Depositary. The
Depositary has not been retained to make solicitations or recommendations in
its role as Depositary. The Depositary will receive reasonable and customary
compensation for its services, will be reimbursed for certain reasonable out-
of-pocket expenses and will be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities under the U.S.
federal securities laws.
In addition, the Purchaser has retained Morrow & Co., Inc. to act as the
Information Agent in connection with the Offer. The Information Agent will
receive reasonable and customary compensation for its services, will be
reimbursed for certain reasonable out-of-pocket expenses and will be
indemnified against certain liabilities and expenses in connection therewith,
including certain liabilities under the U.S. federal securities laws.
Brokers, dealers, commercial banks and trust companies will be reimbursed by
the Purchaser for customary mailing and handling expenses incurred by them in
forwarding offering material to their customers.
41
<PAGE>
17. MISCELLANEOUS.
The Purchaser is not aware of any state or jurisdiction where the making of
the Offer is prohibited by any administrative or judicial action pursuant to
any valid statute. If the Purchaser becomes aware of any valid statute
prohibiting the making of the Offer or the acceptance of the Shares pursuant
thereto, the Purchaser will make a good faith effort to comply with such
statute. If, after such good faith effort, the Purchaser cannot comply with
any such statute, the Offer will not be made to (nor will tenders be accepted
from or on behalf of) the Holders in such state or jurisdiction. In any state
or jurisdiction where the securities, blue sky or other laws require the Offer
to be made by a licensed broker or dealer, the Offer shall be deemed to be
made on behalf of the Purchaser by Credit Suisse First Boston or one or more
registered brokers or dealers which are licensed under the laws of such state
or jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF THE PARENT OR THE PURCHASER NOT CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
The Parent and the Purchaser have filed with the Commission the Schedule
14D-1, together with exhibits, pursuant to Rule 14d-3 of the General Rules and
Regulations under the Exchange Act, furnishing certain additional information
with respect to the Offer, and may file amendments thereto. The Schedule 14D-1
and any amendments thereto, including exhibits, may be inspected at, and
copies may be obtained from, the same places and in the manner set forth in
Section 7--"Certain Information Concerning the Company and the Trust".
ABB TRANSPORTATION PARTICIPATIONS
B.V.
October 20, 1998
42
<PAGE>
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF THE PURCHASER
1. Supervisory Board and Management Board of the Purchaser. Set forth below
is the name, present principal occupation or employment and material
occupations, positions, offices or employments for the past five years, of
each member of the Supervisory Board and the Management Board of the
Purchaser. The principal address of the Purchaser and the current business
address for each member of the Management Board of the Purchaser is
Burgemeester Haspelslaan 45, 5HG, NL-1181 NB Amstelveen, The Netherlands,
Telephone: 31-20-543-4444. The current address of each member of the
Supervisory Board of the Purchaser is c/o ABB Asea Brown Boveri Ltd., P.O. Box
8131, Affolternstrasse 44, CH-8050, Zurich, Switzerland, Telephone 41-1-317-
7111. Members of the Supervisory Board are identified by an asterisk and
members of the Management Board are identified by two asterisks.
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---------------- --------------------------------------------------
Dr. Beat Hess* General Counsel of the Parent,
Switzerland January, 1988 to Present.
Dr. Alfred Storck* Senior Vice President (Taxes) of the
Switzerland Parent, 1988 to Present.
Tomas Ericsson* Senior Corporate Officer (Finance &
Sweden Administration) of the Parent, March
1997 to Present; Senior Vice
President (Control) of the Parent,
January 1988 to March 1997.
Dr. Eberhard von Koerber* Executive Vice President and member
Germany of Executive Committee of the
Parent, January 1988 to August 1998.
Renato Fassbind* Chief Financial Officer and
Switzerland Executive Vice President of the
Parent, January 1997 to Present;
Head of Corporate Audit of the
Parent, May 1990 to December 1996.
Eric Elzvik* Vice President of Corporate
Sweden Development of the Parent, August
1993 to Present.
J.A. De Raad** Managing Director of the Purchaser,
The Netherlands August 1997 to Present; Managing
Director of ABB Systemen B.V.,
January 1996 to July 1997; Managing
Director of ABB Industri B.V.,
January 1993 to December 1995.
Brian Norman van Reijn** Managing Director of the Purchaser,
The Netherlands August 1997 to Present; Managing
Director of ABB Financial Services
B.V., March 1992 to July 1997.
2. Ownership of Shares by Directors and Executive Officers. To the best
knowledge of the Purchaser, none of the other persons listed on this Schedule
I beneficially owns or has a right to acquire directly or indirectly any
Shares, and none of the persons listed on this Schedule I has effected any
transactions in the Shares during the past 60 days.
I-1
<PAGE>
INFORMATION CONCERNING THE DIRECTORS AND
EXECUTIVE OFFICERS OF THE PARENT
1. Board of Directors, Group Executive Committee of Parent. Set forth below
is the name, present principal occupation or employment and material
occupations, positions, offices or employments for the past five years, of each
member of the Board of Directors and the Group Executive Committee of the
Parent. The principal address of the Parent and, unless indicated below, the
current business address for each individual listed below is P.O. Box 8131,
Affolternstrasse 44, CH-8050, Zurich, Switzerland, Telephone: 41-1-317-7111.
Members of the Board of Directors are identified by an asterisk and members of
the Group Executive Committee are identified by two asterisks.
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---------------- --------------------------------------------------
Percy Barnevik* Chairman of the Parent, 1997 to
Sweden Present; Chairman of Investor AB,
c/o Investor UVC Ltd. 1997 to Present; President and Chief
10 Hill Street Executive Officer of the Parent, 1988
London, WIK 7FU to 1996.
England
Robert A. Jeker* Chairman Feldschlosschen Hurlimann,
Switzerland April 1998 to Present; Chairman
P.O. Box 4021 Batigroup Holding, January 1997 to
Basel Present; Chairman Swiss Steel,
Switzerland January 1997 to Present; Chairman
Stratec Holding, February 1996 to
Present; Chairman Swiss Industries
Fair, July 1995 to Present; Vice
Chairman of the Parent, February 1996
to Present; Chairman of ABB AG, May
1986 to Present; Chairman of George
Fischer Ltd., May 1980 to Present.
Donald H. Rumsfeld* Self employed, September 1993 to
United States of America Present.
400 N. Michigan #405
Chicago, Illinois 60611
USA
I-2
<PAGE>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---------------- --------------------------------------------------
Yotaro Kobayashi* Chairman and Co-Chief Executive
Japan Officer of Fuji XEROX Co., Ltd.,
c/o Fuji Xerox Co., Ltd. January 1998 to Present; Chairman
17-2 Akasaka 2-chome, Minato-ku and Chief Executive Officer of Fuji
Tokyo 107 0052 XEROX Co., Ltd., January 1992 to
Japan December 1997.
Agostino Rocca* President and Chief Executive
Italy Officer of TECHINT, October 1993 to
c/o TECHINT Present.
Av. L.N. Alem 1065-2(degrees) p.
1001 Buenos Aires
Argentina
Bjorn Svedberg* Chairman of Ericsson Telecom,
Sweden October 1993 to April 1998; Chief
Box 16100 Executive Officer Scandinaviska
S-103 22 Stockholm Enskilda Banken, May 1997 to April
Sweden 1998; Director: Investor AB, April
1998 to Present.
Peter D. Sutherland* Chairman and Managing Director of
Ireland Goldman Sachs International,
c/o Goldman Sachs International September 1995 to Present; Chairman
Peterborough Court of British Petroleum, July 1995 to
133, Fleet Street May 1997; Director-General of GATT
London EC4A 2BB, England and WTO January, 1993 to 1995;
Director: Telefonaktiebolaget,
European Movement (Ireland), ABB AB,
Goldman Sachs Europe Ltd., Goldman
Sachs Holdings (UK), Goldman Sachs
(UK) L.L.C. Investment Bank, LM
Ericsson Holdings Ltd., The British
Petroleum Company, Investor AB.
Lodewijk C. van Wachem* Director: The Parent, February 1996
The Netherlands to Present, Zurich Insurance
c/o Royal Dutch Petroleum Co. Company, June 1993 to Present, ATCO
30, Carel van Bylandtlaan Ltd., IBM Corporation, July 1992 to
NL-2596 HR The Hague Present, Credit Suisse Holding, 1992
The Netherlands to 1996; Member of Supervisory
Board: Bayer A.G., April 1997 to
Present, BMW A.G., May 1994 to
Present, Philips Electronics N.V.,
June 1993 to Present, Akzo Nobel,
June 1992 to Present; Chairman of
Supervisory Board of Royal Dutch
Petroleum Company, July 1992 to
Present.
Dr. Gerhard Cromme* Chief Executive Officer of Fried.
Germany Krupp AG Hoesch-Krupp, 1989 to
c/o Fried. Krupp AG Hoesch-Krupp Present.
Altendorfer Strasse 103
D-45143 Essen
Germany
Sune Karlsson** Executive Vice President of the
Sweden Parent, January 1997 to Present;
Director of Asea Brown Boveri AG,
October 1988 to December 1996.
I-3
<PAGE>
NAME AND CURRENT PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT;
BUSINESS ADDRESS MATERIAL POSITIONS HELD DURING THE PAST FIVE YEARS
---------------- --------------------------------------------------
Alexis Fries** Executive Vice President of the
Switzerland Parent, October 1993 to Present.
Kjell E. Almskog** Executive Vice President of the
Norway Parent, September 1998 to Present;
Country Manager/BA Manager of Asea
Brown Boveri AS, 1986 to September
1988.
Goran Lindahl** President and Chief Executive Officer
Sweden of the Parent, January 1997 to
Present; Executive Vice President of
the Parent, January 1988 to December
1996.
Jorgen Centerman** Executive Vice President of the
Sweden Parent, September 1998 to Present;
Senior Vice President of the Parent,
August 1993 to September 1998.
Jurgen Dormann* Chief Executive Officer of Hoechst
Germany AG, April 1994 to Present; Chief
c/o Hoechst AG Financial Officer of Hoechst AG, 1987
D-65928 Frankfurt to April 1994.
Germany
Jan Roxendal** Executive Vice President of Parent,
Sweden September 1998 to Present; President
and Segment Manager of ABB Financial
Services, June 1991 to Present.
Armin Meyer** Executive Vice President of Parent,
Switzerland 1995 to Present; Head of Power
Generation, Asea Brown Boveri AG,
January 1992 to January 1995.
Edwin Somm* Chief Executive Officer and President
Switzerland of ABB Switzerland; January 1988 to
Asea Brown Boveri AG March 1997; Director: SIG
Postfach Schaffhausen Switzerland, Swiss Steel
5401 Baden Emmenbrucke, the Parent, GF
Switzerland Schaffhausen Switzerland.
Renato Fassbind** Chief Financial Officer and Executive
Switzerland Vice President of the Parent, January
1997 to Present; Head of Corporate
Audit of the Parent, May 1990 to
December 1996.
2. Ownership of Shares by Directors and Executive Officers. To the best
knowledge of Parent, none of the other persons listed on this Schedule I
beneficially owns or has a right to acquire directly or indirectly any Shares,
and none of the persons listed on this Schedule I has effected any transactions
in the Shares during the past 60 days.
I-4
<PAGE>
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates evidencing
Shares and any other required documents should be sent or delivered by each
holder of Shares or such holder's broker, dealer, commercial bank, trust
company or other nominee to the Depositary as follows:
The Depositary for the Offer is:
THE BANK OF NEW YORK
By Mail: Facsimile Transmission: By Hand or Overnight
Courier:
(for Eligible
Institutions Only)
Tender & Exchange
Department (212) 815-6213 Tender & Exchange
P.O. Box 11248 Department
Church Street Station 101 Barclay Street
New York, New York Receive and Deliver
10286-1248 Window
Confirmation of Fax:
(800) 507-9357 New York, New York
10286
Questions or requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth below. Additional copies of this Offer to Purchase, the
Letter of Transmittal and the Notice of Guaranteed Delivery may be obtained
from the Information Agent or the Dealer Manager and will be furnished
promptly at the Purchaser's expense. A holder of Shares may also contact his
broker, dealer, commercial bank or trust company for assistance concerning the
Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
445 Park Avenue
Fifth Floor
New York, New York 10022
Call Collect (212) 754-8000
Banks & Brokers Call Toll-Free (800) 662-5200
All Others Call Toll-Free (800) 566-9061
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON CORPORATION
ELEVEN MADISON AVENUE
NEW YORK, NEW YORK 10010-3629
CALL TOLL FREE (800) 881-8320
<PAGE>
Exhibit (a)(2)
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER COMMON SHARES
OF
ELSAG BAILEY PROCESS AUTOMATION N.V.
AND/OR
TO TENDER 5 1/2% CONVERTIBLE TRUST ORIGINATED PREFERRED SECURITIES
OF
ELSAG BAILEY FINANCING TRUST
PURSUANT TO THE OFFER TO PURCHASE DATED OCTOBER 20, 1998
BY
ABB TRANSPORTATION PARTICIPATIONS B.V.
A DIRECT, WHOLLY OWNED SUBSIDIARY OF
ABB ASEA BROWN BOVERI LTD.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, NOVEMBER 17, 1998, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
THE BANK OF NEW YORK
BY MAIL: FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT
COURIER:
Tender & Exchange (for Eligible Institutions Only)
Department (212) 815-6213 Tender & Exchange
P.O. Box 11248 For Confirmation Telephone: Department
Church Street Station (800) 507-9357 101 Barclay Street
New York, New York Receive and Deliver
10286-1248 Window
New York, New York 10286
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by holders of Company Shares
(as defined below) and holders of Preferred Securities (as defined below)(such
holders, collectively, the "Holders") if certificates evidencing Company
Shares and/or Preferred Securities are to be forwarded herewith or, unless an
Agent's Message (as defined in the Offer to Purchase) is utilized, if tenders
of Company Shares and/or Preferred Securities are to be made by book-entry
transfer to the account maintained by The Bank of New York, as Depositary (the
"Depositary") at The Depository Trust Company (the "Book-Entry Transfer
Facility"), pursuant to the procedures set forth in Section 3--"Procedures for
Tendering Shares" of the Offer to Purchase (as defined below). Holders who
tender Company Shares and/or Preferred Securities by book-entry transfer are
referred to herein as "Book-Entry Holders" and other Holders are referred to
herein as "Certificate Holders."
<PAGE>
Holders whose certificates evidencing Company Shares ("Company Share
Certificates") and/or Preferred Securities ("Preferred Securities
Certificates" and, together with the Company Share Certificates, the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other documents required hereby to the Depositary on or
prior to the Expiration Date (as defined in Section 1--"Terms of the Offer" of
the Offer to Purchase), or who cannot comply with the book-entry transfer
procedures on a timely basis, may nevertheless tender their Company Shares
and/or Preferred Securities according to the guaranteed delivery procedure set
forth in Section 3--"Procedures for Tendering Shares" of the Offer to
Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
2
<PAGE>
DESCRIPTION OF COMPANY SHARES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(IF BLANK, PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) COMPANY SHARES TENDERED
ON THE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ---------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF COMPANY
COMPANY SHARES NUMBER
SHARE EVIDENCED BY OF COMPANY
CERTIFICATE COMPANY SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
----------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL COMPANY
SHARES
</TABLE>
- --------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Company Shares
evidenced by any Company Share Certificate(s) delivered to the
Depositary are being tendered. See Instruction 4.
AND/OR
DESCRIPTION OF PREFERRED SECURITIES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(IF BLANK, PLEASE FILL IN EXACTLY AS NAME(S) APPEAR(S) PREFERRED SECURITIES TENDERED
ON THE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY)
- ----------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF PREFERRED
SECURITIES
PREFERRED EVIDENCED BY NUMBER
SECURITIES PREFERRED OF PREFERRED
CERTIFICATE SECURITIES SECURITIES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
-----------------------------------------------------------------------
<S> <C> <C> <C>
TOTAL PREFERRED
SECURITIES
</TABLE>
- --------------------------------------------------------------------------------
* Need not be completed by Holders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Preferred
Securities evidenced by any Preferred Securities Certificate(s)
delivered to the Depositary are being tendered. See Instruction 4.
3
<PAGE>
[_]CHECK HERE IF COMPANY SHARES AND/OR PREFERRED SECURITIES ARE BEING
DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNTS MAINTAINED BY THE
DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY:
Name of Tendering Institution ______________________________________________
Account Numbers: (i) Company Shares __________________________
(ii) Preferred Securities ____________________
Transaction Code Numbers:
(i) Company Shares _________________________
(ii) Preferred Securities ____________________
[_]CHECK HERE IF COMPANY SHARES AND/OR PREFERRED SECURITIES ARE BEING TENDERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE
DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Holder(s) ____________________________________________
Window Ticket No. (if any) _________________________________________________
Date of Execution of Notice of Guaranteed Delivery _________________________
Name of Institution which Guaranteed Delivery ______________________________
Account Numbers (if Delivered by Book-Entry Transfer):
(i) Company Shares __________________________
(ii) Preferred Securities ____________________
Transaction Code Numbers:
(i) Company Shares ___________________________
(ii) Preferred Securities ____________________
[_]CHECK HERE IF TENDER IS BEING MADE PURSUANT TO LOST OR MUTILATED
SECURITIES. SEE INSTRUCTION 10.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
4
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to ABB Transportation Participations B.V.
(the "Purchaser"), a corporation organized under the laws of The Netherlands
and a direct, wholly owned subsidiary of ABB Asea Brown Boveri Ltd., a
corporation organized under the laws of Switzerland (the "Parent"), the above-
described common shares, par value NLG 1.00 per share (the "Company Shares"),
of Elsag Bailey Process Automation N.V., a company organized under the laws of
The Netherlands (the "Company") and/or (ii) the above-described 5 1/2%
Convertible Trust Originated Preferred Securities (the "Preferred Securities")
of Elsag Bailey Financing Trust (the "Trust"), pursuant to the Purchaser's
Offer to Purchase all outstanding (i) Company Shares at a price of $39.30 per
Company Share, net to the seller in cash, without interest thereon and (ii)
Preferred Securities at a price of $61.21 per Preferred Security, net to the
seller in cash, without interest thereon, dated October 20, 1998 (the "Offer
to Purchase"), upon the terms and subject to the conditions set forth in the
Offer to Purchase, receipt of which is hereby acknowledged, and in this Letter
of Transmittal (which, as may be amended and supplemented from time to time,
together with the Offer to Purchase, constitutes the "Offer"). The undersigned
understands that the Purchaser reserves the right to assign to an affiliate of
the Parent the right to purchase all or any portion of the Company Shares
and/or Preferred Securities tendered pursuant to the Offer, but the
undersigned further understands that any such assignment will not relieve the
Purchaser of its obligations under the Offer and will in no way prejudice the
rights of tendering Holders to receive payment for Company Shares and/or
Preferred Securities validly tendered and accepted for payment pursuant to the
Offer.
Upon the terms and subject to the conditions of the Offer, subject to, and
effective upon, acceptance for payment of and payment for the Company Shares
and/or Preferred Securities tendered herewith in accordance with the terms of
the Offer (including, if the Offer is extended or amended, the terms and
conditions of such extension or amendment), the undersigned hereby sells,
assigns and transfers to, or upon the order of, the Purchaser, all right,
title and interest in and to all of the Company Shares and/or Preferred
Securities that are being tendered hereby and any and all non-cash dividends,
distributions, rights, other Company Shares and/or Preferred Securities and
other securities issued or issuable in respect thereof on or after October 20,
1998 (collectively, "Distributions"), and appoints the Depositary the true and
lawful agent and attorney-in-fact of the undersigned with respect to such
Company Shares and/or Preferred Securities and all Distributions with full
power of substitution (such power of attorney being deemed to be an
irrevocable power coupled with an interest) to (a) deliver such Share
Certificates and all Distributions or transfer ownership of such Company
Shares and/or Preferred Securities and all Distributions on the account books
maintained by the Book-Entry Transfer Facility, together in either such case
with all accompanying evidences of transfers and authenticity, to or upon the
order of the Purchaser, (b) present such Company Shares and/or Preferred
Securities and all Distributions for transfer on the books of the Company and
(c) receive all benefits and otherwise exercise all rights of beneficial
ownership of such Company Shares and/or Preferred Securities and all
Distributions, all in accordance with the terms and subject to the conditions
of the Offer.
The undersigned hereby irrevocably appoints the designees of the Purchaser,
and each of them, the attorneys-in-fact and proxies of the undersigned, each
with full power of substitution, to vote in such manner as each such attorney-
in-fact and proxy or any substitute thereof shall deem proper in the sole
discretion of such attorney-in-fact and proxy or such substitute, and
otherwise act (including pursuant to written consent) with respect to all of
the Company Shares and/or Preferred Securities tendered hereby and all
Distributions which have been accepted for payment by the Purchaser prior to
the time of such vote or action, which the undersigned is entitled to vote at
any meeting of Holders (whether annual or special and whether or not an
adjourned meeting). This proxy and power of attorney is coupled with an
interest in the Company Shares and/or Preferred Securities and is irrevocable
and is granted in consideration of, and is effective upon, the acceptance for
payment of such Company Shares and/or Preferred Securities and all
Distributions by the Purchaser in accordance with the terms of the Offer. Such
acceptance for payment shall revoke any other proxy granted by the undersigned
at
5
<PAGE>
any time with respect to such Company Shares and/or Preferred Securities and
all Distributions and no subsequent proxies will be given (or, if given, will
not be deemed effective) with respect thereto by the undersigned. The
undersigned understands that in order for Company Shares and/or Preferred
Securities to be deemed validly tendered pursuant to the Offer, immediately
upon the Purchaser's acceptance of such Company Shares and/or Preferred
Securities and all Distributions for payment the Purchaser or its designee
must be able to exercise full voting rights with respect to such Company
Shares and/or Preferred Securities and all Distributions including, without
limitation, voting at any meeting of the Holders then scheduled.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Company Shares
and/or Preferred Securities and all Distributions tendered hereby and that
when the same are accepted for payment by the Purchaser, the Purchaser will
acquire good, marketable and unencumbered title thereto, free and clear of all
liens, restrictions, charges and encumbrances, and the same will not be
subject to any adverse claim. The undersigned will, upon request, execute and
deliver any additional documents deemed by the Depositary or the Purchaser to
be necessary or desirable to complete the sale, assignment, and transfer of
the Company Shares and/or Preferred Securities and all Distributions tendered
hereby. In addition, the undersigned shall promptly remit and transfer to the
Depositary for the account of the Purchaser any and all Distributions in
respect of the Company Shares and/or Preferred Securities tendered hereby,
accompanied by appropriate documentation of transfer; and, pending such
remittance or appropriate assurance thereof, the Purchaser shall be entitled
to all rights and privileges as owner of any such Distributions and may
withhold the entire purchase price or deduct from the purchase price the
amount or value thereof, as determined by the Purchaser in its sole
discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding
upon the heirs, personal representatives, successors and assigns of the
undersigned. Subject to the withdrawal rights set forth in Section 4--
"Withdrawal Rights" of the Offer to Purchase, the tender of Company Shares
and/or Preferred Securities hereby made is irrevocable.
The undersigned understands that tenders of Company Shares and/or Preferred
Securities pursuant to any of the procedures described in Section 3--
"Procedures for Tendering Shares" of the Offer to Purchase and in the
instructions hereto will constitute the undersigned's acceptance of the terms
and conditions of the Offer. The Purchaser's acceptance for payment of such
Company Shares and/or Preferred Securities will constitute a binding agreement
between the undersigned and the Purchaser upon the terms and subject to the
conditions set forth in the Offer. The undersigned recognizes that under
certain circumstances set forth in the Offer to Purchase, the Purchaser may
not be required to accept for payment any of the Company Shares and/or
Preferred Securities tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any Share
Certificates not tendered or not accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Company Shares Tendered"
and/or "Description of Preferred Securities Tendered." Similarly, unless
otherwise indicated under "Special Delivery Instructions," please mail the
check for the purchase price and/or return any Share Certificates not tendered
or not accepted for payment (and accompanying documents, as appropriate) to
the address(es) of the registered holder(s) appearing under "Description of
Company Shares Tendered" and/or "Description of Preferred Securities
Tendered." In the event that both the Special Delivery Instructions and the
Special Payment Instructions are completed, please issue the check for the
purchase price and/or issue any Share Certificates not so tendered or accepted
for payment in the name of, and deliver said check and/or return such
certificates to, the person or persons so indicated. The undersigned
recognizes that the Purchaser has no obligation, pursuant to the Special
Payment Instructions, to transfer any Company Shares and/or Preferred
Securities from the name of the registered holder thereof if the Purchaser
does not accept for payment any of the Company Shares and/or Preferred
Securities so tendered.
6
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS 1,5,6 AND 7) (SEE INSTRUCTIONS 1,5,6 AND 7)
To be completed ONLY if certif- To be completed ONLY if certif-
icate(s) for Company Shares icate(s) for Company Shares
and/or Preferred Securities not and/or Preferred Securities not
tendered or not purchased and/or tendered or not purchased and/or
the check for the purchase price the check for the purchase price
of Company Shares and/or Pre- of Company Shares and/or Pre-
ferred Securities purchased are ferred Securities purchased are
to be issued in the name of some- to be sent to someone other than
one other than the undersigned. the undersigned, or to the under-
signed at an address other than
that shown above.
Issue check and/or certificate(s)
to:
Mail check and/or certificate(s)
Name: ____________________________ to:
PLEASE TYPE OR PRINT Name: ____________________________
Address: _________________________ PLEASE TYPE OR PRINT
__________________________________ Address: _________________________
(INCLUDE ZIP CODE) __________________________________
__________________________________ (INCLUDE ZIP CODE)
(TAX IDENTIFICATION OR SOCIAL __________________________________
SECURITY NO.) (SEE SUBSTITUTE (TAX IDENTIFICATION OR SOCIAL
FORM W-9 ON REVERSE SIDE) SECURITY NO.) (SEE SUBSTITUTE
FORM W-9 ON REVERSE SIDE)
7
<PAGE>
IMPORTANT
HOLDER(S) SIGN HERE
(SEE INSTRUCTIONS 1 AND 5)
(PLEASE COMPLETE SUBSTITUTE FORM W-9 CONTAINED HEREIN)
Signature(s) of Holder(s) _____________________________________
_______________________________________________________________
Dated: __________________________________________________, 19
(Must be signed by registered holder(s) exactly as name(s)
appear(s) on Company Share Certificate(s) and/or Preferred
Securities Certificate(s) or on a security position listing or
by person(s) authorized to become registered holder(s) by
certificate(s) and documents transmitted with this Letter of
Transmittal. If signature is by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of
corporations or other person acting in a fiduciary or
representative capacity, please provide the following
information and see Instruction 5.)
Name(s): ______________________________________________________
(PLEASE PRINT)
Capacity (Full Title): ________________________________________
Address: ______________________________________________________
_______________________________________________________________
(INCLUDE ZIP CODE)
_____________________________ _____________________________
(AREA CODE AND TELEPHONE (TAX IDENTIFICATION AND
NO.) SOCIAL SECURITY NO.)
GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 1 AND 5)
Authorized Signature: _________________________________________
Name: _________________________________________________________
(PLEASE TYPE OR PRINT)
Title: ________________________________________________________
Name of Firm: _________________________________________________
Address: ______________________________________________________
(INCLUDE ZIP CODE)
Name of Firm: _________________________________________________
Area Code and Telephone Number: _______________________________
Dated: __________________________________________________, 19
8
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a financial
institution (including most banks, savings and loan associations and brokerage
houses) which is a participant in the Security Transfer Agents Medallion
Program, The New York Stock Exchange Medallion Signature Guarantee Program or
the Stock Exchange Medallion Program (an "Eligible Institution"). Signatures
on this Letter of Transmittal need not be guaranteed (a) if this Letter of
Transmittal is signed by the registered holder(s) of Company Shares and/or
Preferred Securities (which term, for purposes of this document, shall include
the Book-Entry Transfer Facility where its name appears on a security position
listing as the owner of Company Shares and/or Preferred Securities) tendered
herewith and such holder(s) have not completed either the box entitled
"Special Delivery Instructions" or the box entitled "Special Payment
Instructions" on this Letter of Transmittal or (b) if such Company Shares
and/or Preferred Securities are tendered for the account of an Eligible
Institution. See Instruction 5 of this Letter of Transmittal.
2. DELIVERY OF LETTER OF TRANSMITTAL AND SHARE CERTIFICATES OR BOOK-ENTRY
CONFIRMATIONS. This Letter of Transmittal is to be used either if Share
Certificates are to be forwarded herewith or, unless an Agent's Message is
utilized, if tenders are to be made pursuant to the procedures for tender by
book-entry transfer set forth in Section 3--"Procedures for Tendering Shares"
of the Offer to Purchase. Share Certificates evidencing all physically
tendered Company Shares and/or Preferred Securities or confirmation of any
book-entry transfer into the Depositary's accounts at the Book-Entry Transfer
Facility of Company Shares and/or Preferred Securities tendered by book-entry
transfer, as well as this Letter of Transmittal or a facsimile thereof,
properly completed and duly executed with any required signature guarantees or
an Agent's Message, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein on or prior to the Expiration Date (as defined in Section 1--
"Terms of the Offer" of the Offer to Purchase).
Holders whose Share Certificates are not immediately available or who cannot
deliver their Share Certificates and all other required documents to the
Depositary on or prior to the Expiration Date or who cannot complete the
procedures for book-entry transfer on a timely basis may nevertheless tender
their Company Shares and/or Preferred Securities by properly completing and
duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed
delivery procedure set forth in Section 3--"Procedures for Tendering Shares"
of the Offer to Purchase. Pursuant to such procedure: (i) such tender must be
made by or through an Eligible Institution; (ii) a properly completed and duly
executed Notice of Guaranteed Delivery, substantially in the form provided by
the Purchaser, must be received by the Depositary on or prior to the
Expiration Date; and (iii) Share Certificates or confirmation of any book-
entry transfer into the Depositary's account at the Book-Entry Transfer
Facility of Company Shares and/or Preferred Securities tendered by book-entry
transfer, as well as a Letter of Transmittal, properly completed and duly
executed with any required signature guarantees (or a facsimile thereof,
properly completed and duly executed with any required signature guarantees or
an Agent's Message), and all other documents required by this Letter of
Transmittal must be received by the Depositary within three New York Stock
Exchange trading days after the date of execution of such Notice of Guaranteed
Delivery.
If Share Certificates are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal (of
facsimile hereof) must accompany each such delivery.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND
ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE ELECTION AND RISK OF THE TENDERING HOLDER.
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF
SUCH DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Company Shares and/or Preferred Securities will be purchased. All
tendering Holders, by execution of this Letter of Transmittal or a
9
<PAGE>
facsimile hereof, waive any right to receive any notice of the acceptance of
their Company Shares and/or Preferred Securities for payment.
3. INADEQUATE SPACE. If the space provided under "Description of Company
Shares Tendered" and/or "Description of Preferred Securities Tendered" is
inadequate, the Share Certificate numbers and/or the number of Company Shares
and/or Preferred Securities should be listed on a separate schedule and
attached hereto.
4. PARTIAL TENDERS (APPLICABLE TO HOLDERS OF SHARE CERTIFICATES ONLY). If
fewer than all the Company Shares and/or Preferred Securities evidenced by any
Share Certificate submitted are to be tendered, fill in the number of Company
Shares and/or Preferred Securities which are to be tendered in the box
entitled "Number of Company Shares Tendered" and/or "Number of Preferred
Securities Tendered," as the case may be. In such cases, new Share
Certificate(s) evidencing the remainder of the Shares that were evidenced by
Share Certificate(s) delivered to the Depositary will be sent to the person
signing this Letter of Transmittal, unless otherwise provided in the box
entitled "Special Delivery Instructions" on this Letter of Transmittal, as
soon as practicable after the Expiration Date. All Shares represented by Share
Certificates delivered to the Depositary will be deemed to have been tendered
unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL; STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered Holders of the Company
Shares and/or Preferred Securities tendered hereby, the signature must
correspond with the names as written on the face of the certificates without
alteration, enlargement or any change whatsoever.
If any of the Company Shares and/or Preferred Securities tendered hereby are
owned of record by two or more joint owners, all such owners must sign this
Letter of Transmittal.
If any of the tendered Company Shares and/or Preferred Securities are
registered in different names on several certificates, it will be necessary to
complete, sign and submit as many separate Letters of Transmittal as there are
different registrations of Company Shares and/or Preferred Securities.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory
to the Purchaser of such person's authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Company Shares and/or Preferred Securities listed and transmitted hereby, no
endorsements of certificates or separate stock powers are required unless
payment is to be made to, or Share Certificates evidencing Company Shares
and/or Preferred Securities not tendered or purchased are to be issued in the
name of, a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder of the Company Shares and/or Preferred Securities tendered
hereby, the Share Certificate(s) must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name or names
of the registered holder or holders appear(s) on such Share Certificate(s).
Signatures on such Share Certificates or stock powers must be guaranteed by an
Eligible Institution.
6. TRANSFER TAXES. Except as otherwise provided in this Instruction 6, the
Purchaser will pay or cause to be paid any transfer taxes with respect to the
transfer and sale of purchased Company Shares and/or Preferred Securities to
it or its order pursuant to the Offer. If, however, payment of the purchase
price of any Company Shares and/or Preferred Securities purchased is to be
made to or, in the circumstances permitted hereby, if Share Certificates for
Company Shares and/or Preferred Securities not tendered or purchased are to be
registered in the name of, any person other than the registered holder, or if
tendered Share Certificates are registered in the name of any person other
than the person(s) signing this Letter of Transmittal, the amount of any
transfer taxes
10
<PAGE>
(whether imposed on the registered holder or such person) payable on account
of the transfer to such person will be deducted from the purchase price if
satisfactory evidence of the payment of such taxes, or exemption therefrom, is
not submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE SHARE CERTIFICATES LISTED IN THIS
LETTER OF TRANSMITTAL.
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check for the purchase
price is to be issued in the name of, and/or Share Certificates for Company
Shares and/or Preferred Securities not tendered or not accepted for payment
are to be issued or returned to, a person other than the signer of this Letter
of Transmittal or if a check and/or such Share Certificates are to be mailed
to someone other than the signer of this Letter of Transmittal or to an
address other than that shown above, the appropriate boxes on this Letter of
Transmittal should be completed.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance may be directed to, or additional copies of the Offer to Purchase,
this Letter of Transmittal, the Notice of Guaranteed Delivery and other tender
offer materials may be obtained from, the Information Agent or the Dealer
Manager at their respective addresses set forth below or from your broker,
dealer, commercial bank or trust company.
9. SUBSTITUTE FORM W-9. Under the United States federal income tax backup
withholding rules, unless an exemption applies under the applicable law and
regulations, 31% of the payments to a Holder or other payee pursuant to the
Offer must be withheld unless the Holder or other payee provides his or her
taxpayer identification number ("TIN") (generally, the Holder's employer
identification number or social security number) to the Depositary and
certifies that such number is correct. Therefore, each tendering Holder should
complete and sign the Substitute Form W-9 included as part of the Letter of
Transmittal so as to provide the information and certification necessary to
avoid backup withholding, unless such Holder otherwise establishes to the
satisfaction of the Depositary that it is not subject to backup withholding.
Certain Holders (including, among others, all corporations and certain foreign
Holders) are not subject to these backup withholding and information reporting
requirements. In order for a foreign Holder to qualify as an exempt recipient,
that Holder should submit an IRS Form W-8 or a Substitute Form W-8, signed
under penalties of perjury, attesting to that Holder's exempt status. Such
statements can be obtained from the Depositary. Failure to provide the
information on the form may subject tendering Holders to 31% United States
federal income tax withholding on the payment of the purchase price of cash
pursuant to the Offer.
10. LOST OR DESTROYED SHARE CERTIFICATES. If any Company Share Certificates
have been lost or destroyed, the Holder should promptly notify the Company's
transfer agent, The Bank of New York. If any Preferred Securities Certificates
have been lost or destroyed, the Holder should promptly notify the Trust's
transfer agent, The Bank of New York. The Holder will then be instructed as to
the procedure to be followed in order to replace the relevant Share
Certificates. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed Share
Certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF OR AN AGENT'S
MESSAGE TOGETHER WITH SHARE CERTIFICATES OR CONFIRMATION OF BOOK-
ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS OR THE NOTICE OF
GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY ON OR
PRIOR TO THE EXPIRATION DATE.
11
<PAGE>
IMPORTANT TAX INFORMATION
Under United States federal income tax law, a Holder that is a United States
person (other than an "exempt recipient") whose tendered Company Shares and/or
Preferred Securities are accepted for purchase is required by law to provide
the Depositary (as payer) with such Holder's correct TIN on the Substitute
Form W-9 below. See the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional instructions. If
such Holder is an individual, the TIN is his or her social security number. If
a Holder fails to provide a TIN to the Depositary, such Holder may be subject
to a $50 penalty imposed by the Internal Revenue Service. In addition,
payments that are made to such Holder with respect to Company Shares and/or
Preferred Securities pursuant to the Offer may be subject to backup
withholding of 31%.
Certain Holders (including, among others, all corporations and foreign
persons that provide appropriate certification) are not subject to these
backup withholding and reporting requirements. In order for a foreign person
to qualify as an exempt recipient, that Holder must submit an Internal Revenue
Service Form W-8, signed under penalties of perjury, attesting to that
individual's exempt status. A Form W-8 can be obtained from the Depositary.
If backup withholding applies, the Depositary is required to withhold 31% of
any payments made to the Holder or payee. Backup withholding is not an
additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup U.S. federal income tax withholding with respect to
payment for Company Shares and/or Preferred Securities purchased pursuant to
the Offer, a Holder must provide the Depositary with his or her correct TIN by
completing the Substitute Form W-9 below, certifying that the TIN provided on
Substitute Form W-9 is correct and that (1) such Holder has not been notified
by the Internal Revenue Service that he or she is subject to backup
withholding as a result of failure to report all interest or dividends or (2)
the Internal Revenue Service has notified the Holder that he or she is no
longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The Holder is required to give the Depositary the social security number or
employer identification number of the record holder of the Company Shares
and/or Preferred Securities tendered hereby. If Company Shares and/or
Preferred Securities are registered in more than one name or are not in the
name of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance
on which number to report.
12
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 9)
PAYER'S NAME: THE BANK OF NEW YORK
- --------------------------------------------------------------------------------
PART I--PLEASE PROVIDE YOUR Social Security Number
TIN IN THE BOX AT RIGHT AND
CERTIFY BY SIGNING AND
DATING BELOW
SUBSTITUTE
FORM W-9 or
DEPARTMENT OF THE Employer Identification
TREASURY INTERNAL Number:
REVENUE SERVICE
PART 2--For Payees exempt from Backup Withholding:
Write "Exempt" in this Part 2, enter your
correct TIN in Part 1 and sign and date this
form.
----------------------
--------------------------------------------------------
PAYER'S REQUEST FOR PART 3--CERTIFICATION-Under penalties of perjury, I
TAXPAYER certify that:
IDENTIFICATION NUMBER --------------------------------------------------------
("TIN") AND (1) The number shown on this form is my correct
CERTIFICATION Taxpayer Identification Number (or I am waiting
for a number to be issued to me), and
(2) I am not subject to backup withholding because
(i) I am exempt from backup withholding, (ii) I
have not been notified by the Internal Revenue
Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report
all interest or dividends, or (iii) the IRS has
notified me that I am no longer subject to
backup withholding.
CERTIFICATION INSTRUCTIONS--You must cross out item
(2) in Part 2 above if you have been notified by the
IRS that you are subject to backup withholding
because of under-reporting interest or dividends on
your tax return.
--------------------------------------------------------
Signature: ___________________________ Date: ______
Name (Please Print): _________________________________
Address ______________________________________________
City, State and Zip Code _____________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATIONS OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
13
<PAGE>
The Information Agent for the Offer Is:
MORROW & CO., INC.
445 Park Avenue, 5th Floor
New York, New York 10022
Call Toll Free (800) 566-9061
Call Collect (212) 754-8000
Banks and Brokerage Firms Please Call (800) 662-5200
The Dealer Manager for the Offer is:
CREDIT SUISSE FIRST BOSTON CORPORATION
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800) 881-8320
<PAGE>
Exhibit (a)(3)
<PAGE>
CREDIT SUISSE FIRST BOSTON CORPORATION
LOGO
Eleven Madison Avenue Telephone 212 325 2000
OFFER TO PURCHASE FOR CASH
New York, NY 10010-3629
ALL OF THE OUTSTANDING COMMON SHARES
OF
ELSAG BAILEY PROCESS AUTOMATION N.V.
AT
$39.30 NET PER SHARE
AND
ALL OF THE OUTSTANDING 5 1/2% CONVERTIBLE TRUST ORIGINATED PREFERRED
SECURITIES
OF
ELSAG BAILEY FINANCING TRUST
AT
$61.21 NET PER PREFERRED SECURITY
BY
ABB TRANSPORTATION PARTICIPATIONS B.V.
A DIRECT, WHOLLY OWNED SUBSIDIARY OF
ABB ASEA BROWN BOVERI LTD.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, NOVEMBER 17, 1998, UNLESS THE OFFER IS
EXTENDED.
October 20, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by ABB Transportation Participations B.V. (the
"Purchaser"), a corporation organized under the laws of The Netherlands and a
direct, wholly owned subsidiary of ABB Asea Brown Boveri Ltd., a corporation
organized under the laws of Switzerland, to act as Dealer Manager in
connection with the Purchaser's offer to purchase for cash all outstanding (i)
common shares (the "Company Shares"), par value NLG 1.00 per share, of Elsag
Bailey Process Automation N.V., a company organized under the laws of The
Netherlands (the "Company"), at a price of $39.30 per Company Share, net to
the seller in cash, without interest thereon and (ii) 5 1/2% Convertible Trust
Originated Preferred Securities of Elsag Bailey Financing Trust (the
"Preferred Securities" and, together with the Company Shares, the "Shares"),
at a price of $61.21 per Preferred Security, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated October 20, 1998 (the "Offer to
Purchase") and in the related Letter of Transmittal (which, as they may be
amended and supplemented from time to time, together constitute the "Offer")
copies of which are enclosed herewith. Please furnish copies of the enclosed
materials to those of your clients for whose accounts you hold Shares in your
name or in the name of your nominee.
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase.
2. The Letter of Transmittal to tender Shares for your use and for the
information of your clients. Facsimile copies of the Letter of Transmittal
may be used to tender Shares.
<PAGE>
3. A letter to holders of Shares from Vincenzo Cannatelli, Managing
Director and Chief Executive Officer of the Company, together with a
Solicitation/Recommendation Statement on Schedule 14D-9 filed with the
Securities and Exchange Commission by the Company and mailed to holders of
the Shares.
4. The Notice of Guaranteed Delivery for Shares to be used to accept the
Offer if neither of the two procedures for tendering Shares set forth in
the Offer to Purchase can be completed on a timely basis.
5. A printed form of letter which may be sent to your clients for whose
accounts you hold Shares registered in your name or in the name of your
nominee, with space provided for obtaining such clients' instructions with
regard to the Offer.
6. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
7. A return envelope addressed to The Bank of New York (the
"Depositary").
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, NOVEMBER 17, 1998, UNLESS THE OFFER IS EXTENDED.
Please note the following:
1. The tender price is (i) $39.30 per Company Share, net to the seller in
cash, without interest thereon, and (ii) $61.21 per Preferred Security, net
to the seller in cash, without interest thereon, as set forth in the
Introduction to the Offer to Purchase.
2. The Offer is conditioned on, among other things, (i) there being
validly tendered and not properly withdrawn prior to the expiration of the
Offer a number of Shares which, when added to Shares, if any, previously
acquired by the Purchaser constitute at least seventy-five percent of the
fully diluted share capital of the Company and (ii) the receipt of the
Governmental Approvals (as defined in the Offer to Purchase). See Section
14--"Conditions of the Offer" of the Offer to Purchase.
3. The Offer is being made for all of the Shares.
4. Tendering holders of Shares will not be obligated to pay brokerage
fees or commissions or, except as otherwise provided in Instruction 6 of
the Letter of Transmittal, transfer taxes on the purchase of Shares by the
Purchaser pursuant to the Offer. However, United States federal income tax
backup withholding at a rate of 31% may be required, unless an exemption is
available or unless the required tax identification information is
provided. See Instruction 9 of the Letter of Transmittal.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Tuesday, November 17, 1998, unless the Offer is
extended.
6. Each of the Supervisory Board and the Management Board of the Company
has unanimously (i) determined that the Offer is fair to, and in the best
interests of, the holders of Shares (such holders, the "Holders") and other
relevant constituencies, the Company's subsidiaries and the enterprises
carried on by the Company and its subsidiaries, (ii) approved the
Acquisition Agreement (as defined in the Offer to Purchase), the
transactions contemplated thereby, including the Offer and (iii) resolved
to recommend that the Holders accept the Offer and tender their Shares
pursuant to the Offer.
7. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) certificates evidencing such
Shares (the "Share Certificates") pursuant to the procedures set forth in
Section 3--"Procedures for Tendering Shares" of the Offer to Purchase, or a
timely Book-Entry Confirmation (as
2
<PAGE>
defined in the Offer to Purchase) with respect to such Shares, (b) the
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees or an Agent's Message (as
defined in the Offer to Purchase) in connection with a book-entry transfer,
and (c) any other documents required by the Letter of Transmittal.
Accordingly, payment may not be made to all tendering Holders at the same
time depending upon when Share Certificates are actually received by the
Depositary.
In order to take advantage of the Offer, (i) a duly executed and properly
completed Letter of Transmittal or a facsimile thereof and any required
signature guarantee or other required documents should be sent to the
Depositary and (ii) Share Certificates representing the tendered Shares or a
timely Book-Entry Confirmation should be delivered to the Depositary in
accordance with the instructions set forth in the Letter of Transmittal and
the Offer to Purchase.
If Holders wish to tender, but it is impracticable for them to forward their
Share Certificates or other required documents or complete the procedures for
book-entry transfer prior to the Expiration Date (as defined in the Offer to
Purchase), a tender may be effected by following the guaranteed delivery
procedures specified in Section 3--"Procedures for Tendering Shares" of the
Offer to Purchase.
The Purchaser will not pay any fees or commissions to any broker, dealer or
other person for soliciting tenders of Shares pursuant to the Offer (other
than the Dealer Manager, the Depositary and the Information Agent, as
described in the Offer to Purchase). The Purchaser will, however, upon
request, reimburse you for customary mailing and handling expenses incurred by
you in forwarding any of the enclosed materials to your clients. The Purchaser
will pay or cause to be paid any transfer taxes payable on the transfer of
Shares to it, except as otherwise provided in Instruction 6 of the Letter of
Transmittal.
Any inquiries you may have with respect to the Offer should be addressed to
Credit Suisse First Boston Corporation, the Dealer Manager or Morrow & Co.,
Inc., the Information Agent at their respective addresses and telephone
numbers set forth on the back cover of the Offer to Purchase. Additional
copies of the enclosed materials may be obtained from the Information Agent or
the Dealer Manager or from brokers, dealers, commercial banks or trust
companies.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON AS THE AGENT OF THE PURCHASER, THE COMPANY, THE DEALER
MANAGER, THE DEPOSITARY, THE INFORMATION AGENT OR ANY AFFILIATE OF ANY OF
THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY
DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN
STATEMENTS EXPRESSLY MADE IN THE OFFER TO PURCHASE OR THE LETTER OF
TRANSMITTAL.
3
<PAGE>
Exhibit (a)(4)
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING COMMON SHARES
OF
ELSAG BAILEY PROCESS AUTOMATION N.V.
AT
$39.30 NET PER SHARE
AND
ALL OF THE OUTSTANDING 5 1/2% CONVERTIBLE TRUST ORIGINATED PREFERRED
SECURITIES
OF
ELSAG BAILEY FINANCING TRUST
AT
$61.21 NET PER PREFERRED SECURITY
BY
ABB TRANSPORTATION PARTICIPATIONS B.V.
A DIRECT, WHOLLY OWNED SUBSIDIARY OF
ABB ASEA BROWN BOVERI LTD.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, NOVEMBER 17, 1998, UNLESS THE OFFER IS EXTENDED.
October 20, 1998
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated October 20,
1998 (the "Offer to Purchase"), and the related Letter of Transmittal (which,
as they may be amended and supplemented from time to time, together constitute
the "Offer") relating to the offer by ABB Transportation Participations B.V.
(the "Purchaser"), a corporation organized under the laws of The Netherlands
and a direct, wholly owned subsidiary of ABB Asea Brown Boveri Ltd. a
corporation organized under the laws of Switzerland, to purchase all
outstanding (i) common shares (the "Company Shares"), par value NLG 1.00 per
share, of Elsag Bailey Process Automation N.V., a company organized under the
laws of The Netherlands (the "Company"), at a price of $39.30 per Company
Share, net to the seller in cash, without interest thereon and (ii) 5 1/2%
Convertible Trust Originated Preferred Securities of Elsag Bailey Financing
Trust at a price of $61.21 per Preferred Security, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set
forth in the Offer. Holders of Shares whose certificates evidencing such
Shares (the "Share Certificates") are not immediately available or who cannot
deliver their Share Certificates and all other required documents to The Bank
of New York as depositary (the "Depositary") or complete the procedures for
book-entry transfer prior to the Expiration Date (as defined in the Offer to
Purchase) must tender their Shares according to the guaranteed delivery
procedures set forth in Section 3 of the Offer to Purchase.
WE ARE (OR OUR NOMINEE IS) THE HOLDER OF RECORD OF SHARES HELD BY US FOR
YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF
RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
<PAGE>
Accordingly, we request instruction as to whether you wish to have us tender
on your behalf any or all of the Shares held by us for your account pursuant
to the terms and conditions set forth in the Offer.
Please note the following:
1. The tender price is (i) $39.30 per Company Share, net to the seller in
cash, without interest thereon, and (ii) $61.21 per Preferred Security, net
to the seller in cash, without interest thereon, as set forth in the
Introduction to the Offer to Purchase.
2. The Offer is conditioned on, among other things, (i) there being
validly tendered and not properly withdrawn prior to the expiration of the
Offer a number of Shares which, when added to Shares, if any, previously
acquired by the Purchaser constitute at least seventy-five percent of the
fully diluted share capital of the Company and (ii) the receipt of the
Governmental Approvals (as defined in the Offer to Purchase). See Section
14--"Conditions of the Offer" of the Offer to Purchase.
3. The Offer is being made for all of the Shares.
4. Tendering holders of Shares will not be obligated to pay brokerage
fees or commissions or, except as otherwise provided in Instruction 6 of
the Letter of Transmittal, transfer taxes on the purchase of Shares by the
Purchaser pursuant to the Offer. However, United States federal income tax
backup withholding at a rate of 31% may be required, unless an exemption is
provided or unless the required taxpayer identification information is
provided. See Instruction 9 of the Letter of Transmittal.
5. The Offer and withdrawal rights will expire at 12:00 midnight, New
York City time, on Tuesday, November 17, 1998, unless the Offer is
extended.
6. Each of the Supervisory Board and the Management Board of the Company
has unanimously (i) determined that the Offer is fair to, and in the best
interests of, the holders of Shares (such holders, the "Holders") and other
relevant constituencies, the Company's subsidiaries and the enterprises
carried on by the Company and its subsidiaries, (ii) approved the
Acquisition Agreement (as defined in the Offer to Purchase), the
transactions contemplated thereby, including the Offer and (iii) resolved
to recommend that the Holders accept the Offer and tender their Shares
pursuant to the Offer.
7. Notwithstanding any other provision of the Offer, payment for Shares
accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) Share Certificates pursuant
to the procedures set forth in Section 3--"Procedures for Tendering Shares"
of the Offer to Purchase, or a timely Book-Entry Confirmation (as defined
in the Offer to Purchase) with respect to such Shares, (b) the Letter of
Transmittal (or facsimile thereof), properly completed and duly executed,
with any required signature guarantees or an Agent's Message (as defined in
the Offer to Purchase) in connection with a book-entry transfer, and (c)
any other documents required by the Letter of Transmittal. Accordingly,
payment may not be made to all tendering Holders at the same time depending
upon when Share Certificates are actually received by the Depositary.
If you wish to have us tender any or all of the Shares held by us for your
account please so instruct us by completing, executing, detaching and
returning to us the instruction form set forth herein. If you authorize the
tender of your Shares, all such Shares will be tendered unless otherwise
specified below. An envelope to return your instructions to us is enclosed.
YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO
SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION DATE.
The Purchaser is not aware of any state or jurisdiction where the making of
the Offer is prohibited by administrative or judicial action pursuant to any
valid statute. If the Purchaser becomes aware of any valid statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto, the
Purchaser will make a good faith effort to comply with such statute or seek to
have such statute declared inapplicable to the Offer. If,
2
<PAGE>
after such good faith effort, the Purchaser cannot comply with such statute,
the Offer will not be made to (nor will tenders be accepted from or on behalf
of) the holders of Shares in such state or jurisdiction. In any state or
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of the Purchaser by Credit Suisse First Boston Corporation or one or
more registered brokers or dealers licensed under the laws of such state or
jurisdiction.
3
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING COMMON SHARES
OF
ELSAG BAILEY PROCESS AUTOMATION N.V.
AND
ALL OF THE OUTSTANDING 5 1/2% CONVERTIBLE TRUST ORIGINATED PREFERRED
SECURITIES
OF
ELSAG BAILEY FINANCING TRUST
The undersigned acknowledge(s) receipt of your letter, the enclosed Offer to
Purchase, dated October 20, 1998, and the related Letter of Transmittal
(which, as they may be amended and supplemented from time to time, together
constitute the "Offer") in connection with the offer by ABB Transportation
Participations B.V. (the "Purchaser"), a corporation organized under the laws
of The Netherlands and a direct, wholly owned subsidiary of ABB Asea Brown
Boveri Ltd., a corporation organized under the laws of Switzerland, to
purchase all outstanding (i) common shares (the "Company Shares"), par value
NLG 1.00 per share, of Elsag Bailey Process Automation N.V., a company
organized under the laws of The Netherlands (the "Company"), at a price of
$39.30 per Company Share, net to the seller in cash, without interest thereon
(the "Share Offer Price") and (ii) 5 1/2% Convertible Trust Originated
Preferred Securities of Elsag Bailey Financing Trust (the "Preferred
Securities", and, together with the Company Shares, the "Shares"), at a price
of $61.21 per Preferred Security, net to the seller in cash, without interest
thereon upon the terms and subject to the conditions set forth in the Offer.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are
held by you for the account of the undersigned, upon the terms and subject to
the conditions set forth in the Offer.
4
<PAGE>
Type of Shares to be Tendered (check box):
[_] Company Shares
[_] Preferred Securities
Number of Shares to be Tendered*: _____________________________
Date: _________________________________________________________
_______________________________________________________________
SIGN HERE
Signature(s): _________________________________________________
(Print Name(s)): ______________________________________________
(Print Address(es)): __________________________________________
(Area Code and Telephone Number(s)): __________________________
(Taxpayer Identification or Social Security Number(s)): _______
--------
* Unless otherwise indicated, it will be assumed that all of
your Shares held by us for your account are to be tendered.
5
<PAGE>
Exhibit (a)(5)
<PAGE>
ELSAG BAILEY SIGNS DEFINITIVE AGREEMENT FOR ACQUISITION BY ABB
FOR IMMEDIATE RELEASE
Amsterdam, The Netherlands--(October 14, 1998). Elsag Bailey Process
Automation N.V. (NYSE: EBY) announced today that it has signed a definitive
agreement with ABB to make a recommended cash tender offer for all outstanding
shares of Elsag Bailey Process Automation.
Under the terms of the agreement, the purchaser will begin a cash tender
offer for all outstanding common shares of Elsag Bailey at US$39.30 per common
share and for all 5 1/2% preferred securities issued by the Elsag Bailey
Financing Trust at US$61.21 per preferred share, within five business days of
this announcement. The total consideration payable to holders of such
securities under the tender offer, as well as to holders of options held by
Elsag Bailey employees and directors, is approximately $1.5 billion, and will
be financed from ABB's own resources.
In a separate agreement, Finmeccanica S.p.A. has entered into a definitive
agreement with ABB to tender all of its holdings in Elsag Bailey common and
preferred shares concurrent with the tender offer. Finmeccanica owns
approximately 53% of the outstanding equity of Elsag Bailey on a fully diluted
basis. Completion of the tender offer is dependent, among other conditions, on
a minimum of 75% of the fully diluted share capital of Elsag Bailey being
validly tendered and not withdrawn, and on certain regulatory approvals.
Mr. Goran Lindahl, ABB Group President and Chief Executive Officer,
characterized his company's goals for the partnership, stating, "We are
delighted to add a company with Elsag Bailey's strength, technological
diversity, and global reach to our business portfolio. By combining our
complementary product lines, we will strengthen our powerful range of robust,
vertically-integrated solutions. Our collective technologies, market channels,
and professional workforce will help us provide a most comprehensive and
direct response to the needs of our customers worldwide."
Mr. Vincenzo Cannatelli, Elsag Bailey Managing Director and Chief Executive
Officer, also commented on the transaction, stating, "We are very pleased to
have gained the commitment to partnership of a quality industry leader such as
ABB Group. The synergies of our products, our people, and our global market
presence are dramatic, and can only reinforce the effort we have put forth to
position Elsag Bailey as a leading "one-stop-shop" producer of process
automation technologies. We are very pleased with the excellent value which
this transaction represents for our shareholders, and we are committed to
achieving maximum future value for our customers, our employees, and our new
business partners."
The ABB Group (http://www.abb.com) serves customers worldwide in power
generation, transmission, and distribution; automation; oil, gas, and
petrochemicals, industrial products and contracting; financial services; and
rail transportation. The Group reported orders in 1997 of US$35 billion and
employs about 220,000 people.
Elsag Bailey Process Automation N.V. (http://www.ebpa.com), headquartered in
the Netherlands, is a leading provider of automation systems, process
instrumentation, analytical measurement products, and professional services.
The company's technologies are sold worldwide for the automation of various
processes in the electric power, chemical and pharmaceutical, oil and gas,
pulp and paper, metals and mining, food beverage and other industries. The
company employs some 11,000 among its operating units in more than 30
countries. Elsag Bailey recorded revenues of $1.5 billion during 1997.
For copies of additional press releases or quarterly reports, call Elsag
Bailey's Fax-on-Demand service at 1-888-329-2311, or visit the Company's web
site at www.ebpa.com. Requests for information can also be made via e-mail at
[email protected].
NOTE: This document contains forward-looking statements within the meaning of
federal securities law. These forward-looking statements include, among
others, statements concerning anticipated future events and
1
<PAGE>
expectations which are not historical facts. The forward-looking statement in
this press release is subject to numerous risks and uncertainities which could
cause actual results to differ materially from those expressed or implied by
those statements.
Contacts:
Brad A. Hoffman John Fox
Elsag Bailey Process Automation ABB Corporate Communications
Wickliffe, Ohio USA Zurich, Switzerland
Telephone: 1-440-585-3809 Telephone: 41 1 317 7371
2
<PAGE>
Exhibit (a)(6)
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase
dated October 20, 1998 and the related Letter of Transmittal and any amendments
or supplements thereto and is being made to all holders of
Shares. The Purchaser is not aware of any state or jurisdiction where the making
of the Offer is prohibited by any applicable law. If the Purchaser
becomes aware of any state or jurisdiction where the making of the Offer or the
acceptance of Shares is not in compliance with any applicable law,
the Purchaser will make a good faith effort to comply with such law. If, after
such good faith effort, the Purchaser cannot comply with such law, the
Offer will not be made to (nor will tenders be accepted from or on behalf of)
the holders of Shares residing in such state or jurisdiction.
In any state or jurisdiction where the securities, blue sky or other laws
require the Offer to be made by a licensed broker or dealer,
the Offer shall be deemed to be made on behalf of the Purchaser by Credit Suisse
First Boston Corporation
("Credit Suisse First Boston") or one or more registered brokers or dealers
licensed under the laws of such state or jurisdiction.
Notice of Offer to Purchase for Cash
All of the Outstanding Common Shares
of
Elsag Bailey Process Automation N.V.
at
$39.30 Net Per Share
and
All of the Outstanding 51/2% Convertible Trust Originated Preferred Securities
of
Elsag Bailey Financing Trust
at
$61.21 Net Per Share
by
ABB Transportation Participations B.V.
A Direct, Wholly Owned Subsidiary of
ABB Asea Brown Boveri Ltd.
ABB Transportation Participations B.V., a corporation organized under the laws
of The Netherlands (the "Purchaser") and a direct, wholly owned subsidiary of
ABB Asea Brown Boveri Ltd., is offering to purchase all outstanding (i) common
shares, par value NLG 1.00 per share (the "Company Shares"), of Elsag Bailey
Process Automation N.V., a corporation organized under the laws of The
Netherlands (the "Company"), at a price of $39.30 per Company Share, net to the
seller in cash, without interest thereon and (ii) 5-1/2% Convertible Trust
Originated Preferred Securities (the "Preferred Securities" and, together with
the Company Shares, the "Shares") of Elsag Bailey Financing Trust guaranteed by
the Company and convertible into Company Shares, at a price of $61.21 per
Preferred Security, net to the seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in the Offer to Purchase dated
October 20, 1998 (the "Offer to Purchase'') and in the related Letter of
Transmittal (which, as they may be amended and supplemented from time, together
constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, NOVEMBER 17, 1998, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, (i) there being validly
tendered and not properly withdrawn prior to the Expiration Date (as defined
below) a number of Shares which constitute at least seventy-five percent of the
fully diluted share capital of the Company and (ii) the receipt of certain
governmental approvals. The Offer is also subject to other terms and conditions.
See the Introduction and Sections 1 and 14 of the Offer to Purchase.
The Offer is being made pursuant to an Acquisition Agreement, dated as of
October 14, 1998 (the "Acquisition Agreement"), by and between the Purchaser and
the Company. Concurrently with the execution of the Acquisition Agreement, the
Purchaser and Finmeccanica S.p.A. (the "Selling Shareholder") entered into a
Shareholder's Agreement pursuant to which the Selling Shareholder has agreed to
irrevocably tender pursuant to the Offer (and not withdraw) 17,813,527 Company
Shares and 1,600,000 Preferred Securities (collectively representing
approximately 53.2% of the fully diluted share capital of the Company), all
pursuant to the terms and subject to the conditions set forth in the
Shareholder's Agreement. See Section 11 of the Offer to Purchase.
Each of the Supervisory Board and the Management Board of the Company has
unanimously (i) determined that the Offer is fair to, and in the best interests
of, the holders of Shares (the "Holders") and other relevant constituencies, the
Company's subsidiaries and the enterprises carried on by the Company and its
subsidiaries, (ii) approved the Acquisition Agreement and the transactions
contemplated thereby, including the Offer, and (iii) recommended that the
Holders accept the Offer and tender their Shares pursuant to the Offer.
Tendering Holders who have Shares registered in their own name and who tender
directly to the Depositary (as defined below) will not be obligated to pay
brokerage fees or commissions, or, except as set forth in Instruction 6 to the
Letter of Transmittal, stock transfer taxes on the purchase of Shares pursuant
to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn if, as and when the Purchaser gives oral or written notice to The Bank
of New York (the "Depositary") of its acceptance of such Shares for payment
pursuant to the Offer. Upon the terms and subject to the conditions of the
Offer, payment for Shares accepted pursuant to the Offer will be made by deposit
of the purchase price therefor with the Depositary, which will act as agent for
tendering Holders, for the purpose of receiving payments from the Purchaser and
transmitting payments to such tendering Holders whose Shares have theretofore
been accepted for payment. In all cases, payment for Shares pursuant to the
Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares or, in the case of Shares held in book-entry
form, timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at the Book-Entry Transfer Facility (as defined in Section
3 of the Offer to Purchase), (ii) a duly executed Letter of Transmittal (or
facsimile thereof) or, in the case of a book-entry transfer, an Agent's Message
(as defined in the Offer to Purchase) and (iii) all other documents required by
the Letter of Transmittal. Under no circumstances will interest be paid on the
purchase price for the tendered Shares, regardless of any delay in making such
payment or extension of the Expiration Date.
The "Expiration Date" shall mean 12:00 midnight, New York City time, on November
17, 1998, unless and until the Purchaser, in accordance with the terms of the
Offer, shall have extended the period of time during which the Offer is open, in
which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by the Purchaser, shall expire. Subject to the
applicable rules and regulations of the Securities and Exchange Commission (the
"Commission") and any other U.S. or foreign regulatory or governmental authority
and applicable law, the Purchaser expressly reserves the right, in its sole
discretion (but subject to the terms of the Acquisition Agreement), at any time
or from time to time, to extend for any reason the period of time during which
the Offer is open, including upon the occurrence of any of the events specified
in Section 14 of the Offer to Purchase, by giving oral or written notice of such
extension to the Depositary.
Subject to the applicable rules and regulations of the Commission and to
applicable law, the Purchaser also expressly reserves the right, in its sole
discretion (but subject to the terms and conditions of the Acquisition
Agreement), at any time and from time to time: (i) to delay acceptance for
payment of, or, regardless of whether such Shares were theretofore accepted for
payment, payment for, any Shares pending receipt of any regulatory approval
specified in Section 14 of the Offer to Purchase or in order to comply in whole
or in part with any other applicable law; (ii) to terminate the Offer and not
accept for payment any Shares if any of the conditions referred to in Section 14
of the Offer to Purchase are not satisfied or any of the events specified in
Section 14 of the Offer to Purchase have occurred; and (iii) to waive any
condition, or otherwise amend the Offer in any respect, in each case by giving
oral or written notice of such delay, termination, waiver or amendment to the
Depositary and by making a public announcement thereof.
During any such extension, all Shares previously tendered and not properly
withdrawn will remain subject to the Offer, subject to the right of a tendering
Holder to withdraw such Holder's Shares. Any such extension, delay, termination,
waiver or amendment will be followed, as promptly as practicable, by a public
announcement thereof by no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled Expiration Date. Subject to
applicable law (including Rules 14d-4(c), 14d-6(d) and 14e-1 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), which require
that material changes be promptly disseminated to Holders in a manner reasonably
designed to inform them of such changes) and without limiting the manner in
which the Purchaser may choose to make any public announcement, the Purchaser
will have no obligation to publish, advertise or otherwise communicate any such
public announcement.
Except as otherwise provided below, tenders of Shares made pursuant to the Offer
are irrevocable. Shares tendered pursuant to the Offer may be withdrawn any time
prior to the Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after
December 18, 1998, or at such later time as may apply if the Offer is extended.
For a withdrawal to be effective, a written, telegraphic or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth in the Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn, and the name of the registered
Holder, if different from that of the person who tendered such Shares. If
certificates evidencing Shares to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the tendering Holders must submit the serial numbers shown on the
particular certificate evidencing the Shares to be withdrawn and, unless the
Shares evidenced by such certificates have been tendered by an Eligible
Institution (as defined in Section 3 of the Offer to Purchase) or by means of a
Letter of Transmittal, the signatures on the notice of withdrawal must be
guaranteed by an Eligible Institution. If Shares have been tendered pursuant to
the procedures for book-entry transfer set forth in Section 3 of the Offer to
Purchase, any notice of withdrawal must also specify the name and number of the
account at the Book Entry Transfer Facility to be credited with the withdrawn
Shares.
All questions as to the form and validity (including time of receipt) of notices
of withdrawal will be determined by the Purchaser, in its sole discretion, which
determination shall be final and binding. None of the Purchaser, the Depositary,
the Information Agent, the Dealer Manager or any other person will be under any
duty to give notification of any defects or irregularities in any notice of
withdrawal or incur any liability for failure to give any such notification. Any
Shares properly withdrawn will thereafter be deemed not validly tendered for
purposes of the Offer, but may be retendered at any time prior to the Expiration
Date by following any of the procedures described in Section 3 of the Offer to
Purchase.
The Company has provided the Purchaser with the Company's list of Holders and
security position listings in respect of Shares for the purpose of disseminating
the Offer to the Holders. The Offer to Purchase, the Letter of Transmittal and
any other related materials will be mailed to record Holders whose names appear
on the Company's list of Holders, or if applicable, who are listed as
participants in a clearing agency's security position listing.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6
under the Exchange Act is contained in the Offer to Purchase and is incorporated
herein by reference.
The Offer to Purchase and the related Letter of Transmittal contain important
information that should be read carefully before any decision is made with
respect to the Offer.
Any questions or requests for assistance or additional copies of the Offer to
Purchase, the Letter of Transmittal and other tender offer materials may be
directed to the Information Agent or the Dealer Manager as set forth below, and
copies will be furnished promptly at the Purchaser's expense. The Purchaser or
other related persons will not pay any fees or commissions to any broker or
dealer or other person (other than the Dealer Manager, the Depositary and the
Information Agent) in connection with the solicitation of tenders of Shares
pursuant to the Offer.
The Information Agent for the Offer is:
MORROW & CO., INC.
445 Park Avenue, 5th Floor
New York, New York 10022
Toll Free (800) 566-9061
Call Collect (212) 754-8000
Banks and Brokerage Firms Please Call:
(800) 662-5200
The Dealer Manager for the Offer is:
(Credit Suisse/First Boston -- logo)
Eleven Madison Avenue
New York, New York 10010-3629
Call Toll Free (800) 881-8320
October 20, 1998
<PAGE>
Exhibit (a)(7)
<PAGE>
- -------------------------------------------------------------------------------
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE
IN ANY DOUBT AS TO THE ACTION TO BE TAKEN, YOU SHOULD SEEK YOUR OWN FINANCIAL
ADVICE IMMEDIATELY FROM YOUR OWN APPROPRIATELY AUTHORIZED INDEPENDENT
FINANCIAL ADVISOR.
IF YOU HAVE SOLD OR TRANSFERRED ALL OF YOUR REGISTERED HOLDING OF SHARES (AS
DEFINED BELOW), PLEASE FORWARD THIS DOCUMENT AND ALL ACCOMPANYING DOCUMENTS TO
THE STOCKBROKER, BANK OR OTHER AGENT THROUGH WHOM THE SALE OR TRANSFER WAS
EFFECTED, FOR TRANSMISSION TO THE PURCHASER OR TRANSFEREE.
- -------------------------------------------------------------------------------
NOTICE OF GUARANTEED DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
FOR TENDER OF COMMON SHARES
OF
ELSAG BAILEY PROCESS AUTOMATION N.V.
AND
FOR TENDER OF 5 1/2% CONVERTIBLE TRUST ORIGINATED PREFERRED SECURITIES
OF
ELSAG BAILEY FINANCING TRUST
PURSUANT TO THE OFFER TO PURCHASE
DATED OCTOBER 20, 1998
BY
ABB TRANSPORTATION PARTICIPATIONS B.V.
A DIRECT, WHOLLY OWNED SUBSIDIARY OF
ABB ASEA BROWN BOVERI LTD.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON TUESDAY, NOVEMBER 17, 1998, UNLESS THE OFFER IS EXTENDED.
As set forth under Section 3--"Procedures for Tendering Shares" in the Offer
to Purchase dated October 20, 1998 and any supplements or amendments thereto
(the "Offer to Purchase"), this form or one substantially equivalent hereto
must be used to accept the Offer (as defined below) if (i) certificates
("Company Share Certificates") representing Common Shares, par value NLG 1.00
per share ("Company Shares"), of Elsag Bailey Process Automation N.V., a
corporation organized under the laws of The Netherlands (the "Company") and/or
certificates ("Preferred Securities Certificates" and, together with the
Company Share Certificates, the "Share Certificates") representing 5 1/2%
Convertible Trust Originated Preferred Securities of Elsag Bailey Financing
Trust ("Preferred Securities" and, together with the Company Shares, the
"Shares") are not immediately available, (ii) if the procedures for book-entry
transfer cannot be completed on a timely basis or (iii) time will not permit
Share Certificates and all other required documents to reach The Bank of New
York (the "Depositary") prior to the Expiration Date (as defined in Section
1--"Terms of the Offer" of the Offer to Purchase). This Notice of Guaranteed
Delivery may be delivered by hand or mail or sent by facsimile transmission to
the Depositary and must include a signature guarantee by an Eligible
Institution (as defined in the Offer to Purchase). See the Guaranteed Delivery
Procedures described in the Offer to Purchase under Section 3--"Procedures for
Tendering Shares". Certain terms used herein and not otherwise defined herein
shall have the meanings assigned to them in the Offer to Purchase.
The Depositary for the Offer is:
THE BANK OF NEW YORK
Facsimile Transmission: By Hand or Overnight
By Mail: Courier:
Tender & Exchange (for Eligible Tender & Exchange
Department Institutions Only) Department
P.O. Box 11248 (212) 815-6213 101 Barclay Street
Church Street Station Receive and Deliver
New York, New York Window
10286-1248 New York, New York
10286
For Information Telephone:
(800) 507-9357
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution under the instruction thereto, such
signature guarantee must appear in the applicable space provided in the
signature box on the Letter of Transmittal.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal or an
Agent's Message and Share Certificates to the Depositary within the time
period shown herein. Failure to do so could result in a financial loss to such
Eligible Institution.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to ABB Transportation Participations B.V.
(the "Purchaser"), a corporation organized under the laws of The Netherlands,
and a direct, wholly owned subsidiary of ABB Asea Brown Boveri Ltd., a
corporation organized under the laws of Switzerland, upon the terms and
subject to the conditions set forth in the Offer to Purchase and the related
Letter of Transmittal (which, as they may be amended and supplemented from
time to time, together constitute the "Offer"), receipt of each of which is
hereby acknowledged, the number of Shares indicated below pursuant to the
Guaranteed Delivery Procedures described in the Offer to Purchase under
Section 3--"Procedures for Tendering Shares".
TYPE OF SHARES (CHECK BOX)
[_] Company Shares Name of Record Holder(s): ________
[_] Preferred Securities __________________________________
__________________________________
Number of Shares: ________________ Address: _________________________
Certificate No.(s) (if avail- __________________________________
able): ___________________________ Area Code and Tel. No: ___________
__________________________________ Signature(s): ____________________
Dated: ___________________________
If Shares will be tendered by
book-entry transfer check box:
[_] The Depository Trust Company
Account Number: __________________
Transaction Code Number: _________
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member firm of a registered national securities exchange
or of the National Association of Securities Dealers, Inc., a commercial bank
or trust company having an office or correspondent in the United States, an
escrow agent under an escrow agreement or a trustee under a trust, hereby
guarantees that the undersigned will deliver to the Depositary, at one of its
addresses set forth above, the Share Certificates representing the Shares
tendered hereby, in proper form for transfer, or confirmation of the book-
entry transfer of such Shares into the Depositary's account at The Depository
Trust Company together with a properly completed and duly executed Letter of
Transmittal or, in the case of a book-entry transfer, an Agent's Message (as
defined in the Letter of Transmittal) with any required signature guarantees
and any other required documents, all within three New York Stock Exchange
trading days after the date hereof.
NAME OF FIRM, AGENT OR TRUSTEE: (AUTHORIZED SIGNATURE)
__________________________________ Name: ____________________________
Address: _________________________ (PLEASE TYPE OR PRINT)
(ZIP CODE) Title: ___________________________
Area Code and Tel. No: ___________ Dated: ___________________________
NOTE: DO NOT SEND SHARE CERTIFICATES WITH THIS NOTICE OF GUARANTEED DELIVERY;
SHARE CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
2
<PAGE>
Exhibit (a)(8)
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.-- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
================================================================================
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
================================================================================
1. An individual's account The individual
2. Two or more individuals (joint account) The actual owner of the
account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint account) The actual owner of the
account or, if joint funds,
either person(1)
4. Custodian account of a minor (Uniform The minor(2)
Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor
is the only contributor,
the minor(1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent person(3)
minor, or incompetent person
7. a The usual revocable savings trust The grantor-trustee(1)
account (grantor is also trustee)
b So-called trust account that is not a The actual owner(4)
legal or valid trust under State law
8. Sole proprietorship account The owner(4)
================================================================================
================================================================================
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
================================================================================
9. A valid trust, estate, or pension trust The legal entity (Do not
furnish the identifying
number of the personal
representative or trustee
unless the legal entity
itself is not designated in
the account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or educational The organization
organization account
12. Partnership account held in the name of The partnership
the partnership
13. Association, club, or other tax-exempt The organization
organization
14. A broker or registered nominee The broker or registered
nominee
15. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a state or local
government, school district, or prison)
that receives agricultural program
payments
================================================================================
(1) List all names first and circle the name of the person whose number you
furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Provide the name of the owner.
(5) List all names first and circle the name of the legal trust, estate, or
pension trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Page 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of
the Social Security Administration or the Internal Revenue Service and apply for
a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), or an individual retirement plan.
. The United States or any agency or instrumentality thereof.
. A state, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or any
agency or instrumentality thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a) of the Code.
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1) of the Code.
. An entity registered at all times under the Investment Company Act of 1940.
. A foreign central bank of issue.
PAYMENTS NOT GENERALLY SUBJECT TO BACKUP WITHHOLDING
Payments of dividends and patronage dividends not generally subject to back
up withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441 of
the Code.
. Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding including
the following:
. Payments of interest on obligations issued by individuals. Note: A Payee may
be subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and such payee has not
provided its correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852 of the Code).
. Payments described in section 6049(b)(5) of the Code to nonresident aliens
. Payments on tax-free covenant bonds under section 1451 of the Code.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
EXEMPT PAYEES DESCRIBED ABOVE MUST STILL COMPLETE THE SUBSTITUTE FORM W-9 TO
AVOID POSSIBLE ERRONEOUS BACKUP WITHHOLDING. FILE SUBSTITUTE FORM W-9 WITH THE
PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE
OF THE FORM, AND RETURN IT TO THE PAYER. IF THE PAYMENTS ARE INTEREST,
DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends and patronage dividends
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050(A) of the Code. PRIVACY ACT NOTICE. Section 6109 of the Code
requires most recipients of dividends, interest or other payments to give
taxpayer identification numbers to payers who must report the payments to the
IRS. The IRS uses the numbers for identification purposes. Payers must be given
the numbers whether or not recipients are required to file tax returns. Payers
must generally withhold 31% of taxable interest, dividends and certain other
payments to a payee who does not furnish a taxpayer identification number to a
payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you make
a false statement with no reasonable basis that results in no imposition of
backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
(4) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS. If you fail to
include any portion of an includible payment for interest, dividends or
patronage dividends in gross income and such failure is due to negligence, a
penalty of 20% is imposed on any portion of an underpayment attributable to that
failure.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE>
Exhibit (c)(1)
<PAGE>
SHAREHOLDER'S AGREEMENT
BY AND BETWEEN
ABB TRANSPORTATION PARTICIPATIONS B.V.
AND
FINMECCANICA S.P.A.
DATED AS OF OCTOBER 14, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Section 1. Certain Definitions.......................................... 1
Section 2. Tender....................................................... 2
Section 3. Voting....................................................... 2
Section 4. Restrictions During the Voting Period........................ 2
Section 5. Additional Shares............................................ 3
Section 6. Covenants of Purchaser....................................... 3
Section 7. Representations and Warranties of the Shareholder............ 4
Section 8. Representations and Warranties of Purchaser.................. 5
Section 9. Confidentiality.............................................. 6
Section 10. Further Assurances........................................... 6
Section 11. Expiration................................................... 6
Section 12. Survival..................................................... 7
Section 13. Miscellaneous................................................ 7
</TABLE>
i
<PAGE>
SHAREHOLDER'S AGREEMENT
This SHAREHOLDER'S AGREEMENT is made and entered into as of October 14, 1998
(this "Agreement"), by and between ABB Transportation Participations B.V., a
corporation organized under the laws of The Netherlands with its statutory
seat in Amsterdam ("Purchaser"), and Finmeccanica S.p.A., a corporation
organized under the laws of Italy with its statutory seat in Rome (the
"Shareholder").
WHEREAS, concurrently herewith, Purchaser and Elsag Bailey Process
Automation N.V., a corporation organized under the laws of the Netherlands
with its statutory seat in Amsterdam (the "Company"), are entering into an
acquisition agreement (the "Acquisition Agreement"), pursuant to which
Purchaser has agreed, among other things, to commence a cash tender offer (the
"Offer") to purchase all of the issued and outstanding common shares, par
value NLG 1.00 per share, of the Company (the "Company Shares"), and all of
the issued and outstanding 5 1/2% Convertible Trust Originated Preferred
Securities convertible into Company Shares and guaranteed by the Company (the
"TOPrS");
WHEREAS, as of the date hereof, the Shareholder, directly and indirectly
through subsidiaries, is the record and beneficial owner of, and has the sole
right to vote and dispose of, 17,813,527 Company Shares and 1,600,000 TOPrS;
WHEREAS, as an inducement and a condition to entering into the Acquisition
Agreement and incurring the obligations set forth therein, including the
Offer, Purchaser has required that the Shareholder enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
Section 1. Certain Definitions. Capitalized terms used and not defined
herein shall have the respective meanings set forth in the Acquisition
Agreement. In addition, the following terms shall, when used in this
Agreement, have the following respective meanings:
(a) "Affiliate" shall have the meaning assigned to such term in Section
12(b)-2 of the Exchange Act; provided that with respect to the Shareholder,
"Affiliate" shall not include the Company or any of its Subsidiaries.
(b) "Beneficially Owned" or "Beneficial Ownership" with respect to any
securities shall mean having beneficial ownership of such securities (as
determined pursuant to Rule 13d-3 under the Exchange Act), including
pursuant to any agreement, arrangement or understanding, whether or not in
writing. Without duplicative counting of the same securities by the same
holder, securities Beneficially Owned by a Person shall include securities
Beneficially Owned by all other Persons with whom such Person would
constitute a "group" for purposes of Section 13d-3 of the Exchange Act.
(c) "Option Agreement" shall mean the option agreement dated as of
November 15, 1993 between the Shareholder and the Company giving the
Shareholder an option under certain conditions to purchase all of the
Priority Shares.
(d) "Person" shall mean a natural person, corporation, limited liability
company, partnership, association, trust, unincorporated organization,
union or other employee group, Governmental Entity, or other entity or
group (as defined in the Exchange Act).
(e) "Priority Shares" shall mean the priority shares, par value NLG 1.00
per share, of the Company, authorized under Article 3 of the Company's
articles of association.
(f) "Transfer" shall mean, with respect to a security or option, the
sale, transfer, pledge, hypothecation, encumbrance, assignment or
disposition of or granting of rights with respect to such security or
option or the Beneficial Ownership thereof, the offer to make such a sale,
transfer or other disposition, and each option, agreement, arrangement or
understanding, whether or not in writing, to effect any of the foregoing.
1
<PAGE>
Section 2. Tender. The Shareholder hereby agrees to validly and irrevocably
tender in accordance with the terms hereof (or to cause the record owner
thereof to so validly tender), pursuant to Rule 14d-2 under the Exchange Act,
and in accordance with the terms of the Offer, not later than, (i) in the case
of Company Shares and TOPrS owned by the Shareholder on the date hereof (such
securities, the "Existing Securities"), the fifth Business Day following the
commencement of the Offer and (ii) in the case of Company Shares and TOPrS
acquired after the date hereof and prior to the termination of this Agreement,
whether upon the exercise of options, warrants or rights, the conversion or
exchange of convertible or exchangeable securities, or by means of purchase,
dividend distribution or otherwise (such securities, together with the
Existing Securities, the "Securities"), the next succeeding Business Day after
acquisition thereof, any and all of the Securities Beneficially Owned by the
Shareholder at any time during such period, and shall not withdraw any such
tender before consummation of the Offer or the Expiration Date. The
Shareholder hereby acknowledges and agrees that the obligation of Purchaser to
accept for payment Company Shares and TOPrS tendered pursuant to the Offer,
including any Company Shares and TOPrS tendered by the Shareholder and its
Affiliates, shall be subject to the terms and conditions of the Offer. The
parties agree that the Shareholder will, for all Company Shares and TOPrS
tendered by the Shareholder in the Offer and accepted for payment and paid for
by Purchaser, receive the same amount per Company Share or TOPrS as is paid to
other holders of such securities who have tendered into, and whose securities
are accepted for payment in, the Offer.
Section 3. Voting. (a) The Shareholder hereby agrees that during the period
commencing on the date hereof and continuing until the Expiration Date (such
period being referred to as the "Voting Period"), at any meeting (whether
annual or special, and whether or not an adjourned or postponed meeting) of
the Company's shareholders or holders of TOPrS, however called, or in
connection with any written consent of the Company's shareholders or holders
of TOPrS, unless there shall be in effect at such time a preliminary or
permanent injunction or other final order by any court of competent
jurisdiction barring such action, the Shareholder shall vote (or cause to be
voted) (i) all Securities and (ii) all other securities of the Company then
Beneficially Owned by the Shareholder and entitled to vote generally in the
election of directors of the Company or otherwise entitled to vote with
respect to any matter or proposal submitted for the vote or consent of the
shareholders of the Company or holders of TOPrS: (i) in favor of the Offer,
the execution, delivery and performance by the Company of the Acquisition
Agreement and the approval and acceptance of the Offer and the terms thereof;
and (ii) against any action or agreement that would (A) result in a breach of
any covenant, representation or warranty or any other obligation or agreement
of the Shareholder under this Agreement or of the Company under the
Acquisition Agreement or (B) prevent, impede, interfere with, delay, postpone
or attempt to discourage the Offer or the transactions contemplated by the
Acquisition Agreement including without limitation: (1) any extraordinary
corporation transaction (other than with Purchaser as contemplated by the
Acquisition Agreement), such as a merger, other business combination,
reorganization or liquidation involving the Company or any of its
Subsidiaries; (2) a sale or transfer of material assets of the Company or any
of its Subsidiaries; (3) any change in the membership of the Supervisory Board
of [sic] Management Board of the Company, except as otherwise agreed to or
requested in writing by Purchaser in accordance with the terms hereof; (4) any
change in the present capitalization or dividend policy of the Company or any
of its Subsidiaries or (5) any other change in the Company's corporate
structure or business or operations. The Shareholder shall not enter into any
agreement with any Person which would violate the provisions contained in this
Section 3.
(b) As soon as practicable after commencement of the Offer, Purchaser shall
provide the Company and Shareholder with the names of the individuals
Purchaser wishes to be appointed to the Supervisory Board and the Management
Board of the Company effective as of the Closing. Following receipt by
Shareholder and the Company of the names of such individuals (and any further
information regarding these individuals as reasonably requested by Shareholder
and the Company), at a general meeting of shareholders convened by the Company
for the purpose of appointing such individuals to the Supervisory Board and
the Management Board of the Company, as the case may be, Shareholder shall
cause such appointments to take place effective as of, and conditional upon
the occurrence of, the Closing.
Section 4. Restrictions During the Voting Period. (a) The Shareholder shall
not, until the termination of the Voting Period, exercise or Transfer the
option granted to it by the Option Agreement unless requested in
2
<PAGE>
writing by Purchaser and then, in accordance with the terms of the Option
Agreement. Subject to the required consent of the Company, the Shareholder
hereby assigns, transfers and conveys to Purchaser, effective upon the
consummation of the transactions contemplated by the Acquisition Agreement,
all of its rights and entitlement under the Option Agreement, and Purchaser
hereby assumes, effective upon the consummation of the transactions
contemplated by the Acquisition Agreement, all of the rights and obligations
of the Shareholder thereunder.
(b) The Shareholder shall not, until the termination of the Voting Period,
directly or indirectly: (i) except as provided in Section 2 hereof, Transfer
any securities of an Affiliate (whether by merger, consolidation or similar
change of control transaction) which is then a record or beneficial holder of
Company Shares or TOPrS if, as the result of such Transfer, such Person would
cease to be an Affiliate of the Shareholder (ii) Transfer to any Person any
Securities; (iii) grant any proxies or powers of attorney in respect of any
Securities, deposit any Securities into a voting trust or enter into a voting
agreement, understanding or arrangement (except, to the extent applicable, the
Financing Trust, as may be required by the terms pursuant to which the TOPrS
have been issued) with respect thereto; (iv) take any action that would make
any representation or warranty of the Shareholder contained herein untrue or
incorrect or would result in a breach by the Shareholder of its obligations
under this Agreement; or (v) vote any of the Securities in a manner which
would make any representation and warranty of the Company in the Acquisition
Agreement untrue or incorrect or would result in a breach by the Company of
its obligations under the Acquisition Agreement.
(c) Until the termination of the Voting Period, the Shareholder shall not,
and shall cause its Representatives and Affiliates not to, directly or
indirectly, (x) solicit, initiate, encourage, or take any other action (i) to
facilitate, any inquiry or the making of any Acquisition Proposal or (ii)
which could reasonably be expected to impede, frustrate, prevent, delay or
nullify any of the transactions contemplated by this Agreement or the
Acquisition Agreement or to materially diminish the benefits to Purchaser of
the transactions contemplated by this Agreement or the Acquisition Agreement,
(y) take any action to enter into an agreement for the sale or other
disposition by the Company or any of its Subsidiaries of any significant
portion of the assets of or a sale by the Company or any of its Subsidiaries
or by the Shareholder of shares of capital stock of the Company or any of its
Subsidiaries whether by merger or other business combination or tender or
exchange offer or (z) enter into or participate in any discussions or
negotiations regarding any of the foregoing, or in furtherance of any
inquiries regarding any of the foregoing, or furnish to any other Person
(other than Purchaser and its Representatives) any information with respect to
the business, properties or assets of the Company or any of its Subsidiaries
or any of the foregoing. If the Shareholder or any of its Affiliates or
Representatives receives any request for information or an inquiry, proposal
or offer relating to any of the foregoing, then the Shareholder shall orally
(as promptly as practicable and no later than one day) and in writing (as
promptly as practicable) inform Purchaser of the terms and the conditions of
such proposal, inquiry or offer and the identity of the Person making it. The
Shareholder agrees that it will and will cause its Affiliates and their
respective Representatives to immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. The Shareholder agrees that
it will take the necessary steps to promptly inform its Representatives and
Affiliates of the obligations undertaken in this section.
Section 5. Additional Shares. The Shareholder hereby agrees, while this
Agreement is in effect, to promptly notify Purchaser of the number of Company
Shares and TOPrS acquired beneficially or of record by the Shareholder, if
any, after the date hereof. In the event that, between the date of this
Agreement and the Closing Date, Company Shares and TOPrS shall have been
affected or changed into a different number of shares or a different class of
shares as a result of a share split, reverse share split, share distribution,
spin-off, recapitalization, reclassification (other than a change in par
value), or other similar transaction, the term Securities or other securities
shall be deemed to refer to and include any shares or other securities into
which or for which any or all of the Securities may be changed or exchanged
and all such share distributions.
Section 6. Covenants of Purchaser.
(a) Purchaser shall, with effect as of the Closing, indemnify and hold
harmless the Shareholder and its Affiliates from and against all damages,
losses, costs and expenses incurred solely as a result of or arising solely
from, and as promptly as possible following the Closing shall use its
commercially reasonable efforts
3
<PAGE>
to cause the Shareholder and its Affiliates to be released from
Shareholder's and such Affiliates' obligations under performance bonds,
guarantees, indemnities or other obligations of the Shareholder and any of
its Affiliates outstanding on behalf of the Company and its Subsidiaries as
set forth in Section 2.20 of the Company Disclosure Schedule and as
otherwise agreed by Purchaser in writing. Shareholder agrees that neither
it nor its Affiliates shall be entitled to receive any fees or other
compensation in connection with such performance bonds, guarantees,
indemnities or other obligations accrued for any period after the later of
the Closing and the effectiveness of such release or counter-
indemnification.
(b) In the event any claim, liability, demand, assessment, action, suit
or proceeding shall be asserted against the Shareholder or any of its
Affiliates in respect of which the Shareholder proposes to demand
indemnification pursuant to Section 6(a) (a "Claim"), the Shareholder shall
promptly notify Purchaser thereof (including, without limitation, the
notification and delivery of any information pertaining to such Claim, as
and when received by the Shareholder or any of its Affiliates); provided,
however, that the failure to so notify or deliver such information to
Purchaser shall not discharge Purchaser or otherwise affect Purchaser's
obligations pursuant to Section 6(a) except to the extent that Purchaser is
prejudiced thereby. Purchaser shall have the right, promptly upon receipt
of any notice of any Claim, to assume the control of the defense,
compromise or settlement of such Claim including, at its own expense, the
employment of counsel. The Shareholder shall not settle or compromise any
such Claim without express the written consent of Purchaser.
(c) Effective upon the Closing, Purchaser undertakes for a period of no
less than 36 months from the Closing, that Purchaser, except for good
cause, will not terminate or lay-off any employees of the Company's Italian
Affiliates, unless an appropriate agreement has been entered into with the
relevant unions in Italy. In addition, Purchaser will endeavor to
capitalize on the opportunities and resources available within the
Company's Italian Affiliates.
Section 7. Representations and Warranties of the Shareholder. The
Shareholder hereby represents and warrants to Purchaser as follows:
(a) The Shareholder is a corporation duly organized and validly existing
under the laws of Italy. The Shareholder has all requisite corporate power
and authority to enter into this Agreement and to consummate the
transactions contemplated hereby. The execution and delivery of this
Agreement, the performance by the Shareholder of its obligations hereunder
and the consummation by the Shareholder of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate
action on the part of the Shareholder. This Agreement has been duly
executed and delivered by the Shareholder and constitutes the legal, valid
and binding obligation of the Shareholder, enforceable against the
Shareholder in accordance with its terms except as such enforceability may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or other similar laws relating to or affecting creditors generally and by
the general principles of equity, regardless of whether such enforceability
is considered in a proceeding at law or in equity.
(b) The Shareholder, directly and indirectly through Subsidiaries, is the
record holder and Beneficial Owner of 17,813,527 Company Shares (the "Owned
Shares") and 1,600,000 TOPrS convertible into 2,492,212 Company Shares
(collectively, the "Shareholder Securities"), and has good and marketable
title to all of such securities, free and clear of all liens, claims,
options, proxies, voting agreements, security interests, charges, and
encumbrances and preemptive rights. The Shareholder Securities constitute
all of the issued and outstanding capital stock of the Company and its
Subsidiaries and TOPrS Beneficially Owned by the Shareholder and, except
for the TOPrS owned by the Shareholder and as provided thereby and in the
Option Agreement, the Shareholder does not Beneficially Own or have any
right to acquire (whether currently, upon lapse of time, following the
satisfaction of any conditions, upon the occurrence of any event or any
combination of the foregoing) any Company Shares or TOPrS or any securities
convertible into Company Shares or TOPrS. The Shareholder has sole power to
vote and to dispose of the Shareholder Securities, to issue instructions
with respect to the Shareholder Securities to the extent appropriate in
respect of the matters set forth in this Agreement and to agree to all of
the matters set forth in this Agreement, in each case with respect to all
of the Shareholder Securities, with no limitations, qualifications or
restrictions
4
<PAGE>
on such rights, subject to applicable securities laws and the terms of this
Agreement. The delivery to Purchaser of any Securities pursuant to the
provisions of this Agreement will transfer to Purchaser good and marketable
title thereto, free and clear of all liens, encumbrances, restrictions and
claims of every kind.
(c) The execution and delivery of this Agreement by the Shareholder do
not, and the performance by the Shareholder of its obligations hereunder
and the consummation by the Shareholder of the transactions contemplated
hereby will not, (i) (A) conflict with or violate the articles of
incorporation or by-laws or other organizational documents of the
Shareholder, (B) conflict with or violate any material law, statute, rule,
regulation order, judgment, writ, injunction or decree applicable to the
Shareholder or any of its properties or assets, (C) result in a violation
or breach of or constitute a default under (or an event which with the
giving of notice or the lapse of time or both would constitute a default
under), require any consent, approval or authorization under, result in the
loss of a benefit or result in any provision becoming applicable or
effective under, or give rise to any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
other encumbrance on any property or asset of the Shareholder pursuant to,
any material note, bond, mortgage, indenture, contract, agreement, lease,
license, permit, franchise or other instrument or obligation to which the
Shareholder is a party or by which the Shareholder or any property or asset
(including the Shareholder Securities) of the Shareholder may be bound or
affected, except that an Affiliate of the Shareholder is required to prepay
its bank financing upon the sale of the Company Shares and TOPrS owned by
it; or (ii) require the Shareholder to obtain any consent, approval,
authorization or permit of, or to make any filing with or notification to,
any Governmental Entity, except (A) for (1) applicable requirements, if
any, of the Exchange Act, securities or "blue sky" laws of the states of
the United States ("Blue Sky Laws"), and securities laws of Italy, (2) the
prior notification and reporting requirements under the Antitrust Laws (3)
the voluntary notification under Exon-Florio; and (4) any filing required
to be made with the Australian Foreign Investment Review Board; and (B)
where the failure to obtain such consents, approvals, authorizations and
permits, or to make such filings or notifications, would not be reasonably
likely to have a Company Material Adverse Effect and would not prevent or
materially delay the Shareholder from consummating the transactions
contemplated hereby.
(d) The Shareholder understands and acknowledges that Purchaser is
entering into the Acquisition Agreement and incurring the obligations set
forth therein, in reliance upon the Shareholder's execution and delivery of
this Agreement.
Section 8. Representations and Warranties of Purchaser. Purchaser hereby
represents and warrants to the Shareholder as follows:
(a) Purchaser is a corporation duly organized and validly existing under
the laws of the jurisdiction of The Netherlands and has all requisite
corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby and by the Acquisition
Agreement. The execution and delivery of this Agreement and the Acquisition
Agreement, the performance by Purchaser of its obligations hereunder and
thereunder and the consummation by Purchaser of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Purchaser. This Agreement has been duly
executed and delivered by Purchaser and constitutes the legal, valid and
binding obligation of Purchaser, enforceable against Purchaser in
accordance with its terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws relating to or affecting creditors generally and by general
principles of equity, regardless of whether such equitable principles are
applied in a proceeding at law or in equity.
(b) Subject to making the filings and obtaining the approvals identified
in Section 3.4 of the Acquisition Agreement, the execution and delivery of
this Agreement and the Acquisition Agreement by Purchaser do not, and the
performance by Purchaser of its obligations hereunder and thereunder and
the consummation by Purchaser of the transactions contemplated hereby and
thereby will not (i) (A) conflict with or violate the articles of
association, certificate of incorporation, by-laws, partnership agreement
or other charter or organization document of Purchaser or any of its
material Subsidiaries, (B) conflict with or violate any material law,
statute, rule, regulation, order, judgment, writ, injunction or decree
applicable to Purchaser or any of its Subsidiaries or any of their
respective properties or assets or (C) result in a violation
5
<PAGE>
or breach of or constitute a default under (or an event which with the
giving of notice or the lapse of time or both would constitute a default
under), require any consent, approval or authorization under, result in the
loss of a material benefit or result in any provision becoming applicable
or effective under, or give rise to any right of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or
other encumbrance on any property or asset of Purchaser or any of its
Subsidiaries pursuant to, any material note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
or obligation to which Purchaser or any of its Subsidiaries is a party or
by which Purchaser or any of its Subsidiaries or any material property or
asset of Purchaser or any of its Subsidiaries may be bound or affected,
except in the case of each of clauses (B) and (C) for any such conflicts,
violations, breaches, defaults or other occurrences which would not be
reasonably likely to result in a Purchaser Material Adverse Effect or
prevent or materially delay Purchaser from consummating the transactions
contemplated hereby and thereby; or (ii) require Purchaser to obtain any
consent, approval, authorization or permit of, or to make any filing with
or notification to, any Governmental Entity, except (A) for (1) applicable
requirements, if any, of the Exchange Act and Blue Sky Laws, (2) the prior
notification and reporting requirements under the Antitrust Laws, (3) the
voluntary notification under Exon-Florio, and (4) any filing required to be
made with the Australian Foreign Investment Review Board; and (B) where the
failure to obtain such consents, approvals, authorizations and permits, or
to make such filings or notifications, would not be reasonably likely to
have a Purchaser Material Adverse Effect or prevent Purchaser from
consummating the transactions contemplated hereby and thereby.
(c) Purchaser understands and acknowledges that the Shareholder is
entering into this Agreement and incurring the obligations set forth
herein, in reliance upon Purchaser's execution and delivery of the
Acquisition Agreement as well as this Agreement.
Section 9. Confidentiality. The Shareholder shall not disclose and will keep
confidential for a period of five years from the Closing Date any information
not otherwise publicly available relating to the Company, any of the
Subsidiaries or the business conducted by any of them that was provided to the
Shareholder by the Company or any of its Subsidiaries and will not use any
such information in any manner detrimental to the Company or its Subsidiaries,
except that Shareholder may disseminate such information to Representatives
who need to know such information for the purpose of analyzing the
transactions contemplated hereby, provided that such Representatives shall be
informed of the confidential nature of such information and Shareholder shall
cause them to treat it confidentially, and otherwise may disclose such
information as required by law.
Section 10. Further Assurances. From time to time, at the other party's
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as
may be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.
Section 11. Expiration. This Agreement and the Shareholder's obligation to
tender, and not withdraw, pursuant hereto and any obligations of Parent and
Purchaser hereunder shall terminate on the Expiration Date. As used herein,
the term "Expiration Date" means the date on which the Acquisition Agreement
is terminated by the Purchaser in accordance with its terms. In the event of
termination of this Agreement, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of Purchaser or the
Shareholder or their respective officers or directors; provided, however, the
foregoing shall not relieve either party for any breach of any representation,
warranty, covenant or agreement in this Agreement. Parent and Purchaser each
acknowledges that, in the event of termination of this Agreement in accordance
with its terms, the Shareholder shall no longer have the obligation to tender,
and may withdraw, the Shareholder Securities; provided, that if the Company
terminates the Acquisition Agreement in accordance with Section 5.1(c), the
Purchaser shall, within five Business Days, either (i) terminate the Offer or
(ii) waive the Minimum Condition and the condition set forth in Paragraph (C)
of the Offer Conditions set forth in Annex A of the Acquisition Agreement
(except that the portion of such condition related to performance or
compliance as to covenants and agreements shall only be waived as to breaches
actually known by Purchaser as of the date of such election) and, to the
extent all other Offer Conditions are satisfied, shall accept for payment and
pay for at the next scheduled expiration date of the Offer (subject to
applicable law) all Company Shares and TOPrS then validly tendered and not
withdrawn in the Offer.
6
<PAGE>
Section 12. Survival. The representations and warranties contained in
Sections 7(a) and 7(b) and in Section 8 shall survive the consummation of the
Offer indefinitely and the representations and warranties contained in Section
7(c) shall survive until the second anniversary of the Closing Date.
Section 13. Miscellaneous.
(a) This Agreement constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior agreements and
understandings between the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon either
party hereto unless made in writing and signed by both parties hereto. Any
term or condition of this Agreement may be waived at any time by the party
that is entitled to the benefit thereof, but no such waiver shall be effective
unless set forth in a written instrument duly executed by or on behalf of the
party waiving such term or condition. No waiver by any party of any term or
condition of this Agreement, in any one or more instances, shall be deemed to
be a waiver of the same or any other term or condition of this Agreement on
any future occasion.
(b) Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by either of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
party, provided, however, that Purchaser may assign its rights and delegate
its obligations hereunder to a wholly-owned subsidiary of Purchaser and
provided, further, that such assignment and delegation shall not relieve
Purchaser of its obligations hereunder. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, nothing in this
Agreement, expressed or implied, is intended to confer on any Person other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
(c) All notices and other communications hereunder shall be in writing and
shall be deemed duly given (i) on the date of delivery if delivered
personally, or by facsimile, upon confirmation of receipt, (ii) on the first
Business Day following the date of dispatch if delivered by a recognized next-
day courier service, or (iii) on the fifth Business Day following the date of
mailing if delivered by registered or certified mail (airmail if
international), return receipt requested, postage prepaid. All notices
hereunder shall be delivered as set forth below, or pursuant to such other
instructions as may be designated in writing by the party to receive such
notice:
If to the Shareholder, to:
Piazza Monte Grappa 4
00195 Rome, Italy
Attention: Secretary
Facsimile: 39-06-32657-164
with a copy to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, NY 10178
Attention: W. Preston Tollinger
Facsimile: (212) 309-6273
If to Purchaser, to:
ABB Transportation Participations B.V.
PO Box 74690
NL-1070BR Amsterdam
The Netherlands
Fax: 31-20-445-9844
Attention: Managing Director
7
<PAGE>
With a copy to:
ABB Asea Brown Boveri Ltd.
PO Box 8131
CH-8050 Zurich
Switzerland
Fax: 011-411-317-7992
Attention: CS-LE
With a further copy to:
White & Case LLP
1155 Avenue of the Americas
New York, NY 10036
Attention: Gregory Pryor, Esq.
Telephone: (212) 819-8200
Facsimile: (212) 354-8113
(d) If any provision of this Agreement is held to be illegal, invalid or
unenforceable under any present or future law, and if the rights or
obligations of any party hereto under this Agreement will not be materially
and adversely affected thereby, (i) such provision will be fully severable,
(ii) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (iii)
the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (iv) in lieu of such illegal,
invalid or unenforceable provision, there will be added automatically as a
part of this Agreement a legal, valid and enforceable provision as similar
in terms to such illegal, invalid or unenforceable provision as may be
possible.
(e) The parties hereto agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with its specific terms or was 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 hereof in any New York Court, this
being in addition to any other remedy to which they are entitled at law or
in equity.
(f) All rights, powers and remedies provided under this Agreement or
otherwise available in respect hereof at law or in equity shall be
cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other
such right, power or remedy by such party. The failure of any party hereto
to exercise any right, power or remedy provided under this Agreement or
otherwise available in respect hereof at law or in equity, or to insist
upon compliance by any other party hereto with its obligations hereunder,
and any custom or practice of the parties at variance with the terms
hereof, shall not constitute a waiver by such party of its right to
exercise any such or other right, power or remedy or to demand such
compliance.
(g) This Agreement shall be governed by and construed in accordance with
the laws of the State of New York without regard to its rules of conflict
of laws. Each of the parties hereto hereby irrevocably and unconditionally
consents to submit to the non-exclusive jurisdiction of the courts of the
State of New York and of the United States of America located in the State
of New York (the "New York Courts") for any litigation arising out of or
relating to this Agreement and the transactions contemplated hereby waives
any objection to the laying of venue of any such litigation in the New York
Courts and agrees not to plead or claim in any New York Court that such
litigation brought therein has been brought in an inconvenient forum.
(h) As used in this Agreement, the word "including" means without
limitation; the word "or" is not exclusive; and the words "herein",
"hereof", "hereby", "hereto" and "hereunder" refer to this Agreement as a
whole. Any reference to any applicable law shall be deemed also to refer to
all rules and regulations promulgated thereunder unless the context
otherwise requires. Whenever required by the
8
<PAGE>
context, any gender shall include any other gender, the singular shall
include the plural and the plural shall include the singular. Unless the
context otherwise requires, references herein: (i) to Sections mean the
Sections of this Agreement; and (ii) to an agreement, instrument or other
document means such agreement, instrument or other document as amended,
supplemented and modified through the date hereof, unless the context
otherwise requires, and thereafter from time to time to the extent
permitted by this Agreement. The headings of Sections are inserted for
convenience of reference only and shall not be deemed a part of, or affect
in any way the meaning or interpretation of, this Agreement.
9
<PAGE>
IN WITNESS WHEREOF, Purchaser and the Shareholder have caused this Agreement
to be duly executed as of the day and year first above written.
Shareholder:
Finmeccanica S.p.A.
/s/ Alberto Lina
By: _________________________________
Name: Alberto Lina
Title: Vice-Chairman and
Chief Executive Officer
Purchaser:
ABB Transportation Participations
B.V.
/s/ Mats Sacklen
By: _________________________________
Name: Mats Sacklen
Title: PP
/s/ Eric Elzvik
By: _________________________________
Name: Eric Elzvik
Title:
The undersigned, being the sole Shareholder of the Purchaser, hereby
undertakes to insure that the Purchaser will duly perform its obligations
under this Agreement and hereby guarantees any and all liabilities and amounts
which become payable by Purchaser hereunder.
ABB Asea Brown Boveri Ltd.
/s/ Mats Sacklen
By: _________________________________
Name: Mats Sacklen
Title: VP
/s/ Eric Elzvik
By: _________________________________
Name: Eric Elzvik
Title: VP
10
<PAGE>
INDEX OF DEFINED TERMS
(NOT PART OF AGREEMENT)
<TABLE>
<CAPTION>
TERM SECTION
- ---- --------
<S> <C>
Acquisition Agreement................................................. RECITALS
Affiliate............................................................. 1(a)
Agreement............................................................. RECITALS
Beneficial Ownership.................................................. 1(b)
Blue Sky Laws......................................................... 7(c)
Company............................................................... RECITALS
Company Shares........................................................ RECITALS
Expiration Date....................................................... 11
New York Courts....................................................... 13(g)
Offer................................................................. RECITALS
Option Agreement...................................................... 1(c)
Owned Shares.......................................................... 7(b)
Person................................................................ 1(d)
Priority Shares....................................................... 1(e)
Purchaser............................................................. RECITALS
Shareholder........................................................... RECITALS
Shareholder Securities................................................ 7(b)
TOPrS................................................................. RECITALS
Transfer.............................................................. 1(f)
Voting Period......................................................... 3
</TABLE>
<PAGE>
Exhibit (c)(2)
<PAGE>
ACQUISITION AGREEMENT
BY AND BETWEEN
ELSAG BAILEY PROCESS AUTOMATION N.V.
AND
ABB TRANSPORTATION PARTICIPATIONS B.V.
DATED AS OF OCTOBER 14, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I. THE OFFER....................................................... 1
Section 1.1 The Offer.................................................... 1
Section 1.2 Company Stock Options........................................ 3
Section 1.3 Company Actions.............................................. 3
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.................. 4
Section 2.1 Organization and Qualification............................... 4
Section 2.2 Capitalization............................................... 4
Section 2.3 Subsidiaries................................................. 5
Section 2.4 Authorization, Validity and Enforceability................... 6
Section 2.5 No Conflict or Violation..................................... 6
Section 2.6 Consents and Approvals....................................... 6
Section 2.7 SEC Documents and Financial Statements....................... 7
Section 2.8 Absence of Certain Changes................................... 7
Section 2.9 Litigation................................................... 9
Section 2.10 Compliance.................................................. 9
Section 2.11 Employee Benefit Plans...................................... 9
Section 2.12 Labor Matters............................................... 10
Section 2.13 Tax Matters................................................. 10
Section 2.14 Properties.................................................. 10
Section 2.15 Environmental Matters....................................... 11
Section 2.16 Material Contracts and Commitments.......................... 11
Section 2.17 Intellectual Property....................................... 12
Section 2.18 Opinion of Financial Advisor................................ 13
Section 2.19 Brokers..................................................... 13
Section 2.20 Guarantees.................................................. 13
Section 2.21 Schedule 14D-9 and Schedule 14D-1........................... 13
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF PURCHASER................... 14
Section 3.1 Organization and Qualification............................... 14
Section 3.2 Authorization, Validity and Enforceability................... 14
Section 3.3 No Conflict or Violation..................................... 14
Section 3.4 Consents and Approvals....................................... 14
Section 3.5 Brokers...................................................... 15
Section 3.6 Financing.................................................... 15
ARTICLE IV. COVENANTS...................................................... 15
Section 4.1 Interim Operations........................................... 15
Section 4.2 No Solicitation.............................................. 17
Section 4.3 Access to Information........................................ 18
Section 4.4 Notice of Certain Matters.................................... 18
Section 4.5 Further Actions.............................................. 18
Section 4.6 Public Announcements......................................... 19
Section 4.7 Expenses..................................................... 19
Section 4.8 Directors and Officers Indemnification Insurance............. 19
Section 4.9 Post-Closing Restructuring................................... 20
ARTICLE V. TERMINATION..................................................... 20
Section 5.1 Termination.................................................. 20
Section 5.2 Effect of Termination........................................ 22
Section 5.3 Extention; Waiver............................................ 22
ARTICLE VI. MISCELLANEOUS.................................................. 22
Section 6.1 Certain Definitions.......................................... 22
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Section 6.2 Nonsurvival of Representations and Warranties................ 23
Section 6.3 Entire Agreement............................................. 23
Section 6.4 Waiver....................................................... 23
Section 6.5 Assignment; Binding Effect................................... 23
Section 6.6 Notices...................................................... 24
Section 6.7 Severability................................................. 25
Section 6.8 Enforcement of Agreement..................................... 25
Section 6.9 Governing Law................................................ 25
Section 6.10 Waiver of Personal Liability................................ 26
Section 6.11 Interpretation.............................................. 26
Section 6.12 Counterparts................................................ 26
Section 6.13 Confidentiality............................................. 26
Section 6.14 Exchange Rates.............................................. 26
</TABLE>
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ACQUISITION AGREEMENT
This ACQUISITION AGREEMENT is made and entered into as of October 14, 1998
(this "Agreement"), by ABB Transportation Participations B.V., a corporation
organized under the laws of The Netherlands with its statutory seat in
Amsterdam ("Purchaser"), and Elsag Bailey Process Automation N.V., a
corporation organized under the laws of The Netherlands with its statutory
seat in Amsterdam (the "Company").
WHEREAS, the Supervisory Board of the Company and the Management Board of
the Company each has determined that the acquisition of the Company by
Purchaser, upon the terms and subject to the conditions set forth herein, is
fair to, and in the best interests of, the Company's shareholders and other
relevant constituencies, its Subsidiaries (as defined in Section 6.1(h)) and
the enterprises carried on by the Company and its Subsidiaries;
WHEREAS, Finmeccanica S.p.A., a company organized under the laws of Italy
("Shareholder"), together with certain of its Subsidiaries, is the record and
beneficial owner of (i) a majority of the issued and outstanding Company
Shares (as defined below)(together with any other Company Shares acquired by
Shareholder or its Subsidiaries after the date hereof and during the term of
the Shareholder's Agreement (as defined below), the "Shareholder Shares") and
(ii) certain TOPrS (as defined below);
WHEREAS, the Board of Directors of Shareholder has approved the sale of the
Shareholder Shares and the TOPrS held by Shareholder or its Affiliates to
Purchaser pursuant to the Offer (as defined below);
WHEREAS, upon the terms and subject to the conditions set forth herein, the
parties hereto desire that Purchaser prepare and commence an offer which may
be structured as separate offers (the "Offer") to purchase all of the issued
and outstanding common shares, par value NLG 1.00 per share, of the Company
(the "Company Shares") and all of the issued and outstanding 5 1/2% Trust
Originated Preferred Securities guaranteed by the Company and convertible into
Company Shares (the "TOPrS") of Elsag Bailey Financing Trust (the "Financing
Trust"); and
WHEREAS, as a condition to its willingness to enter into this Agreement,
Purchaser has required Shareholder to enter into a shareholder's agreement,
dated as of the date hereof (the "Shareholder's Agreement"), pursuant to which
Shareholder has agreed, among other things, to tender, or cause its
Subsidiaries to tender, all of the Shareholder Shares and TOPrS held by
Shareholder and such Subsidiaries, into the Offer.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I.
THE OFFER
Section 1.1 The Offer. (a) Provided that none of the events set forth in
Annex A hereto (the "Offer Conditions") shall have occurred, as promptly as
practicable following the execution hereof, Purchaser shall
<PAGE>
make a public announcement pursuant to Rule 14d-2(b) under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, promptly
thereafter but in no event later than the fifth Business Day following the
date of such announcement, Purchaser shall commence the Offer. The obligation
of Purchaser to accept for payment Company Shares and TOPrS validly tendered
pursuant to the Offer and not withdrawn (the "Tendered Securities") shall be
subject only to the satisfaction or waiver by Purchaser of the Offer
Conditions. Subject to the provisions of this Agreement, Purchaser shall keep
the Offer open until at least midnight, New York City time, on the date twenty
(20) days from the date of its commencement. The Offer shall be made by means
of an offer to purchase (the "Offer to Purchase") containing the Offer
Conditions. Without the written consent of the Company, Purchaser shall not
(i) decrease the Offer Consideration (as defined below); (ii) change the form
of Offer Consideration (other than by increasing it); (iii) decrease the
number of Company Shares and TOPrS sought pursuant to the Offer; (iv) extend
the Offer, beyond any scheduled expiration date; or (v) amend the Offer
Conditions in a manner which is materially adverse to the holders of Company
Shares or holders of TOPrS (including imposing any additional conditions);
provided, however, that if on the scheduled expiration date of the Offer (as
it may be extended) (x) all Offer Conditions shall not have been satisfied or
waived or (y) any Person has made an Acquisition Proposal (as defined in
Section 4.2), the Offer may be extended by Purchaser from time to time.
Purchaser agrees that, if on the initial scheduled Termination Date of the
Offer there is a failure of the Offer Conditions set forth in clause (i) or
(ii) of the second sentence of Annex A or paragraph (F) of the third sentence
thereof to be satisfied, it shall, unless this Agreement is terminated
pursuant to Section 5.1, extend the Offer and set a subsequent scheduled
Termination Date, and shall continue to so extend the Offer and set subsequent
scheduled Termination Dates until the Expiration Date (as defined in Section
6.1(c)). In addition, Purchaser may, without the consent of the Company,
increase the Offer Consideration and in connection therewith extend the Offer
to the extent required by law.
(b) Upon the terms and subject to the Offer Conditions, the Offer shall
commit Purchaser to acquire (i) each Company Share validly tendered and not
withdrawn for $39.30, net to the seller in cash (the "Share Offer Price"), and
(ii) each of the TOPrS validly tendered for $61.21, net to the seller in cash
(the "TOPrS Offer Price" and collectively with the Share Offer Price, the
"Offer Consideration").
(c) Provided that none of the events set forth in the Offer Conditions shall
have occurred, as soon as practicable on the date the Offer is commenced,
Purchaser shall file with the United States Securities and Exchange Commission
(the "Commission") a Tender Offer Statement on Schedule 14D-1 with respect to
the Offer (together with all amendments and supplements thereto and including
the exhibits thereto, the "Schedule 14D-1") which will include, as exhibits,
the Offer to Purchase and a form of letter of transmittal with respect to the
Offer (collectively, together with any amendments and supplements thereto, the
"Offer Documents"). Purchaser represents that the Offer Documents will comply
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder, and all other applicable United States federal
securities laws and, on the date filed with the Commission and on the date
first published, sent or given to the Company's shareholders, will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading, except that no representation is made by Purchaser with respect to
information supplied by the Company for inclusion in the Schedule 14D-1 or
Offer Documents. Purchaser further agrees to take all steps necessary to cause
the Offer Documents to be filed with the Commission and to be disseminated to
all holders of Company Shares and TOPrS, in each case as and to the extent
required by applicable United States federal securities laws and any other
applicable laws. Each of Purchaser, on the one hand, and the Company, on the
other hand, 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
and misleading in any material respect, and Purchaser further agrees to take
all steps necessary to cause the Offer Documents, as so corrected, to be filed
with the Commission and to be disseminated to holders of Company Shares and
TOPrS, in each case as and to the extent required by applicable United States
federal securities laws and any other applicable laws. The Company and its
counsel shall be given the opportunity to review and comment on the Offer
Documents before they are filed with the Commission. In addition, Purchaser
agrees to provide the Company and its counsel in writing any comments
Purchaser or its counsel may receive from time to time from the Commission or
its staff with respect to the Offer Documents promptly after receipt of such
comments.
2
<PAGE>
(d) Upon the terms of the Offer and subject to the Offer Conditions,
Purchaser shall consummate the Offer and acquire all Tendered Securities
properly tendered and not withdrawn (the "Closing") at the earliest time
permitted under the Exchange Act and other applicable laws and as of which all
of the Offer Conditions shall have been satisfied or waived by Purchaser. For
purposes of this Agreement, the "Closing Date" shall be the date on which
Purchaser shall acquire the Tendered Securities by means of the Offer. The
Closing shall occur on the Closing Date at a place or places to be mutually
agreed by the parties.
Section 1.2 Company Stock Options. (a) As of the Closing, all outstanding
options and other rights to acquire shares under the Company's 1993 Long-Term
Stock Incentive Plan and the Company's Global Employee Stock Purchase Plan
(each, as amended, an "Option Plan," together, the "Option Plans" and such
options and other rights, "Stock Options") whether or not such Stock Options
are then exercisable or vested, shall vest in full, and as soon as practicable
after the Closing Date, but in any event within 5 Business Days thereafter,
Purchaser shall pay to the holder of each outstanding Stock Option an amount
in cash equal to the difference between the Share Offer Price and the exercise
price per share of each such Stock Option, less applicable withholding taxes;
except in the case of certain Italian and German executives identified by the
Company in writing to Purchaser prior to the date hereof with respect to whom
arrangements shall be made (subject to applicable law) as described on
Schedule 1.2 attached hereto. If and to the extent required by the terms of
the Option Plans or the terms of any Stock Option granted thereunder, the
Company shall use its best efforts to obtain the consent of each holder of
outstanding Stock Options to the foregoing treatment of such Stock Options and
to take any other action necessary to effectuate the foregoing provisions.
(b) Except as provided in Section 1.2(a), the Option Plans shall terminate
as of the Closing Date and any rights under any provisions in any other plan,
program or arrangement (other than the option agreement (the "Option
Agreement") dated as of November 15, 1993 between the Shareholder (or
Purchaser as assignee of the Option Agreement) and the Company giving the
Shareholder (or Purchaser as assignee of the Option Agreement) an option,
subject to the fulfillment of certain conditions, to purchase all of the
Priority Shares) providing for the issuance or grant by the Company of any
interest in respect of the capital stock of the Company shall be canceled as
of the Closing Date.
(c) The Company hereby consents and agrees to the assignment and transfer by
the Shareholder to Purchaser, at the Closing, of all rights and obligations of
the Shareholder under the Option Agreement. Notwithstanding the provisions of
Section 9 of the Option Agreement, the Company acknowledges and agrees that
the Option Agreement shall remain in full force and effect and be unaffected
by the transactions contemplated by this Agreement and the Shareholders
Agreement.
Section 1.3 Company Actions. (a) The Company hereby consents to the Offer
and represents that each of its Management Board and its Supervisory Board, in
each case in accordance with the Company's articles of association and
applicable law, has (i) determined that the Offer, upon the terms and subject
to the conditions set forth herein, is fair to, and in the best interests of,
the Company's shareholders, the holders of the TOPrS and other relevant
constituencies, its Subsidiaries, and the enterprises carried on by the
Company and its Subsidiaries, (ii) approved this Agreement and the
transactions contemplated hereby, including the Offer, and (iii) resolved to
recommend that the shareholders of the Company and the holders of the TOPrS
accept the Offer and tender their Company Shares and TOPrS thereunder to
Purchaser. Merrill Lynch International ("Merrill Lynch") has delivered to the
Management Board and Supervisory Board of the Company its opinion that the
Share Offer Price to be received by the holders of Company Shares pursuant to
the Offer is fair to such holders from a financial point of view.
(b) On the date the Offer is commenced, the Company shall promptly file with
the Commission a Solicitation/Recommendation Statement on Schedule 14D-9
(together with all amendments and supplements thereto and including the
exhibits thereto, the "Schedule 14D-9") which shall contain the recommendation
referred to in clause (iii) of Section 1.3(a) hereof. The Company further
agrees to take all steps necessary to cause the Schedule 14D-9 to be filed
with the Commission and to be disseminated to holders of Company Shares and
TOPrS, in each case as and to the extent required by applicable United States
federal securities laws and any
3
<PAGE>
other applicable laws. Each of the Company, on the one hand, and Purchaser, on
the other hand, 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
and 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 Commission and to be disseminated to holders of the Company Shares
and TOPrS to the extent required by applicable United States federal
securities laws. Purchaser and its counsel shall be given the opportunity to
review the Schedule 14D-9 before it is filed with the Commission. In addition,
the Company agrees to provide Purchaser and its counsel with any comments the
Company or its counsel may receive from time to time from the Commission or
its staff with respect to the Schedule 14D-9 promptly after the receipt of
such comments and shall provide Purchaser and its counsel an opportunity to
participate, including by way of discussions with the Commission or its staff,
in the response of the Company to such comments.
(c) In connection with the Offer, the Company will promptly furnish or cause
to be furnished to Purchaser mailing labels, security position listings and
any available listing or computer file containing the names and addresses of
the record holders of the Company Shares and of the TOPrS as of a recent date,
and shall furnish Purchaser with such information and assistance as Purchaser
or its agents may reasonably request in communicating the Offer to the holders
of the Company Shares and of the TOPrS (including updates thereof). Except as
is necessary to disseminate the Offer Documents and any other offering
materials required to consummate the Offer, Purchaser agrees to hold in
confidence the information contained in any such labels, lists and files, and
to use the information contained in any such labels, lists and files only in
connection with the Offer and, if this Agreement shall be terminated pursuant
to Article V hereof, shall promptly return to the Company all copies and
extracts of such information then in its possession or under its control, or
the possession or control of its agents or representatives.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Purchaser as follows:
Section 2.1 Organization and Qualification. The Company is a limited
liability company in the form of a "naamloze vennootschap" duly organized and
validly existing under the laws of The Netherlands and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. The Company is duly
qualified or licensed to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so qualified or licensed would not have a Material Adverse
Effect (as defined in Section 6.1(e)) with respect to the Company and its
Subsidiaries, taken as a whole (a "Company Material Adverse Effect"). The
Company has heretofore delivered to Purchaser true and complete copies of the
articles of association, as amended to date, of the Company.
Section 2.2 Capitalization. (a) (i) The authorized capital stock of the
Company consists of (A) 75,000,000 shares, par value NLG 1.00 per share, of
which 29,201,981 common shares are issued and outstanding and (B) 1,000
priority shares, par value NLG 1.00 per share, of which none are outstanding
and (ii) the Financing Trust has 5,740,000 TOPrS issued and outstanding. The
Company Shares set forth in Section 2.2 of the disclosure schedule provided by
the Company and attached hereto and made a part hereof (the "Company
Disclosure Schedule") and (i) identified thereon as "Company Option Shares"
are reserved for issuance upon exercise of outstanding Stock Options granted
to directors, officers and employees of the Company and its Subsidiaries
pursuant to the Option Plans and (ii) identified thereon as "Company
Conversion Shares", are reserved for future issuance upon conversion of
outstanding TOPrS. No Company Shares are held in the treasury of the Company.
No additional shares of capital stock of the Company are issued or outstanding
or reserved for issuance (except for Company Shares issued upon exercise of
Stock Options granted as aforesaid and Company Shares reserved for issuance
upon conversion of TOPrS), and except as set forth in Section 2.2 of the
Company
4
<PAGE>
Disclosure Schedule, no options or other rights to purchase or otherwise
acquire shares of capital stock of the Company have been issued or granted.
Except as set forth above in this paragraph, no shares of capital stock or
other equity or voting securities or equivalents of the Company are issued,
reserved for issuance or outstanding. All of the outstanding shares of capital
stock of the Company are, and all shares thereof which may be issued upon
exercise of Stock Options will upon issuance be, duly authorized, validly
issued and fully paid, and free of any preemptive rights except to the extent
provided in the Company's articles of association.
(b) Except as set forth in Section 2.2 of the Company Disclosure Schedule,
(i) no bonds, debentures, notes or other indebtedness or obligations of the
Company or any of its Subsidiaries entitling the holders thereof to vote (or
which are convertible into, or exercisable or exchangeable for, securities
entitling the holders thereof to vote) with the shareholders of the Company or
any of its Subsidiaries on any matter are authorized, issued, reserved for
issuance or outstanding, (ii) there are no options, warrants, calls,
subscriptions, convertible or exchangeable securities, or other rights,
agreements or commitments of any character obligating the Company or any of
its Subsidiaries to grant, issue, transfer or sell, or cause to be granted,
issued, transferred or sold, any shares of capital stock or any other equity
or voting security or equity or voting interest (or any securities convertible
into, exchangeable for, or evidencing the right to subscribe for, any of the
foregoing securities or interests), of the Company or any of its Subsidiaries
or obligating the Company or any of its Subsidiaries to grant, issue, extend
or enter into any right, agreement or commitment with respect to the
foregoing, (iii) there are no obligations (absolute, contingent or otherwise)
of the Company or any of its Subsidiaries to repurchase, redeem or otherwise
acquire any shares of capital stock, or other equity or voting security or
equity or voting interest, of the Company or any of its Subsidiaries and (iv)
other than this Agreement, there are no voting trusts, proxies or other
agreements or understandings 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, or any other equity or
voting security or interest, of the Company or any of its Subsidiaries.
Section 2.3 Subsidiaries. (a) Each of the Subsidiaries of the Company is
duly formed and validly existing and, to the extent applicable, in good
standing under the laws of the jurisdiction of its organization and has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as it is now being conducted. Each Subsidiary of the
Company is duly qualified or licensed to do business and, to the extent
applicable, is in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to
be so qualified, licensed or in good standing would not be reasonably likely
to have a Company Material Adverse Effect. Except as set forth in Section 2.3
of the Company Disclosure Schedule, the respective certificates of
incorporation and by-laws and other organizational documents of the
Subsidiaries of the Company do not contain any provision limiting or otherwise
restricting the ability of the Company to control such Subsidiaries. The
Company has heretofore made available to Purchaser true and complete copies of
the respective certificates of incorporation and by-laws or other
organizational documents of the Subsidiaries of the Company.
(b) Section 2.3 of the Company Disclosure Schedule lists all of the
Subsidiaries of the Company. All of the outstanding shares of capital stock
of, or other equity interests in, each of the Subsidiaries of the Company are
duly authorized and validly issued and, in the case of shares of capital
stock, are fully paid and, to the extent applicable, nonassessable and free of
any preemptive rights, and, except as set forth in Section 2.3 of the Company
Disclosure Schedule, all such shares or other equity interests are owned
directly or indirectly by the Company free and clear of all liens, security
interests, claims, pledges, rights of first refusal, limitations on voting
rights, charges or other encumbrances of any nature whatsoever. No shares of
capital stock of any of Company's Subsidiaries are reserved for issuance,
except to the Company or another wholly-owned Subsidiary of the Company. There
are no outstanding options, warrants, rights, subscriptions, claims of any
character, agreements, obligations, convertible or exchangeable securities, or
other commitments contingent or otherwise relating to the capital stock of any
Subsidiary of the Company pursuant to which such Subsidiary is or may become
obliged to issue any shares of capital stock of such Subsidiary or any
securities convertible into, exchangeable for, or evidencing the right to
subscribe for, any shares of such Subsidiary, other than such rights granted
to the
5
<PAGE>
Company or a wholly-owned Subsidiary of the Company. There are no material
restrictions of any kind which prevent the payment of dividends or the making
of distributions by any of the Company's Subsidiaries.
Section 2.4 Authorization, Validity and Enforceability. The Company has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement, the performance by the Company of its obligations hereunder
and the consummation by the Company of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of the
Company. This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors generally, and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding at law or in equity.
Section 2.5 No Conflict or Violation. Subject to making the filings and
obtaining the approvals identified in Section 2.6, except as set forth in
Section 2.5 of the Company Disclosure Schedule, the execution and delivery of
this Agreement by the Company do not, and the performance by the Company of
its obligations hereunder and the consummation by the Company of the
transactions contemplated hereby will not (a) conflict with or violate the
articles of association, certificate of incorporation, bylaws, partnership
agreement or other charter or organization document of the Company or any of
its Subsidiaries, (b) conflict with or violate any law, statute, rule,
regulation, order, judgment, writ, injunction or decree applicable to the
Company or any of its Subsidiaries or any of their respective properties or
assets or (c) result in a violation or breach of or constitute a default under
(or an event which with the giving of notice or the lapse of time or both
would constitute a default under), require any consent, approval or
authorization under, result in the loss of a benefit or result in any
provision becoming applicable or effective under, or give rise to any right of
termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the
Company or any of its Subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries or any property or
asset of the Company or any of its Subsidiaries may be bound or affected,
except in the case of each of clauses (b) and (c) for any such filings,
permits, consents or approvals or conflicts, violations, breaches, defaults or
other occurrences which would not be reasonably likely to have a Company
Material Adverse Effect, prevent or delay beyond the Expiration Date the
Company from consummating the transactions contemplated hereby.
Section 2.6 Consents and Approvals. The execution and delivery of this
Agreement by the Company do not, and the performance by the Company of its
obligations hereunder and the consummation by the Company of the transactions
contemplated hereby will not, require the Company to obtain any consent,
approval, authorization or permit of, or to make any filing with or
notification to, any Governmental Entity, except (a) as more specifically
described in Section 2.6 of the Company Disclosure Schedule for (i) applicable
requirements, if any, of the Exchange Act and securities or "blue sky" laws of
the states of the United States ("Blue Sky Laws"), (ii) the pre-merger
notification and reporting requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), (iii) the prior notification and reporting requirements of
the European Community pursuant to Council Regulation 4064/89, as amended as
well as any other anti-trust filings/notifications which must or may be
effected at the national level in countries having jurisdiction, (iv) the
notification requirements under the Competition Act (Canada) (the laws,
statutes or regulations described in clauses (ii), (iii) and (iv),
collectively, the "Antitrust Laws"), (v) the voluntary notification under
Section 721 of the Defense Production Act of 1950, as amended ("Exon-Florio")
and (vi) any filing required to be made with the Australian Foreign Investment
Review Board and (b) where the failure to obtain such consents, approvals,
authorizations and permits, or to make such filings or notifications, would
not be reasonably likely to have a Company Material Adverse Effect or prevent
or delay beyond the Expiration Date the Company from consummating the
transactions contemplated hereby.
6
<PAGE>
Section 2.7 SEC Documents and Financial Statements. (a) Since January 1,
1996, the Company has filed all forms, reports, statements and other documents
required to be filed by it with the Commission pursuant to the Securities Act
of 1933, as amended (the "Securities Act") and the Exchange Act (such forms,
reports, statements and other documents are hereinafter referred to as the
"Company SEC Documents"). None of the Company SEC Documents, (if amended or
superseded by a filing prior to the date of this Agreement, then as so
amended), contains, and no Company SEC Documents filed with the Commission on
or subsequent to the date of this Agreement will contain, any untrue statement
of a material fact or omits or will omit to state a material fact required to
be stated therein or necessary in order to make the statements therein, in the
light of the circumstances under which they are made, not misleading. All of
the Company SEC Documents have complied and each Company SEC Document filed
with the Commission on or subsequent to the date of this Agreement will comply
in each case in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, and the rules and regulations promulgated
thereunder.
(b) The financial statements of the Company (including, in each case, any
related notes or schedules thereto) contained or incorporated by reference in
the Company SEC Documents filed prior to the date of this Agreement (i) have
been prepared in accordance with the published rules and regulations of the
Commission and United States generally accepted accounting principles,
consistently applied ("GAAP") except as indicated in the notes thereto and
(ii) present fairly in all material respects the consolidated financial
position and the consolidated results of operations and cash flows of the
Company and its Subsidiaries as of the respective dates or for the respective
periods set forth therein (subject, in the case of unaudited interim financial
statements, to normal year-end audit adjustments).
(c) Except as set forth in Section 2.7 of the Company Disclosure Schedule,
as of the date hereof, neither the Company nor any of its Subsidiaries has any
liabilities (absolute, accrued, contingent or otherwise), except liabilities
(i) reserved on, or disclosed or reflected in, the Company's audited balance
sheet (including any related notes and schedules thereto) for the fiscal year
ended December 31, 1997 included in the Company's annual report on Form 20-F
for such fiscal year, (ii) incurred in the ordinary course of business since
December 31, 1997, (iii) incurred in accordance with this Agreement or the
transactions contemplated hereby or (iv) which would not be reasonably likely
to have a Company Material Adverse Effect.
Section 2.8 Absence of Certain Changes. From December 31, 1997 until the
date hereof, (a) there has not occurred any event, change or development which
has had or would be reasonably likely to have a Company Material Adverse
Effect and (b) except as disclosed in the Company SEC Documents or Section 2.8
of the Company Disclosure Schedule, and except for the performance of this
Agreement and the transactions contemplated hereby, the Company and its
Subsidiaries have:
(i) conducted its business and operations only in the ordinary course of
business consistent with past practices;
(ii) used reasonable efforts to preserve intact the business organizations,
rights, licenses, permits and franchises of the Company and its Subsidiaries,
maintain their existing relationships with customers, suppliers and other
Persons having business dealings with them and keep available the services of
its officers and employees;
(iii) used reasonable efforts to keep in full force and effect adequate
insurance coverages and maintain and keep its properties and assets in good
repair, working order and condition, normal wear and tear excepted;
(iv) not amended or modified its articles of association, certificate of
incorporation, by-laws or comparable governing documents;
(v) not authorized for issuance, issued, sold, granted, delivered, pledged
or encumbered or agreed or committed to issue, sell, grant, deliver, pledge or
encumber (to or with any party other than the Company and
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any of its wholly-owned Subsidiaries) any shares of any class or series of
capital stock of the Company or any of its Subsidiaries or any other equity or
voting security or equity or voting interest of the Company or any of its
Subsidiaries, any securities convertible into or exercisable or exchangeable
for any such shares, securities or interests, or any options, warrants, calls,
commitments, subscriptions or rights to purchase or acquire any such shares,
securities or interests (other than issuances of Company Shares (i) upon
exercise of outstanding Stock Options granted to directors, officers,
employees and consultants of the Company in accordance with the Option Plans
as currently in effect and (ii) pursuant to conversion of the TOPrS);
(vi) except for conversion of the TOPrS in accordance with their terms, (i)
split, combined or reclassified any shares of its capital stock or issued or
authorized or proposed the issuance of any other securities in respect of, in
lieu of, or in substitution for, shares of its capital stock, (ii) in the case
of the Company or any Subsidiary of the Company that is not wholly-owned by
the Company, declared, set aside or paid any dividends on, or made other
distributions in respect of, any capital stock or (iii) repurchased, redeemed
or otherwise acquired, or agreed or committed to repurchase, redeem or
otherwise acquire, any shares of capital stock or other equity or debt
securities or equity interests of the Company or any of its Subsidiaries
(other than to fulfill its obligations under the Option Plans as currently in
effect);
(vii) not amended or otherwise modified the terms of any Stock Options or
any Option Plan the effect of which was to make such terms more favorable to
the holders thereof or Persons eligible for participation therein, or reserved
any additional Company Shares for issuance under any such Plan;
(viii) except as required by law or existing written agreements, entered
into, adopted or materially amended any incentive, compensation, option or
severance plan or arrangement (including, without limitation, any Benefit
Plan) for the benefit or welfare of any current or former director, officer or
employee of the Company or any of its Subsidiaries, or (except for normal
increases in the ordinary course of business that are consistent with past
practices) increased the compensation or benefits of any persons or pay any
benefit not required by any existing plan and arrangement;
(ix) not acquired or agreed to acquire (by merger, consolidation,
acquisition of stock or assets or otherwise) from any Person, any corporation,
partnership, joint venture, association or other business organization or
division thereof or otherwise acquired or agreed to acquire any assets of
another Person other than the purchase of assets in the ordinary course of
business consistent with past practice or in an aggregate amount of less than
$5,000,000;
(x) not sold, leased, licensed, encumbered or otherwise disposed of, or
agreed to sell, lease, license, encumber or otherwise dispose of, any material
properties or assets of the Company or any of its Subsidiaries, except as
intercompany transactions between the Company and any of its wholly-owned
Subsidiaries or in transactions with any other Person in the ordinary course
of business, consistent with past practice and in an aggregate amount of less
than $5,000,000.
(xi) not made any material change in any of its accounting or financial
reporting methods, principles or practices, except as may be required by GAAP;
(xii) except in the ordinary course of business consistent with past
practices, not amended, modified or terminated any Material Contract required
to be listed in Section 2.16 of the Company Disclosure Schedule (other than in
response to Section 2.16(a)(iii) thereof) or waived, released or assigned any
material rights or claims thereunder;
(xiii) not adopted a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other reorganization
of the Company or any of its Subsidiaries;
(xiv) not made any loans, advances or capital contributions to any Person
other than as required by existing agreements or in the ordinary course of
business consistent with past practice; or
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(xv) not agreed or committed in writing or otherwise to do or, in the case
of clauses (i) through (iii), to do anything inconsistent with, any of the
foregoing.
(c) For purposes of this Section 2.8 and Section 4.1, the term "wholly-owned
Subsidiary" shall be deemed to include Subsidiaries of the Company of which
the Company owns at least 99% of the outstanding capital stock or other equity
interests.
Section 2.9 Litigation. Except as disclosed in Section 2.9 of the Company
Disclosure Schedule, as of the date hereof there is no action, suit, claim,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company or any of its Subsidiaries by or before any
court, other Governmental Entity or arbitrator which, if determined adversely
to the Company and its Subsidiaries would be reasonably likely to have a
Company Material Adverse Effect or prevent or delay beyond the Expiration Date
consummation of the transactions contemplated hereby. Except as disclosed in
the Company SEC Documents, the Company is not subject to any order, writ,
injunction, judgment, decree or award which would be reasonably expected to
have a Company Material Adverse Effect or to prevent or delay beyond the
Expiration Date consummation of the transactions contemplated hereby.
Section 2.10 Compliance. Except as set forth in Section 2.10 of the Company
Disclosure Schedule, neither the Company nor any of its Subsidiaries is in
conflict with, or in default or in violation under, (a) its respective
articles of association, certificate of incorporation, bylaws, or other
charter or organization documents, (b) any law, statute, rule or regulation
applicable to it or any of its respective properties or assets or (c) as of
the date hereof, any loan or credit agreement, note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which it is a party or by which its assets may be
bound, except for any such conflicts, defaults or violations which (i) would
not be reasonably expected to prevent or delay beyond the Expiration Date the
consummation of the transactions contemplated hereby and (ii) would not be
reasonably likely to have a Company Material Adverse Effect. The Company and
its Subsidiaries hold all licenses, permits, approvals and other
authorizations of Governmental Entities, and are in substantial compliance
with all applicable laws and governmental regulations in connection with their
businesses as now being conducted, except for such matters as would not be
reasonably likely to have a Company Material Adverse Effect.
Section 2.11 Employee Benefit Plans. (a) For purposes of this Agreement,
"Benefit Plans" shall mean all employee benefit plans, agreements and
programs, and management employment agreements (including any "employee
benefit plan" within the meaning of Section 3(3) of ERISA) maintained or
contributed to by (or with respect to which there is an obligation to
contribute by) the Company or any of its Subsidiaries or any organization
which, together with the Company and/or any such Subsidiary, would be treated
as a "single employer" within the meaning of Section 414(b) or (c) of the
Internal Revenue Code of 1986, as amended (the "Code"), for the benefit of any
employee or former employee of the Company or any of its Subsidiaries or to
which the Company or any such Subsidiary or organization is a party. Section
2.11(a) of the Company Disclosure Schedule sets forth a list of each material
Benefit Plan. No Benefit Plan is a multiemployer plan as defined in Section
4001(a)(3) or 3(37) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and subject thereto.
(b) With respect to each material Benefit Plan, the Company has made
available to Purchaser (i) true and complete copies of any written plan
document relating thereto and any description thereof, (ii) the most recent
determination or opinion issued by the U.S. Internal Revenue Service, if
applicable, and (ii) the most recent U.S. Internal Revenue Service Form 5500
filings, if applicable.
(c) Except as set forth in Section 2.11(c) of the Company Disclosure
Schedule, and except where a failure to do so would not be reasonably likely
to have a Company Material Adverse Effect, (i) each Benefit Plan has been
established and administered in accordance with its terms and in compliance
with the applicable provisions of ERISA, the Code and other applicable laws,
(ii) each Benefit Plan intended to qualify under Section 401(a) of the Code is
the subject of a favorable determination from the U.S. Internal Revenue
Service as to its qualified status and, to the knowledge of the Company, no
event has occurred and no condition exists which would be
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reasonably likely to result in the revocation of any such determination, and
(iii) no Benefit Plan covered by Title IV of ERISA has been terminated and no
proceedings have been instituted to terminate or appoint a trustee to
administer any such plan. Solely for purposes of this Section 2.11(c), the
term "Benefit Plan" shall include Benefit Plans no longer in effect, but which
were in effect at any time after January 1, 1992, or, as to any Subsidiary
acquired after such date, after the date such Subsidiary was acquired.
Section 2.12 Labor Matters. Except as set forth in Section 2.12 of the
Company Disclosure Schedule, neither the Company nor any of its Subsidiaries
is a party to any collective bargaining or other labor union contracts
applicable to any Person employed by the Company or any of its Subsidiaries.
As of the date hereof, there is no pending or, to the knowledge of the
Company, threatened material labor dispute, strike or work stoppage against
the Company or any of its Subsidiaries which would be reasonably likely to
have a Company Material Adverse Effect. Neither the Company nor its
Subsidiaries, nor their respective representatives or employees, has committed
any unfair labor practices in connection with the operation of the respective
businesses of the Company or its Subsidiaries which would be reasonably likely
to have a Company Material Adverse Effect. As of the date hereof, there is no
pending or, to the knowledge of the Company, threatened charge or complaint
against the Company or its Subsidiaries by the National Labor Relations Board
or any comparable state or foreign governmental agency which, if adversely
determined, would be reasonably likely to have a Company Material Adverse
Effect. The Company and its Subsidiaries are in compliance in all material
respects with all applicable laws and regulations respecting employment,
employment practices, labor relations, employment discrimination, sexual
harassment, employment termination, safety and health, wages, hours and terms
and conditions of employment. As of the date hereof, there is no pending or,
to the knowledge of the Company, threatened grievance alleging a violation of
any collective bargaining agreement or other labor union contract which, if
adversely determined, would be reasonably likely to have a Company Material
Adverse Effect. To the knowledge of the Company, the Company and its
Subsidiaries have complied and are complying in all material respects with the
terms and conditions of any collective bargaining or other labor union
contracts applicable to it or them.
Section 2.13 Tax Matters. (a) For purposes of this Agreement: (i) "Taxes"
means any taxes, charges, fees, levies, or other assessments imposed by any
Governmental Entity, including all net income, gross income, sales and use,
value added, ad valorem, transfer, gains, profits, excise, franchise, real and
personal property, gross receipts, capital stock, business and occupation,
disability, employment, payroll, license, estimated or withholding taxes or
charges imposed by any Governmental Entity, and includes any interest and
penalties on or additions to any such taxes; and (ii) "Tax Return" means a
report, return or other statement required to be supplied to a Governmental
Entity with respect to Taxes.
(b) Except as set forth in Section 2.13(b) of the Company Disclosure
Schedule, the Company and each of its Subsidiaries has, or has caused to be,
timely filed or will timely file on or prior to the Closing Date all Tax
Returns required to be filed by, or which include, the Company and its
Subsidiaries, that are due on or prior to the Closing Date and except as
provided in Section 2.13(c), has, or has caused to be, paid, or will pay on or
prior to the Closing Date, all taxes owed by the Company and its Subsidiaries
for periods ending on or prior to the Closing Date, in each case except where
failure to so file or so to pay would not be reasonably likely to have a
Company Material Adverse Effect.
(c) Each of the Company and, where applicable, its Subsidiaries has
established on its books and records reserves adequate to pay all unpaid Taxes
of the Company or such Subsidiary, as the case may be, in accordance with and
to the extent required by GAAP, which reserves are reflected on the most
recent consolidated financial statements of the Company and its Subsidiaries
contained in the Company SEC Documents.
Section 2.14 Properties. Section 2.14 of the Company Disclosure Schedule
contains a true and complete list of all real properties owned and all real
properties leased by the Company or any of its Subsidiaries, and identifies
the relevant owner or lessee thereof, as the case may be. Each of the Company
and its Subsidiaries has good and marketable title to all real properties
owned by it or a valid and subsisting leasehold interest in all real
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properties not owned but used or occupied by it (collectively, the "Company
Properties"), in each case free and clear of any mortgage, security interest,
deed of trust, encumbrance or other lien, except (a) as reflected in the
consolidated financial statements of the Company and its Subsidiaries
contained in the Company SEC Documents, (b) for any mortgage, security
interest, deed of trust, encumbrance or other lien arising by reason of (i)
Taxes, not yet delinquent or which are being contested in good faith, (ii)
deposits to secure public or statutory obligations in lieu of surety or appeal
bonds entered into in the ordinary course of business and (iii) operation of
law in favor of carriers, warehousemen, landlords, mechanics, materialmen,
laborers, employees or suppliers, incurred in the ordinary course of business
for sums which are not yet delinquent or are being contested in good faith by
negotiations or by appropriate proceedings which suspend the collection
thereof (collectively, "Permitted Liens"), (c) for any mortgage, security
interest, deed of trust, encumbrance or other lien as would not be reasonably
likely to have a Company Material Adverse Effect or (d) as set forth in
Section 2.14 of the Company Disclosure Schedule. Except as set forth in
Section 2.14 of the Company Disclosure Schedule, there are no pending or, to
the knowledge of the Company, threatened condemnation proceedings against or
affecting any material Company Properties, and none of the material Company
Properties is subject to any commitment or other arrangement for its sale to a
third party other than in the ordinary course of business.
Section 2.15 Environmental Matters. (a) For purposes of this Agreement, the
following terms shall have the following meanings: (i) "Hazardous Substances"
means petroleum, petroleum by-products, polychlorinated biphenyls and any
other chemicals, materials, substances or wastes which are currently defined
or regulated as "hazardous substances," "hazardous materials," "hazardous
wastes," "extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," "toxic air pollutants," "pollutants," or
"contaminants" or words of similar meaning in any language under any
Environmental Law; and (ii) "Environmental Law" means any law, order,
regulation, decree, permit, license, ordinance, or other foreign, federal,
state or local governmental requirement relating to pollution, the protection
of human health and the environment, the discharge or release of Hazardous
Substances into the environment, or the exposure to Hazardous Substances in
the work place which regulates the conduct of the Company and its Affiliates.
(b) Except as described in Section 2.15 of the Company Disclosure Schedule
or as would not be reasonably likely to have a Company Material Adverse
Effect: (i) neither the Company nor any of its Subsidiaries is in violation
of, or subject to any claim, order, judgment or consent decree under, any
applicable Environmental Law; (ii) since 1993 and, with respect to periods
prior thereto to the best of the Company's knowledge, there have been no
releases of material quantities of Hazardous Substances or other conditions or
occurrences at any of the properties currently owned or leased by the Company
or any of its Subsidiaries, or in connection with the business or operations
of the Company and its Subsidiaries, that would be reasonably likely to give
rise to liability under any applicable Environmental Law; (iii) neither the
Company nor any of its Subsidiaries has been notified by a Governmental Entity
that it is liable under applicable Environmental Laws for releases of
Hazardous Substances at any off-site location to which the Company or any of
its Subsidiaries sent Hazardous Substances for disposal; and (iv) the Company
and each of its Subsidiaries holds, and is in compliance with, all permits,
licenses and other authorizations required under any applicable Environmental
Law.
Section 2.16 Material Contracts and Commitments. (a) Section 2.16 of the
Company Disclosure Schedule contains a true and complete list of the following
contracts or agreements of the Company or any of its Subsidiaries (such
contracts or agreements, "Material Contracts"), each as of the date hereof:
(i) agreements with respect to joint ventures, consortiums or joint
development arrangements having annual revenues in excess of $5,000,000;
(ii) loan agreements, notes, bonds, debentures, debt instruments, evidences
of indebtedness, debt securities, or other contracts relating to any financial
indebtedness of the Company or any of its Subsidiaries in an amount in excess
of $5,000,000, or that obligate the Company or any of its Subsidiaries to
pledge, encumber or restrict assets in an amount in excess of $5,000,000, or
that provide the direct or indirect guaranty or suretyship by the Company or
any of its Subsidiaries of any indebtedness of a third party;
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(iii) contracts by which the Company or any of its Subsidiaries has
committed to extend credit to third parties (other than pursuant to ordinary
course trade payment terms);
(iv) contracts that limit or restrict the ability of the Company or any of
its Subsidiaries to compete or otherwise to conduct business in any material
manner or place;
(v) contracts with Shareholder or its Affiliates requiring aggregate
payments still to be made in excess of $5,000,000, or that have been entered
into other than in the ordinary course of business or on other than arm's
length terms;
(vi) any guaranty, surety bond or letter of credit with a face value in
excess of $5,000,000, guaranteeing a performance or payment obligation of the
Company or a Subsidiary; and
(vii) contracts with directors and officers of the Company and its
Subsidiaries and any of their Affiliates (other than contracts with the
Shareholders and its Affiliates).
(b) The Company has heretofore made available to Purchaser true and complete
copies of the contracts required to be set forth in Section 2.16 of the
Company Disclosure Schedule. Except as set forth in Section 2.16 of the
Company Disclosure Schedule, as of the date hereof, each such contract is
valid and binding in accordance with its terms, and is in full force and
effect, neither the Company nor any of its Subsidiaries is in default in any
material respect with respect to any such contract, nor, to the knowledge of
the Company, does any condition exist that with notice or lapse of time or
both would constitute such a material default thereunder or permit any other
party thereto to terminate such contract. Except as set forth in Section 2.16
of the Company Disclosure Schedule, as of the date hereof, no party has given
any written notice of termination or cancellation of any such contract or that
it intends to assert a breach of, or seek to terminate or cancel, any such
contract, whether as a result of the transactions contemplated by this
Agreement or otherwise.
Section 2.17 Intellectual Property. (a) As used herein "Intellectual
Property" means inventions, patents, patent applications (pending or
otherwise), copyrights, service marks, trademarks, trade names, brand names,
and registrations or applications for registration of any of the foregoing;
and trade secrets, know-how, and the intellectual property rights subsisting
in computer software and databases.
(b) Section 2.17(b) of the Company Disclosure Schedule contains a list of
the material patents and registered trademarks, and pending applications
therefor, owned by the Company and its Subsidiaries as of the date hereof.
Section 2.17(b) of the Company Disclosure Schedule contains a list of all
material Intellectual Property licensed by the Company or any of its
Subsidiaries from any Person as of such date and a list of all material
Intellectual Property licensed by any Person from the Company or any of its
Subsidiaries as of such date. Except as set forth in Section 2.17(b) of the
Company Disclosure Schedule and except as would not be reasonably likely to
have a Company Material Adverse Effect, the Company or its Subsidiaries have
(i) good and marketable title (free and clear of liens or encumbrances of any
kind) to and (ii) the exclusive right to sell, transfer, assign and license
all right, title and interest in and to the Intellectual Property listed as
being owned by the Company and its Subsidiaries in Section 2.17(b) of the
Company Disclosure Schedule. Except as set forth in Section 2.17(b) of the
Company Disclosure Schedule and except as would not be reasonably likely to
have a Company Material Adverse Effect, the Intellectual Property listed as
being owned by the Company and its Subsidiaries in Section 2.17(b) of the
Company Disclosure Schedule has been duly registered to the extent applicable
with, filed in, or issued by the appropriate governmental agency in each
appropriate jurisdiction, such registration, filing and issuance remains in
full force and effect and to the knowledge of the Company no claim adverse to
the interests of the Company or its Subsidiaries has been asserted, in
litigation or otherwise with respect to such Intellectual Property. Except as
set forth in Section 2.17(b) of the Company Disclosure Schedule and except as
would not be reasonably likely to have a Company Material Adverse Effect, the
Company and its Subsidiaries have performed all material obligations required
to be performed by them, and are not in default under any license or other
agreement granting them the right to use, or otherwise relating to, material
Intellectual Property.
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(c) Except as set forth in Section 2.17(c) of the Company Disclosure
Schedule and except as would not be reasonably likely to have a Company
Material Adverse Effect, (i) neither the Company nor any of its Subsidiaries
has received, as of the date hereof, any notice to the effect, or has
knowledge, that any of its Intellectual Property or the use thereof by the
Company or any of its Subsidiaries or the products or conduct of the business
of the Company or its Subsidiaries infringes the intellectual property rights
of any Person; (ii) to the best of the Company's knowledge, no source code
relating to computer software owned by the Company or any of its Subsidiaries
has been made available to any Person other than pursuant to escrow or similar
arrangements identified in Section 2.17(c) of the Company Disclosure Schedule;
(iii) with respect to Intellectual Property comprising trade secrets, know-how
and other confidential information, neither the Company nor any of its
Subsidiaries has disclosed any such information to any Person, other than
pursuant to the terms and conditions of written confidentiality agreements
which, to the knowledge of the Company, are valid and enforceable in
accordance with their respective terms; and (iv) the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby will not breach, violate or conflict with any agreements
of the Company or its subsidiaries regarding Intellectual Property.
(d) Except as set forth in Section 2.17(d) of the Company Disclosure
Schedule and except as could not reasonably be expected to have a Company
Material Adverse Effect, the operation of the Company and its Subsidiaries as
presently conducted requires no rights under Intellectual Property other than
rights under Intellectual Property owned by or licensed to the Company or its
Subsidiaries.
Section 2.18 Opinion of Financial Advisor. The Company has received the
opinion of Merrill Lynch to the effect that, as of the date hereof, the Share
Offer Price to be received by the holders of Company Shares pursuant to the
Offer is fair to such holders from a financial point of view, and a complete
and correct executed copy of such opinion has been, or promptly upon receipt
thereof will be, delivered to Purchaser.
Section 2.19 Brokers. 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 or
on behalf of the Company or any of its Affiliates, other than Merrill Lynch,
the fees and expenses of which shall be paid in full by the Company. The
Company has heretofore furnished to Purchaser a true and complete description
of the agreement between the Company and Merrill Lynch relating to the
transactions contemplated hereby, including the terms regarding payment and
all amounts payable by the Company thereunder.
Section 2.20 Guarantees. Set forth in Section 2.20 of the Company Disclosure
Schedule is a list of all guarantees, performance bonds, indemnities and other
obligations (collectively, the "Guarantees") provided, or caused to be
provided, by Shareholder or any of its Affiliates to or on behalf of the
Company or any of its Subsidiaries as of the date hereof.
Section 2.21 Schedule 14D-9 and Schedule 14D-1. None of the information
supplied by the Company or its Subsidiaries for inclusion or incorporation by
reference in the documents pursuant to which the Offer will be made, including
the Schedule 14D-1 and the Offer to Purchase will, at the time the Offer to
Purchase is filed with the Commission, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make
the statements made, in light of the circumstance under which they are made,
not misleading. None of the information in the Schedule 14D-9, at the time the
Schedule 14D-9 is filed with the Commission, will contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which they are made, not
misleading. Notwithstanding the foregoing, no representation or warranty is
made with respect to any information with respect to the Purchaser or its
officers, directors or Affiliates, provided to the Company by Purchaser in
writing for inclusion in Schedule 14D-9. The Schedule 14D-9 will comply in all
material respects with the Exchange Act and the rules and regulations
thereunder and any other applicable laws.
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ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company as follows:
Section 3.1 Organization and Qualification. Purchaser is a corporation duly
organized and validly existing under the laws of the Netherlands and has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as it is now being conducted.
Purchaser is duly qualified or licensed to do business in each jurisdiction in
which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary,
except where the failure to be so qualified or licensed would not have a
Material Adverse Effect with respect to Purchaser and its Subsidiaries, taken
as a whole (a "Purchaser Material Adverse Effect").
Section 3.2 Authorization, Validity and Enforceability. Purchaser has all
requisite corporate power and authority to enter into this Agreement and to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement, the performance by Purchaser of its respective obligations
hereunder and the consummation by Purchaser of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Purchaser. This Agreement has been duly executed and delivered by Purchaser
and constitutes the legal, valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, except as such
enforceability may be limited by any applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors generally, and by general principles of equity, regardless of
whether such equitable principles are applied in a proceeding at law or in
equity.
Section 3.3 No Conflict or Violation. Subject to making the filings and
obtaining the approvals identified in Section 3.4, the execution and delivery
of this Agreement by Purchaser does not, and the performance by Purchaser of
its obligations hereunder and the consummation by Purchaser of the
transactions contemplated hereby will not (a) conflict with or violate the
articles of association, certificate of incorporation, by-laws, partnership
agreement or other charter or organization document of Purchaser or any of its
material Subsidiaries, (b) conflict with or violate any law, statute, rule,
regulation, order, judgment, writ, injunction or decree applicable to
Purchaser or any of its Subsidiaries or any of its properties or assets or (c)
result in a violation or breach of or constitute a default under (or an event
which with the giving of notice or the lapse of time or both would constitute
a default under), require any consent, approval or authorization under, result
in the loss of a material benefit or result in any provision becoming
applicable or effective under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the creation of a
lien or other encumbrance on any property or asset of its or any of its
Subsidiaries pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Purchaser or any of its Subsidiaries is a party or by which Purchaser
or any of its Subsidiaries or any material property or asset of Purchaser or
any of its Subsidiaries may be bound or affected, except in the case of each
of clauses (b) and (c) for any such conflicts, violations, breaches, defaults
or other occurrences which would not be reasonably likely to result in a
Purchaser Material Adverse Effect or prevent or delay beyond the Expiration
Date Purchaser from consummating the transactions contemplated hereby.
Section 3.4 Consents and Approvals. The execution and delivery of this
Agreement by Purchaser does not, and the performance by Purchaser of its
obligations hereunder and the consummation by Purchaser of the transactions
contemplated hereby will not require Purchaser to obtain any consent,
approval, authorization or permit of, or to make any filing with or
notification to, any Governmental Entity, except (a) as more specifically
described in Section 3.4 of the disclosure schedule provided by Purchaser and
attached hereto and made a part hereof (the "Purchaser Disclosure Schedule"),
for (i) applicable requirements, if any, of the Exchange Act and Blue Sky
Laws, (ii) the prior notification and reporting requirements under Antitrust
Laws, (iii) the voluntary notification under Exon-Florio, and (iv) any filing
required to be made with the Australian Foreign Investment Review Board; and
(b) where the failure to obtain such consents, approvals, authorizations and
permits, or to make such filings or notifications, would not be reasonably
expected to constitute a Purchaser Material Adverse
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Effect or prevent or delay beyond the Expiration Date Purchaser from
consummating the transactions contemplated hereby.
Section 3.5 Brokers. 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 or
on behalf of Purchaser, other than Credit Suisse First Boston, the fees and
expenses of which shall be paid in full by Purchaser.
Section 3.6 Financing. Purchaser has adequate cash resources available to
consummate the Offer.
ARTICLE IV.
COVENANTS
Section 4.1 Interim Operations. From the date of this Agreement until the
Closing Date, except as set forth in Section 4.1 of the Company Disclosure
Schedule or as expressly contemplated by any other provision of this
Agreement, unless Purchaser has consented thereto, the Company shall, and
shall cause each of its Subsidiaries to:
(a) conduct its business and operations only in the ordinary course of
business consistent with past practices;
(b) use reasonable efforts to preserve intact the business organizations,
rights, licenses, permits and franchises of the Company and its
Subsidiaries, maintain their existing relationships with customers,
suppliers and other Persons having business dealings with them and keep
available the services of its officers and employees;
(c) use reasonable efforts to keep in full force and effect adequate
insurance coverages and maintain and keep its properties and assets in good
repair, working order and condition, normal wear and tear excepted;
(d) not amend or modify its articles of association, certificate of
incorporation, by-laws or comparable governing documents;
(e) not authorize for issuance, issue, sell, grant, deliver, pledge or
encumber or agree or commit to issue, sell, grant, deliver, pledge or
encumber (to or with any party other than the Company and any of its
wholly-owned Subsidiaries) any shares of any class or series of capital
stock of the Company or any of its Subsidiaries or any other equity or
voting security or equity or voting interest of the Company or any of its
Subsidiaries, any securities convertible into or exercisable or
exchangeable for any such shares, securities or interests, or any options,
warrants, calls, commitments, subscriptions or rights to purchase or
acquire any such shares, securities or interests (other than issuances of
Company Shares (i) upon exercise of outstanding Stock Options granted to
directors, officers, employees and consultants of the Company in accordance
with the Option Plans as currently in effect (ii) pursuant to conversion of
the TOPrS);
(f) not, except for conversion of the TOPrS in accordance with their
terms, (i) split, combine or reclassify any shares of its capital stock or
issue or authorize or propose the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of its capital
stock, (ii) in the case of the Company or any Subsidiary of the Company
that is not wholly-owned by the Company, declare, set aside or pay any
dividends on, or make other distributions in respect of, any capital stock
or (iii) repurchase, redeem or otherwise acquire, or agree or commit to
repurchase, redeem or otherwise acquire, any shares of capital stock or
other equity or debt securities or equity interests of the Company or any
of its Subsidiaries (other than to fulfill its obligations under the Option
Plans as currently in effect);
(g) except as otherwise provided in this Agreement, not amend or
otherwise modify the terms of any Stock Options or any Option Plan the
effect of which would be to make such terms more favorable to the holders
thereof or Persons eligible for participation therein; or reserve any
additional Company Shares for issuance under any such Plan;
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(h) except as required by law or existing written agreements, enter into,
adopt or materially amend any incentive, compensation, option or severance
plan or arrangement (including, without limitation, any Benefit Plan) for
the benefit or welfare of any current or former director, officer or
employee of the Company or any of its Subsidiaries, or (except for normal
increases in the ordinary course of business that are consistent with past
practices) increase the compensation or benefits of any persons or pay any
benefit not required by any existing plan and arrangement;
(i) not acquire or agree to acquire (by merger, consolidation,
acquisition of stock or assets or otherwise) from any Person, any
corporation, partnership, joint venture, association or other business
organization or division thereof or otherwise acquire or agree to acquire
any assets of another Person other than the purchase of assets in the
ordinary course of business consistent with past practice or in an
aggregate amount of less than $5,000,000;
(j) not, except as an intercompany transaction between the Company and
any of its wholly-owned Subsidiaries, incur, assume, prepay or become
liable for or guarantee any long term, or material short term, indebtedness
(including draw-downs on letters or lines of credit, other than letters of
credit in support of ordinary course transactions with trade creditors),
refinance any such indebtedness or issue or sell any notes, bonds,
debentures, debt instruments, evidences of indebtedness or other debt
securities of the Company or any of its Subsidiaries or any options,
warrants or rights to purchase or acquire any of the same, except for (i)
advances, loans or other financial indebtedness, including refinancing of
its existing lines of credit, in an aggregate amount (together with all
other such financial indebtedness of the Company and its Subsidiaries
outstanding) of net financial indebtedness at any time outstanding not
exceeding $700,000,000; provided, however that any refinancing permitted
above shall be (A) on commercially reasonable terms and (B) prepayable
without penalty on no more than 90 days advance written notice and (ii)
obtaining, extending or renewing existing guarantees, bonds and letters of
credit issued by financial institutions in the ordinary course of business
in an aggregate amount (together with all other such items outstanding) at
any time outstanding not exceeding 1.25 times the aggregate amount of such
guarantees, bonds and letters of credit outstanding as of June 25, 1998,
which amount the Company represents to be $ 426.2 million.
(k) not sell, lease, license, encumber or otherwise dispose of, or agree
to sell, lease, license, encumber or otherwise dispose of, any properties
or assets of the Company or any of its Subsidiaries, except as intercompany
transactions between the Company and any of its wholly-owned Subsidiaries
or in transactions with any other Person in the ordinary course of
business, consistent with past practice and in an aggregate amount of less
than $5,000,000.
(l) not authorize or make any capital expenditures, other than capital
expenditures (i) authorized or incurred in the ordinary course of business
consistent with past practice during the period up to and including
December 31, 1998 not exceeding, in the aggregate for the Company and all
of its Subsidiaries, $15,000,000 and (ii) if the Closing Date has not
occurred prior to January 1, 1999, authorized or incurred in the ordinary
course of business consistent with past practice during any subsequent
fiscal quarter of the Company, in each case not exceeding, in the aggregate
for the Company and all of its Subsidiaries, $15,000,000;
(m) not make any material change in any of its accounting or financial
reporting methods, principles or practices, except as may be required by
GAAP;
(n) except in the ordinary course of business consistent with past
practices, not amend, modify or terminate any Material Contract required to
be listed in Section 2.16 of the Company Disclosure Schedule or waive,
release or assign any material rights or claims thereunder or authorize,
execute or deliver any agreement, arrangement or understanding that, if
existing on the date hereof, would be included in Section 2.16 of the
Company Disclosure Schedule (other than in response to Section 2.16(a)(iii)
thereof);
(o) not adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries;
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(p) not take any action that would, or would be reasonably likely to,
result in any of the Offer Conditions not being satisfied or the
satisfaction of any of the Offer Conditions being delayed beyond the
Expiration Date; and
(q) not make any loans, advances or capital contributions to any Person
other than as required by existing agreements or in the ordinary course of
business consistent with past practice;
(r) not agree or commit in writing or otherwise to do or, in the case of
clauses (a) through (c), to do anything inconsistent with, any of the
foregoing.
For purposes of this Section 4.1, the term "wholly-owned Subsidiary" shall
be deemed to include any Subsidiary of which the Company or any such
Subsidiary owns at least 99% of the outstanding capital stock or other equity
interests.
Section 4.2 No Solicitation. (a) Prior to the Closing Date, the Company
agrees that neither it nor any of its Subsidiaries shall, nor shall the
Company nor any of its Subsidiaries authorize or permit any of their
respective Representatives (as defined below) or Affiliates to, directly or
indirectly, (a) solicit, initiate, encourage, or take any other action to
facilitate, any inquiry or the making of any proposal or offer (i) with
respect to or that could reasonably be expected to result in any acquisition
or sale of all or any significant portion of the assets of, or any equity
interest in (whether newly-issued equity interests or outstanding equity
interests), the Company or any of its Subsidiaries or any tender offer
(including a self tender offer) or exchange offer, merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving the Company or any of the Company's Subsidiaries (each
such proposal or offer, an "Acquisition Proposal") or (ii) which could
reasonably be expected to impede, frustrate, prevent, delay or nullify any of
the transactions contemplated by this Agreement or to materially diminish the
benefits to Purchaser of the transactions contemplated by this Agreement, (b)
take any action to enter into an agreement for the sale or other disposition
by the Company or any of its Subsidiaries of any significant portion of the
assets of or a sale of shares of capital stock whether by merger or other
business combination or tender or exchange offer or (c) enter into or
participate in any discussions or negotiations regarding any of the foregoing,
or in the furtherance of any inquiries regarding any of the foregoing, or
furnish to any other Person (other than Purchaser and its Representatives) any
information with respect to its business, properties or assets or any of the
foregoing; provided that the foregoing clauses (a), (b) and (c) shall not
prohibit the Company's Supervisory Board or Management Board from (i)
furnishing information concerning the Company and its business, properties or
assets to a third party who has made a bona fide written transaction proposal
to acquire all of the outstanding Company Shares and TOPrS or all of the
assets of the Company and its Subsidiaries, which is not subject to any
material contingencies relating to financing (it being acknowledged that a
highly confident letter or commitment letter shall not be deemed to have
resolved any such material contingency), in response to a request for such
information, pursuant to a confidentiality agreement on terms no less
favorable to the Company than the Confidentiality Agreement dated July 2, 1998
between Purchaser and the Company (the "Confidentiality Agreement"), so long
as neither such request for information nor such transaction proposal was
solicited, initiated, encouraged or facilitated in violation of clause (a)
above, (ii) engaging in discussions or negotiations with such a third party
who has made such a transaction proposal or (iii) following receipt of such a
transaction proposal, taking and disclosing to its shareholders a position
contemplated by Rule 14e-2(a) under the Exchange Act or disclosing to its
shareholders information required by Schedule 14D-9; provided, further, that
any such action referred to in the foregoing clauses (i), (ii) and (iii) may
be taken by the Company only if its Management Board or Supervisory Board, as
applicable, shall have concluded in good faith and on the basis of advice (x)
from the Company's financial advisors, that such transaction proposal involves
consideration to the holders of Company Shares and TOPrS that is superior to
the Offer Consideration and is otherwise superior to the Offer ("Superior
Proposal"), and (y) from independent outside counsel that failure to take such
action would constitute a breach of the fiduciary duties of such Boards under
Dutch Law; and provided, further, that the Company shall not, and shall not
authorize or permit any other such Persons to, take any of the foregoing
actions referred to in clauses (i) through (iii) until after providing prior
written notice to Purchaser. If the Company or its Representatives or
Affiliates or the Company's Supervisory Board or Management Board receives any
request for information or an inquiry, proposal or offer
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relating to any of the foregoing, then the Company shall orally (as promptly
as practicable and no later than one day) and in writing (as promptly as
practicable) inform Purchaser of the terms and conditions of such proposal,
inquiry or offer and the identity of the Person making it. The Company agrees
that it will and will cause its Affiliates and their respective
Representatives to immediately cease and cause to be terminated any
activities, discussions or negotiations existing at the date hereof with any
parties conducted heretofore with respect to any of the foregoing. The Company
agrees that it will take the necessary steps to promptly inform its
Representatives of the obligations undertaken in this Section.
(b) Immediately following the execution of this Agreement, the Company shall
request each Person which has heretofore executed a confidentiality agreement
in connection with its consideration of acquiring the Company or any portion
thereof to return all confidential information heretofore furnished to such
Person by or on behalf of the Company. Neither the Management Board nor the
Supervisory Board of the Company shall, except as expressly permitted by this
Agreement (A) withdraw or modify, in any manner adverse to Purchaser, or take
any public position inconsistent with, their approval and recommendation of
the Offer or the Acquisition Agreement or (B) approve or recommend any
Acquisition Proposal and shall not resolve to do any of the foregoing.
Section 4.3 Access to Information. From the date of this Agreement until the
Closing Date, upon reasonable prior notice, the Company shall, and shall cause
each of its Subsidiaries, Affiliates and Representatives to, give Purchaser
and its Representatives reasonable access, during normal business hours, to
the executive officers and employees and the books, records, contracts,
commitments, properties, offices, plants and other facilities of the Company
and its Subsidiaries; provided that the requirements of this section shall not
apply to, and the Company shall not be required to provide access to, books,
records, contracts, commitments or other information in the possession or
control of the Company or any of its Subsidiaries which pertains solely to
business operations of the Shareholder or any of its Affiliates. Any
investigation of the Company and its Subsidiaries by Purchaser and its
Representatives shall not affect the representations and warranties made by
the Company in this Agreement or limit or discharge the obligations of the
Company pursuant to Section 4.4 of this Agreement. The Company shall furnish
promptly to Purchaser (a) a copy of each report, schedule, registration
statement and other document filed by it or its Subsidiaries during such
period pursuant to the requirements of the Securities Act, Exchange Act and
Blue Sky Laws and (b) all other information concerning its or its
Subsidiaries' business, properties, and personnel as Purchaser may reasonably
request.
Section 4.4 Notice of Certain Matters. The Company shall give prompt notice
to Purchaser, and Purchaser shall give prompt notice to the Company, of (a)
the occurrence or non-occurrence of any event which would cause (i) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (ii) any covenant, condition or
agreement contained in this Agreement or any Offer Condition not to be
complied with or satisfied in any material respect, (b) any failure of the
Company or of Purchaser, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder in any material respect, and (c) any notice or other communication
from any third party alleging that the consent of such third party is or may
be required in connection with the transactions contemplated by this
Agreement; provided that the delivery of any such notice shall not limit or
otherwise affect any representations and warranties contained herein or the
remedies available hereunder to the party receiving such notice.
Section 4.5 Further Actions. (a) Each of the parties hereto shall use all
commercially reasonable efforts to take, or cause to be taken, all actions, do
or cause to be done all things necessary, proper or advisable under applicable
laws and regulations, and fully cooperate with and provide reasonable
assistance to the other and its Representatives, as may be required to
consummate the transactions contemplated hereby as promptly as practicable,
including (i) making all filings, applications, notifications, reports,
submissions and registrations with, and obtaining all consents, approvals,
authorizations or permits of, Governmental Entities or other Persons or
entities necessary for the consummation of the transactions contemplated
hereby, including pursuant to Antitrust Laws, Exon-Florio, the Exchange Act,
Blue Sky Laws, labor laws and regulations, foreign investment laws and
regulations and other applicable laws and regulations in effect in the United
States, the European
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Community, The Netherlands or any other jurisdiction, and (ii) taking such
actions and doing such things as the other party hereto may reasonably request
in order to cause any of the Offer Conditions to be fully satisfied. Prior to
making any application to or filing with any Governmental Entity or other
Person or entity in connection with this Agreement, the Company, on the one
hand, and Purchaser, on the other hand, shall provide the other with drafts
thereof and afford the other a reasonable opportunity to comment on such
drafts.
(b) Without limiting the generality of the foregoing, each of Purchaser and
the Company agrees to cooperate and use all commercially reasonable efforts
vigorously to contest and resist any action, suit, proceeding or claim, and to
have vacated, lifted, reversed or overturned any injunction, order, judgment
or decree (whether temporary, preliminary or permanent), that delays, prevents
or otherwise restricts the consummation of the transactions contemplated
hereby, and to take any and all actions (including the disposition of assets,
divestiture of businesses, or the withdrawal from doing business in particular
jurisdictions) and to enter into such agreements and undertakings (including
with respect to the conduct of the business of the Company and its
Subsidiaries after the Closing as may be required by foreign investment laws
and labor laws and regulations), as may be required by Governmental Entities
or other Persons as a condition to the granting of any such necessary
approvals or as may be required to avoid, vacate, lift, reverse or overturn
any injunction, order, judgment, decree or regulatory action; provided,
however, that in no event shall any party hereto be required to take any
action that would be reasonably likely to have a Company Material Adverse
Effect or a Purchaser Material Adverse Effect or that would not be required in
accordance with paragraph (c) below.
(c) Notwithstanding anything to the contrary contained in this Agreement,
the Company shall not and shall cause its Affiliates not to, and neither
Purchaser nor any of its Affiliates shall be required to divest any assets or
business of Purchaser or any of its Affiliates or of the Company or its
Subsidiaries or hold separate or otherwise take or commit to take any action
that materially limits its freedom of action with respect to any of their
respective assets or businesses, if in the aggregate such assets and/or
businesses are material to the condition, business, assets, liabilities or
results of operations of, in the case of Purchaser, the process control and
instrumentation operations of Purchaser and its Affiliates, taken as a whole
(with estimated annual revenues of $3 billion), or in the case of the Company,
to the Company and its Subsidiaries taken as a whole, respectively.
Section 4.6 Public Announcements. Unless otherwise required by applicable
law or requirements of the NYSE, at all times prior to the earlier of the
Closing Date or the termination of this Agreement, no party hereto shall or
shall permit any of its Subsidiaries to (and each party shall use its
reasonable best efforts to cause its Affiliates and Representatives not to)
issue any press release concerning this Agreement, or any of the transactions
contemplated hereby, without prior consultation with the other parties hereto.
Section 4.7 Expenses. Whether or not the transactions contemplated hereby
are consummated, subject to Section 5.2 hereof, all costs and expenses
incurred in connection with this Agreement, including fees and disbursements
of Representatives, shall be borne by the party which incurs such cost or
expense; provided, however, that all out-of-pocket costs and expenses related
to the printing, filing and mailing of the Offer Documents shall be borne by
Purchaser.
Section 4.8 Directors and Officers Indemnification Insurance. (a) For a
period of six years from and after the Closing Date, Purchaser shall, or shall
cause the Company to, exculpate, indemnify and hold harmless certain officers
and directors of the Company to the same extent as such persons are currently
exculpated and indemnified by the Company pursuant to those certain indemnity
agreements identified in Section 4.8(a) of the Company Disclosure Schedule
(the "Indemnified Parties") for acts or omissions occurring prior to the
Closing Date.
(b) For six years from the Closing Date, the Purchaser shall either (x)
cause the Company to maintain in effect the Company's current directors' and
officers' liability insurance covering those persons who are currently covered
on the date of this Agreement by the Company's directors' and officers'
liability insurance policy (a copy of which has been heretofore delivered to
Purchaser) (the "Insured Parties"); provided, however, that in no event shall
Purchaser or the Company be required to expend in any one year an amount in
excess of 150% of
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the annual premiums currently paid by the Company for such insurance which the
Company represents to be $395,000 for the twelve month period ending on
November 19,1998; and provided further that if the annual premiums of such
insurance coverage exceed such amount, the Purchaser shall cause the Company
to obtain a policy with the greatest coverage available for a cost not
exceeding such amount; provided further that the Purchaser may substitute for
such Company policies, policies with at least the same coverage containing
terms and conditions which are no less advantageous and provided that said
substitution does not result in any gaps or lapses in coverage with respect to
matters occurring prior to the Closing Date or (y) cause the Purchaser's
directors' and officers' liability insurance then in effect to cover those
persons who are covered on the date of this Agreement by the Company's
directors' and officers' liability insurance policy with respect to those
matters covered by the Company's directors' and officers' liability policy.
(c) The covenants set forth in this Section 4.8 shall survive the Closing
Date, shall be binding on Purchaser and all its successors and assigns, and
are intended for the benefit of, and shall be enforceable by, each of the
Company, the Indemnified Parties and the Insured Parties, and their respective
heirs and legal representatives.
Section 4.9 Post-Closing Restructuring. (a) Purchaser may, simultaneous with
or as soon as possible after the Closing, consummate a corporate
reorganization of the Company and its Subsidiaries which may include, without
limitation, (i) the sale and transfer by the Company or any of its
Subsidiaries of all or part of the assets of the Company or any of its
Subsidiaries to Purchaser or any Affiliates of Purchaser, (ii) the
consummation by the Company and one or more Dutch Subsidiaries of Purchaser of
a legal merger within the meaning of Section 2:309 of the Dutch Civil Code and
(iii) the commencement of the compulsory acquisition by Purchaser of Company
Shares from any remaining minority shareholder, in accordance with Section
2:92a of the Dutch Civil Code.
(b) The Company hereby agrees with Purchaser that, at Purchaser's request
and to the extent permitted by law, it shall take all actions reasonably
necessary or desirable to accomplish the corporate reorganizations referred to
in Section 4.9(a) including, without limitation, (i) the convening of the
necessary meetings of the holders of Company Shares and holders of TOPrS, the
Management Board and the Supervisory Board of the Company, (ii) the
consideration of any and all necessary or desirable resolutions by the
Management Board or the Supervisory Board of the Company for the purpose of
consummating such corporate reorganizations and (iii) the execution of any and
all reasonably requested documents, agreements or deeds that are necessary or
desirable to consummate any of such corporate reorganizations and the filing
or registration of any or all of such documents, agreements or deeds with the
appropriate authorities or agencies.
ARTICLE V.
TERMINATION
Section 5.1 Termination. This Agreement may be terminated and the Offer may
be abandoned at any time prior to the Closing Date:
(a) by mutual consent of Purchaser and the Company; or
(b) by action of either the Supervisory Board or Management Board of
Purchaser or the Supervisory Board and Management Board of the Company if:
(i) the Closing Date shall not have occurred on or before April 15,
1999 or, if the only condition remaining to be satisfied as of such
date shall be a condition set forth in either clause (i) or clause (ii)
of Annex A, May 31, 1999; provided that the right to terminate this
Agreement under this clause shall not be available to (A) Purchaser, if
(i) the failure of Purchaser to perform its obligations hereunder or
(ii) the failure of the representations and warranties contained in
Article III to be true and correct has to any material extent been the
cause of, or resulted in, the failure of the Closing to occur on or
before such date or (B) the Company, if (i) the failure of the Company
to perform its obligations
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hereunder or (ii) the failure of the representations and warranties
contained in Article II to be true and correct has to any material
extent been the cause of, or resulted in, the failure of the Closing to
occur on or before such date; or
(ii) a Governmental Entity (A) shall have issued an order, decree or
ruling or taken any other action (which the parties shall have used all
commercially reasonable efforts to resist, resolve or lift, as
applicable, in accordance with Section 4.5) permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by
this Agreement and such order, decree, ruling or other action shall
have become final and non-appealable or (B) shall have failed to issue
an order, decree or ruling or to take any other action (which order,
decree, ruling or other action the parties shall have used all
commercially reasonable efforts to obtain, in accordance with Section
4.5), which is necessary to fulfill the Offer Conditions and such
denial of a request to issue such order, decree or ruling or take such
other action shall have become final and nonappealable; provided,
however, that the right to terminate this Agreement under this Section
shall not be available to any party whose failure to comply with
Section 4.5 has to any material extent been the cause of such action or
inaction; or
(c) by action of the Supervisory Board of the Company on five days' prior
written notice to Purchaser if the Supervisory Board of the Company,
without violation of the obligations set forth in Section 4.2, withdraws
its approval or recommendation of the Offer or this Agreement and the
Company pays to Purchaser all expenses and other amounts as provided in
Section 5.2; or
(d) by action of the Supervisory Board or Management Board of Purchaser,
if the Supervisory Board or Management Board of the Company shall have
determined that an Acquisition Proposal is a Superior Proposal or shall not
have issued, or shall have withdrawn or modified (including by amendment of
the Schedule 14D-9) in a manner adverse to Purchaser, its approval or
recommendation of the Offer or this Agreement or shall have recommended an
alternative transaction proposal to the shareholders of the Company, or
shall have adopted any resolution to effect any of the foregoing; or any
corporation, partnership, person or other entity or group 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 Company
Shares or TOPrS or an Acquisition Proposal;
(e) by Purchaser, if the Offer is terminated (or expires in accordance
with its terms) without Purchaser having purchased any Company Shares or
TOPrS thereunder due to an occurrence which would result in a failure to
satisfy any of the Offer Conditions, unless any such failure shall have
been caused by or resulted from a failure of Purchaser to perform in any
material respect any covenant or agreement contained in this Agreement or
the failure of any representations or warranties contained in Article III
hereof to be true and correct in any material respect; or
(f) by Purchaser, if any of the representations and warranties of the
Company contained in Article II of this Agreement is or becomes untrue or
incorrect or the Company breaches any of its obligations under this
Agreement which (A) in either case would give rise to the failure of a
condition set forth in clause (C) of the Offer Conditions to be met and (B)
cannot or has not been cured prior to the earlier of (i) 15 days after the
giving of written notice to the Company of such untruth, incorrectness or,
as the case may be, breach and (ii) two Business Days prior to the date on
which the Offer expires; or
(g) by Purchaser, if (i) any of the representations and warranties of the
Shareholder contained in the Shareholder's Agreement that are qualified by
reference to a Company Material Adverse Effect is or becomes untrue or
incorrect or any such representation and warranty that is not so qualified
is or becomes untrue or incorrect in any respect that would be reasonably
likely to have a Company Material Adverse Effect or to prevent Shareholder
from consummating the transactions contemplated by the Shareholder's
Agreement, or (ii) the Shareholder breaches any of its obligations under
the Shareholder's Agreement; or
(h) by the Company, if the Offer has been terminated by Purchaser and if
(i) any of the representations and warranties of Purchaser contained in
Article III of this Agreement or in the Shareholder's Agreement is or
becomes, and at the time of termination remains, untrue or incorrect in any
material respect or (ii) Purchaser shall have breached or failed to comply
in any material respect with any of its obligations under this Agreement or
in the Shareholder's Agreement which breach shall not have been cured
within 15 days
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following notice from the Company to Purchaser of such breach and the
Company's intent to terminate pursuant to this provision.
Section 5.2 Effect of Termination. (a) In the event that any Person shall
have made an Acquisition Proposal and this Agreement is terminated by either
Party, or in the event this Agreement is otherwise terminated pursuant to
Section 5.1(c), (d), (f) or (g), the Company shall, within two days after
termination has occurred, pay to Purchaser in same day funds all of
Purchaser's reasonably documented out-of-pocket expenses (including the fees
and expenses of counsel and other advisors).
(b) In the event that this Agreement is terminated by the Company pursuant
to Section 5.1(c) or by Purchaser pursuant to either (i) Section 5.1(d) or
(ii) 5.1(e) because of an event described in paragraph (E) of Annex A, the
Company shall, within two days after termination has occurred, pay to
Purchaser in same day funds an amount equal to the sum of (i) $1.57 for each
Company Share outstanding as of the date hereof, and (ii) $2.45 for each TOPrS
outstanding as of such date. Any payment pursuant to this paragraph (b) shall
be in addition to any reimbursement pursuant to Section 5.2(a).
(c) In the event this Agreement is terminated pursuant to this Article V,
all future obligations and liabilities of the parties hereto shall terminate,
except the obligations of the parties described in Sections 2.19, 4.7 and this
Section 5.2. Nothing in this Section 5.2 shall relieve any party to this
Agreement of liability for breach of this Agreement.
Section 5.3 Extension; Waiver. At any time prior to the Closing Date, any
party hereto, by action taken by the Supervisory Board of the Company or the
Supervisory Board or Management Board of Purchaser, may, to the extent
permitted by law, (a) extend the time for the performance of any of the
obligations or other acts of the other party hereto, (b) waive any
inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein. Any such extension or waiver shall be valid only if
set forth in an instrument in writing signed by or on behalf of the party or
parties to be bound thereby.
ARTICLE VI.
MISCELLANEOUS
Section 6.1 Certain Definitions. The following terms shall, when used in
this Agreement, have the following respective meanings:
(a) "Affiliate" shall have the meaning assigned to such term in Section
12(b)-2 of the Exchange Act; provided that with respect to the Shareholder,
"Affiliate" shall not include the Company or any of its Subsidiaries.
(b) "Business Day" shall have the meaning set forth in Rule 14d-l(c)(6)
under the Exchange Act.
(c) "Expiration Date" means whichever date set forth in Section 5.1(b)(i)
shall apply in the circumstances, at the time of determination.
(d) "Governmental Entity" means any supranational, national, provincial,
state, municipal or local government, any instrumentality, subdivision,
court, arbitrator, administrative agency or commission or other authority
thereof, or any quasi-governmental or private body exercising any
regulatory, taxing, importing or other governmental or quasi-governmental
authority.
(e) "Material Adverse Effect" means any effect that, individually or in
aggregate, is materially adverse to the condition, business, assets,
liabilities or results of operations of a party and its Subsidiaries taken
as a whole, other than any effect resulting from (i) changes in general
economic conditions, (ii) the announcement and performance of this
Agreement and the transactions contemplated hereby and
22
<PAGE>
compliance with the covenants set forth in this Agreement, and (iii)
changes or developments in the industrial process control industry
generally or its markets and (iv), subject to Section 4.5, any actions
required under this Agreement to obtain any approval or authorization under
any Antitrust Law or from the Australian Foreign Investment Review Board
for the consummation of the Offer.
(f) "Person" means a natural person, corporation, limited liability
company, partnership, association, trust, unincorporated organization,
union or other employee group, Governmental Entity, or other entity or
group (as defined in the Exchange Act).
(g) "Representatives" when used with respect to any Person, means any
officer, director, managing director, employee or agent of such Person or
any of its Affiliates, including any investment banker, financial advisor,
attorney, accountant, consultant or other advisor, agent, representative or
expert retained by or acting on behalf of such Person or such Affiliate.
(h) "Subsidiary" when used with respect to any entity means any
corporation or other organization, whether incorporated or unincorporated,
(i) of which such entity or any other Subsidiary of such entity is a
general partner (excluding partnerships, the general partnership interests
of which held by such entity or any Subsidiary of such entity do not have a
majority of the voting interests in such partnership) or (ii) at least a
majority of the securities or other interests having by their terms
ordinary voting power to elect a majority of the management board,
supervisory board, board of directors or others performing similar
functions with respect to such corporation or other organization is
directly or indirectly owned or controlled by such entity or by any one or
more of its Subsidiaries; provided, however, that the term "Subsidiary"
when used with respect to Shareholder shall not include the Company or any
of its Subsidiaries.
(i) "Termination Date" means the date on which the Offer expires.
Section 6.2 Nonsurvival of Representations and Warranties. All
representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall be deemed to the extent expressly
provided herein to be conditions to the Offer and shall not survive
consummation thereof and thereafter neither Purchaser, the Company, nor any
Affiliate, officer, director, employee or shareholder of Purchaser, the
Company or their respective Subsidiaries shall have any liability with respect
thereto.
Section 6.3 Entire Agreement. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings other than the
Confidentiality Agreement among the parties with respect thereto. No addition
to or modification of any provision of this Agreement shall be binding upon
any party hereto unless made in writing and signed by each of the parties
hereto.
Section 6.4 Waiver. Any term or condition of this Agreement may be waived at
any time by the party that is entitled to the benefit thereof, but no such
waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the party waiving such term or condition. No
waiver by any party of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be a waiver of the same or any other term
or condition of this Agreement on any future occasion.
Section 6.5 Assignment; Binding Effect. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by either of
the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other party, provided, however, that Purchaser
may assign its rights and delegate its obligations hereunder to an Affiliate
of Purchaser and provided further, that such assignment and delegation shall
not relieve Purchaser of its obligations hereunder. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, except
for the provisions of Sections 4.8 and 6.10, nothing in this Agreement,
expressed or implied, is intended to confer on any Person and the parties
hereto or their respective heirs, successors, executors, administrators and
assigns any rights, remedies, obligations or liabilities under or by reason of
this Agreement.
23
<PAGE>
Section 6.6 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed duly given (a) on the date of delivery if
delivered personally, or by facsimile, upon confirmation of receipt, (b) on
the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the fifth Business Day
following the date of mailing if delivered by registered or certified mail
(airmail if international), return receipt requested, postage prepaid. All
notices hereunder shall be delivered as set forth below, or pursuant to such
other instructions as may be designated in writing by the party to receive
such notice:
(a) if to Purchaser, to
ABB Transportation Participations B.V.
PO Box 74690
NL-1070BR Amsterdam
The Netherlands
Fax: 31-20-445-9844
Attention: Managing Director
with a copy to:
ABB Asea Brown Boveri Ltd.
PO Box 8131
CH-8050 Zurich
Switzerland
Fax: 411-317-7992
Attention: CS-LE
and to:
White & Case LLP
1155 Avenue of the Americas
New York, NY 10036
Attention: Gregory Pryor, Esq.
Telephone: (212) 819-8200
Facsimile: (212) 354-8113
(b) if to the Company, to
Elsag Bailey Process Automation N.V.
World Trade Center
Schipol Boulevard 157
1118 B6 Luchthaven Schipol
The Netherlands
Attention: Managing Director: V. Cannatelli
Telephone: 011-31-20-
Facsimile: 011-31-20-
24
<PAGE>
with a copy to:
Elsag Bailey Process Automation NV
c/o Elsag Bailey, Inc.
29801 Euclid Avenue
Wickliffe, Ohio 44092-1898
Attention: General Counsel: Mark V. Santo
Telephone: (440) 585-5855
Facsimile: (440) 585-8821
and to:
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Attention: W. Preston Tollinger
Facsimile: (212) 309-6273
or to such other address as any party shall specify by written notice so
given, and such notice shall be deemed to have been delivered as of the date
so telecommunicated or personally delivered or on the fifth Business Day after
being deposited in the United States mail, if mailed.
Section 6.7 Severability. If any provision of this Agreement is held to be
illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (d) in lieu of such illegal,
invalid or unenforceable provision, there will be added automatically as a
part of this Agreement a legal, valid and enforceable provision as similar in
terms to such illegal, invalid or unenforceable provision as may be possible.
Section 6.8 Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with its specific terms or was
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 hereof in any New York
Court, this being in addition to any other remedy to which they are entitled
at law or in equity. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative, and the exercise of any thereof by any
party shall not preclude the simultaneous or later exercise of any other such
right, power or remedy by such party. The failure of any party hereto to
exercise any right, power or remedy provided under this Agreement or otherwise
available in respect hereof at law or in equity, or to insist upon compliance
by any other party hereto with its obligations hereunder, and any custom or
practice of the parties at variance with the terms hereof, shall not
constitute a waiver by such party of its right to exercise any such or other
right, power or remedy or to demand such compliance.
Section 6.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without regard to its
rules of conflict of laws. Each of the parties hereto hereby irrevocably and
unconditionally consents to submit to the non-exclusive jurisdiction of the
courts of the State of New York and of the United States of America located in
the State of New York (the "New York Courts") for any litigation arising out
of or relating to this Agreement and the transactions contemplated hereby,
waives any objection to the laying of venue of any such litigation in the New
York Courts and agrees not to plead or claim in any New York Court that such
litigation brought therein has been brought in an inconvenient forum.
25
<PAGE>
Section 6.10 Waiver of Personal Liability. The parties hereto acknowledge
and agree that the representations and warranties contained in this Agreement
are made on behalf of the parties hereto and are not made by the officers or
members of the Management Board or Supervisory Board of Purchaser or any
Indemnified Party or Insured Party. The parties hereto acknowledge and agree
that no such Person shall have any personal liability, in law or in equity, of
any kind with regard to the representations and warranties of Purchaser or the
Company, as applicable, contained in this Agreement or in any other agreement,
document or certificate contemplated by this Agreement, and each party hereto
irrevocably waives any such claim regarding the validity or enforceability of
this Section 6.10, and agrees not to challenge or otherwise reject the terms
hereof. The parties hereto also waive any claim regarding the validity or
enforceability of the provisions of this Section 6.10, and agree not to
challenge or otherwise reject the terms hereof. The Persons designated in the
first sentence of this Section 6.10 are intended, and shall be deemed, to be
third-party beneficiaries of the provisions of this Section 6.10, and shall be
entitled to directly claim and enforce the rights and benefits provided
herein.
Section 6.11 Interpretation. As used in this Agreement, the word "including"
means without limitation; the word "or" is not exclusive; and the words
"herein", "hereof", "hereby", "hereto" and "hereunder" refer to this Agreement
as a whole. Any reference to any applicable law shall be deemed also to refer
to all rules and regulations promulgated thereunder unless the context
otherwise requires. Whenever required by the context, any gender shall include
any other gender, the singular shall include the plural and the plural shall
include the singular. Unless the context otherwise requires, references
herein: (i) to Sections and Annexes mean the Sections of, and the Annexes
attached to, this Agreement; and (ii) to an agreement, instrument or other
document means such agreement, instrument or other document as amended,
supplemented and modified through the date hereof, unless the context
otherwise requires, and thereafter from time to time to the extent permitted
by this Agreement. The Annexes referred to herein, including the Company
Disclosure Schedule and Purchaser Disclosure Schedule, shall be construed with
and as an integral part of this Agreement to the same extent as if they were
set forth verbatim herein. The headings of Sections are inserted for
convenience of reference only and shall not be deemed a part of, or affect in
any way the meaning or interpretation of, this Agreement.
Section 6.12 Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.
Section 6.13 Confidentiality. All information obtained by Purchaser pursuant
to this Agreement shall be kept confidential as provided in the
Confidentiality Agreement.
Section 6.14 Exchange Rates. Any reference to U.S. dollars in Articles 2 and
4 of the Agreement shall include reference to any other currency based upon
the mid-rate of exchange in effect at the close of business on June 25, 1998.
26
<PAGE>
IN WITNESS WHEREOF, Purchaser and the Company have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the
date first set forth above.
Elsag Bailey Process Automation N.V.
/s/ Vincenzo Cannatelli
By: ___________________________________
Name: Vincenzo Cannatelli
Title: Managing Director
ABB Transportation Participations B.V.
/s/ Mats Sacklen
By: ___________________________________
Name: Mats Sacklen
Title: PP
/s/ Eric Elzvik
By: __________________________________
Name: Eric Elzvik
Title:
The undersigned, being the sole share-
holder of the Purchaser, hereby under-
takes to insure that the Purchaser
will duly perform its obligations un-
der this Agreement and hereby guaran-
tees any and all liabilities and
amounts which become payable by Pur-
chaser hereunder.
ABB Asea Brown Boveri Ltd.
/s/ Mats Sacklen
By: __________________________________
Name: Mats Sacklen
Title: VP
/s/ Eric Elzvik
By: ___________________________________
Name: Eric Elzvik
Title: VP
27
<PAGE>
ANNEX A
CONDITIONS TO THE OFFER
The capitalized terms used in this Annex A shall have the meanings set forth
in the Acquisition Agreement to which this Annex A is attached.
Notwithstanding any other provisions of the Offer, Purchaser shall not be
required to accept for payment, purchase or, subject to any applicable rules
and regulations of the Commission including Rule 14e-l(c) under the Exchange
Act, pay for any Tendered Securities and may postpone the acceptance for
payment or, subject to the restrictions referred to above, the payment for,
any Tendered Securities, if (i) any applicable waiting period under the HSR
Act, Competition Act (Canada) or Exon-Florio has not expired or been
terminated prior to the expiration of the Offer, or (ii) a decision of the
Commission of the European Communities that the purchase of the Company Shares
and TOPrS contemplated by the Offer are compatible with the common market has
not been received prior to the expiration of the Offer. In addition to and not
limiting the foregoing, notwithstanding any other provision of the Offer,
Purchaser shall not be required to accept for payment or, subject to
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act, pay for any Tendered Securities and may terminate or
amend the Offer and may postpone the acceptance of, and payment for, Tendered
Securities if there shall not have been validly tendered and not validly
withdrawn pursuant to the Offer a number of Company Shares and TOPrS which,
when added to the Company Shares and TOPrS, if any, previously acquired by
Purchaser, constitute at least 75% of the fully diluted share capital of the
Company (the "Minimum Condition") or at any time on or after this date and at
or before the time of acceptance of Tendered Securities for payment pursuant
to the Offer or payment therefor (whether or not any Tendered Securities have
been accepted for payment or paid for), any of the following events shall
occur:
(A) there shall have occurred any event or circumstance that has a Company
Material Adverse Effect;
(B) any Governmental Entity or court of competent jurisdiction shall have
taken any action or enacted, issued, promulgated, enforced, amended or entered
any statute, rule, regulation, executive order, decree, interpretation,
injunction or other order (whether temporary, preliminary or permanent) which
is in effect and which would reasonably be expected to (1) make the acceptance
for payment of, or the payment for, the Tendered Securities illegal or
otherwise prohibit or restrict consummation of the Offer, (2) impose material
limitations on the ability of the Purchaser to acquire or hold or to exercise
any rights of ownership of the Tendered Securities, or effectively to manage
or control or operate the Company and its business, assets and properties or
(3) have a Company Material Adverse Effect;
(C) any of the representations and warranties of the Company set forth in
the Acquisition Agreement that are qualified by reference to a Company
Material Adverse Effect shall not be true and correct, or any such
representation and warranty that is not so qualified shall not be true and
correct in any respect which would be reasonably likely to have a Company
Material Adverse Effect, in each case as if such representation and warranty
were made at the time of determination (except to the extent any such
representation and warranty speaks as of an earlier date) or the Company shall
have failed to perform or comply with, in any material respect, any covenant,
agreement or obligation to be performed or complied with by it under the
Acquisition Agreement;
(D) the Acquisition Agreement shall have been terminated in accordance with
its terms;
(E) the Supervisory Board of the Company or the Management Board of the
Company shall have withdrawn or modified in a manner adverse to Purchaser its
approval or recommendation of the Offer, or shall have approved or recommended
to the Company's shareholders or holders of TOPrS another offer or Acquisition
Proposal or shall have adopted a resolution to effect either of the foregoing
or any corporation, partnership, person or other entity or group 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 Company
Shares or TOPrS or a merger, consolidation or other business combination or
Acquisition Proposal with or involving the Company or any of its Subsidiaries;
A-1
<PAGE>
(F) any of the material consents, approvals, authorizations, orders or
permits required to be obtained by the Company, Purchaser, or their respective
Subsidiaries in connection with the Offer or Acquisition Agreement from, or
filings or registrations required to be made by any of the same prior to the
Closing Date with, any Governmental Entity in connection with the consummation
of the transactions contemplated by the Acquisition Agreement or the Offer
shall not have been obtained or made or can only be obtained or made subject
to conditions or requirements which Purchaser and the Company are not required
to meet pursuant to Section 4.5;
(G) there shall have occurred (1) any general suspension for at least three
Business Days of trading in, or limitation on prices for, securities on the
New York Stock Exchange, Inc., (2) the declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States,
Netherlands, or Switzerland (whether or not mandatory), (3) the commencement
or material escalation of a war or armed hostilities having had or being
reasonably likely to have a material adverse effect on the condition,
business, assets, liabilities or results of operations of the Company and its
Subsidiaries taken as a whole, or (4) any limitation or proposed limitation
(whether or not mandatory) by any Governmental Entity, or any other event,
that materially adversely affects generally the extension of credit by banks
or other financial institutions; or
(H) any of the representations and warranties of the Shareholder in the
Shareholder's Agreement that are qualified by reference to materiality shall
not be true and correct or any such representation and warranty that is not so
qualified shall not be true and correct in any respect which would be
reasonably likely to have a Company Material Adverse Effect, in each case as
if such representation and warranty were made at the time of determination
(except to the extent any such representation and warranty speaks as of an
earlier date) or the Shareholder shall have failed in any material respect, to
perform, or comply with, any covenant, agreement or obligation to be performed
or complied with by it under the Shareholder's Agreement.
The foregoing conditions are for the sole benefit of Purchaser and may be
asserted by Purchaser or may be waived by Purchaser, in whole or part, at any
time and from time to time in its sole discretion (subject to the terms of the
Acquisition Agreement). Failure by Purchaser at any time to exercise any of
the foregoing rights shall not be deemed a waiver of any such right and each
such right shall be deemed an ongoing right which may be asserted at any time
and from time to time.
A-2
<PAGE>
INDEX OF DEFINED TERMS
(NOT PART OF AGREEMENT)
<TABLE>
<CAPTION>
TERM SECTION
- ---- --------
<S> <C>
Affiliate............................................................. 6.1(a)
Agreement............................................................. RECITALS
Acquisition Proposal.................................................. 4.2
Benefit Plans......................................................... 2.11(a)
Blue Sky Laws......................................................... 2.6
Business Day.......................................................... 6.1(b)
Closing............................................................... 1.1(d)
Closing Date.......................................................... 1.1(d)
Code.................................................................. 2.11(c)
Commission............................................................ 1.1(c)
Company............................................................... RECITALS
Company Disclosure Schedule........................................... 2.2(a)
Company Material Adverse Effect....................................... 2.1
Company Properties.................................................... 2.14
Company SEC Documents................................................. 2.7(a)
Company Shares........................................................ RECITALS
Confidentiality Agreement............................................. 4.2
Environmental Law..................................................... 2.15(a)
ERISA................................................................. 2.11(a)
Exchange Act.......................................................... 1.1(a)
Exon--Florio.......................................................... 2.6
Financing Trust....................................................... RECITALS
GAAP.................................................................. 2.7(b)
Governmental Entity................................................... 6.1(c)
Guarantees............................................................ 2.20
Hazardous Substances.................................................. 2.15(a)
HSR Act............................................................... 2.6
Indemnified Parties................................................... 4.8
Insured Parties....................................................... 4.8(b)
Intellectual Property................................................. 2.17(a)
Material Adverse Effect............................................... 6.1(d)
Material Contracts.................................................... 2.16(a)
Merrill Lynch......................................................... 1.3(a)
New York Courts....................................................... 6.9
Offer................................................................. RECITALS
Offer Conditions...................................................... 1.1(a)
Offer Consideration................................................... 1.1(b)
Offer Documents....................................................... 1.1(c)
Offer to Purchase..................................................... 1.1(a)
Option Agreement...................................................... 1.2(b)
Option Plan........................................................... 1.2(a)
Permitted Liens....................................................... 2.14
Person................................................................ 6.1(e)
Purchaser............................................................. RECITALS
Purchaser Disclosure Schedule......................................... 3.4
Purchaser Material Adverse Effect..................................... 3.1
Representatives....................................................... 6.1(f)
Schedule 14D-1........................................................ 1.1(c)
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
TERM SECTION
- ---- --------
<S> <C>
Schedule 14D-9........................................................ 1.3(b)
Securities Act........................................................ 2.7(a)
Share Offer Price..................................................... 1.1(b)
Shareholder........................................................... RECITALS
Shareholder's Agreement............................................... RECITALS
Shareholder Shares.................................................... RECITALS
Stock Options......................................................... 1.2(a)
Subsidiary............................................................ 6.1(g)
Superior Proposal..................................................... 4.2
Tax Return............................................................ 2.13(a)
Taxes................................................................. 2.13(a)
Tendered Securities................................................... 1.1(a)
TOPrS................................................................. RECITALS
TOPrS Offer Price..................................................... 1.1(b)
</TABLE>
A-4
<PAGE>
Exhibit (c)(3)
<PAGE>
[LETTERHEAD OF ELSAG BAILEY PROCESS AUTOMATION]
July 2, 1998
ABB Asea Brown Boveri Ltd.
P.O. Box 8131, CH-8050
Zurich, Switzerland
Attention: Mr. Eric Elzvik, Vice President, Corporate Development
Dear Mr. Elzvik,
In order to allow you to evaluate the possible acquisition (the "Proposed
Acquisition") of Elsag Bailey Process Automation N.V. (the "Company"), we will
deliver to you, upon your execution and delivery to us of this letter
agreement, certain information about the properties and operations of the
Company. All information about the Company furnished by us or our
Representatives, whether furnished before or after the date hereof, whether
oral or written, and regardless of the manner in which it is furnished or
gathered by you by inspection, and regardless of whether identified
"confidential" or "proprietary", is referred to in this letter agreement as
"Proprietary Information". Proprietary Information does not include, however,
information which (a) is or becomes generally available to the public other
than as a result of a disclosure by you or your Representatives, (b) was
available to you on a nonconfidential basis prior to its disclosure by us or
our Representatives, (c) becomes available to you on a nonconfidential basis
from a person other than us or our Representatives who is not otherwise bound
by a confidentiality agreement with us or any Representative of ours, or is
otherwise not under an obligation to us or any Representative of ours not to
transmit the information to you or (d) is independently developed by you. As
used in this letter agreement, the term "Representative" means, as to any
person, such person's affiliates and its and their directors, officers,
employees, agents, advisors (including, without limitation, financial
advisors, counsel and accountants) and controlling persons. As used in this
letter agreement, the term "person" shall be broadly interpreted to include,
without limitation, any corporation, company, partnership, other entity or
individual.
Except as required by law, unless otherwise agreed to in writing by us, you
agree (a) to keep all Proprietary Information confidential and not to disclose
or reveal any Proprietary Information to any person other than your
Representatives who are actively and directly participating in your evaluation
of the Proposed Acquisition or who otherwise need to know the Proprietary
Information for the purpose of evaluating the Proposed Acquisition and to
cause those persons to observe the terms of this letter agreement, (b) not to
use Proprietary Information for any purpose other than in connection with your
evaluation of the Proposed Acquisition or the consummation of the Proposed
Acquisition in a manner that we have approved and (c) not to disclose to any
person (other than those of your Representatives who are actively and directly
participating in your evaluation of the Proposed Acquisition or who otherwise
need to know for the purpose of evaluating the Proposed Acquisition and, in
the case of your Representatives, whom you will cause to observe the terms of
this letter agreement) any information about the Proposed Acquisition, or the
terms or conditions or any other facts relating thereto, including, without
limitation, the fact that discussions are taking place with respect thereto or
the status thereof, or the fact that Proprietary Information has been made
available to you or your Representatives. If you are not selected as the
acquirer, you and your Representatives shall make no further use of the
Proprietary Information for any purposes. You will be responsible for any
breach of the terms of this letter agreement by you or your Representatives.
In the event that you are requested pursuant to, or required by, applicable
law or regulation or by legal process to disclose any Proprietary Information
or any other information concerning the Company or the Proposed Acquisition,
you agree that you will provide us with prompt notice of such request or
requirement in
1
<PAGE>
order to enable us to seek an appropriate protective order or other remedy, to
consult with you with respect to our taking steps to resist or narrow the
scope of such request or legal process, or to waive compliance, in whole or in
part, with the terms of this letter agreement. In any such event you will use
your reasonable best efforts to ensure that all Proprietary Information and
other information that is so disclosed will be accorded confidential
treatment.
You acknowledge that you are aware, and that you will advise your directors,
officers, employees, agents, representatives, lenders and other sources of
financing who are informed as to the matters which are the subject of this
letter, that the United States securities laws prohibit any person who has
received from an issuer any material, non-public information from purchasing
or selling securities of such issuer or from communicating such information to
any other person under circumstances in which it is reasonably foreseeable
that such person is likely to purchase or sell such securities.
You also agree that for a period of one year from the date of this letter
agreement, neither you nor any of your Representatives will, without the prior
written consent of the Company:
(a) acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities or direct or
indirect rights to acquire any voting securities of the Company or any
subsidiary thereof, or of any successor to or person in control of the
Company, or any assets of the Company or any subsidiary or division thereof
or of any such successor or controlling person, except that the provisions
of this item (a) shall not apply to a financial advisor engaged by you, any
part of which is acting in the ordinary course of its business;
(b) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies" to vote (as such terms are used in the rules of
the Securities and Exchange Commission), or seek to advise or influence any
person or entity with respect to the voting of any voting securities of the
Company;
(c) make any public announcement with respect to, or submit a proposal
for, or offer of (with or without conditions) any extraordinary transaction
involving the Company or any of its securities or assets;
(d) form, join or in any way participate in a "group" as defined in
Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, in
connection with any of the foregoing; or
(e) request the Company or any of our Representatives, directly or
indirectly, to amend or waive any provision of this paragraph.
You will promptly advise the Company of any inquiry or proposal made to you
with respect to any of the foregoing.
If you determine that you do not wish to proceed with the Proposed
Acquisition, you will promptly advise us of that decision. In that case, or in
the event that we, in our sole discretion, so request or the Proposed
Acquisition is not consummated by you, you will, upon our request, promptly
deliver to us all Proprietary Information, including all copies,
reproductions, summaries, analyses or extracts thereof or based thereon in
your possession or in the possession of any Representative of yours.
You acknowledge that none of the Company, Merrill Lynch International
("Merrill Lynch") or our other Representatives and none of the respective
officers, directors, employees, agents or controlling persons of Merrill Lynch
or such other Representatives makes any express or implied representation or
warranty as to the accuracy or completeness of any Proprietary Information,
and you agree that none of such persons shall have any liability to you or any
of your Representatives relating to or arising from your or their use of any
Proprietary Information or for any errors therein or omissions therefrom. You
also agree that you are not entitled to rely on the accuracy or completeness
of any Proprietary Information and that you shall be entitled to rely solely
on such representations and warranties regarding Proprietary Information as
may be made to you in any final acquisition agreement relating to the Proposed
Acquisition, subject to the terms and conditions of such agreement.
2
<PAGE>
You agree that, without our prior written consent, you will not for a period
of two years from the date hereof directly or indirectly solicit for
employment or employ any person who is now employed by us or any of our
subsidiaries in an executive or management position or who has access to new
product development information or technology or who is involved in sales or
marketing.
You agree that until a final acquisition agreement regarding the Proposed
Acquisition has been executed by you and us, neither we nor any of our
Representatives are under any legal obligation and shall have no liability to
you of any nature whatsoever with respect to the Proposed Acquisition by
virtue of this letter agreement or otherwise. You also acknowledge and agree
that (i) we and our Representatives may conduct the process that may or may
not result in the Proposed Acquisition in such manner as we, in our sole
discretion, may determine (including, without limitation, negotiating and
entering into a final acquisition agreement with any third party without
notice to you) and (ii) we reserve the right to change (in our sole
discretion, at any time and without notice to you) the procedures relating to
our and your consideration of the Proposed Acquisition (including, without
limitation, terminating all further discussions with you and requesting that
you return all Proprietary Information to us).
This letter agreement shall be governed by and interpreted in accordance
with the laws of the State of New York. You hereby irrevocably consent that
any legal action or proceeding against you arising out of or in any way
connected with this letter agreement may be instituted in any New York state
or United States federal court located in New York City, and by execution and
delivery of this letter agreement you hereby irrevocably submit to the non-
exclusive jurisdiction of the aforesaid courts in any such legal action or
proceeding.
Without prejudice to the rights and remedies otherwise available to us, you
agree we shall be entitled to equitable relief by way of injunction or
otherwise if you or any of your Representatives breach or threaten to breach
any of the provisions of this letter agreement.
It is further understood and agreed that no failure or delay by us in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other
or further exercise thereof or the exercise of any right, power or privilege
hereunder.
Unless otherwise expressed herein, the obligations undertaken by you
pursuant to this letter agreement should survive for a period of three (3)
years from the date of your acceptance of this proposal.
This letter agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts executed in and to
be performed in that state.
Any assignment of this letter agreement by you without our prior written
consent shall be void.
This letter agreement contains the entire agreement between you and us
concerning confidentiality of the Proprietary Information, and no modification
of this letter agreement or waiver of the terms and conditions hereof shall be
binding upon you or us, unless approved in writing by each of you and us.
3
<PAGE>
Please confirm your agreement with the foregoing by signing and returning to
the undersigned the duplicate copy of this letter enclosed herewith.
ELSAG BAILEY PROCESS AUTOMATION N.V.
/s/ Vincenzo Cannatelli
By __________________________________
Name: Vincenzo Cannatelli
Title: Chief Executive Officer
Accepted and Agreed as of the date
first written above:
ABB ASEA BROWN BOVERI LTD.
/s/ Mats Sacklen
By __________________________________
Name: Mats Sacklen
Title: Vice President
4
<PAGE>
Exhibit (g)(1)
<PAGE>
Annual Report 1997
ABB Group and Parent Companies
[PHOTO] [PHOTO] [PHOTO]
[PHOTO] [PHOTO] [PHOTO]
ABB moved early to tap new opportunities for growth in 1997. The Group
accelerated expansion in Asia and productivity improvements in Western Europe
and the U.S. ABB aims to make its customers more competitive over the long term,
wherever in the world they do business.
<PAGE>
ABB IS A GLOBAL $35 BILLION ENGINEERING GROUP SERVING CUSTOMERS IN ELECTRIC
POWER GENERATION, TRANSMISSION AND DISTRIBUTION, INDUSTRIAL AND BUILDING
SYSTEMS, AND RAIL TRANSPORTATION. OF THE GROUP'S TOTAL SALES, 55 PERCENT ARE IN
EUROPE, 20 PERCENT IN THE AMERICAS AND 25 PERCENT IN ASIA, THE MIDDLE EAST AND
AFRICA.
REVENUES PER REGION 1997
- --------------------------------------
Europe 55%
The Americas 20%
Asia/Middle East and Africa 25%
- --------------------------------------
EMPLOYEES PER REGION 1997
- --------------------------------------
Europe 65%
The Americas 15%
Asia/Middle East and Africa 20%
- --------------------------------------
<TABLE>
<S> <C> <C> <C> <C>
========================================================================================
(US$ in millions, unless otherwise stated) 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------
Orders received/1,2/ 34,803 33,884 35,163 30,827
- ----------------------------------------------------------------------------------------
Revenues/1/ 31,265 33,767 32,751 28,758
- ----------------------------------------------------------------------------------------
Operating earnings after depreciation/1/ 1,137 2,113 2,181 1,574
- ----------------------------------------------------------------------------------------
Income before taxes/1/ 853 1,901 2,003 1,362
- ----------------------------------------------------------------------------------------
Net income 572 1,233 1,315 760
- ----------------------------------------------------------------------------------------
Stockholders' equity 5,283 5,875 5,243 4,017
- ----------------------------------------------------------------------------------------
Total assets 29,784 30,896 32,076 29,055
- ----------------------------------------------------------------------------------------
Capital expenditure for tangible fixed assets 1,093 1,168 1,171 935
- ----------------------------------------------------------------------------------------
Capital expenditure for acquisitions 302 333 315 196
- ----------------------------------------------------------------------------------------
Expenditure for research and development 2,657 2,638 2,627 2,353
- ----------------------------------------------------------------------------------------
Operating earnings/revenues (%)/1/ 3.6 6.3 6.7 5.5
- ----------------------------------------------------------------------------------------
Return on capital employed (%)/1/ 12.2 19.9 21.8 16.9
- ----------------------------------------------------------------------------------------
Return on equity (%) 10.3 22.2 28.4 20.2
- ----------------------------------------------------------------------------------------
Number of employees 213,057 214,894 209,637 207,557
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Net income per share
- ----------------------------------------------------------------------------------------
ABB AB A shares (in Swedish krona)/3/ 2.32 4.42 4.99 3.21
- ----------------------------------------------------------------------------------------
ABB AB B shares (in Swedish krona)/3/ 2.32 4.42 4.99 3.21
- ----------------------------------------------------------------------------------------
ABB AG bearer shares (in Swiss francs) 46.70 85.40 90.20 57.30
- ----------------------------------------------------------------------------------------
ABB AG registered shares (in Swiss francs) 9.34 17.08 18.04 11.46
- ----------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------
Dividend per share (1997 proposed)
- ----------------------------------------------------------------------------------------
ABB AB A (in Swedish krona)/3/ 2.10 1.75 1.60 1.15
- ----------------------------------------------------------------------------------------
ABB AB B (in Swedish krona)/3/ 2.10 1.75 1.60 1.15
- ----------------------------------------------------------------------------------------
ABB AG bearer (in Swiss francs) 40.00 38.00 30.00 20.00
- ----------------------------------------------------------------------------------------
ABB AG registered (in Swiss francs) 8.00 7.60 6.00 4.00
- ----------------------------------------------------------------------------------------
</TABLE>
/1/ 1994 to 1996 restated; refer to section N in the Principles of
Consolidation.
/2/ 1996 end 1997 restated to reflect the indefinite delay of the Bakun project.
/3/ Per-share data 1994 to 1996 have been adjusted for the 10:1 stock split in
ABB AB shares effective as of April 21, 1997.
<PAGE>
KEY FIGURES
[THE FOLLOWING TABLE WAS REPRESENTED BY 3 BAR CHARTS IN THE PRINTED MATERIAL]
<TABLE>
<CAPTION>
Power Trans- Industrial 50% of ABB Various Activities/
Power mission and and Build- Daimler-Benz Financial Corporate (including the
(US$ in millions) Generation Distribution ing Systems Transportation Services restructuring charge)
---------- ------------ ----------- -------------- --------- ------------------------
<S> <C> <C> <C> <C> <C> <C>
Orders Received per
Segment* 1997 10,038 8,595 16,294 2,095 828 2,093
Revenues per Segment* 1997 8,114 7,889 15,501 1,870 828 2,074
Operating Earnings after
Depreciation per Segment 1997 125 557 1,066 (111) 297 (797)
</TABLE>
* Before eliminations of intra-Group transactions.
[THE FOLLOWING TABLES WERE REPRESENTED BY BAR GRAPHS IN THE PRINTED MATERIAL]
GROUP ORDERS RECEIVED /1,2/
(US$ in millions)
90 91 92 93 94 95 96 97
------- ------- ------- ------- ------- ------- ------- -------
28,938 29,209 31,153 28,644 30,827 35,163 33,884 34,803
GROUP REVENUES /1/
(US$ in millions)
90 91 92 93 94 95 96 97
------- ------- ------- ------- ------- ------- ------- -------
26,337 28,443 29,109 27,521 28,758 32,751 33,767 31,265
GROUP OPERATING EARNINGS /1/
(US$ in millions)
90 91 92 93 94 95 96 97
------- ------- ------- ------- ------- ------- ------- -------
1,386 1,417 1,219 1,311 1,574 2,181 2,113 1,137
/1/ 1990 to 1996 restated; refer to section N in the Principles of
Consolidation.
/2/ 1996 and 1997 restated to reflect the indefinite delay of the Bakun project.
1
<PAGE>
From growing food and making cars to providing medical care and using the
internet, it's difficult to imagine the development of society anywhere in
today's world that is not affected by the availability and use of electrical
power.
ABB provides the complete range of engineering expertise to make the best use
of this valuable resource.
[PHOTO]
ABB's customers are companies that extract and refine the fuels used to
generate electricity, builders and operators of power plants, movers of power
from plant to consumer, and users of electricity and electrical systems and
equipment, from steel mills and chemical companies to the builders of airports,
office towers and homes.
ABB aims to make its customers more competitive. That is why we are
committed to fully understanding their businesses, anticipating their future
challenges and being first with innovative, cost-effective and total system
solutions.
We do that by being local partners everywhere in the world, backed up
with global strengths in technology, production, and finance.
We combine the creative power of our people from all over the globe and
focus it on the needs of our customers, present and future.
Because, ultimately, making our customers successful is the key to our
own profitable growth, to providing a challenging environment for our employees,
and to delivering more value to our shareholders.
<PAGE>
Contents
ABB GROUP
5 Letter from the Chairman
6 President's Comments
10 ABB Group Organization
13 ABB's Businesses
30 Management's Discussion and Analysis
42 Consolidated Financial Statements
56 Board of Directors
60 Financial Statements of ABB Asea Brown Boveri Ltd
62 Statistical Group Data
PARENT COMPANIES' ANNUAL REPORTS
64 ABB AB
74 ABB AG
ABB AB Shareholders ABB AG Shareholders
- ------------------- -------------------
ABB AB ABB AG
Stockholm Baden
Sweden Switzerland
50% 50%
- ------------------- -------------------
| |
- --------------------------------------------
ABB Asea Brown Boveri Ltd
Zurich
Switzerland
- --------------------------------------------
|
- --------------------------------------------
ABB Asea Brown Boveri Group
1,000 Companies
37 Business Areas organized into
4 Business Segments
- --------------------------------------------
ABB AB, Stockholm (Sweden), and ABB AG Baden (Switzerland) are owners in equal
parts of ABB Asea Brown Boveri Ltd, Zurich (Switzerland), which is the holding
company of the ABB Group with approximately 1,000 companies around the world.
The shares of the two parent companies are listed on various stock exchanges in
Europe and the United States.
This annual report presents the consolidated financial statements of the ABB
Group, as well as the financial statements of the parents ABB AB, Stockholm,
ABB AG, Baden, and the holding ABB Asea Brown Boveri Ltd, Zurich. This report
conforms to OECD guidelines and recommendations concerning the publication of
information.
The ABB Group publishes its annual report in English, German and Swedish. The
English-language version is binding. It also issues quarterly financial results
in April, July and October. All figures shown for the ABB Group are in U.S.
dollars. In addition, separate annual reports are published by some ABB national
and business entities. ABB also publishes an annual environmental report.
3
<PAGE>
Highlights 1997
Orders received in 1997, restated to reflect the indefinite delay of the Bakun
hydroelectric project in Malaysia, were up 3 percent at $34.8 billion. Expressed
in local currencies, orders received were 11 percent higher. Revenues amounted
to $31.3 billion. Net income amounted to $572 million. Excluding an
extraordinary restructuring charge, net income was 5 percent lower than the year
before. Expressed in local currencies and excluding the charge, net income rose
4 percent. Return on capital employed excluding the charge was 19.4 percent.
Industrial and Building Systems reported higher operating earnings
despite a cyclic downturn in some major markets. Excluding the costs associated
with the Bakun project, operating earnings were higher in Power Transmission and
Distribution and about the same in Power Generation. Operating earnings in
Financial Services were below last year's record levels due to currency
translation effects. Adtranz, ABB's 50-50 rail joint venture with Daimler-Benz,
recorded a loss.
In the fourth quarter of 1997 ABB booked an extraordinary restructuring
charge of $866 million to speed up local expansion in emerging markets and
improve the productivity and competitiveness of operations in higher-cost
Western countries.
ABB continued to expand its local operations in emerging markets and
Central and Eastern Europe through acquisitions, joint ventures and internal
growth. Targeted acquisitions were also made in Western Europe and the U.S.
Large orders in 1997 included combined-cycle gas-fired power plants in
the U.K. and Taiwan, hydro generators for China, a large ethylene plant in Saudi
Arabia, and a subsea oil separation plant in Norway.
ABB spent 8.5 percent of revenues, or $2.7 billion, on research and
development. Among the key innovations was a new power generator design that
eliminates the need for auxiliary equipment, dramatically improving reliability
and efficiency.
4
<PAGE>
LETTER FROM THE CHAIRMAN
[PHOTO]
In a rapidly changing and increasingly unpredictable world, being fast and
flexible can give a global company a big competitive advantage. Our people at
ABB have worked hard during our first 10 years to build that kind of company.
And those efforts continued to pay off in 1997 when the Group moved early to
take advantage of the opportunities in Asia, positioning itself for future
growth in what will be the world's most dynamic market over the long term.
We have also focused on anticipating and adapting to the shifting needs
of our customers in Western Europe and North America. Deregulation and
privatization in these markets are creating opportunities where ABB can use its
special strengths in technology, economies of scale in production and supply,
and expert financing.
In Central and Eastern Europe I am confident that, in spite of the
recent slowdown, we will continue to reap the rewards of having moved early-
growing profitability, access to skilled talent, and a significant head start in
countries like Poland. The good progress in Latin America, the Middle East and
Africa is promising and I see further exciting growth there as these regions
continue to integrate themselves into the global economy, and as our people keep
pace to support and, when possible, accelerate that process.
Being fast and flexible is not always easy and 1997 held its share of
challenges. ABB expects a lot from its people but they have repeatedly
demonstrated their ability to meet the challenges and, more often than not,
exceed expectations. I am proud of their efforts and, on behalf of the Board of
Directors and our shareholders, want to thank them. The future holds untold
opportunities for ABB. I am confident that we will take them and continue to
build our success around the world.
/s/ Percy Barnevik
Percy Barnevik
Chairman
of the Board of Directors
5
<PAGE>
PRESIDENT'S COMMENTS
[PHOTO]
The world has changed tremendously since ABB was founded 10 years ago. In 1988,
when Asea of Sweden and BBC Brown Boveri of Switzerland completed what was at
the time Europe's biggest cross-border merger to create ABB, the collapse of the
Iron Curtain was still barely imaginable. Few understood the speed with which
the Asian economies, especially China's, would become such engines of growth for
the whole world. In Latin America, political instability, runaway inflation and
economic stagnation seemed inescapable. The single European market existed only
on paper, and many believed that a united Europe was an impossible dream.
CONTINUOUS CHANGE
ABB also faced doubters in 1988 as we merged two large companies, each with its
own century-old traditions, cultures and values. The skeptics could only see
what had worked in the past. We looked for the new ideas that would work in a
future in which change would be continuous and accelerating. As ABB grew beyond
Europe, into the Americas, Asia, the Middle East and Africa, the challenge was
to find the common values on which we could build a unified and motivated team
of people capable of delivering ever-greater value to customers and
shareholders.
Our answer was to get rid of centralized corporate bureaucracy and to
create thousands of small profit centers around the world that put our employees
in direct contact with their customers and encourage entrepreneurship. We back
them up with strong global networks in production, supply, marketing, finance,
and technology development. We tell them not to get hung up on the way things
used to be done, but to find new ways to grow and be profitable in a world that
is changing faster than ever.
ABB has faced many challenges in its first 10 years and the process of
change and growth has not been a painless one. But I believe our record shows
that ABB's approach to business works - and it works well. Our shareholders have
seen annual returns clearly above the stock market indices. The challenge of
course is to push this development even further.
OPPORTUNITY IN ASIA
The economic turbulence in Asia dominated world headlines in the last quarter of
1997. ABB was among the first companies to recognize both the threats and the
opportunities and to take quick action. In October, we announced a plan to
accelerate our expansion in Asia while restructuring some operations in Western
Europe and the U.S. - including the reduction of some 10,000 jobs - to make our
6
<PAGE>
Western factories more competitive for the future. A charge of $866 million was
taken in the fourth quarter to carry out this measure, which we expect to have
an average payback period of about two years.
We took these steps because we believe Asia will begin to bounce back in
the next 2-3 years and resume growth even faster than before. The region's long-
term need for infrastructure and industrial investments remains. Of course,
there have been short-term impacts and we saw some project delays, most notably
the Bakun hydroelectric project in Malaysia, for which we booked costs of about
$100 million in the fourth quarter. At the same time, however, production at
our sites in Asia is now more competitive and we are working hard to tap that
advantage.
We moved early with our restructuring so that we can grab new
opportunities as soon as they emerge. It was a painful step, but we are
convinced that waiting would have only made the situation much worse later.
Within a period of 15 weeks, initiatives were started covering most of the
restructuring. That has allowed us to now focus all of our energies on securing
growth for the future.
FINANCIAL REVIEW
ABB's markets were characterized by continued order growth in most emerging
economies, and in the U.S. and Nordic countries. As a result, 1997 orders
received grew 3 percent to $34.8 billion.
But our reported results in 1997 were affected by a number of factors
that mask our underlying growth. One of these is the indefinite delay of the
Bakun project, which affected both the Power Generation and Power Transmission
and Distribution segments. Not considering the effects of the delay, operational
earnings in all industrial segments were stable or higher in 1997 (Financial
Services did not reach last year's record earnings level, while Adtranz, our
rail joint venture with Daimler-Benz of Germany, reported a loss in 1997).
The restructuring charge is another distorting factor that of course had
a big effect on our results. So did the strong U.S. dollar. Since we conduct a
large share of our business in local currencies and then convert them into our
reporting currency, the strong dollar tends to lower our results. For example,
orders received were 3 percent higher as reported in U.S. dollars, but 11
percent higher when expressed in local currencies. This is an important
indicator of the underlying strength of our local operations around the world.
Disregarding both the restructuring charge and the currency effect, Group net
income was 4 percent higher in 1997 than the year before.
Meanwhile, our efforts to reduce working capital in mature markets
have begun to bear fruit and contributed to a 30-percent improvement in net
cash position to $1.6 billion. We plan to reduce working capital even further.
Excluding the restructuring charge, return on capital employed was slightly
lower at 19.4 percent from 19.9 percent, while return on equity on the same
basis was 21.1 percent, compared to 22.2 percent in 1996.
ABB AND THE ENVIRONMENT
The climate change agreement reached at the United Nations Conference at Kyoto,
Japan, in 1997 could influence many of ABB's markets. By pushing industrialized
countries to reduce greenhouse gas emissions, and urging developing countries to
continue infrastructure development without compro-
7
<PAGE>
mising environmental standards, the agreement promises to increase demand for
ecoefficient technologies - one of ABB's strengths. Although the agreement must
still be ratified, I believe ABB is well positioned to meet the new challenges
and opportunities.
At the end of 1997, I launched the second generation of environmental
goals for ABB. These focus on the full integration of environmental policies
into the strategic plans of our business areas, with environmental goals based
on lifecycle assessment for their core products. These will make us better
environmental neighbors and help us better meet the environmental demands of our
customers and society at large. ABB's approach to sustainable development is
further described in our Environmental Management Report 1997.
INNOVATIVE TECHNOLOGY AND LEADERSHIP
One of the key drivers of ABB's growth is our ability to generate new ideas and
transform them quickly into solutions for our customers. Our commitment to
research and development (R&D) has played an important role in this regard. Our
spending on R&D in 1997 amounted to $2.7 billion, slightly higher than the
year before. The results are reflected in areas like our oil, gas and
petrochemicals business, which has grown from some $300 million in 1988 to more
than $3 billion today. Our high-efficiency, low-emission GT24/GT26 sequential
combustion gas turbines have helped secure market growth for ABB in North
America, Europe and Asia. We are also leaders in providing advanced power grid
systems that allow electricity consumers in deregulated markets to shop for
power from among a number of suppliers.
ABB is generating new ideas to tap many more opportunities for future
growth: new superconducting materials to improve the performance of
generators, transformers, locomotives and many other products; technology to
produce oil and gas more economically; and new burner technology that
significantly reduces emissions for a wide variety of industrial furnace
applications. Our ambition is to step up the pace of bringing new products and
systems to the market.
Creating new products that help our customers become more competitive
and creating new ways of doing business are vital to our success. ABB itself
represented a new idea in 1988 and I believe that has energized the whole
company and given our people a sense of being pioneers. Cultivating creativity
takes its own kind of innovation, a new kind of leadership. Because ABB is a
local company in the more than 100 countries where we do business, we are unique
for the diversity of our people. Our ability to bring them together and focus
their creative energy on the needs of our customers represents a competitive
advantage that cannot easily be copied. We have made good progress in this area
over the past 10 years but I believe ABB still has a huge reservoir of untapped
human and creative potential. This is an area on which I intend to focus even
more, now and into the next century.
Our people - they are the source of our creativity. I am proud of their
achievements since 1988 in an often demanding environment and their
accomplishments in 1997. My colleagues and I on the Executive Committee would
like to thank them for taking on the challenges and for their dedication to
making ABB a success.
8
<PAGE>
OUTLOOK FOR 1998 AND BEYOND
Despite short-term uncertainties, Asia continues to represent a significant
growth potential for ABB as continued rapid urbanization and industrialization
due to high population growth is driving demand for infrastructure development.
Demand for ABB systems, products and services is also expected to rise in the
Middle East and Africa with their large reserves of raw materials, low installed
base of generating capacity and the move towards interconnecting national and
regional power grids. In the Americas, deregulation is creating opportunities in
the power sector and in other industries such as oil and gas. Increased foreign
investments in Latin America reflect growing demand in that region. With huge
infrastructure needs in most Central and Eastern European countries, ABB will
continue to benefit from its strong local presence there. Western European
economies have started to improve, with Northern Europe leading the recovery.
Export and domestic demand is expected to drive increasing industrial output in
major Western European countries.
The continuous investment in the global Power Generation sales network
has resulted in a more efficient sales process which provides higher quality
customer services and solutions. As a result of these improvements, orders for
1998 are expected to exceed the level of 1997. Following major restructuring
and lower cost levels, earnings are expected to increase substantially during
1998. Due to the anticipated strengthening of the economies in Western Europe
and Latin America and as a result of restructuring, orders and earnings for
Power Transmission and Distribution are expected to increase in 1998. For
Industrial and Building Systems, the outlook for 1998 can be characterized as
cautiously optimistic. An improved business climate in Europe should contribute
to higher orders and improved earnings despite an expected, although temporary,
slowdown in Asia. Adtranz expects higher orders and a return to positive results
in 1998, with impacts from the restructuring programs gradually taking effect.
Financial Services, earnings for 1998 are expected to be on the same level as in
1997.
Reductions in working capital and positive effects from the ongoing
restructuring programs are expected to compensate for the major part of the cash
needed to carry out those programs. Excluding the impact of the 1997
restructuring charge and assuming that average exchange rates against the U.S.
dollar in 1998 remain about the same as in 1997, net income in 1998 is expected
to increase.
ABB's longer term targets are reaffirmed despite increased uncertainties
in the market environment. Annual growth of at least 6 percent on average over
this business cycle with a peak around the turn of the century, further
considerable reduction of working capital in relation to revenues and a
substantial increase of net income margin from last year's 3.8 percent
(excluding the restructuring charge) to 6-7 percent remain main objectives for
the Group.
/s/ Goran Lindahl
GORAN LINDAHL
PRESIDENT AND CHIEF EXECUTIVE OFFICER
9
<PAGE>
ABB GROUP ORGANIZATION
GORAN LINDAHL
PRESIDENT, CEO
<TABLE>
<S> <C> <C> <C> <C>
Executive Committee Armin Meyer Sune Karlsson Sune Carlsson Goran Lindahl, CEO
Member
Business Segments/ POWER GENERATION POWER TRANSMISSION INDUSTRIAL AND FINANCIAL SERVICES
Regions AND DISTRIBUTION BUILDING SYSTEMS
Business Area/ - Gas Turbine and - Cables - Automation and Drives - Treasury Centers
Country/Function Combined-Cycle Plants - Distribution Transformers - Oil, Gas and - Leasing & Financing
- Large Steam Power - High-Voltage Switchgear Petrochemical - Insurance
Plants - Medium-Voltage - Flexible Automation - Investment Management
- Power Generation Equipment - Instrumentation - Project & Trade Finance
Industry - Network Control and - Motors - Energy Ventures
- Hydro Power Plants Protection - Contracting - Structured Finance
- Fossil Combustion - Power Lines - Low-Voltage Systems
Systems and Services - Power Systems - Low-Voltage Apparatus
- Nuclear Power Plants - Power Transformers - Installation Material
- Power Plant Control - Air Handling Equipment
- Environmental Systems - Service
- District Heating - Superchargers
</TABLE>
<TABLE>
<S> <C> <C>
SENIOR Markus Bayegan Group R & D
CORPORATE OFFICERS Tomas Ericsson Corporate projects/Finance and Administration
BUSINESS SEGMENT
MANAGER Jan Roxendal Financial Services
</TABLE>
10
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[MAP]
<TABLE>
<CAPTION>
Eberhard von Koerber Howard Pierce Alexis Fries Renato Fassbind ABB DAIMLER-
BENZ TRANSPORTATION
EUROPE, MIDDLE EAST THE AMERICAS ASIA CHIEF FINANCIAL OFFICER CEO: Kaare Vagner
AND AFRICA
<S> <C> <C> <C> <C>
Austria Argentina Australia - Accounting
Belgium Bolivia China - Controlling
Hong Kong
Czech Republic Brazil Indonesia - Consolidation
Denmark Canada Japan - Insurance
Finland Chile Korea - Risk Management
France Colombia Malaysia - Real Estate
Germany Mexico New Zealand - Reporting
Greece Peru Philippines - Taxes and Finance
Singapore
Hungary USA Taiwan - Travel Management
Ireland Venezuela Thailand
Italy Vietnam
Netherlands Central America Other Asia
Norway and Caribbean Pacific Countries
Poland
Portugal South Asia
Romania
India
Russia Other South Asian
Spain Countries
Sweden
Switzerland
Turkey
United Kingdom
Other European
Countries and CIS
Middle East and Africa
Egypt
Israel
Jordan
Saudi Arabia
South Africa
United Arab Emirates
Other Middle East
and African Countries
</TABLE>
EXECUTIVE COMMITTEE
[PHOTO] From Left to Right:
Sune Carlsson
Renato Fassbind
Alexis Fries
Sune Karlsson
Goran Lindahl
Eberhard von Koerber
Armin Meyer
Howard Pierce
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They wouldn't have survived their migration if they couldn't have stopped at
their feeding grounds;
they couldn't have stopped if construction on a nearby power plant had scared
them away;
the construction wouldn't have waited if not for the engineers of ABB.
[PHOTO]
Last year in South Humbur Bank, UK, one of the wonders of technology
collided with one of the wonders of nature and something wonderful happened.
Nature survived.
The largest combined cycle power plant in Europe was under construction.
Unfortunately it was on a site adjacent to a feeding ground for migratory birds.
Fortunately, the company doing the construction was ABB. You see, ABB is
one company that's not only committed to the business of electric power
generation, it's also committed to the preservation of the environment.
And it's a commitment that stretches from ABB's senior management all
the way through to its subcontractors on the construction site.
Which is why during the months between September and March, construction
on the plant, which might have alarmed the migrating birds and prevented them
from feeding, was abruptly stopped.
The power plant, which is representative of modern power plant
technology (highly efficient with minimal impact on the surrounding
environment), was finished only after the birds had completed their annual
migration through the area.
A fact that made English environmentalists very happy. Not to mention
the birds.
12
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POWER GENERATION
[PHOTO]
India's first operational private power plant, Jegurupadu, Andhra Pradesh.
The global market for power generation equipment and service is moving through a
period of profound change. The range of customers is expanding from large public
utilities to energy-intensive industries and private power producers building
plants with financial specifications that are as ambitious as the technical
ones. Demand for new power generation capacity is shifting to Asia and Latin
America while large new markets in service and retrofit are emerging in Europe
and North America. Small-scale power is becoming more attractive. Competition is
global, but market conditions can vary considerably from one country to the
next.
It's a challenging environment. But, as in all periods of change, it
also provides many opportunities for growth. ABB's goal is not only to keep up
with change, but to anticipate it and develop today the solutions our customers
will need tomorrow. A key to our approach is the ability to offer the broadest
scope of power generation systems and equipment in the industry. This allows us
to deliver total solutions, from the boilers, turbines and generators that
actually produce the electricity to the control systems, pollution control
equipment, transformers and all the other systems needed to make a power plant
run reliably, efficiently and with low emissions.
BROADEST SCOPE
ABB power plants generate electricity from a wide range of fuels: natural gas,
coal, oil, diesel, hydro, nuclear, and non-
[PHOTO]
North America's largest heat and power plant, Midland, Michigan, USA.
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conventional fuels, such as industrial furnace gases, wood chips, and other
materials. ABB even provides civil engineering to erect the plant, build access
roads, and develop other supporting infrastructure. Our uniquely broad scope of
supply means we can deliver exactly what our customers need, no matter how
diverse their requirements.
ABB also offers unique geographic scope. We manufacture power equipment
around the world, and provide on-site engineering and service with local people
living and working right beside the customer. Our global ability to provide
customers with a broad range of financing options is another strength, and ABB
technology ensures that power producers can offer their customers a reliable and
cost-effective source of energy.
ABB power generation has strengthened its position as a leading
supplier of high-efficiency, low emission gas-fired power plants. Sales of its
advanced cycle GT24/GT26 turbine family continue to grow, with orders from
Argentina, the U.S., the United Kingdom and Taiwan. These turbines have
previously been sold in the United States, Germany, and South Korea. When used
in a combined-cycle plant - in which waste heat from a gas turbine is captured
and used to produce steam for a steam turbine - the improved efficiency of the
GT24/GT26 can bring customers significant savings in operating costs every year.
The benefits of combined-cycle operation include lower investment and operating
costs, shorter construction times, high reliability and low emissions.
[PHOTO]
Emission control system for a coal-fired power plant, Witbank, South Africa.
SMALL-SCALE POWER
ABB also launched a new high-performance gas turbine in 1997, the GTX100. The
43-megawatt GTX100 will meet the growing demand from private power producers,
smaller utilities and process industries who want a more compact plant with the
same reliability, efficiency and emission performance of a bigger system. The
GTX100 - developed using know-how from Sweden, Switzerland and from ABB's
turbine center in Moscow - is the first gas turbine to feature ABB's new
Advanced EV burner, which achieves emissions of nitrogen oxides (NO/x/) and
carbon monoxide (CO) as low as 25 parts per million, even at half load - a new
industry standard. The GTX100 is expected to enter service in 1999.
ABB also won a number of orders for industrial power plants to meet
rising demand in emerging markets and the fast-growing oil and gas sector. These
plants, built to provide electricity to individual processing or manufacturing
facilities, range in size from 53-270 megawatts. Orders included small power
plants for a Venezuela oil field, a Taiwan chemicals manufacturer, an Indonesian
pulp and paper maker, and energy companies exploring the oil and gas fields of
the North Sea. ABB also builds high-performance gas turbines for ships. With our
comprehensive product range in the small-to-medium turbine market, ABB is
14
<PAGE>
well-positioned to meet expected future demand. In each case, ABB's technology
and its ability to provide close-to-the-customer support through its strong
local operations played a key role in winning the orders, many of which resulted
in increased business for ABB turbine production centers in Germany and Sweden.
[PHOTO]
Gas turbines for the world's fastest ferry, Argentina.
LONGER OPERATING LIFE
Many of ABB's power customers are looking for ways to get more out of existing
plant and equipment. This is especially true in the current environment of
[privatization] and deregulation, where profitability targets have become just
as important as output. ABB has developed a retrofit package for 200-megawatt
turbogenerators of non-ABB design, for example, that extends operating life by
20 to 30 years while lifting output by 15 percent.
Coal is an important source of energy around the world and will
remain so for decades to come. ABB's boiler technology for coal-fired
plants helps get the most out of this abundant fuel while reducing emissions,
even for brown coal, whose sulfur content is relatively high. In 1997, ABB won
orders to build new large coal-fired plants in China, Greece and Morocco. We are
continuously aiming for improved performance and emission levels for coal-fired
plants in anticipation of growing demand, especially in the emerging markets of
Asia. ABB's nuclear activities focus on delivering its proven System 80
technology and providing fuel and modernization services. For example, ABB won
an order in 1997 to modernize the Oskarshamn nuclear plant in Sweden with new
turbines and control technology to lift the plant's output and improve
efficiency and reliability.
Important orders in ABB's hydro business in 1997 included the award to
supply eight generators to China's Three Gorges hydro project, and generators,
control systems and other equipment for a dam to supply electricity in northern
Turkey.
[PHOTO]
Pollution control system, Bangpakong power plant, Thailand.
The power markets of tomorrow hold considerable promise for companies
that are quick to anticipate change and create new ways for their customers to
improve their competitiveness. Through its broad product and geographic scope,
technology and financing strength, and its commitment to customer value, ABB is
positioned for continued leadership into the next century.
15
<PAGE>
A farm would never become a reality for this family without the
irrigation system;
the irrigation system would never become a reality without electricity;
electricity might never become a reality if not for the engineers of ABB.
[PHOTO]
When electric current begins flowing into the coastal region of northern
Peru, some of the local people may think it's nothing short of a miracle.
Perhaps they won't be far wrong.
The Peruvian Energy Commission had been trying to bring power to this
remote region for a long time. And they knew all too well the myriad problems
inherent in a project of this magnitude.
Fortunately, the local firm heading the project, 'Aguaytia Energia del
Peru SRL', found a company that could help provide an ingenious solution to this
energy challenge: ABB.
It's a solution that will utilize natural gas located east of the Andes.
The gas will be pumped from the fields, processed, then piped to a 155
megawatt power plant.
Electricity from the plant will then be sent via a 400 kilometre power
transmission line across the Andes to the coast, thereby supplying the area with
the much needed energy from Peruvian resources.
It's the kind of solution only a team of dedicated individuals with
multi-cultural perspectives, multi-disciplinary expertise and global and local
orientation working together could create.
And, if for one particular group of Peruvian farmers, ABB's ingenious
engineering qualifies as a miracle, that's OK with us.
16
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TRANSMISSION AND DISTRIBUTION
[PHOTO]
Power transmission system, Chile.
Consumers of electricity - from homes and offices to farms and factories - are
often far away from the power plants on which they depend. ABB provides the
technology to move that power efficiently, reliably and at competitive prices,
whether it's across town or across the continent.
It is a business that is changing rapidly. Many of our customers are
adapting fast to new market forces, such as deregulation and privatization.
Industrial customers, such as chemical or mining companies with major power
systems installed at refineries or steel mills, are striving to boost their
efficiency and productivity in a globally competitive market. ABB is the
largest and most complete supplier of power transmission and distribution
systems and equipment in the world. We make the substations, power lines,
cables, transformers, network control systems and other systems and equipment
our customers use to transport electricity efficiently. We also have the
broadest global presence, able to supply and service our customers through our
strong local operations in all parts of the world.
POWER LINKS
Achieving the single Europe of tomorrow will depend on the ability to link power
systems between West and East. Such links will lead to significant improvements
in the efficiency with which electrical power in Europe is used. For example,
power generated at off-peak times in one location could be used thousands of
kilometers away to meet peak load demands in
[PHOTO]
Diagnostic and retrofit systems for power transformers.
17
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[PHOTO]
Self-regulating "smart" gas-insulated switch gear, Frankfurt, Germany.
another. Among other things, this will reduce the need to build costly
additional power plants inside each country and make it possible to buy
electricity from the most economic source.
One key to making it work is ABB's HVDC (High-Voltage Direct Current) power
transmission technology in which we are a world leader. HVDC allows
large amounts of electricity to be transported over very long distances with low
losses. Many ABB HVDC systems are currently operating in North America and
Western Europe.
In addition, ABB now provides a smaller-scale HVDC solution called HVDC
Light, using newly-developed voltage converter and cable technology. HVDC Light
helps make small-scale power more economically feasible, an important
development for increasingly privatized and deregulated markets where smaller
power plants are becoming a financially attractive option for expanding
electricity infrastructure. HVDC Light will be used to improve the wind power
network on the Swedish island of Gotland in the Baltic Sea.
EMERGING MARKET GROWTH
Economic growth in emerging markets is closely linked to the availability of
electrical power. Supporting that economic development is a growth opportunity
for ABB, especially with our strong local presence in most of these markets. For
example, ABB is building a high-voltage substation near Jubail, Saudi Arabia, on
the Arabian Gulf, equipped with the latest compact gas-insulated switchgear. The
station will link a new 2,400 megawatt power plant to the area's power grid and
improve the reliability of electricity supplies to industries in the area,
particularly the fast-growing petrochemical industry, a major contributor to the
country's exports.
In Brazil, ABB has established a new plant for transmission line
towers and related fittings. ABB is building a new power and traction
transformer plant in India using technology transferred from ABB in Germany and
Switzerland, and a second joint venture for power transformers has been
established in China. In Russia, ABB is building air insulated switchgear, high-
voltage equipment and energy metering systems. ABB is building and expanding
plants in China, Korea, Malaysia, Indonesia and Mexico as well.
Our lead position as a provider of power lines and transmission
towers has been strengthened by our expansion into emerging markets. ABB has
power line projects ongoing in Peru, Chile, Indonesia, the Philippines, Brazil,
and Mexico, to name a few.
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NEW SERVICE CONCEPT
In more competitive deregulated markets, many of our customers are looking for
new ways to get more out of their existing transmission and distribution
networks, to deliver power to their customers more cost-effectively and more
reliably. ABB delivers innovative solutions in a number of ways. In our high-
voltage systems businesses, ABB has launched a unique service and retrofit
program that goes beyond conventional service concepts to include network
planning, financial and environmental engineering and personnel training.
Getting more out of the existing transmission and distribution systems
also increasingly relies on advanced software and communications systems. These
allow power providers to measure consumption patterns and load conditions in
real time, and then take efficiency improvement steps quickly. ABB is a leading
provider in this field and has won an order to build one of the world's first
systems to manage power grid traffic in real-time in an open retail energy
market. The project is being carried out in the U.S., in California, where
consumers will soon be able to choose from whom they wish to buy power. ABB will
deliver a system that will allow the State not only to schedule and manage
electricity transmission among a number of suppliers, but also to administer
business operations such as bidding, billing and credit. The project puts ABB in
a good position to capture similar orders as deregulation takes place in other
areas.
[PHOTO]
Complete electrical and process control system for a
cement plant, Thung Song, Thailand.
Expanding our technology leadership remains a key element of ABB's
approach to business. The aim is to offer customers maximum flexibility and
improved cost-effectiveness. One way is to make products more compact, with
fewer moving parts, easy to integrate into existing systems, and with built-in
"intelligent" self-monitoring and control functions. The result is higher system
reliability and lower operating costs. ABB is also increasingly using lifecycle
analysis in product development to reduce total environmental impact and help
customers minimize lifecycle costs.
With our broad product range, fast and flexible local presence in all of
our markets, and leading technology, ABB's power transmission and distribution
business is in a good position to tap the growth opportunities of tomorrow's
quickly changing market.
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Her father won't be sitting in the front row
if he can't make the airport train on time;
he won't make the train on time
if he can't land on time;
he might not be landing on time
if not for the engineers of ABB.
[PHOTO]
Today her father is working in Lyons. Tonight, she's playing in Oslo. So
it won't be possible for them to be together on one of the most important
evenings of her young life.
But soon, it will be.
A few years ago, the Parliament of Norway approved a plan to construct a
totally new international airport that would streamline service to Oslo.
It was a challenging project that presented some serious problems for
the builders until they met the engineers of ABB who showed them how ingenious
engineering could help provide some answers.
Now the project is underway and ABB and its partners are turning the new
airport at Gardermoen into a reality.
New runway lighting will help make landings and take-offs safer and more
punctual; the computerized control equipment for a new baggage handling system
will make getting out of the terminal easier; and the associated rail connection
will make getting home quicker.
To the Norwegian public, it will mean safer and more efficient travel to
and from Oslo. But to the father of one young violinist, it will mean something
far more.
Because on an evening when his daughter is playing Schubert's 'Sonata in
B Flat', he will be there.
<PAGE>
INDUSTRIAL AND BUILDINGS SYSTEMS
[PHOTO]
Electrical contracting and installation, Malaysian National Theatre, Kuala
Lumpur.
On average, about a third of all the electricity generated in the developed
world is consumed by industry, from energy-intensive processes such as chemical
processing, steel making or the production of pulp and paper, to the electrical
systems inside industrial and commercial buildings. In the emerging markets of
Asia, Latin America, the Middle East and Africa, the proportion is smaller but
growing quickly.
Making industrial processes faster, more reliable and more energy
efficient improves the competitiveness of businesses and reduces their impact on
the environment. It's a large market with a large potential worldwide. It's a
market in which ABB's Industrial and Building Systems aims to build its leading
position by offering a full range of innovative solutions to our customers
wherever they do business.
DESIGN FOR EFFICIENCY
One such solution is the latest generation of variable speed drives to control
the speed and output of industrial motors used, for example, in fans, pumps
and conveyors. By matching the speed of the motor to changing load conditions,
variable speed drives can significantly improve equipment performance while
lowering electricity consumption, repair costs and downtime.
ABB introduced two new variable speed drives in 1997. One is the ACS
1000 for medium-voltage motors. The ACS 1000 uses new semiconductor technology
to reduce size and costs while increasing reliability substantially. The result
is a standard drive for motors that previously required more expensive
[PHOTO]
ABB turbocharger, diesel engine plant, The Netherlands.
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and bulkier custom-made drives. ABB also launched the ACS 100, a fast, easy-to-
install micro drive only 80 millimeters across, including a matchbox-sized
control panel. Demand for micro drives is expected to make up 30 percent of the
total drives market by the year 2000.
ABB continued to improve its Advant process control system. Advant gives
customers in process industries such as chemical, oil and gas, pulp and paper
and metals refining the ability to measure in real time and then modify the
performance of their entire processing system to achieve the highest efficiency
and product quality and lowest downtime and operating costs. The user interface
is also available now in Chinese to meet the growing demand in that high-
potential market.
GROWTH IN NEW MARKETS
From a minor presence in the oil and gas business nine years ago, ABB has grown
into an industry leader, especially in the area of deep-sea exploration
technologies that operate on the ocean floor. In 1997, ABB was chosen to develop
the world's first commercially operational subsea oil separation plant. ABB's
technology makes developing these deep sea fields more economically feasible and
lowers their environmental impact. It also represents a significant growth
opportunity.
In its petrochemicals business, ABB continues to bring customers the
benefit of its global leadership in chemical engineering in areas such as
ethylene production, oil refining, and natural gas processing. ABB builds both
turnkey projects, such as an 800,000 ton per year ethylene plant to be built in
Saudi Arabia, and modernizes existing plants, such as a petrochemical refinery
in Russia, so customers can get more out of their existing assets.
ABB's flexible automation business also continues to expand into new and
promising markets. By offering globally standardized robotics, paint finishing
and other automated systems, ABB is able to provide high performance automation
solutions to its large international customers around the world. ABB increased
market share significantly in 1997 in sectors like consumer goods packaging and
coating systems for white goods, such as washing machines and other household
appliances. Combined with ABB's continuing strong position in the global
automotive market, the expansion into new industrial sectors promises good
growth for the future.
Boosting our customers' productivity through expert service and
professional maintenance is another growth opportunity for ABB. In the Gulf of
Mexico, ABB is providing Mexican oil producer Pemex with a complete maintenance
program to increase up-time and lower environmental risks for four of their
offshore drilling platforms. ABB is also providing full service to the French
aerospace company Snecma, which delivers high-precision parts to
[PHOTO]
Automated motorcycle production, Taiwan.
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major civilian aircraft manufacturers in Europe and the U.S. ABB's service
business has also set up global centers of excellence in sectors such as
metallurgy, cement, pulp and paper, and petrochemicals to speed up the delivery
of our engineering expertise to customers around the world.
INTELLIGENT BUILDING SYSTEMS
Our building systems customers are increasingly asking for total solutions that
cover all of their needs, from lighting and ventilation systems to monitoring
and control systems that ensure the most efficient use of electricity through an
entire building. ABB has the product and system know-how and design and project
management capabilities to meet this growing demand.
For example, ABB delivers high-performance fans for industrial processes
and ventilation systems, as well as energy-efficient air handling systems for
large buildings and tunnels. ABB continues to build this business in Asia
Pacific with orders for fans from a petrochemical customer in Taiwan, from a
power plant in Singapore, and tunnel fans in Australia.
ABB has pioneered intelligent electrical systems in buildings to monitor
and control a variety of different tasks, such as lighting, heating and
security. Each control system is able to communicate with the others, allowing a
fully integrated energy management system. ABB has achieved a new first in this
area with its Powernet EIB system which allows intelligent controls to be built
into existing electrical installations, without the need to install additional
power lines. Using energy efficiently will continue to be a high priority in
both the industrialized world and emerging markets. ABB intends to be a lead
player in this growth area.
[PHOTO]
World's largest industrial drive - 135,000 horse power -
at NASA wind tunnel, Virginia, USA.
Building our local presence around the world remains a key part of ABB's
profitable growth plan. This was driven forward in 1997 through a number of
acquisitions and joint ventures. Among the acquisitions were two electrical
contracting companies in Switzerland, water metering and analyzer companies in
Hungary and France, and a major electrical equipment supplier in Argentina.
Important new industrial service joint ventures were established in India and
Poland, positioning ABB to tap future growth opportunities in those important
markets.
By focusing on our core businesses, building our local presence in high-
potential markets around the world and continually striving for technological
leadership, ABB's Industrial and Building Systems segment aims to deliver more
value to its customers and, in turn, to ABB's shareholders.
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ADTRANZ
[PHOTO]
Urban transit system, Stockholm, Sweden.
The rapidly changing world of rail transportation is creating growth
opportunities for those companies able to meet the competitive challenges:
deregulation, privatization, and the rapid globalization of their customer base.
Adtranz, ABB's 50-50 rail joint venture with Daimler-Benz AG of Germany, is
fully committed to meeting these challenges and has taken decisive steps in 1997
to secure its leadership position as the world's most complete and cost-
effective provider of total rail systems.
MOVING UP IN EUROPE
Adtranz' success in the U.K. market reflects the new opportunities becoming
available in deregulated rail markets. After some years of uncertainty, the
effect of privatization exceeds expectations and the U.K. rail market is
prospering, with new investments from entrepreneurial private operators. Adtranz
won a substantial share of that market in 1997, including orders for 26 diesel
trains in Midland, 30 four-car Electrostar trains from Connex Rail Ltd, and 44
four-car electric commuter trainsets from Prism Rail.
The Scandinavian market continued to be very good, in part because of
continued efforts to build north-south links with the rest of Europe. Adtranz
won an order for 27 complete train sets for the Oresund connection between
Denmark and Sweden. The Stockholm, Sweden, public transport authority bought 12
new-generation light rail vehicles plus a complete signaling system, while in
Germany, Adtranz technology has helped it significantly expand its share of the
market for advanced signalling systems.
EXPANDING MARKETS
The long-term need for efficient mass transit systems in the rapidly urbanizing
emerging markets opens a growth opportunity for Adtranz. Meeting that demand
quickly means having local operations near the customer. Adtranz established an
advanced signalling technology center in Bangkok, Thailand, in 1997 which will
offer local system engineering and software development for the entire Asia-
Pacific region. Engineering and manufacturing facilities in China
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[PHOTO]
Advanced signalling and power systems for the German rail network.
[PHOTO]
Flexliner tours North America.
position Adtranz to play a key role in this high-potential market. In Latin
America, Adtranz won orders in Brazil, Argentina and Mexico. This is a region in
which Adtranz expects good future growth.
Central and Eastern Europe is another key market because of the ongoing
need for rail infrastructure expansion. Adtranz has invested significantly in
these markets and has a particularly strong presence in Poland. These
investments started to bear fruit in 1997, for example, with a Russian order for
21 electric locomotives. As the economies in this region continue to expand,
Adtranz will be there to provide the transportation infrastructure needed for
growth.
CUSTOMER SUCCESS
Adtranz focuses its technology development on making rail operators even more
competitive with other forms of transport. One way to accomplish this is to
create vehicles that can operate at speeds of up to 250 kilometers per hour or
higher using existing rail systems. Adtranz has become a leader in this area,
providing not only tilting train technology but also the on-board computers and
advanced traffic control systems that allow high-speed trains to operate most
efficiently.
Another way is to help operators improve traffic control so they can
move more people or freight while improving safety and reducing operating costs.
Adtranz is a leading supplier of signalling, control and diagnostic systems that
make these improvements possible. Vehicle designs using lightweight materials
and that offer improved passenger comfort also help operators boost ridership,
while low-noise propulsion systems make rail a more friendly neighbor. In the
U.S., Adtranz is focusing on developing automated elevated passenger transport
systems to alleviate congestion in the big cities without having to tear down
existing neighborhoods.
The significant restructuring plans announced in 1997 and investments in
technology development promise to lift Adtranz' profitability in 1998 and
beyond.
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FINANCIAL SERVICES
[PHOTO]
ABB's ability to provide total financing solutions is a key to our success.
As a global supplier of systems to generate, transmit and use electrical energy,
ABB is involved in large scale infrastructure projects, such as power plants and
long-distance transmission systems. These projects are often cornerstones of
economic development in emerging markets and involve enormous capital
investments for which the funding is not always available locally. Finding and
managing that capital is a key to any project's success. With the continued
privatization and deregulation of the global power business, investors expect
risks and returns that are competitive with other investment opportunities.
ABB's financial services business provides the financial expertise
needed to get these projects up and running as fast as possible, generating
revenue and profits for our customers. Whether they require equity or debt
financing, risk management, insurance, lease financing, investment consulting
services or, most often, some combination of all of these tools, ABB has the
right people in the right places to get the job done.
A good example of how ABB's financial know how delivers greater value to
our customers is the development of a $1-billion 1,200 megawatt coal-fired power
plant at the port of Jorf Lasfar in Morocco. The project, which involves
doubling the output of an existing plant, will supply 60 percent of the
country's base load needs. It's the largest privately owned infrastructure
project in Africa. ABB arranged equity investment and loan guarantees and in a
joint venture with its U.S. partner, will also own and operate the power plant
for 30 years. The customer's investment goals are met and ABB wins an order for
turbine-generators, boilers, a control system and other equipment.
[PHOTO]
LOCAL MARKET KNOWLEDGE
ABB has delivered similar solutions in the Czech Republic, India, South Korea,
Argentina, Colombia,
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and elsewhere. Our knowledge of local markets combined with a proven track
record and links into the global financial network mean we can meet our
customers' financing needs wherever in the world they plan to do business. With
these future growth opportunities in mind, ABB Financial Services is expanding
its project financing activities in India and other countries.
[PHOTO]
But the impact of privatization and deregulation on our power customers
goes beyond the need to meet tough investment return targets on individual
projects. It also means they must develop business systems geared to buying,
selling and moving electricity among a variety of suppliers and customers in an
increasingly open market. In order to tap this growth opportunity, ABB Financial
Services is expanding its financial consulting services in Sweden, Switzerland
and the U.S., offering customers financial strategy, treasury management,
financial risk management and cash flow and credit risk management services. ABB
is focusing these efforts on helping our customers to manage risks by improving
their policies, trading practices, business systems and administrative routines.
ABB Financial Services also provides financing tools for the ABB Group.
For example, ABB returned successfully to the Eurobond market in 1997 through
two issues, one in U.S. dollars and the other in Australian dollars. The funds
will be used to re-finance long-term debt. ABB Financial Services also provides
Group companies with other financial support, such as treasury services,
currency hedging, and portfolio and fund management.
In today's global market, many of our customers' businesses are changing
quickly, often unpredictably. ABB's goal is to understand our customers' markets
as well as they do, to anticipate change, and then to provide the cost-effective
solutions they need as fast as possible. ABB Financial Services plays a vital
role in our ability to meet this challenge and, by expanding its expertise in
key growth areas and its geographic presence in all markets of the world, it is
well positioned for future profitable growth.
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R&D
[PHOTO]
The GTX100 gas turbine improves efficiency significantly.
Developing innovative technology is a key to making our customers more
competitive. So is getting those solutions into their hands quickly and at
competitive costs. That's why building our technology leadership and targeting
our research and development efforts at specific customer needs is so important
to us.
For example, ABB's new GTX100 gas turbine meets our customers' needs for
efficient, low-emission power in the low- to mid-output range. We achieved this
with a number of innovations, such as a heat-resistant single-crystal material
for the turbine blades and our Advanced EV burner that ensures lower emissions
of NO/x/ (oxides of nitrogen) across a wider range of load conditions.
In our power transmission and distribution business, market deregulation
puts a premium on efficient network operation. That has opened new opportunities
for ABB's wide range of intelligent switchgear systems that give grid operators
greater freedom to optimize network configurations as load conditions change.
ABB is also a leader in technology that allows consumers in deregulated markets
to choose where they buy electricity, under conditions that best suit their
needs.
In the oil and gas sector, ABB has helped make exploration of deep sea
offshore oil and gas fields more economically feasible and safer. Our
electronically-controlled gas production modules installed on the sea floor are
serviced by remote-controlled vehicles. As this technology is further adapted to
greater depths, large new fuel resources will be opened up for the future. When
ABB was formed in 1988, revenues in this area amounted to less than US$ 300
million. Today, it is a multi-billion dollar business and the prospects for
further growth are good.
Creativity in research and development is ultimately about motivating
people and providing them with an environment in which new ideas can thrive. At
ABB, we see the cultural diversity as fertile
28
<PAGE>
[PHOTO]
Micro-engineered catalyst system to speed up
chemical processes.
ground in which to cultivate creativity. With some 20,000 research engineers and
scientists worldwide, ABB is able to build multicultural teams in which our
people bring a variety of perspectives to bear on specific customer needs.
ABB's eight corporate research centers in the U.S. and Europe -
including a new center in Krakow, Poland - bring together top researchers in
many fields and from many backgrounds to work in our core technologies. It's
a global network that pays off in innovative leading-edge technology solutions
for our customers around the world.
ABB'S ENVIRONMENTAL PERFORMANCE
Sustainable development is an ideal to which ABB is fully committed. Our efforts
comprise three main elements:
. Developing and supplying ecoefficient products and systems, such as
high-efficiency process control systems for industry, low-emission power
generation technology, low-loss power transmission systems, and many others.
. Transferring state-of-the-art technology to developing countries,
together with management, quality and environmental standards. This is one of
the most effective ways a global company like ABB can support the drive for
sustainable development.
. Continuous improvement of our own environmental performance. At the end
of 1997, 123 ABB sites had been certified under the ISO 14001 standard, with
implementation at most of our 712 sites scheduled to be underway by the end of
1998.
At the end of 1997, we launched the second generation of environmental
goals for the ABB group. These focus on the full integration of environmental
policies into strategic planning in our global business areas. A key element is
the introduction of lifecycle assessment for our core products. This will equip
us to meet increasing demands on both our environmental and business
performance.
For further information on ABB's environmental performance, please read
our Environmental Management Report 1997, available free of charge from:
ABB Environmental Affairs
V. Esplanaden 9a
S-35231 Vaxjo
Sweden.
Or visit the ABB worldwide website at
http://www.abb.com
29
<PAGE>
MANAGEMENT'S DISCUSSION -
ANALYSIS OF THE GROUP
- --------------------------------------------------------------------------------
KEY FIGURES (US$ in millions, unless otherwise stated) TOTAL GROUP
- --------------------------------------------------------------------------------
Year ended December 31 1997 1996
- --------------------------------------------------------------------------------
Orders received/2,3/ 34,803 33,884
- --------------------------------------------------------------------------------
Revenues/2/ 31,265 33,767
- --------------------------------------------------------------------------------
Operating earnings after depreciation/2/ 1,137 2,113
- --------------------------------------------------------------------------------
Income before taxes/2/ 853 1,901
- --------------------------------------------------------------------------------
Net income 572 1,233
- --------------------------------------------------------------------------------
Stockholders' equity 5,283 5,875
- --------------------------------------------------------------------------------
Total assets 29,784 30,896
- --------------------------------------------------------------------------------
Capital expenditure for tangible fixed assets 1,093 1,168
- --------------------------------------------------------------------------------
Capital expenditure for acquisitions 302 333
- --------------------------------------------------------------------------------
Divestitures 748 286
- --------------------------------------------------------------------------------
Expenditure for research and development 2,657 2,638
- --------------------------------------------------------------------------------
Operating earnings/revenues (%)/2/ 3.6 6.3
- --------------------------------------------------------------------------------
Return on equity (%) 10.3 22.2
- --------------------------------------------------------------------------------
Return on capital employed (%)/2/ 12.2 19.9
- --------------------------------------------------------------------------------
Interest coverage ratio/2/ 2.7 5.0
- --------------------------------------------------------------------------------
Debt/equity ratio 0.8 0.7
- --------------------------------------------------------------------------------
Net cash position 1,564 1,204
- --------------------------------------------------------------------------------
Capital turnover rate/2/ 1.03 1.07
- --------------------------------------------------------------------------------
Number of employees 213,057 214,894
/1/Total revenues of the ABB Group from third-party customers in each
region/country.
/2/1996 restated; refer to section N in the Principles of Consolidation.
/3/Restated to reflect the indefinite delay of the Bakun project.
- --------------------------------------------------------------------------------
REVENUES/1/ (US$ IN MILLIONS) REVENUES EMPLOYEES
AND EMPLOYEES
- --------------------------------------------------------------------------------
1997 1996/2/ 1997 1996
- --------------------------------------------------------------------------------
EUROPE 17,099 19,215 139,528 140,447
- --------------------------------------------------------------------------------
Austria 302 367 1,316 1,464
- --------------------------------------------------------------------------------
Belgium 282 340 1,393 1,407
- --------------------------------------------------------------------------------
Czech Republic 319 348 5,759 5,969
- --------------------------------------------------------------------------------
Denmark 530 576 4,035 3,995
- --------------------------------------------------------------------------------
Finland 845 1,020 9,241 9,215
- --------------------------------------------------------------------------------
France 590 668 2,908 2,936
- --------------------------------------------------------------------------------
Germany 3,968 4,705 29,138 31,026
- --------------------------------------------------------------------------------
Italy 1,203 1,413 8,495 8,375
- --------------------------------------------------------------------------------
Netherlands 467 556 2,197 2,092
- --------------------------------------------------------------------------------
Norway 1,116 1,259 7,209 7,184
- --------------------------------------------------------------------------------
Poland 526 500 7,738 6,690
- --------------------------------------------------------------------------------
Portugal 256 239 1,487 1,566
- --------------------------------------------------------------------------------
Russia 207 203 1,462 1,499
- --------------------------------------------------------------------------------
Spain 509 632 3,810 4,090
- --------------------------------------------------------------------------------
Sweden 2,331 2,790 24,293 26,220
- --------------------------------------------------------------------------------
Switzerland 826 860 12,483 11,353
- --------------------------------------------------------------------------------
United Kingdom 1,784 1,990 9,174 8,685
- --------------------------------------------------------------------------------
Others 1,038 749 7,390 6,681
- --------------------------------------------------------------------------------
THE AMERICAS 6,374 5,994 31,647 31,303
- --------------------------------------------------------------------------------
Argentina 177 177 684 645
- --------------------------------------------------------------------------------
Brazil 602 555 3,718 4,843
- --------------------------------------------------------------------------------
Canada 396 417 2,172 2,070
- --------------------------------------------------------------------------------
Mexico 202 117 1,227 1,017
- --------------------------------------------------------------------------------
USA 4,142 4,014 21,433 20,435
- --------------------------------------------------------------------------------
Others 855 714 2,413 2,293
- --------------------------------------------------------------------------------
ASIA 5,427 6,304 30,912 32,262
- --------------------------------------------------------------------------------
Australia 791 619 4,748 4,640
- --------------------------------------------------------------------------------
China/Hong Kong 561 519 4,525 4,092
- --------------------------------------------------------------------------------
India 511 914 9,630 9,802
- --------------------------------------------------------------------------------
Indonesia 615 595 1,960 1,702
- --------------------------------------------------------------------------------
Japan 651 696 1,138 1,216
- --------------------------------------------------------------------------------
Malaysia 383 953 880 774
- --------------------------------------------------------------------------------
Philippines 243 340 1,470 1,485
- --------------------------------------------------------------------------------
Singapore 163 215 1,071 993
- --------------------------------------------------------------------------------
Thailand 351 351 3,739 5,974
- --------------------------------------------------------------------------------
Others 1,158 1,102 1,751 1,584
- --------------------------------------------------------------------------------
MIDDLE EAST AND AFRICA 2,365 2,254 10,970 10,882
- --------------------------------------------------------------------------------
Egypt 193 195 1,954 1,669
- --------------------------------------------------------------------------------
Saudi Arabia 521 424 1,189 1,472
- --------------------------------------------------------------------------------
South Africa 253 258 2,703 2,885
- --------------------------------------------------------------------------------
Others 1,398 1,377 5,124 4,856
- --------------------------------------------------------------------------------
GROUP TOTAL 31,265 33,767 213,057 214,894
- --------------------------------------------------------------------------------
30
<PAGE>
MANAGEMENT'S DISCUSSION-
ANALYSIS OF THE GROUP
MARKET CONDITIONS
Continued rapid urbanization and industrialization due to high population
growth is driving demand for infrastructure development in emerging markets.
Accordingly, demand in many of these markets for ABB systems, products and
services was strong during 1997. Although there have been some negative impacts
from the financial turbulence in certain countries in South-east Asia on ABB's
business in the short-term -- most notably on the Bakun hydroelectric project in
Malaysia and some delays in planned projects -- the situation also has provided
significant opportunities. ABB's local operations in the countries most
affected by the currency devaluations now enjoy a corresponding cost advantage,
in both local and regional export markets. The effect of the turbulence on the
large markets in China, India and Australia has been minimal until now and
demand there remains good. The long-term outlook for Asia is positive. The
instability in Asia did not have significant effects on emerging markets in
other parts of the world. In Latin America, continued deregulation fuelled good
order growth, especially in the power generation and transmission sectors.
Demand also remained good in the Middle East and Africa.
In the industrialized countries, demand was mixed. In North America, the economy
remained strong throughout the year, but demand within ABB's industrial markets
recovered only slowly through the second half. Uncertainties associated with
ongoing deregulation of the power industry in the U.S. continued to hold back
demand. Demand in the service and retrofit business was good. European economies
showed some improvements, with Northern Europe leading the recovery. Demand for
investment goods and infrastructure projects in Western Europe remained low in
1997, the second year of the expected two-year downturn in ABB's business cycle.
Certain standardized industrial goods showed good growth in Germany, indicating
a sustained strengthening of the German economy. Switzerland experienced
another year of economic stagnation with flat domestic demand. Italy showed
signs of recovery in the second half of the year, while markets in Central and
Eastern Europe saw continued growth for modernization of existing plants, as
well as new equipment
Deregulation and privatization in the power sector continue to lift the
importance of private power developers and to shift the utility market towards
smaller output power plants. Demand is also shifting from the high-voltage power
transmission sector towards lower-voltage power distribution systems. This
trend opens new growth opportunities for ABB, with its ability to deliver total
financing solutions, provide service and retrofit in combination with turnkey
capabilities and ensure reliability and environmental efficiency. Competence in
these areas also led to strong order growth in all markets in the rail
industry. In the oil and gas industry, innovative ABB technology for exploration
and process automation generated higher demand in spite of low oil prices. Base
orders for modernization in the pulp and paper and cement industries were
moderate with only low demand for new plants. Expenditures for industrial
equipment and process automation systems in the automobile and metal
industries were flat during the year.
Global competition and price pressure intensified in many markets. ABB adapted
by accelerating cost reduction actions during the year. Market conditions
showed signs of improvement towards year-end for some power generation
equipment, especially steam power plants. Pricing for transmission and
distribution equipment stabilized. In the oil, gas and petrochemical industry
the environment remained good. Prices in the rail transportation, automotive and
cement industries showed no improvement. Construction and building markets in
Europe and North America recovered slightly from a low level
CHANGES IN THE 1997 ACCOUNTS
During 1997, ABB introduced certain changes in its accounting principles and
previous years' figures in this report have been restated accordingly. ABB no
longer includes in orders received and revenues imputed interest income on
advances (IAC) received from customers on construction contracts. Prior to 1997,
ABB calculated the notional interest on these advances and added it to revenues
when sales were recorded on the project. The same amount was then subtracted
under the "Interest on advances" line in the consolidated income statement. This
change reduces operating earnings after depreciation, but has no effect on
income before taxes or net income. Until year-end 1996, taxes on capital and
property were recorded together with income taxes under the caption taxes. As
of 1997, the line "Taxes" in the ABB Group income statement contains only income
taxes while taxes other than on income are included in other expenses. This
change, following International Accounting Standards (IAS), reduces both
operating earnings after depreciation and income be-
ORDERS RECEIVED 1,2
(US$ in millions)
97 34,803
96 33,884
95 35,163
94 30,827
93 28,644
92 31,153
REVENUES 1
(US$ in millions)
97 31,265
96 33,767
95 32,751
94 28,758
93 27,521
92 29,109
NUMBER OF EMPLOYEES
97 213,057
96 214,894
95 209,637
94 207,557
93 206,490
92 213,407
1 1992 through 1996 restated;
refer to section N in the Principles
of Consolidation.
2 1996 and 1997 restated to reflect
the indefinite delay of the Bakun
project.
31
<PAGE>
CAPITAL EXPENDITURE
for Acquisitions
(US$ in millions)
97 302
96 333
95 315
94 196
93 212
92 253
DIVESTITURES
(US$ in millions)
97 748
96 286
95 1,140
94 317
93 162
92 274
CAPITAL EXPENDITURE FOR
TANGIBLE FIXED ASSETS
(US$ in millions)
97 1,093
96 1,168
95 1,171
94 935
93 816
92 957
AVERAGE CAPITAL
EMPLOYED
(US$ in millions)
97 12,086
96 12,537
95 12,478
94 11,816
93 11,579
92 12,531
R&D EXPENDITURE
(US$ in millions)
97 2,657
96 2,638
95 2,627
94 2,353
93 2,271
92 2,386
fore taxes, but has no effect on net income. In addition, ABB has restated
orders received and the order backlog for both 1996 and 1997 to reflect the
indefinite delay of the Bakun hydroelectric project in Malaysia.
ORDER INTAKE AND SALES
Orders received for the ABB Group reached $34,803 million, an increase of 3
percent (1996: $33,884 million). Expressed in local currencies, orders received
increased by 11 percent. A discussion of the orders received per business
segment follows on pages 35 to 41. Large orders grew strongly in 1997 and now
represent some 28 percent of total orders received. Expressed in local
currencies, orders for standard products were somewhat higher in the year with a
stronger increase in the second half. Demand for standard products is expected
to accelerate in Europe in 1998. The order backlog at the end of 1997 reached
$31,160 million compared to $31,023 million at year-end 1996. Expressed in
local currencies, the backlog increased 11 percent.
Revenues amounted to $31,265 million, a decrease of 7 percent (1996: $33,767
million) In local currencies revenues were 1 percent higher.
PERSONNEL AND ORGANIZATION
At the end of 1997, ABB employed 213,057 people compared to 214,894 at year-end
1996. The total number of employees decreased by 1 percent, also on a comparable
basis adjusted for divestitures, acquisitions and new joint ventures. To assure
close contact with customers and to achieve an optimal cost structure, ABB
employees were added in emerging markets, such as in the Middle East and Africa,
and in various countries in Latin America and in Central and Eastern Europe. ABB
also increased employment in most countries in Asia. Employment was reduced in
Germany and Sweden following divestitures and restructuring measures to focus on
core activities and enhance competitiveness. Employment in Automation and
Drives remained stable, whereas ABB's accelerated move into on- and offshore
activities in the oil and gas industry, flexible automation and service-related
activities in many sectors led to higher employment in Industrial and Building
Systems. Stronger sales support for the Group is reflected in a significantly
higher number of employees in the Financial Services segment. Resources
dedicated to ABB sales activities increased strongly, particularly in emerging
markets.
During the year, ABB launched a new management share option program for some
400 senior managers worldwide. It will be based on options which can be
exercised into existing ABB AG bearer shares. The intention is to have a
continuous program with annual option launches, each covering some 100,000
underlying shares. The duration of each year's launch will be six years. The new
program will succeed the present management option program launched in 1993
which expires at the beginning of 1999.
Personnel costs as a share of revenues remained at about last year's low level.
Continuous productivity improvements are essential for maintaining a
competitive cost structure. The restructuring measures announced in 1997 will
accelerate these programs significantly.
Recently, industry and the general public have become increasingly concerned
about the year 2000 issue. The problem arises from the almost universal practice
of using only two digits in program source codes to denote the year. ABB
management gives the year 2000 issue top priority and has appointed a steering
committee to intensify the review of all ABB products and systems in an effort
to achieve full year 2000 compliance. In addition, ABB is preparing for the
planned introduction of the Euro as the official currency in many European
countries.
RESEARCH AND DEVELOPMENT, INVESTMENTS
AND DIVESTITURES
Increased competition and faster changes in the business environment require a
much higher pace of innovation. ABB's spending in research and development in
1997 reached $2,657 million, about 8.5 percent of Group revenues (1996:
$2,638 million or 7.8 percent). Expressed in local currencies, R&D increased
by 11 percent. ABB stepped up investments in high risk, high reward projects,
resulting in breakthrough solutions to maintain technological leadership and
faster market introduction of technology-based innovations to secure sustainable
profitability for its customers.
Acquisitions during 1997 amounted to $302 million (1996: $333 million). Several
acquisitions were concluded in Central and Eastern Europe, including a majority
stake in a power grid construction company to broaden the scope of ABB's power
transmission and distribution equipment and services in Poland. New joint
ventures in the Czech Republic and Poland complement the Group's activities in
service, repair
<PAGE>
and modernization. ABB in Switzerland achieved
market leadership in electrical installations
through two acquisitions. In Germany, the
Group acquired companies for the supply of air-
port electrical systems. Operations for electrical
installations and contracting were acquired in
the Ivory Coast and for motor repair and rewind-
ing in Zimbabwe.
In line with the Group's strategy to concentrate
on its core businesses and find strong partners
for non-core activities, ABB made divestitures in
1997 totaling $748 million (1996: $286 million).
These included the electrical wholesale busi-
nesses Asea Skandia in Northern Europe and
ABB Serienprodukte GmbH in Austria. ABB
also sold its wire rod and winding wires busi
nesses, AB Elektrokoppar and AB Dahrentrad in
Sweden and ABB Isodraht GmbH, Germany. In
addition, ABB sold its worldwide refrigeration
business.
Restructuring programs, productivity increases
and advanced inventory management allowed
ABB to sell land and buildings with a value
of $104 million (1996: $176 million).
CAPITAL EXPENDITURE AND RESTRUCTURING
Capital expenditure for tangible fixed assets in
1997 reached $1,093 (1996: $1,168 million). Ex-
penditure in land and buildings totaled $133
million (1996: $176 million) and $960 million in
machinery and equipment (1996: $992 million).
Increased investments in Brazil and other Latin
American countries strengthened ABB's local
presence there. New manufacturing equipment
and processes in Central and Eastern Europe
led to higher capital expenditures in that region.
Capital expenditures increased in several coun-
tries in Asia, the Middle East and Africa. As a
consequence of restructuring activities, capital
expenditures in Western Europe decreased
somewhat in line with ABB strategy.
The costs for discontinued operations and re-
structuring in 1997 amounted to $889 million
(1996: $156 million) including the extraordinary
restructuring charge of $866 million to improve
the productivity and competitiveness of opera-
tions in higher-cost Western countries and speed
up local expansion in emerging markets. These
programs are expected to have an average pay-
back period of about two years.
FOREIGN EXCHANGE EFFECTS
ABB consolidated financial statements are ex-
pressed in U.S. dollars. A major part of the
Group's value added and profits is generated in
Europe. Therefore, a depreciation of the dollar
against European currencies has a positive trans-
lation effect on ABB's consolidated earnings.
Conversely, a rising U.S. dollar has a negative
translation effect.
The strong appreciation of the U.S. dollar against
many major currencies during 1997 reduced
ABB's balance sheet, where assets and liabilities
are translated into U.S. dollars at year-end ex-
change rates, by 9 percent. The average U.S. dol-
lar exchange rates for the year, used to translate
the consolidated income statement from local
currencies into dollars, also strengthened signifi-
cantly. This reduced orders received, revenues
and result figures by 8-10 percent.
ABB's industrial profit centers hedge their cash
flows against local currency fluctuations to pro-
tect their domestic earnings. In addition, the
Group is hedged against currency fluctuations by
its local presence in many markets with a sub-
stantial part of the costs occurring under the
same currency regime as revenues. By expand-
ing its local presence in emerging markets and
Central and Eastern Europe, ABB increases its
value added in these regions and its long-term
competitiveness. The majority of the Group's
value added is created in countries related to the
German mark, the Swiss franc, Nordic curren-
cies, the U.S. dollar and the yen. Within these
countries, global sourcing initiatives continue to
benefit from weaker currencies or comparative
cost advantages in emerging economies.
FINANCIAL REVIEW AND DIVIDENDS
At year-end 1997, the Group's net cash position
(defined as cash and marketable securities
minus short-, medium-, and long-term loans)
was $1,564 million, an increase of $360 million
compared to year-end 1996. Expressed in year-
end 1996 exchange rates, the increase was $600
million. The reduction in working capital in
mature markets and proceeds from divestitures
compensated for the increased need for working
capital in emerging markets. Net cash from oper-
ating activities more than doubled during 1997
to $1,791 million (1996: $834 million).
During 1997, ABB executed nine new capital
markets issues, totaling $1,054 million, in the
form of private placements or public issues.
A majority of the issues took place under its
Euro Medium-Term Note (EMTN) program. The
public issues continued to be rated Aa2 by
Moody's Investor Service and AA by Standard &
NET CASH POSITION
(US$ in millions)
--------------------
97 1,564
--------------------
--------------------
96 1,204
--------------------
--------------------
95 1,997
--------------------
--------------------
94 1,686
--------------------
--------------------
93 242
--------------------
--------------------
92 -7
--------------------
--------------------
91 -950
--------------------
--------------------
90 -2,110
--------------------
--------------------
89 -1,760
--------------------
--------------------
88 576
--------------------
DIVIDENDS
(declared pertaining to fiscal
year, CHF in millions)
--------------------
97 700
--------------------
--------------------
96 650
--------------------
--------------------
95 520
--------------------
--------------------
94 370
--------------------
--------------------
93 340
--------------------
--------------------
92 340
--------------------
--------------------
91 330
--------------------
--------------------
90 300
--------------------
--------------------
89 290
--------------------
--------------------
88 200
--------------------
OPERATING EARNINGS AFTER
Depreciation/1/
(US$ in millions)
--------------------
97 1,137
--------------------
--------------------
96 2,113
--------------------
--------------------
95 2,181
--------------------
--------------------
94 1,574
--------------------
--------------------
93 1,311
--------------------
--------------------
92 1,219
--------------------
--------------------
91 1,417
--------------------
--------------------
90 1,386
--------------------
--------------------
89 918
--------------------
--------------------
88 543
--------------------
OPERATING EARNINGS
AFTER DEPRECIATION AS A
% OF REVENUES/1/
--------------------
97 3.6%
--------------------
--------------------
96 6.3%
--------------------
--------------------
95 6.7%
--------------------
--------------------
94 5.5%
--------------------
--------------------
93 4.8%
--------------------
--------------------
92 4.2%
--------------------
--------------------
91 5.0%
--------------------
--------------------
90 5.3%
--------------------
--------------------
89 4.5%
--------------------
--------------------
88 3.1%
--------------------
/1/ 1988 through 1998 restated; re-
fer to section N in the Principles of
Consolidation.
33
<PAGE>
INCOME BEFORE TAXES/1/
(US$ in millions)
--------------------
97 853
--------------------
--------------------
96 1,901
--------------------
--------------------
95 2,003
--------------------
--------------------
94 1,362
--------------------
--------------------
93 520
--------------------
--------------------
92 861
--------------------
--------------------
91 997
--------------------
--------------------
90 1,052
--------------------
--------------------
89 872
--------------------
--------------------
88 495
--------------------
NET INCOME
(US$ in millions)
--------------------
97 572
--------------------
--------------------
96 1,233
--------------------
--------------------
95 1,315
--------------------
--------------------
94 760
--------------------
--------------------
93 68
--------------------
--------------------
92 505
--------------------
--------------------
91 609
--------------------
--------------------
90 590
--------------------
--------------------
89 589
--------------------
--------------------
88 386
--------------------
RETURN ON CAPITAL
EMPLOYED/1/
--------------------
97 12.2%
--------------------
--------------------
96 19.9%
--------------------
--------------------
95 21.8%
--------------------
--------------------
94 16.9%
--------------------
--------------------
93 15.4%
--------------------
--------------------
92 14.7%
--------------------
--------------------
91 14.7%
--------------------
--------------------
90 17.3%
--------------------
--------------------
89 15.1%
--------------------
--------------------
88 11.6%
--------------------
RETURN ON EQUITY
--------------------
97 10.3%
--------------------
--------------------
96 22.2%
--------------------
--------------------
95 28.4%
--------------------
--------------------
94 20.2%
--------------------
--------------------
93 1.8%
--------------------
--------------------
92 11.8%
--------------------
--------------------
91 13.9%
--------------------
--------------------
90 14.5%
--------------------
--------------------
89 16.8%
--------------------
--------------------
88 12.5%
--------------------
/1/ 1988 through 1996
restated; refer to section
N in the Principles of
Consolidation.
Poor's. Short-, medium-, and long-term loans were
reduced by $123 million.
ABB's dividend policy is to pay out between 30 and 50
percent of consolidated net income for the year. The
ABB Board of Directors based the dividend proposal for
1997 on the underlying earnings before the restructuring
charge and consequently proposed in February 1998 a
dividend for 1997 of Sfr.700 million to its two parent
companies, ABB AB and ABB AG, an increase of Sfr. 50
million (1996: Sfr. 650 million). Translated into dollars at
the time of the decision and disregarding the restructuring
charge, the dividend corresponds to 41 percent of Group
net income for 1997.
EARNINGS
Operating earnings after depreciation in 1997
amounted to $1,137 million (1996: $2,113 million).
Expressed on a comparable basis in local currencies
and excluding the restructuring charge, operating
earnings increased by 4 percent. A discussion of the
earnings by segment follows on pages 35 to 41.
Unusual items were a negative $608 million. Unusual
income of $295 million was derived from divestitures
and real estate sales. Unusual costs of $903 million was
comprised mainly of the restructuring charge which was
taken at the corporate level.
From a regional perspective, Sweden, Norway, Finland, the
U.S., Switzerland, Italy and the U.K. were the largest
contributors to the Group's operating earnings. The Americas
improved earnings significantly through successful cost
reduction programs, particularly in the U.S. and Brazil. A
strong economy in Northern Europe and success in export
markets supported good earnings in Finland and Norway, the
latter benefiting especially from its worldwide oil and gas
activities. The U.K. achieved higher profitability whereas
earnings in Sweden were somewhat lower. Operating earnings
also declined during the year in Switzerland, Italy and
Germany. Most countries in Asia showed earnings
improvements, but lower results in India and some other
countries reduced the total level for the region. Operations in
the Middle East and Africa contined ued to contribute to
Group earnings.
Regional operating margins, based on domestic and
export revenues within the respective region and
excluding the restructuring charge, developed as follows
during 1997: Europe increased
margins to 7.8 percent (1996: 7.5 percent) and the
Americas to 4.1 percent (1996: 3.2 percent). Lower
results in some Asian countries reduced the region's
margin to 4.1 percent (1996: 6.2 percent) whereas the
Middle East and Africa kept its margin at a high level of
8.5 percent (1996: 9.2 percent).
Income before taxes as reported totaled $853 million
(1996: $1,901 million). Excluding the restructuring
charge and expressed in local currencies, income before
taxes decreased by 1 percent.
Income taxes for the Group in 1997 amounted to $258
million (1996: $659 million). The overall tax rate
decreased on a comparable basis to 30 percent (1996:
35 percent).
Reported net income for 1997 was $572 million (1996:
$1,233 million). Expressed in local currencies and
excluding the restructuring charge, net income for 1997
increased by 4 percent. Reported return on capital
employed was 12.2 percent (1996: 19.9 percent) and
return on equity 10.3 percent (1996: 22.2 percent).
Excluding the restructuring charge, both ratios were
slightly be low last year's level at 19.4 percent and 21.1
percent, respectively.
The outlook for 1998 is addressed in the President's
Comments.
34
<PAGE>
MANAGEMENT'S DISCUSSION -
ANALYSIS OF THE BUSINESS SEGMENTS
<TABLE>
<CAPTION>
=======================================================================================================================
DATA PER BUSINESS SEGMENT (US$ in millions)
- -----------------------------------------------------------------------------------------------------------------------
ORDERS RECEIVED ORDER BACKING REVENUES
- -----------------------------------------------------------------------------------------------------------------------
1997 1996/1/ 1997 1996/1/ 1997 1996/1/
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Power Generation/2/ 10,038 9,448 14,025 13,739 8,114 9,992
- -----------------------------------------------------------------------------------------------------------------------
Power Transmission and Distribution/2/ 8,595 8,290 5,798 5,956 7,889 8,899
- -----------------------------------------------------------------------------------------------------------------------
Industrial and Building Systems 16,294 16,513 7,846 7,844 15,501 15,875
- -----------------------------------------------------------------------------------------------------------------------
Financial Services 828 479 - - 828 479
- -----------------------------------------------------------------------------------------------------------------------
Various Activities/Corporate/*/ 2,093 3,414 240 409 2,074 3,320
- -----------------------------------------------------------------------------------------------------------------------
Adtranz/3/ 2,095 1,835 5,161 5,392 1,870 1,927
- -----------------------------------------------------------------------------------------------------------------------
TOTAL 39,943 39,979 33,070 33,340 33,276 39,792
- -----------------------------------------------------------------------------------------------------------------------
Intra-Group transactions - 5,140 - 6,095 - 1,910 - 2,317 - 5,011 - 6,025
- -----------------------------------------------------------------------------------------------------------------------
NET TOTAL 34,803 3,884 31,160 31,023 31,265 33,767
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
====================================================================================================================================
DATA PER BUSINESS SEGMENT (US$ in millions)
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING EARNINGS CAPITAL EXPENDITURE AVERAGE CAPITAL NUMBER OF
AFTER DEPRECIATION EMPLOYED EMPLOYEES
- ----------------------------------------------------------------------------------------------------------------------------------
1997 1996/1/ 1997 1996 1997 1996 1997 1996
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Power Generation 125 139 205 315 2,919 3,223 43,093 43,449
- ----------------------------------------------------------------------------------------------------------------------------------
Power Transmission and Distribution 557 622 246 273 3,087 3,560 50,846 51,134
- ----------------------------------------------------------------------------------------------------------------------------------
Industrial and Building Systems 1,066 1,035 372 376 4,596 4,906 96,887 95,084
- ----------------------------------------------------------------------------------------------------------------------------------
Financial Services 297 323 13 6 n/a n/a 885 825
- ----------------------------------------------------------------------------------------------------------------------------------
Various Activities/Corporate/*/ -797 -4 210 124 1,159 524 9,989 13,482
- ----------------------------------------------------------------------------------------------------------------------------------
Adtranz/3/ -111 -2 47 74 324 324 11,357 10,920
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL 1,137 2,113 1,093 1,168 12,085 12,537 213,057 214,894
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Restated: refer to section N in the Principles of Consolidation.
/2/ Orders Received and Order Backlog restated to reflect the indefinite
delay of the Bakun project.
/3/ 50% of ABB Daimler-Benz Transportation Group.
/*/ Activities included under Various Activities/Corporate
This category is comprised of local businesses (orders received in 1997: $382
million; 1996/1/: $1,482 million) in several countries and internal services
performed mainly for ABB companies, including information management and
processing centers, consulting services for operational units, corporate R&D and
management of ABB real estate. The largest of the local business included in the
1996 figures, electrical wholesaling in Sweden, Norway and Finland, was divested
during 1997.
The 1997 result is impacted by the restructuring charge of $866 million which
has not been allocated to the related business segments. Approximately half of
the restructuring charge relates to the segment Power Generation with the
remaining amount primarily attributable to Power Transmission and Distribution
and Industrial and Building Systems.
35
<PAGE>
POWER GENERATION
ORDERS RECEIVED/1,2/
(US$ in millions)
--------------------
97 10,038
--------------------
--------------------
96 9,448
--------------------
--------------------
95 9,955
--------------------
--------------------
94 9,493
--------------------
--------------------
93 8,885
--------------------
--------------------
92 8,291
--------------------
REVENUES/1/
(US$ in millions)
--------------------
97 8,114
--------------------
--------------------
96 9,292
--------------------
--------------------
95 9,742
--------------------
--------------------
94 8,354
--------------------
--------------------
93 7,681
--------------------
--------------------
92 6,943
--------------------
OPERATING EARNINGS/1/
(US$ in millions)
--------------------
97 125
--------------------
--------------------
96 139
--------------------
--------------------
95 354
--------------------
--------------------
94 331
--------------------
--------------------
93 368
--------------------
--------------------
92 238
--------------------
AVERAGE CAPITAL EMPLOYED
(US in millions)
--------------------
97 2,919
--------------------
--------------------
96 3,223
--------------------
--------------------
95 3,004
--------------------
--------------------
94 2,306
--------------------
--------------------
93 2,030
--------------------
--------------------
92 1,924
--------------------
NUMBER OF EMPLOYEES
--------------------
97 43,093
--------------------
--------------------
96 43,449
--------------------
--------------------
95 45,968
--------------------
--------------------
94 41,529
--------------------
--------------------
93 39,718
--------------------
--------------------
92 34,694
--------------------
ORDERS RECEIVED PER
REGION/2/
- -------------------------
Europe 43%
The Americas 20%
Asia/Middle East
and Africa 37%
- -------------------------
The global market for power generation equipment developed positively in 1997.
Demand from the mature markets in Europe was stable, while the North American
market started to show signs of recovery. The market for new equipment in Asia
was strong, despite the financial turbulence in Southeast Asia during the last
months of the year. Latin America continued to grow at a high rate resulting
from the ongoing liberalization in the region. Overall, the 1997 development of
the market reconfirmed ABB's strategy that global success results from a global
presence and a strong commitment to invest locally in the emerging markets. The
market for service and retrofit again grew faster than that for new equipment,
especially in the mature markets in Europe and North America. ABB's focus on
this business resulted in an even higher service market share. All business
areas increased their service order volumes.
Orders received in 1997 were $10,038 million, 6 percent above last year (1996:
$9,448 million). Expressed in local currencies, the increase was 15 percent. Gas
Turbine and Combined-Cycle Plants led the increase, reflecting the market
acceptance of ABB's complete range of highly advanced gas turbines. ABB's
GT24/GT26 gas turbine family experienced another successful year. With 11
machines sold in 1997, ABB has to date realized a total of 11 projects with 25
GT24/GT26 machines worldwide. This success confirms ABB's lead in the field of
advanced high performance gas turbines. In Hydro Power Plants, ABB managed to
further strengthen its global market position by securing a major share of the
first group of generators for the Three Gorges hydro-electric power project in
China. As expected, the Nuclear Power Plants business area did not reach the
extraordinary high order level of 1996.
Selective bid criteria led to somewhat lower order intake already in 1996. In
combination with periodization effects in invoicing, revenues in 1997 totaled
$8,114 million, 13 percent lower than the prior year (1996: $9,292 million).
Operating earnings reached $125 million. Disregarding the costs of $11
million associated with the indefinite delay of the Bakun hydroelectric project,
operating earnings were at about last year's level (1996: $139 million),
despite the shortfall in revenues. The lower revenue level was partly offset by
a strong performance in the service and retrofit business and cost reduction
initiatives.
The segment continued its restructuring in 1997, with an emphasis on the steam
power plant business, especially in Germany. These efficiency improvements will
enable ABB to fully benefit from the expected growth opportunities in new fossil
fuel plant and service business. By speeding up the restructuring process, ABB
has taken a major step towards achieving the most cost efficient global
structure in the industry. These efforts supported the 1997 results and will
have an enhanced positive impact in the coming years. Investments in research
and development remained at a high level, leading to the market introduction of
certain high-voltage generators which can be connected to the power grid with-
out a step-up transformer and the efficient GTX 100 gas turbine in the low to
medium output range.
The continuous investment in the segment's global sales network has resulted in
a more efficient sales process which is of mutual benefit to customers and ABB.
The overall quality of services and solutions has thereby increased.
As a result of these improvements, orders for 1998 are expected to exceed the
level of 1997 and earnings are expected to substantially increase during 1998.
================================================================================
BUSINESS AREAS IN THE
POWER GENERATION SEGMENT (US$ in millions)
- --------------------------------------------------------------------------------
ORDERS RECEIVED/1/ 1997 1996
- --------------------------------------------------------------------------------
Gas Turbine and Combined-Cycle Plants 2,917 1,797
- --------------------------------------------------------------------------------
Utility Steam Power Plants 1,549 1,495
- --------------------------------------------------------------------------------
Power Generation Industry 1,064 1,048
- --------------------------------------------------------------------------------
Hydro Power Plants/2/ 826 469
- --------------------------------------------------------------------------------
Fossil Combustion Systems and Services 1,527 1,738
- --------------------------------------------------------------------------------
Nuclear Power Plants 742 1,272
- --------------------------------------------------------------------------------
Power Plant Control 383 405
- --------------------------------------------------------------------------------
Environmental Systems 760 843
- --------------------------------------------------------------------------------
District Heating 237 249
- --------------------------------------------------------------------------------
Other (not assigned to specific B. Area) 33 132
- --------------------------------------------------------------------------------
TOTAL 10,038 9,448
- --------------------------------------------------------------------------------
================================================================================
SIGNIFICANT ORDERS FOR THE POWER GENERATION
SEGMENT IN 1997 (US$ in millions)
- --------------------------------------------------------------------------------
Combined-cycle power plant, U.K. 700
- --------------------------------------------------------------------------------
Combined-cycle power plant, Taiwan 660
- --------------------------------------------------------------------------------
Hydro-power generators, China 250
- --------------------------------------------------------------------------------
Steam power plant, Greece 200
- --------------------------------------------------------------------------------
Combined-cycle power plant, U.S. 190
- --------------------------------------------------------------------------------
/1/ 1992 through 1996 restated; refer to section N in the Principles of
Consolidation.
/2/ 1996 and 1997 restated to reflect the indefinite delay of the Bakun project.
36
<PAGE>
POWER TRANSMISSION AND DISTRIBUTION
The global market for transmission and distribution in 1997 continued to grow in
most regions and for most products. However, demand in Western Europe was
essentially flat and for some products Asia showed a slowdown, which is expected
to be temporary. The expanding deregulation of the electricity market is
changing customer behavior, as well as creating new categories of customers with
higher demand for complete systems and strongly increasing need for service and
retrofit.
Orders received of $8,595 million were 4 percent above the previous year (1996:
$8,290 million) which was adjusted for the order bookings of the indefinitely
delayed Bakun hydropower project in Malaysia. Orders in Cables were also
affected by the sale of the wire rod and winding wires business. On a comparable
basis, and expressed in local currencies, orders received for the segment
increased in 1997 by 18 percent. Important large project orders were booked in
High-Voltage Switchgear for Malaysia and Saudi Arabia. Power Lines secured large
projects in Latin America, Africa and Portugal. Network Control and Protection
received a landmark order for an energy scheduling system in California.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
BUSINESS AREAS IN THE POWER TRANSMISSION AND DISTRIBUTION SEGMENT
(US$ in millions)
- ------------------------------------------------------------------------------
<S> <C> <C>
Orders Received /1/ 1997 1996
- ------------------------------------------------------------------------------
Cables /2/ 752 1,080
- ------------------------------------------------------------------------------
Distribution Transformers 887 873
- ------------------------------------------------------------------------------
High-Voltage Switchgear 2,244 2,080
- ------------------------------------------------------------------------------
Medium-Voltage Equipment 1,141 1,205
- ------------------------------------------------------------------------------
Network Control and Protection 1,100 1,018
- ------------------------------------------------------------------------------
Power Lines /2/ 864 715
- ------------------------------------------------------------------------------
Power Systems 381 190
- ------------------------------------------------------------------------------
Power Transformers 1,079 1,082
- ------------------------------------------------------------------------------
Other (not assigned to specific Business Area) 147 47
- ------------------------------------------------------------------------------
TOTAL 8,595 8,290
- ------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
Significant Orders for the Power Transmission and Distribution Segment in 1997
(US$ in millions)
- ------------------------------------------------------------------------------
<S> <C>
Turnkey order for high-voltage substation,
Saudi Arabia 150
- ------------------------------------------------------------------------------
High-voltage substations and transmission
lines, Mexico 100
- ------------------------------------------------------------------------------
</TABLE>
Distribution Transformers increased order intake, supported especially by the
stronger U.S. economy.
Revenues were 11 percent below 1996, primarily because of lower project
invoicing in Power Systems and divestments in Cables. Revenues on a comparable
basis and expressed in local currencies were 4 percent above the last year.
Operating earnings decreased by 10 percent to $557 million (1996: $622
million). Excluding the costs of $91 million associated with the indefinite
delay of the Bakun hydroelectric project, operating earnings were 4 percent
higher and in local currencies 14 percent higher than 1996. Distribution
Transformers increased their results. Restructuring in Western Europe resulted
in lower operating earnings in Network Control and Protection, High-Voltage
Switchgear and Medium-Voltage Equipment.
Expansion in emerging markets continued in 1997. Including new operations, the
segment employs more than 16,000 employees in Asia, Middle East and Africa and
Central and Eastern Europe. In India, work began on a plant to manufacture power
transformers and in South Korea, facilities for production of distribution
transformers and medium-voltage switchgear are well underway. In Poland, joint
venture companies for service, power lines and substations were established. An
agreement was concluded to acquire the ZWAR Group, one of Poland's leading
switchgear manufacturers. In the Ivory Coast, operations for installation and
contracting were started up. Two companies were acquired in Germany for the
supply of electrical systems to airports.
Following continued high expenditures for research and development, several new
products and systems went into operation in 1997. The world's first operational
high-temperature super-conducting transformer was connected to the power supply
network of the City of Geneva. ABB's lead in high-voltage direct current
technology (HVDC) has been further strengthened with a pilot installation of the
new HVDC Light system, employing new converter and cable technology.
Due to the anticipated strengthening of the economies in Western Europe and
Latin America and as a result of major restructuring, orders and earnings are
expected to increase in 1998.
ORDERS RECEIVED /1/, /2/
(US$ in millions)
--------------------
97 8,595
--------------------
--------------------
96 8,290
--------------------
--------------------
95 8,700
--------------------
--------------------
94 7,614
--------------------
--------------------
93 6,489
--------------------
--------------------
92 7,401
--------------------
REVENUES /1/
(US$ in millions)
--------------------
97 7,889
--------------------
--------------------
96 8,899
--------------------
--------------------
95 8,043
--------------------
--------------------
94 6,924
--------------------
--------------------
93 6,507
--------------------
--------------------
92 7,167
--------------------
OPERATING EARNINGS /1/
(US$ in millions)
--------------------
97 557
--------------------
--------------------
96 622
--------------------
--------------------
95 557
--------------------
--------------------
94 538
--------------------
--------------------
93 427
--------------------
--------------------
92 532
--------------------
AVERAGE CAPITAL EMPLOYED
(US$ in millions)
--------------------
97 3,087
--------------------
--------------------
96 3,560
--------------------
--------------------
95 3,022
--------------------
--------------------
94 2,795
--------------------
--------------------
93 2,621
--------------------
--------------------
92 2,823
--------------------
NUMBER OF EMPLOYEES
--------------------
97 50,846
--------------------
--------------------
96 51,134
--------------------
--------------------
95 46,827
--------------------
--------------------
94 46,457
--------------------
--------------------
93 43,484
--------------------
--------------------
92 47,071
--------------------
ORDERS RECEIVED PER REGION /2/
- --------------------------------------
Europe 46%
The Americas 27%
Asia/Middle East and Africa 27%
- --------------------------------------
- -------------------------------------------------------------------------------
/1/ 1992 through 1996 restated; refer to section N in the Principles of
Consolidation.
/2/ 1996 and 1997 restated to reflect the indefinite delay of the Bakun project.
37
<PAGE>
INDUSTRIAL AND BUILDING SYSTEMS
ORDERS RECEIVED /1/
(US$ in millions)
--------------------
97 16,294
--------------------
--------------------
96 16,513
--------------------
--------------------
95 15,812
--------------------
--------------------
94 13,119
--------------------
--------------------
93 11,397
--------------------
--------------------
92 13,448
--------------------
REVENUES /1/
(US$ in millions)
--------------------
97 15,501
--------------------
--------------------
96 15,875
--------------------
--------------------
95 14,728
--------------------
--------------------
94 12,604
--------------------
--------------------
93 11,751
--------------------
--------------------
92 12,813
--------------------
OPERATING EARNINGS /1/
(US$ in millions)
--------------------
97 1,066
--------------------
--------------------
96 1,035
--------------------
--------------------
95 855
--------------------
--------------------
94 566
--------------------
--------------------
93 437
--------------------
--------------------
92 464
--------------------
AVERAGE CAPITAL EMPLOYED
(US$ in millions)
--------------------
97 4,596
--------------------
--------------------
96 4,906
--------------------
--------------------
95 4,598
--------------------
--------------------
94 3,791
--------------------
--------------------
93 3,615
--------------------
--------------------
92 4,301
--------------------
NUMBER OF EMPLOYEES
--------------------
97 96,887
--------------------
--------------------
96 95,084
--------------------
--------------------
95 89,987
--------------------
--------------------
94 89,023
--------------------
--------------------
93 85,928
--------------------
--------------------
92 89,324
--------------------
ORDERS RECEIVED PER REGION
- --------------------------------------
Europe 62%
The Americas 16%
Asia/Middle East and Africa 22%
- --------------------------------------
In Western Europe, demand for standard products, such as electrical motors,
small drives and low-voltage apparatus, started to grow during 1997. Following
this development, an increased demand for larger customized products and systems
is expected during 1998.
Industrial investments slowed in Asia due to the financial turbulence in certain
countries in the region. Some planned projects were postponed in the steel, pulp
and paper, cement and construction industries. China, India and Australia were
less affected than the countries hit by large currency devaluations.
The markets in the Americas were steady, although there are signs of slowing
investments in many process and manufacturing industries. This slowdown is
likely to continue as long as prices for most raw materials and bulk products
continue to decrease.
The market for service and revamping grew strongly in the industrialized
countries. In the oil, gas and petrochemical industry, the strong market demand
continued for the whole year.
Orders received amounted to $ 16,294 million, 1 percent lower than the previous
year (1996: $ 16,513 million). Expressed in local currencies, orders rose 7
percent. Revenues fell 2 percent to $ 15,501 million (1996: $ 15,875 million).
Despite lower revenues, operating earnings increased by 3 percent to $ 1,066
million (1996: $ 1,035 million). In local currencies, earnings increased by 13
percent. Earnings were higher in nine of the segment's 12 business areas.
The Americas region showed good growth in orders received and revenues, led by
the U.S., Mexico and Venezuela. Local expansion in South America continued with
both acquisitions and startups. Operating earnings also improved with the
largest contributions coming from the U.S., Canada and Mexico.
Orders received in Asia were slightly lower than 1996. The financial turbulence
in Southeast Asia led to reduced investments in large- and medium- sized
projects. The build-up in China continued as planned and orders for local
operations increased strongly. The segment has now over 2,300 employees in
China. Australia booked several large contracting projects. Earnings were lower
than 1996 due to unsatisfactory performance in India and Thailand.
The markets in Europe showed improvements and orders received, expressed in
local currencies, increased. Order volumes in Norway were substantially higher
than last year due to favorable oil, gas and petrochemical markets. Orders also
rose in large markets such as Germany and Italy. Sweden faced a weak
construction and installation market and reported lower orders. Orders in
Switzerland were higher due to the acquisition of two installation companies.
The development in Central and Eastern Europe was positive and new operations
were added in Poland, the Czech Republic and Hungary. Operating earnings in
Europe were flat, but showed a good increase in local currencies. The largest
improvements in earnings were reported in Finland, Norway, Italy, Denmark,
Switzerland, Greece and the U.K. Sweden and Austria also improved earnings.
Earnings in Germany declined due to lower revenues and restructuring costs.
The performance in the Middle East and Africa continued to improve. Orders
increased substantially in Egypt and South Africa and new operations were
established during 1997. Operating earnings increased in Saudi Arabia, whereas
earnings fell in South Africa.
Orders received for Automation and Drives were lower due to a negative currency
effect caused by the stronger U.S. dollar. Orders grew in South America,
especially in the chemical, oil and gas sectors. The European markets for
products, such as drives and high-voltage motors, showed a good recovery during
1997. Some markets in Southeast Asia experienced weakened demand as investments
in new plants were delayed. Earnings were maintained at a good level despite
lower revenues. Several new product launches, such as the very reliable and
compact ACS 1000 medium-voltage alternating current drives, and acquisitions
were made during the year.
The market for Oil, Gas and Petrochemical remained favorable and orders received
increased by more than 20 percent, including a $ 500 million contract to build
an ethylene plant in Saudi Arabia and a $ 100 million contract to modernize a
refinery for one of Russia's largest companies. Orders for additional large
projects were received in the U.S., Germany and the Netherlands. Operating
earnings increased. ABB Vetco Gray, which manufactures equipment for oil and gas
drilling and production, achieved particularly good results. ABB was awarded the
first commercial contract to supply a system for sub-
38
<PAGE>
sea separation and water injection for oil and gas exploration.
Flexible Automation increased its orders, although investments in the automotive
industry slowed. Acquisitions in Canada, the U.S., Italy and Sweden were
integrated and contributed to the higher orders. Expansion in general industry
continued, creating a second strong leg in addition to the automotive business.
Earnings were slightly below the 1996 level.
Orders received for Instrumentation were flat despite good growth in the process
analytics area. Sales for water meters were reduced by the strong pound
sterling. Earnings improved strongly, led by a continued good performance in the
water meter business.
Demand for Motors started to increase steadily in most countries during 1997. An
announcement was made to close a loss-making plant in Germany. Operating
earnings for the business area improved substantially.
A difficult market situation for electrical and mechanical installations in
several European countries caused a decline in orders received for Contracting.
Large orders were received in Australia, Germany and the U.S. The turbulence
towards year-end in Southeast Asia had a certain impact in Thailand and
Malaysia, but overall business in Asia was positive. Two major acquisitions
were made in Switzerland, while the refrigeration activities were divested
during the year. Operating earnings improved substantially from a low level in
1996.
Low-Voltage Systems increased its orders received in local currencies. A large
project was awarded in Germany, which compensated for the slowdown in the Asian
markets. Earnings declined due to lower revenues.
The market for the Low-Voltage Apparatus business grew in Europe and North
America, but was weak in the other regions. Three joint ventures in China with
a total of some 400 employees started local production. Earnings showed a good
increase mainly due to a major improvement in Italy.
Orders received for Installation Material were lower as the larger European
markets, such as Germany and Italy, remained sluggish. However, these markets
now show signs of improvement. The divestiture of the electrical wholesale
business in Austria also contributed to the lower order volume. An acquisition
was made in Argentina. The result declined slightly due to lower revenues but is
still on a good level.
Air Handling Equipment faced low demand in Scandinavia and orders were lower
than 1996. A Swedish company producing refrigeration products was sold in 1997.
Earnings improved despite lower revenues.
Investments and expansion in Service continued during 1997. Volumes increased
and over 1,300 people were added in this business area during 1997, an increase
of 15 percent. The number of full service contracts booked almost doubled
compared to 1996. Several acquisitions and joint ventures were completed.
Earnings showed a major increase.
Orders for new products in Superchargers declined somewhat, while orders for
the service and spare parts business increased. The result remained on a
satisfactory level.
The outlook for 1998 can be characterized as cautiously optimistic. An improved
business climate in Europe should contribute to higher orders and improved
earnings despite an expected, although temporary, slowdown in Asia.
================================================================================
BUSINESS AREAS IN THE INDUSTRIAL AND BUILDING
SYSTEMS SEGMENT (US$ in millions)
- -------------------------------------------------------------------------------
ORDERS RECEIVED/1/ 1997 1996
- -------------------------------------------------------------------------------
Automation and Drives 3,251 3,486
- -------------------------------------------------------------------------------
Oil, Gas and Petrochemical 3,096 2,563
- -------------------------------------------------------------------------------
Flexible Automation 1,437 1,379
- -------------------------------------------------------------------------------
Instrumentation 583 579
- -------------------------------------------------------------------------------
Motors 385 393
- -------------------------------------------------------------------------------
Contracting 3,089 3,521
- -------------------------------------------------------------------------------
Low-Voltage Systems 470 473
- -------------------------------------------------------------------------------
Low-Voltage Apparatus 612 662
- -------------------------------------------------------------------------------
Installation Material 1,060 1,231
- -------------------------------------------------------------------------------
Air Handling Equipment 545 639
- -------------------------------------------------------------------------------
Service 1,105 1,106
- -------------------------------------------------------------------------------
Superchargers 349 375
- -------------------------------------------------------------------------------
Other
(not assigned to specific Business Area) 312 106
- -------------------------------------------------------------------------------
TOTAL 16,294 16,513
- -------------------------------------------------------------------------------
/1/ 1992 through 1996 restated; refer to section N in the Principles of
Consolidation.
39
<PAGE>
ORDERS RECEIVED/1/
(US$ in millions)
--------------------
97 2,095*
--------------------
--------------------
96 1,835*
--------------------
95 3,170
--------------------
--------------------
94 3,035
--------------------
93 2,988
--------------------
--------------------
92 2,789
--------------------
REVENUES/1/
(US$ in millions)
--------------------
97 1,870*
--------------------
--------------------
96 1,927*
--------------------
95 2,764
--------------------
--------------------
94 2,786
--------------------
93 2,607
--------------------
--------------------
92 2,564
--------------------
OPERATING EARNING/1/
(US$ in millions)
97 -111*
96 -2*
--------------------
95 85
--------------------
--------------------
94 4
--------------------
93 - 69
92 -140
AVERAGE CAPITAL EMPLOYED
(US$ in millions)
--------------------
97 324*
--------------------
--------------------
96 324*
--------------------
95 355*
--------------------
--------------------
94 542
--------------------
93 616
--------------------
--------------------
92 518
--------------------
NUMBER OF EMPLOYEES
--------------------
97 11,357*
--------------------
--------------------
96 10,920*
--------------------
--------------------
95 10,717*
--------------------
--------------------
94 15,760
--------------------
--------------------
93 16,119
--------------------
92 17,500
--------------------
*50% of ABB Daimler-Benz
Transportation Group
ORDERS RECEIVED PER
REGION
_ Europe 83%
_ The Americas 11%
- - Asia/Middle East
and Africa 6%
ADTRANZ
MARKET CONDITIONS
Adtranz maintained its global position as the leading and most complete provider
of rail systems, from rolling stock and fixed installations to signaling and
customer support, provided through a growing network of strong local operations
around the world.
Orders received in 1997 were substantially higher than last year. Order intake
was characterized by success in all global regions and stabilized or improved
margins in a growing, but competitive market environment. The trend towards
total system supplies and operators letting maintenance and service contracts
continues.
In anticipation of increasing price pressure and with continued overcapacity in
particular in its European operations, Adtranz is planning to speed up its
restructuring programs. Concentration on core competencies, combined with a net
reduction in the number of employees by some 3,600 up to the year 2000 in
Europe, will reduce Adtranz' cost base and, together with the capital increase
in 1997 of $ 358 million, improve its long-term competitiveness. At the end of
1997 Adtranz employed 22,714 people (1996: 21,841).
RESULTS
Since 1996, ABB owns 50 percent of ABB Daimler-Benz Transportation Group. ABB's
share of the Adtranz venture represents a smaller business than the former 1OO-
percent-owned ABB Transportation in 1995. The comments below, where not stated
otherwise, are based on ABB's 50 percent portion of the 1997 Adtranz numbers.
Orders for 1997 increased by 14 percent to $2,095 million (1996: $1,835
million). In the U.K., the rail market is prospering after some years of
uncertainty. Adtranz won orders in the U.K. for diesel and electrical multiple
units totaling over 400 vehicles with options for more than 800 additional cars
and received a major order for maintenance. Adtranz was awarded the order for
new generation high-speed trains and fixed installations for the Oresund project
linking Sweden and Denmark. Other major orders included complete rail systems in
Adana, Turkey and Oporto, Portugal. Additional major orders were secured in
Western, Central and Eastern Europe as well as the U.S.
Revenues in 1997 totaled $1,870 million, a decrease from last year of 3 percent
(1996: $1,927 million). In local currencies revenues increased by 7 percent.
Many of the projects awarded prior to 1996 are now in a delivery phase. Revenues
in Germany picked up in the last quarter of 1997, indicating significant
improvements in delivery performance. For some delays and cost overruns in Italy
and Germany appropriate provisions were taken in 1997.
ABB's share in the operating earnings of Adtranz was a negative $111 million
(1996: negative $2 million). The result was affected by further restructuring
programs as well as overcapacity in certain workshops which will be reduced by
better utilization and lower employment at selected locations. Disregarding
acquisitions, the total number of employees for the Adtranz Group in 1997 fell
by some 1,200, mainly in Germany. In the U.S. the signaling activities expanded
in line with the growth strategy. The U.S. operations showed a significant
turnaround and the operations in the U.K. and Portugal continued to improve. In
1997, Adtranz developed seven new vehicle concepts and standardized designs,
focusing on customer demand for highly efficient and reliable vehicles.
Investments in global development programs for the Adtranz Group in total
amounted to $141 million in 1997.
Adtranz increased its stake in Adtranz MAV Dunakeszi, Hungary by 26 percent and
is now the majority shareholder. At the end of the year, Adtranz also agreed to
acquire the rolling stock activity of Schindler Waggon, Switzerland as per
January 1,1998. The group established a signaling center in Bangkok and took
over a maintenance workshop in Uganda.
The order intake prospects for the Group look promising. Despite delays in
awarding new infrastructure projects due to the current financial turbulence in
certain Asian countries, a positive growth is anticipated in that region. To
strengthen Adtranz' presence in Asia the group has opened a corporate center in
Singapore.
Adtranz expects higher orders and a return to positive results in 1998, with
impacts from the restructuring programs gradually taking effect.
- ------------------------------------------------------------------------
SIGNIFICANT ORDERS IN 1997 (US$ in millions)/2/
- ------------------------------------------------------------------------
Multiple units for Connex rail and Prism, U.K. 510
- ------------------------------------------------------------------------
Total metro system for the City of Oporto, Portugal 470
- ------------------------------------------------------------------------
Total light rail system for the City of Adana, Turkey 410
- ------------------------------------------------------------------------
High speed trains for Oresund crossing, Denmark 180
- ------------------------------------------------------------------------
Suburban trains for Brisbane and Perth, Australia 180
- ------------------------------------------------------------------------
/1/ 1992 through 1996 restated; refer to section N in the Principles of
Consolidation.
/2/ Total contract values.
40
<PAGE>
FINANCIAL SERVICES
ABB Financial Services completed another year with a good performance while
financial markets globally showed mixed trends. Long term interest rates in the
major industrial countries continued to fall in 1997 as inflation rates stayed
low. This was further enforced in Europe by the convergence of interest rates
within the Economic and Monetary Union (EMU). Short-term interest rates in most
countries increased somewhat in response to a higher level of economic activity.
In the foreign exchange markets the most significant events were the strong
depreciation of some Asian currencies. The U.S. dollar strengthened
considerably against most currencies throughout the year. The international
stock markets had another strong year even though the turbulence in certain
countries in Southeast Asia had a negative impact on world equity markets
towards the end of the year.
In 1997 the segment's sales support activities continued to expand and several
major contracts reached financial closing in ABB's industrial units with the
contribution from the business areas Energy Ventures, Structured Finance,
Project & Trade Finance and Leasing & Financing.
Income before taxes totaled $297 million (1996: $323 million). In local
currencies income before taxes again reached last year's level.
Treasury Centers' primary source of income comes from trading, within clearly
defined risk limits, in the foreign exchange and interest rate markets. The
earnings did not reach the levels of 1996, due to lower volatility in the
European interest rate markets following the convergence process of the EMU.
Leasing & Financing grew its earnings to a high level mainly through
substantially higher fee income as a result of several successfully syndicated
projects and an active portfolio management. Signed volume amounted to $723
million, primarily in Germany, Sweden, and Finland.
================================================
Business Areas in the Financial Services Segment
(US$ in millions)
- ------------------------------------------------
Income before Taxes 1997 1996
- ------------------------------------------------
Treasury Centers 63 120
- ------------------------------------------------
Leasing & Financing 56 49
- ------------------------------------------------
Insurance 113 117
- ------------------------------------------------
Investment Management 1 5
- ------------------------------------------------
Project & Trade Finance 7 5
- ------------------------------------------------
Energy Ventures 46 6
- ------------------------------------------------
Structured Finance 12 3
- ------------------------------------------------
Holding Activities & Eliminations -1 18
- ------------------------------------------------
Total 297 323
- ------------------------------------------------
Insurance reported earnings close to the level of 1996. The underwriting result
continued to improve in spite of lower insurance premium levels. Investment
income stayed on the same high level as in 1996 benefiting from a good
performance in the stock and bond markets. To increase its premium volume, ABB's
insurance unit, Sirius International, acquired part of a U.K. insurance
portfolio from a Swedish insurance company. In 1997, Sirius International issued
$900 million worth of bonds and guarantees for ABB companies.
Investment Management reported lower earnings in 1997. A new company was formed
in Poland focusing on mutual funds and pension fund management. Total funds
under management increased to $3.8 billion.
Project & Trade Finance arranged financial agreements representing a total
contract value of $7.6 billion (1996: $5.1 billion) supporting ABB equipment
sales with a total value of $4.0 billion.
Energy Ventures develops, invests equity in and manages privately-owned power
projects (IPPs). The business area improved their earnings substantially after
partial divestments of a number of IPP projects and the successful financial
closing of the 1,360 megawatt coal-fired Jorf Lasfar power station in Morocco.
Structured Finance provides debt financing to selected ABB projects as well as
underwriting capacity for future syndication of debt. In 1997, the first full
year of operation, earnings reached a good level. Several transactions were
closed in Africa, Asia, Eastern Europe and Latin America, corresponding to a
project volume of $1.2 billion.
The consolidated assets of Financial Services amounted to $16.0 billion and
represent marketable securities held by the Treasury Centers and Insurance,
financial leases held by Leasing & Financing, equity participation held by
Energy Ventures, lending to ABB projects by Structured Finance and lending to
ABB companies by the Treasury Centers.
Earnings for 1998 are expected to be on the same level as in 1997.
OPERATING EARNINGS
(US$ in millions)
-------------------
97 297
-------------------
-------------------
96 323
-------------------
-------------------
95 257
-------------------
-------------------
94 214
-------------------
-------------------
93 225
-------------------
-------------------
92 242
-------------------
-------------------
NUMBER OF EMPLOYEES
97 885
-------------------
-------------------
96 825
-------------------
-------------------
95 863
-------------------
-------------------
94 816
-------------------
-------------------
93 749
-------------------
-------------------
92 716
-------------------
-------------------
41
<PAGE>
CONSOLIDATED INCOME STATEMENT
===========================================================================
Year ended December 31 (US$ in millions) Notes 1997 1996
- ---------------------------------------------------------------------------
REVENUES 1,18 31,265 33,767*
- ---------------------------------------------------------------------------
Material expenses -14,232 -15,309
- ---------------------------------------------------------------------------
Personnel expenses -9,498 -10,254
- ---------------------------------------------------------------------------
Other expenses 2 -4,973 -5,338*
- ---------------------------------------------------------------------------
Changes in work in progress and finished goods 180 255
- ---------------------------------------------------------------------------
Depreciation of fixed assets 3 -997 -1,044
- ---------------------------------------------------------------------------
Unusual items 4 -608 36
- ---------------------------------------------------------------------------
OPERATING EARNINGS AFTER DEPRECIATION 18 1,137 2,113*
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Earnings from equity accounted companies 2 6
- ---------------------------------------------------------------------------
Dividend income 10 15
- ---------------------------------------------------------------------------
Interest income 5 325 362
- ---------------------------------------------------------------------------
Interest expense 5 -616 -618
- ---------------------------------------------------------------------------
Exchange differences -5 23
- ---------------------------------------------------------------------------
INCOME BEFORE TAXES 18 853 1,901*
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Taxes 6 -258 -659*
- ---------------------------------------------------------------------------
NET INCOME BEFORE MINORITY INTERESTS 595 1,242
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Minority interests -23 -9
- ---------------------------------------------------------------------------
NET INCOME 18 572 1,233
- ---------------------------------------------------------------------------
* Restated: refer to the pertinent explanations in the Consolidation Principles
(section N) and Notes
42
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
===========================================================================
December 31 (US$ in millions) Notes 1997 1996
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
- ---------------------------------------------------------------------------
ASSETS
- ---------------------------------------------------------------------------
CURRENT ASSETS
- ---------------------------------------------------------------------------
Cash and marketable securities 7,20 5,790 5,553
- ---------------------------------------------------------------------------
Trade receivables 20 5,656 6,152
- ---------------------------------------------------------------------------
Other current receivables 8,20 4,283 4,143
- ---------------------------------------------------------------------------
Inventories 9 4,907 5,311
- ---------------------------------------------------------------------------
TOTAL CURRENT ASSETS 20,636 21,159
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
FIXED ASSETS
- ---------------------------------------------------------------------------
Financing receivables 7,20 1,815 1,776
- ---------------------------------------------------------------------------
Shares and participations 10 385 441
- ---------------------------------------------------------------------------
Intangible assets 11 1,981 1,953
- ---------------------------------------------------------------------------
Construction in progress 12 242 192
- ---------------------------------------------------------------------------
Machinery and equipment 12,21 2,479 2,746
- ---------------------------------------------------------------------------
Land and buildings 12,21 2,246 2,629
- ---------------------------------------------------------------------------
TOTAL FIXED ASSETS 9,148 9,737
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL ASSETS 18,19 29,784 30,896
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
LIABILITIES AND EQUITY
- ---------------------------------------------------------------------------
CURRENT LIABILITIES
- ---------------------------------------------------------------------------
Trade payables 20 4,566 4,457
- ---------------------------------------------------------------------------
Provisions 5,233 4,914
- ---------------------------------------------------------------------------
Other current liabilities 13,20 5,006 5,250
- ---------------------------------------------------------------------------
Short-term loans 7,20,21 1,715 2,526
- ---------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 16,520 17,147
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
Advances from customers 14 2,612 2,610
- ---------------------------------------------------------------------------
Medium- and long-term loans 7,21 2,511 1,823
- ---------------------------------------------------------------------------
Pension liabilities 22 1,748 2,024
- ---------------------------------------------------------------------------
Deferred taxes 15 790 1,070
- ---------------------------------------------------------------------------
Minority interests 320 347
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
- ---------------------------------------------------------------------------
Share capital 2,087 2,087
- ---------------------------------------------------------------------------
Restricted reserves 965 962
- ---------------------------------------------------------------------------
Other reserves and retained earnings 1,659 1,593
- ---------------------------------------------------------------------------
Net income 572 1,233
- ---------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 16 5,283 5,875
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
TOTAL LIABILITIES AND EQUITY 18 29,784 30,896
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
===========================================================================
CONTINGENT LIABILITIES 17 195 246
- ---------------------------------------------------------------------------
</TABLE>
43
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
================================================================================
Year ended December 31 (US$ in millions) 1997 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
- --------------------------------------------------------------------------------
Income before taxes 853 1,901*
- --------------------------------------------------------------------------------
Adjustments for depreciation of fixed assets 997 1,044
- --------------------------------------------------------------------------------
Adjustments for changes in provisions 546 -21
- --------------------------------------------------------------------------------
Adjustments for changes in pension liabilities 11 91
- --------------------------------------------------------------------------------
Other adjustments -328 -211
- --------------------------------------------------------------------------------
2,079 2,804
- --------------------------------------------------------------------------------
Changes in operating assets and liabilities:
- --------------------------------------------------------------------------------
Changes in trade receivables -264 -85
- --------------------------------------------------------------------------------
Changes in other current receivables -754 -774
- --------------------------------------------------------------------------------
Changes in inventories -293 -425
- --------------------------------------------------------------------------------
Changes in trade payables 650 -33
- --------------------------------------------------------------------------------
Changes in other current liabilities (excl. taxes due) 279 331
- --------------------------------------------------------------------------------
Changes in advances from customers 498 -631
- --------------------------------------------------------------------------------
116 -1,617
- --------------------------------------------------------------------------------
TAXES PAID -404 -353*
- --------------------------------------------------------------------------------
NET CASH FROM OPERATING ACTIVITIES 1,791 834
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES
- --------------------------------------------------------------------------------
Changes in financing receivables -232 -127
- --------------------------------------------------------------------------------
Acquisitions -302 -333
- --------------------------------------------------------------------------------
Capital expenditure for tangible fixed assets -1,093 -1,168
- --------------------------------------------------------------------------------
Proceeds from sale of shares and participations 748 286
- --------------------------------------------------------------------------------
Proceeds from disposal of tangible fixed assets 153 224
- --------------------------------------------------------------------------------
NET CASH FROM INVESTING ACTIVITIES -726 -1,118
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
- --------------------------------------------------------------------------------
Changes in short-term loans -640 521
- --------------------------------------------------------------------------------
Changes in medium- and long-term loans 734 -942
- --------------------------------------------------------------------------------
Dividends paid -446 -437
- --------------------------------------------------------------------------------
Other items -65 3
- --------------------------------------------------------------------------------
NET CASH FROM FINANCING ACTIVITIES -417 -865
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EFFECTS OF TRANSLATION DIFFERENCES ON CASH AND MARKETABLE
SECURITIES -411 -139
- --------------------------------------------------------------------------------
NET CHANGE IN CASH AND MARKETABLE SECURITIES 237 -1,278
- --------------------------------------------------------------------------------
Cash and marketable securities -- beginning of year 5,553 6,831
- --------------------------------------------------------------------------------
Cash and marketable securities -- end of year 5,790 5,553
- --------------------------------------------------------------------------------
* Restated as per reclassifications in the Income Statement
44
<PAGE>
PRINCIPLES FOR CONSOLIDATED FINANCIAL STATEMENTS
A. GENERAL
The Group's accounting principles comply with International Accounting
Standards (IAS).
Changes from the 1996 published Financial Statements are described in
section N below.
Because of the international nature of the Group's activities and the fact
that more of its business is transacted in US$ than in any other currency,
the consolidated financial statements are published in that currency.
B. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include ABB Asea Brown Boveri Ltd and
all companies in which it has, directly or indirectly, more than 50% of the
voting rights or over which it exerts decisive influence. Companies are
contained in the consolidation as from the date of acquisition. Earnings in
divested companies are included up to the date of sale.
The consolidated financial statements include on a proportionate basis ABB
Daimler-Benz Transportation GmbH and its subsidiaries, a Group which is
jointly controlled (50%/50%) by ABB Asea Brown Boveri Ltd and Daimler-Benz AG
(Germany) and which started its operations in 1996. Other material
investments in companies where ABB Asea Brown Boveri Ltd, directly or
indirectly, has not more than 50% and not less than 20% of the voting rights
are accounted for by the equity method.
The consolidated financial statements have been prepared in accordance with
the purchase method. Goodwill from acquisitions is capitalized and amortized
over periods not exceeding 20 years
Assets, liabilities and equity as well as income and expenses of fully
consolidated companies are reflected in their entirety in the consolidated
financial statements. The shares in net income and equity attributable to
minority shareholders are stated separately in the consolidated income
statement and balance sheet. Assets, liabilities and equity as well as income
and expenses of the proportionately consolidated ABB Daimler-Benz
Transportation Group are included to 50% in the consolidated financial
statements.
Intercompany balances and transactions, including intercompany profits, are
eliminated.
C. REVENUES
Revenues include sales and other operating income. Sales are reported net of
sales or value added tax, returned goods and trade discounts.
Revenues have been restated compared to previous years reports as explained
in section N below.
D. REVENUE RECOGNITION
Revenues from products and services are recognized at the date of delivery.
Revenues from construction contracts are recognized according to the
percentage-of-completion method. Depending on the type of business, the stage
of completion is determined by delivery events, by units of delivery or by
a survey of work performed.
E. FOREIGN CURRENCIES
Translation of financial statements
Financial statements of Group companies expressed in currencies other than
US$ are translated at year-end rates of exchange with respect to the balance
sheet, and average rates of exchange for the year with respect to the income
statement. Translation adjustments are included in stockholders' equity and
have no effect on net income.
In high inflation countries, monetary balance sheet positions in local
currency are stated at closing values prior to conversion at the year-end US$
rate. Fixed assets are kept at historic US$ values from acquisition dates.
Revenues and expenses are generally converted at the exchange rates pre-
vailing at the date incurred. All translation gains/losses from restatements
of balance sheet positions are included in net income.
Foreign currency transactions
Transactions in foreign currencies are converted at the rate of exchange
prevailing at the transaction date.
Foreign currency receivables and payables covered by forward contracts are
stated at contracted forward rates. Other receivables and payables in foreign
currencies are translated at year-end market rates. Resulting exchange
differences are included in net income.
F. TANGIBLE FIXED ASSETS
Tangible fixed assets are stated at cost, less accumulated depreciation
using the straight-line method over their estimated useful lives.
The depreciation periods normally are:
- production tools*, EDP-equipment 3 years
- machinery and equipment 5-15 years
- buildings 15-50 years
* other than wear and tear tools which are expensed
G. RESEARCH AND DEVELOPMENT
Research and general development costs are expensed as incurred. Engineering
and design costs directly related to contracts are capitalized in work in
progress.
H. FINANCIAL ASSETS AND LIABILITIES
Balance sheet positions from investing and financing activities are normally
reported at cost. Adjustments for financial assets are made if their
carrying amount exceeds the value realizable in the foreseeable future.
Entities primarily engaged in transactions with financial instruments carry
their related financial assets and liabilities as well as their off balance
sheet positions at fair values. Gains and losses from changes in the fair
values of such positions are recognized in income as they arise.
45
<PAGE>
I. INVENTORIES
Purchased goods are stated at the lower of cost - determined on the basis of
weighted average prices or by the "first-in first-out" method - or
replacement value, while manufactured goods are valued at the lower of
manufacturing cost or net realizable value. Appropriate provisions are made
for obsolescence.
J. EMPLOYEE RETIREMENT BENEFITS
The cost of defined retirement benefits is determined on an actuarial basis
using accrued benefit valuation methods which reflect service rendered by
employees to the date of valuation and incorporate assumptions concerning
employees' projected salaries. Current service costs are charged to income in
the periods in which the services are rendered. Past service costs,
experience adjustments and the effects of changes in actuarial assumptions on
retirement benefit costs are charged or credited to income systematically
over a period approximating the average of the expected remaining working
lives of participating employees.
Obligations from retiree medical benefits in the U.S. incurred up to the end
of 1992 are being amortized in the net income over a period of 20 years.
K. PROVISIONS
Provisions provide cover for identifiable warranties, penalties, loss orders,
committed costs for delivered plant orders, currency and country risks and
restructuring measures.
L. Taxation
All taxes ultimately to be paid on income, capital and property referring to
the reporting period are provided for. These taxes are calculated in
accordance with the regulations in force in each country. Irrecoverable
withholding taxes paid on dividends received are included in the tax charge
for the year.
In addition, deferred taxes on income are provided using the comprehensive
allocation method for all income and expense items which affect both the
financial statements and the income tax assessment, but in different periods
(timing differences). The timing differences relate mainly to accelerated
depreciation on tangible fixed assets and inventory reserves as permitted by
the tax laws in certain countries. In determining the tax rate, the liability
method is used. The tax benefits of loss carry-forwards are recognized only
if the likelihood of realizing those benefits is virtually assured.
Taxes have been restated compared to previous years reports as explained in
section N below.
M. ORDERS RECEIVED AND ORDER BACKLOG
Amounts stated for orders received and order backlog are expressed at the
price level estimated for the date of delivery of each order.
Order related figures have been restated compared to previous years' reports
as explained in section N below.
N. Changes in the 1997 accounts
The changes implemented in the consolidated financial statements are
highlighted below:
- Up to 1996 interest on advances from customers has been included in the
order intake, revenues (and consequently in operating earnings) and debited
under the interest on advances caption. This practice was discontinued in
1997. Prior year figures are restated accordingly.
- Up to 1996 taxes on capital and property have been recorded together with
income taxes in the taxes caption of the consolidated income statement. As
of 1997 the taxes caption contains income taxes only and taxes other than
on income are included in other expenses. Prior year figures are restated
accordingly.
- In the past certain sale leasebacks performed up to 1990 have been
accounted for according to local standards with no re-statement to IAS. As
from 1997 those contracts fulfill the IAS requirements for an operating
lease treatment and are reported accordingly.
O. REPORTING FINANCIAL INFORMATION BY SEGMENT
For purposes of satisfying the disclosure requirements under IAS 14 regarding
geographical and business segments, reference is made to these figures
disclosed in the Group's Management's Discussion on pages 30-41 of the Annual
Report. This numerical information is an integral part of these financial
statements.
P. DEFINITION OF KEY RATIOS/CONCEPTS
The ratios shown for the Group are calculated as follows:
a) Return on equity
Net income as a percentage of average stockholders' equity.
b) Return on capital employed
Income before taxes plus interest expense and exchange differences as a
percentage of average capital employed. Capital employed consists of
stockholders' equity, minority interest, pension liabilities and
short-, medium- and long-term loans.
c) Interest coverage ratio
Income before taxes plus interest expense on financial liabilities divided
by interest expense on financial liabilities.
d) Debt/equity ratio
Interest-bearing short-, medium- and long-term liabilities, excluding
pension liabilities divided by stockholders' equity plus minority
interest.
e) Net cash position
Cash and marketable securities minus interest-bearing short-, medium- and
long-term liabilities, excluding pension liabilities.
f) Capital turnover rate
Revenues divided by average total assets.
46
<PAGE>
Q. MAIN EXCHANGE RATES USED FOR CONVERSIONS
- --------------------------------------------------------------------------------
ISO Average Year-end Average Year-end
Codes 1997/US$ 1997/US$ 1996/US$ 1996/US$
- --------------------------------------------------------------------------------
Australian dollar AUD 1.35 1.53 1.28 1.26
- --------------------------------------------------------------------------------
Austrian schilling ATS 12.12 12.60 10.56 10.93
- --------------------------------------------------------------------------------
Canadian dollar CAD 1.39 1.43 1.36 1.37
- --------------------------------------------------------------------------------
Danish krone DKK 6.56 6.82 5.79 5.94
- --------------------------------------------------------------------------------
German mark DEM 1.72 1.79 1.50 1.55
- --------------------------------------------------------------------------------
Finnish markka FIM 5.16 5.42 4.58 4.64
- --------------------------------------------------------------------------------
French franc FRF 5.79 5.99 5.10 5.24
- --------------------------------------------------------------------------------
Italian lira ITL 1,694.92 1,760.56 1,543.21 1,526.72
- --------------------------------------------------------------------------------
Japanese yen JPY 121.18 130.23 108.42 116.36
- --------------------------------------------------------------------------------
Dutch guilder NLG 1.94 2.02 1.68 1.74
- --------------------------------------------------------------------------------
Norwegian krone NOK 7.03 7.35 6.44 6.43
- --------------------------------------------------------------------------------
Pound sterling GBP 0.61 0.60 0.64 0.59
- --------------------------------------------------------------------------------
Swedish krona SEK 7.61 7.90 6.71 6.89
- --------------------------------------------------------------------------------
Swiss franc CHF 1.44 1.45 1.23 1.35
- --------------------------------------------------------------------------------
European
currency unit (ECU) XEU 0.88 0.91 0.80 0.81
- --------------------------------------------------------------------------------
47
<PAGE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(US$ IN MILLIONS)
NOTE 1, REVENUES
Revenues include the following items:
- ---------------------------------------------------------------------------
1997 1996
- ---------------------------------------------------------------------------
Sales 30,069 32,905
- ---------------------------------------------------------------------------
Other operating income 1,196 862
- ---------------------------------------------------------------------------
TOTAL 31,265 33,767
- ---------------------------------------------------------------------------
Licence income amounted to $32 million ($40 million).
- ---------------------------------------------------------------------------
Revenues (as well as orders received) in the 1996 Financial Statements also
included calculated interest on advances from customers. This practice has been
discontinued in the 1997 accounts with 1996 being restated. This change reduces
orders received, revenues and operating earnings after depreciation, but has no
effect on income before taxes and net income of the Group.
NOTE 2, OTHER EXPENSES
Expenses for:
- ----------------------------------------------------------------------
1997 1996
- ----------------------------------------------------------------------
Rents, leasing and
external consultants 1,658 1,715
- ----------------------------------------------------------------------
Packing, freight, sales commission
and other delivery expenses 1,220 1,088
- ----------------------------------------------------------------------
Communication, advertising
travel and entertainment 1,220 1,316
- ----------------------------------------------------------------------
Repair and maintenance,
insurance premiums,
licence fees and other expenses 783 1,113
- ----------------------------------------------------------------------
Taxes on capital, property and similar 92 106
- ----------------------------------------------------------------------
TOTAL 4,973 5,338
- ----------------------------------------------------------------------
NOTE 3, DEPRECIATION OF FIXED ASSETS
- ----------------------------------------------------------------------
1997 1996
- ----------------------------------------------------------------------
Machinery and equipment 760 818
- ----------------------------------------------------------------------
Land and buildings 92 101
- ----------------------------------------------------------------------
Goodwill 145 125
- ----------------------------------------------------------------------
TOTAL 997 1,044
- ----------------------------------------------------------------------
NOTE 4, UNUSUAL ITEMS
- ----------------------------------------------------------------------
1997 1996
- ----------------------------------------------------------------------
Capital gains/losses on sales of
participations, land and buildings 295 207
- ----------------------------------------------------------------------
Discontinued operations/restructuring
expenses -889 -156
- ----------------------------------------------------------------------
Other items -14 -15
- ----------------------------------------------------------------------
TOTAL -608 36
- ----------------------------------------------------------------------
Major transactions in 1997 giving rise to capital gains included among others
the divestment of some non-core activities: The Nordic electrical wholesaler ABB
Asea Skandia with subsidiaries in Sweden, Norway and Finland; ABB's wire rod
and winding wires business with manufacturing sites in Sweden and Germany and
the worldwide refrigeration business. In addition, ABB divested its minority
interest in Elektrim in Poland and equity stakes in some "Independent Power
Producer" operations.
Costs for discontinued operations/restructuring include the charge of $ 866
million for the extensive restructuring which was announced in October 1997.
These expenses refer to severance and early-retirement payments, write-
down of fixed assets and stocks, penalties for cancellation of rents, leases
and similar, incurred in the reporting period or firmly planned and provided for
subsequent years.
NOTE 5, INTEREST INCOME/EXPENSE
The interest net earned by Financial Services of $ 303 million ($ 269 million)
which also includes risk earnings is captured within Operating Earnings after
Depreciation. The corresponding amount is deducted from the interest income
reported.
Interest expense is made up of the following items:
- --------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------
Interest on pension liabilities 119 147
- --------------------------------------------------------------------------
Interest on financial liabilities 497 471
- --------------------------------------------------------------------------
TOTAL 616 618
- --------------------------------------------------------------------------
NOTE 6, TAXES
- --------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------
Current taxes, income 384 441
- --------------------------------------------------------------------------
Deferred taxes -129 217
- --------------------------------------------------------------------------
Taxes, equity accounted companies 3 1
- --------------------------------------------------------------------------
TOTAL 258 659
- --------------------------------------------------------------------------
Taxes other than income-related and formerly included in the caption taxes are
stated in Note 2. Ensuing restatements of reports are explained in the
Principles of Consolidation, section N.
- --------------------------------------------------------------------------
Accumulated tax loss carry-forwards and not recognized deductible timing
differences have developed as follows:
- --------------------------------------------------------------------------
Not recognized Estimated
deductible amounts tax savings
- --------------------------------------------------------------------------
at the end of 1996 2,188 824*
- --------------------------------------------------------------------------
used in 1997 (net) -88 -42
- --------------------------------------------------------------------------
AT THE END OF 1997 2,100 782*
- --------------------------------------------------------------------------
All figures are recalculated to year-end rates.
*Estimated maximum realizable tax savings. Above table does not include
Adtranz.
NOTE 7, FINANCIAL INSTRUMENTS
CASH AND MARKETABLE SECURITIES
- --------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------
Cash and bank 2,266 2,311
- --------------------------------------------------------------------------
Marketable securities 3,524 3,242
- --------------------------------------------------------------------------
TOTAL 5,790 5,553
- --------------------------------------------------------------------------
MARKETABLE SECURITIES
AT FAIR VALUE 3,596 3,305
- --------------------------------------------------------------------------
Not included above are securities sold before year-end and subject to repurchase
agreements to be executed in 1998 (1997) amounting to $ 1,477 million ($ 1,762
million).
48
<PAGE>
The Group's cash and marketable securities at the end of 1997 were mainly
denominated in USD (32%), SEK (15%), DEM (11%), and CHF (11%).
Average nominalinterest rates were in the range of the rates for loans (refer to
table below).
FINANCING RECEIVABLES
================================================================================
1997 1996
- --------------------------------------------------------------------------------
Loans granted 716 752
- --------------------------------------------------------------------------------
Receivables, finance lease 1,099 1,024
- --------------------------------------------------------------------------------
TOTAL 1,815 1,776
- --------------------------------------------------------------------------------
TOTAL RECEIVABLES AT FAIR VALUE 1,849 1,792
- --------------------------------------------------------------------------------
LOANS
================================================================================
SHORT-TERM LOANS 1997 1996
- --------------------------------------------------------------------------------
Short-term borrowings 1,124 2,259
- --------------------------------------------------------------------------------
Short-term part of medium-
and long-term loans 591 267
- --------------------------------------------------------------------------------
TOTAL SHORT-TERM LOANS 1,715 2,526
- --------------------------------------------------------------------------------
================================================================================
MEDIUM-AND LONG-TERM LOANS 1997 1996
- --------------------------------------------------------------------------------
Maturity 1998 -- 283
- --------------------------------------------------------------------------------
Maturity 1999 465 462
- --------------------------------------------------------------------------------
Maturity 2000 578 151
- --------------------------------------------------------------------------------
Maturity 2001 195 179
- --------------------------------------------------------------------------------
Maturity 2002 488 241
- --------------------------------------------------------------------------------
Maturity 2003 and later 785 507
- --------------------------------------------------------------------------------
TOTAL MEDIUM- AND LONG-TERM LOANS 2,511 1,823
- --------------------------------------------------------------------------------
================================================================================
TOTAL LOANS 1997 1996
- --------------------------------------------------------------------------------
Short-, medium- and long-term loans 4,226 4,349
- --------------------------------------------------------------------------------
of which secured 1% 1%
- --------------------------------------------------------------------------------
TOTAL LOANS AT FAIR VALUE 4,255 4,351
- --------------------------------------------------------------------------------
The Group's total loans outstanding at the end of 1997 (1996) were
denominated in the following original currencies (approximate values):
================================================================================
Share Average nominal
interest rates
1997 1996 1997 1996
- --------------------------------------------------------------------------------
USD 47% 39% 6.4% 6.6%
- --------------------------------------------------------------------------------
CHF 19% 24% 2.2% 2.8%
- --------------------------------------------------------------------------------
ITL 7% 14% 9.0% 9.1%
- --------------------------------------------------------------------------------
DEM 5% 3% 4.9% 6.7%
- --------------------------------------------------------------------------------
JPY 3% 4% 2.3% 2.6%
- --------------------------------------------------------------------------------
Scandinavian currencies 4% 2% 5.0% 5.7%
- --------------------------------------------------------------------------------
Others 15% 14% 8.5% 8.1%
- --------------------------------------------------------------------------------
In accordance with ABB financial policies, the industrial companies primarily
borrow in local currency to meet their financial requirements. It should also be
noted that the Group actively utilizes the financial markets to manage its
exposures, with the result that the original borrowing currency may not
necessarily reflect the currency of final obligation.
The ABB Group has no subordinated loans and no debt convertible into own
equity.
Most of the borrowing is in floating rate interest or has been converted
into floating rate interest through the use of derivative instruments. The
combined interest rate risk of the financial assets and liabilities both
recognized and unrecognized is not significant.
There are no significant concentrations of credit risks, neither in the Trade
Receivables nor in Financing Receivables nor in Cash and Marketable Securities.
This is achieved on the one hand by the global and diversified customer base of
ABB and, on the other hand, by making deposits with and holding securities from
counterparties with a rating equal or better than ABB.
DERIVATIVE INSTRUMENTS
The ABB Group uses derivative financial instruments to manage its interest rate
and currency exposures arising from operational, financing and investment
activities, as well as for proprietary trading purposes. Group policies require
that industrial companies hedge all contracted foreign currency exposures, as
well as 50% of the anticipated sales volume of standard products over the next
12 months.
As at December 31, 1997, the notional amounts and fair values of the outstanding
derivative instruments were as follows:
INSTRUMENTS
===============================================================================
(US$ in millions) Notional Fair
Amounts Values
- -------------------------------------------------------------------------------
Forward rate agreements, net 370 +11
- -------------------------------------------------------------------------------
Futures, net 4,181 -
- -------------------------------------------------------------------------------
Interest rate and currency swaps 16,747 -36
- -------------------------------------------------------------------------------
Interest rate options 83 -
- -------------------------------------------------------------------------------
Forward foreign exchange contracts 45,505 -137
- --------------------------------------------------------------------------------
Foreign exchange options 1,307 +4
- --------------------------------------------------------------------------------
FAIR VALUE OF OUTSTANDING TRANSACTIONS -158
- --------------------------------------------------------------------------------
The notional values indicate the volume of the open derivatives at the balance
sheet date and therefore do not reflect the Group's exposures or risks from such
transactions.
Forward rate agreements, interest rate futures and swaps are used extensively
for proprietary trading purposes. The respective figures shown in the table
above represent, where applicable, the net notional amount of the purchases and
sales of such instruments, therefore, generally reflecting the unmatched
derivatives at the balance sheet date. The use of derivative instruments for
proprietary trading purposes is permitted only within the Treasury Centers. In
order to exercise proper control such activities are regulated by financial
policies containing strictly defined limits and rules for the monitoring of risk
and results, as well as policies regarding the selection, monitoring and
avoidance of concentration with counterparties. As a rule, the latter have a
rating equal to or better than ABB. The bulk of this trading is with
counterparties with whom ABB has a signed ISDA master netting agreement.
49
<PAGE>
The fair value (-158 US$ in million) corresponds to the estimated net amount
that would be paid if the transactions were liquidated at December 31, 1997. The
negative fair value arises on instruments which have been used to hedge group
exposures and as such is offset by increases in the value of the underlying
transactions being hedged. To derive the fair value of the outstanding
derivative transactions, option pricing models and discounted cash flow
methodology have been applied using the appropriate market parameters.
NOTE 8, OTHER CURRENT RECEIVABLES
================================================================================
1997 1996
- --------------------------------------------------------------------------------
Non-trade receivables 1,625 1,650
- --------------------------------------------------------------------------------
Prepaid expenses/accrued income 887 752
- --------------------------------------------------------------------------------
Advances to suppliers 552 644
- --------------------------------------------------------------------------------
Advances to contractors 31 48
- --------------------------------------------------------------------------------
Sales in excess of invoicing 1,188 1,049
- --------------------------------------------------------------------------------
TOTAL 4,283 4,143
- --------------------------------------------------------------------------------
Sales recognized in excess of invoicing originate from application of the
percentage of completion method for construction contracts and are reported net
of related advances spent, as follows:
================================================================================
Sales in excess of invoicing (gross) 2,808 2,669
- --------------------------------------------------------------------------------
Advances spent (see Note 14) -1,620 -1,620
- --------------------------------------------------------------------------------
Sales in excess of invoicing (net) 1,188 1,049
- --------------------------------------------------------------------------------
NOTE 9, INVENTORIES
================================================================================
1997 1996
- --------------------------------------------------------------------------------
Materials 1,484 1,628
- --------------------------------------------------------------------------------
Work in progress 2,932 3,070
- --------------------------------------------------------------------------------
Finished goods 491 613
- --------------------------------------------------------------------------------
TOTAL 4,907 5,311
- --------------------------------------------------------------------------------
Work in progress is reported net of related advances spent:
================================================================================
Work in progress (gross) 4,440 4,732
- --------------------------------------------------------------------------------
Advances spent (see Note 14) -1,508 -1,662
- --------------------------------------------------------------------------------
Work in progress (net) 2,932 3,070
- --------------------------------------------------------------------------------
NOTE 10, SHARES AND PARTICPATIONS
- --------------------------------------------------------------------------------
Book value
- --------------------------------------------------------------------------------
Holdings in equity accounted companies 21
- --------------------------------------------------------------------------------
Holdings in other companies 364
- --------------------------------------------------------------------------------
TOTAL 385
- --------------------------------------------------------------------------------
================================================================================
MAJOR COMPANIES: GROUP INTEREST /1/
- --------------------------------------------------------------------------------
AO Vnipineft JSC, Moscow A
- --------------------------------------------------------------------------------
Athens International Airport S.A., Spata, Athens B
- --------------------------------------------------------------------------------
Catalytic Distillation Technology, Houston A
- --------------------------------------------------------------------------------
Dillingham Sadelmi Joint Venture, California A
- --------------------------------------------------------------------------------
Fastighets AB Skulderbladet, Vasteras B
- --------------------------------------------------------------------------------
Forvaltningsbolaget Attan HB, Stockholm A
- --------------------------------------------------------------------------------
Forvaltningsbolaget Kryddgarden HB, Stockholm A
- --------------------------------------------------------------------------------
GVK Industries Ltd., India B
- --------------------------------------------------------------------------------
Hanson Electrical, West Midlands B
- --------------------------------------------------------------------------------
Indeck North American Power Fund, Wheeling B
- --------------------------------------------------------------------------------
Isocracking Catalyst Co., San Francisco A
- --------------------------------------------------------------------------------
Jorf Lasfar Energy Company, Casablanca A
- --------------------------------------------------------------------------------
Lanka Transformers Ltd., Moratuwa A
- --------------------------------------------------------------------------------
Malaysia Transformer Manufacturing, Kuala Lumpur A
- --------------------------------------------------------------------------------
MAV Dunakeszi Vagongyarto es Javito Kft, Dunakeszi/2/ A
- --------------------------------------------------------------------------------
MC Partners C.V., Netherlands Antilles B
- --------------------------------------------------------------------------------
Midland Cogeneration Ventures, Saginaw, Michigan B
- --------------------------------------------------------------------------------
Nordic Aviation B.V., Amstelveen A
- --------------------------------------------------------------------------------
Resilin Joint Venture, Caracas B
- --------------------------------------------------------------------------------
Termobarranquilla SA, Santafe de Bogota A
- --------------------------------------------------------------------------------
/1/ Group interest, direct or indirect: A= 20 to 50%, B = less than 20%.
/2/ 50% of interest held by Adtranz.
NOTE 11, INTANGIBLE ASSETS
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Goodwill at cost 2,552 2,418
- --------------------------------------------------------------------------------
Accumulated depreciation of goodwill -750 -630
- --------------------------------------------------------------------------------
Goodwill at net book value 1,802 1,788
- --------------------------------------------------------------------------------
Other intangibles at net book value 179 165
- --------------------------------------------------------------------------------
TOTAL 1,981 1,953
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
RECONCILIATION OF GOODWILL
- --------------------------------------------------------------------------------
Net book value December 31, 1996 1,788
- --------------------------------------------------------------------------------
Additions 123
- --------------------------------------------------------------------------------
Disposals - 1
- --------------------------------------------------------------------------------
Depreciation - 145
- --------------------------------------------------------------------------------
Other movements 113
- --------------------------------------------------------------------------------
Translation differences - 76
- --------------------------------------------------------------------------------
NET BOOK VALUE DECEMBER 31, 1997 1,802
- --------------------------------------------------------------------------------
50
<PAGE>
<TABLE>
<CAPTION>
NOTE 12, TANGIBLE FIXED ASSETS
- --------------------------------------------------------------------------------------------------------------------
Machinery and equipment Land and buildings Total
- ---------------------------------------------------------------------------------------------------------------------
1997 1996 1997 1996 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Acquisition value 6,843 7,323 3,318 3,673 10,161 10,996
- ---------------------------------------------------------------------------------------------------------------------
Accumulated financial depreciation -4,364 -4,577 -1,072 -1,044 -5,436 -5,621
- ---------------------------------------------------------------------------------------------------------------------
NET BOOK VALUE 2,479 2,746 2,246 2,629 4,725 5,375
- ---------------------------------------------------------------------------------------------------------------------
AMOUNTS COMMITTED FOR CAPITAL
EXPENDITURE AFTER YEAR-END 122 132 20 127 142 259
- ---------------------------------------------------------------------------------------------------------------------
INSURANCE VALUE OF MACHINERY
AND BUILDINGS 8,488 9,488 5,741 6,567 14,229 16,045
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
RECONCILIATION OF TANGIBLE FIXED ASSETS Construction Machinery Land and Total
in progress and equipment buildings
- ---------------------------------------------------------------------------------------------------------------------
Net book value December 31, 1996 192 2,746 2,629 5,567
- ---------------------------------------------------------------------------------------------------------------------
Capital expenditure 304 711 78 1,093
- ---------------------------------------------------------------------------------------------------------------------
Disposals -11 -86 -70 -167
- ---------------------------------------------------------------------------------------------------------------------
Additions through acquisitions 1 26 19 46
- ---------------------------------------------------------------------------------------------------------------------
Transfer between asset classes -222 182 40 -
- ---------------------------------------------------------------------------------------------------------------------
Depreciation -- -760 -92 -852
- ---------------------------------------------------------------------------------------------------------------------
Other movements -4 -74 -89 -167
- ---------------------------------------------------------------------------------------------------------------------
Translation differences -18 -266 -269 -553
- ---------------------------------------------------------------------------------------------------------------------
NET BOOK VALUE DECEMBER 31, 1997 242 2,479 2,246 4,967
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE 13, OTHER CURRENT LIABILITIES
- -----------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------
Taxes due 538 624
- -----------------------------------------------------------------------
Non-trade payables 2,196 2,276
- -----------------------------------------------------------------------
Accrued expenses/deferred income 2,272 2,350
- -----------------------------------------------------------------------
TOTAL 5,006 5,250
- -----------------------------------------------------------------------
NOTE 14, ADVANCES FROM CUSTOMERS
- -----------------------------------------------------------------------
1997 1996
- -----------------------------------------------------------------------
Advances (gross) 5,740 5,892
- -----------------------------------------------------------------------
Advances spent relating to sales
in excess of invoicing -1,620 -1,620
- -----------------------------------------------------------------------
Advances spent relating to work
in progress -1,508 -1,662
- -----------------------------------------------------------------------
ADVANCES (NET) 2,612 2,610
- -----------------------------------------------------------------------
Advances (gross) represent the total of down and progress payments received for
orders or parts of orders not yet invoiced.
Advances spent represent the part of gross advances consumed on work performed
for orders not yet invoiced.
NOTE 15, DEFERRED TAXES
- -----------------------------------------------------------------------
DEFERRED TAXES FROM: 1997 1996
- -----------------------------------------------------------------------
Differences between financial
and tax depreciation 719 724
- -----------------------------------------------------------------------
Inventory reserves and other
untaxed reserves 414 493
- -----------------------------------------------------------------------
Tax assets from tax loss carry-forwards -99 -119
- -----------------------------------------------------------------------
Other items/*/ -244 -28
- -----------------------------------------------------------------------
Total 790 1,070
- -----------------------------------------------------------------------
* This position reflects mainly differences in the accounting and tax method of
profit recognition for construction contracts, the treatment of provisions and
similar.
<TABLE>
<CAPTION>
NOTE 16, STOCKHOLDERS' EQUITY
- -------------------------------------------------------------------------------------------------------------------------
Share Restricted Other reserves and Net Total
capital reserves retained earnings income
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Opening balance sheet 2,087 962 1,593 1,233 5,875
- -------------------------------------------------------------------------------------------------------------------------
Transfers between reserves 1,233 -1,233
- -------------------------------------------------------------------------------------------------------------------------
Dividends -446 -446
- -------------------------------------------------------------------------------------------------------------------------
Translation differences and other 3 -721 -718
- -------------------------------------------------------------------------------------------------------------------------
Net income 1997 572 572
- -------------------------------------------------------------------------------------------------------------------------
CLOSING BALANCE SHEET 2,087 965 1,659 572 5,283
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
NOTE 17, CONTINGENT LIABILITIES AND LITIGATIONS
- -------------------------------------------------------------------------
CONTINGENT LIABILITIES 1997 1996
- -------------------------------------------------------------------------
Discounted bills of exchange 74 77
- -------------------------------------------------------------------------
Guarantees related to financed contracts 28 78
- -------------------------------------------------------------------------
Other contingent liabilities 93 91
- -------------------------------------------------------------------------
TOTAL 195 246
- -------------------------------------------------------------------------
As part of the Group's business operations there are, in addition to the
contingent liabilities listed above, guarantees for the performance of various
contractual undertakings. Some of these are of an on-demand nature (in re-
spect of which ABB maintains insurance protection against "unfair calling").
There is no indication that such guarantees will result in any material payment
not provided for.
LITIGATIONS
Various legal actions and claims are pending or may be asserted in the future
against Group companies. They mainly include matters relating to warranties,
personal injury, damage to property, environmental liability and intellectual
property rights.
Related risks have been analyzed as to likelihood of occurrence and amounts
involved and provisions have been set up after taking into consideration
available insurance coverage. Although the outcome of these matters cannot
always be ascertained with precision, Management believes that no material
liabilities exceeding those provided in the financial statements of the Group
are likely to result.
NOTE 18, ABB DAIMLER-BENZ
TRANSPORTATION GROUP (ADTRANZ)
The ABB Daimler-Benz Transportation Group (Adtranz) started its operations in
1996. It is included on a proportionate basis (50% of each position) in ABB's
consolidated financial statements. The market conditions as well as significant
orders and results of Adtranz are described in the "Management's Discussion --
Analysis of the Business Segments" of the Annual Report.
Summarized consolidated financial information of the ABB
Daimler-Benz Transportation Group (100%):
- -------------------------------------------------------------------------
INCOME STATEMENT 1997 1996*
(year ended December 31)
- -------------------------------------------------------------------------
Revenues 3,740 3,854
- -------------------------------------------------------------------------
Expenses, changes in work
in progress, depreciation -3,851 -3,924
- -------------------------------------------------------------------------
Unusual items -111 66
- -------------------------------------------------------------------------
Operating earnings after depreciation -222 -4
- -------------------------------------------------------------------------
Finance net 6 26
- -------------------------------------------------------------------------
Income (--loss) before taxes -216 22
- -------------------------------------------------------------------------
Taxes and minority interests -23 -21
- -------------------------------------------------------------------------
Net income (--loss) -239 1
- -------------------------------------------------------------------------
* Restated; refer to section N of the Principles of Consolidation.
- -------------------------------------------------------------------------
BALANCE SHEET (December 31) 1997 1996
- -------------------------------------------------------------------------
Current assets 2,813 2,796
- -------------------------------------------------------------------------
Fixed assets 809 943
- -------------------------------------------------------------------------
TOTAL ASSETS 3,622 3,739
- -------------------------------------------------------------------------
- -------------------------------------------------------------------------
Current liabilities 1,876 2,174
- -------------------------------------------------------------------------
Non-current liabilities 1,328 1,244
- -------------------------------------------------------------------------
Stockholders' equity 418 321
- -------------------------------------------------------------------------
Total liabilities and equity 3,622 3,739
- -------------------------------------------------------------------------
NOTE 19, ASSETS PLEDGED
- -------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------
Cash and marketable securities 438 323
- -------------------------------------------------------------------------
Receivables and inventories 90 30
- -------------------------------------------------------------------------
Tangible fixed assets 34 58
- -------------------------------------------------------------------------
Other assets 19 1
- -------------------------------------------------------------------------
TOTAL 581 412
- -------------------------------------------------------------------------
NOTE 20, TRANSACTIONS WITH RELATED PARTIES
The balance sheet includes the following amounts resulting from transactions
with associates (non-consolidated companies in which ABB has a participation),
Adtranz (50%) and shareholders:
- -------------------------------------------------------------------------
1997 1996
- -------------------------------------------------------------------------
Marketable securities 130 49
- -------------------------------------------------------------------------
Receivables 28 70
- -------------------------------------------------------------------------
Financing receivables 9 19
- -------------------------------------------------------------------------
Payables 145 28
- -------------------------------------------------------------------------
Loans 191 231
- -------------------------------------------------------------------------
52
<PAGE>
<TABLE>
<CAPTION>
NOTE 21, LEASES
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
FINANCE LEASES 1997 1996
---------------------------------------------------------------------------------------------------------------------------
ASSETS HELD UNDER FINANCE LEASES 16 22
---------------------------------------------------------------------------------------------------------------------------
Assets subject to finance lease accounting are included in the relevant
categories shown under Note 12, Tangible fixed assets.
---------------------------------------------------------------------------------------------------------------------------
LIABILITIES FROM FINANCE LEASES 1997 1996
---------------------------------------------------------------------------------------------------------------------------
-- short-term 4 6
---------------------------------------------------------------------------------------------------------------------------
-- medium- and long-term 13 17
---------------------------------------------------------------------------------------------------------------------------
TOTAL 17 23
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
Liabilities from finance lease accounting represent the present value of
outstanding lease commitments, whereby amortization is calculated
according to the annuity method. Liabilities from finance leases are
reported within short-, medium-, and long-term loans.
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMITMENTS FROM LEASES
---------------------------------------------------------------------------------------------------------------------------
2003
Payments due 1998 1999 2000 2001 2002 and later
---------------------------------------------------------------------------------------------------------------------------
Finance leases 6 4 2 2 2 1
---------------------------------------------------------------------------------------------------------------------------
Operating leases 496 409 342 295 269 711
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
The above represents the non-discounted contractual lease commitments.
Operating leases correspond essentially to the rental payments for real
estate during the non-cancelable part of the lease term.
<TABLE>
<CAPTION>
NOTE 22, RETIREMENT BENEFIT COSTS
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Retirement benefit costs charged to income in respect 1997 1996*
of substantive retirement plans:
---------------------------------------------------------------------------------------------------------------------------
Defined benefit plans 254 257
---------------------------------------------------------------------------------------------------------------------------
Defined contribution plans 334 405
---------------------------------------------------------------------------------------------------------------------------
TOTAL 588 662
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Restated to reflect proper period apportionments.
<TABLE>
<CAPTION>
STATUS OF SUBSTANTIVE DEFINED BENEFIT PLANS:
---------------------------------------------------------------------------------------------------------------------------
Benefit obligations Assets in excess of
in excess of assets benefit obligations
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1997 1996 1997 1996
---------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation -3,296 -3,422 -961 -698
---------------------------------------------------------------------------------------------------------------------------
Plan assets at fair value 1,438 1,322 1,112 860
---------------------------------------------------------------------------------------------------------------------------
Funded status -1,858 -2,100 151 162
---------------------------------------------------------------------------------------------------------------------------
Pension liability(-)/asset* -1,565 -1,846 84 85
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Pension liabilities stated in the balance sheet include in addition
minor defined benefit plans as well as accruals for other post-
employment benefits, the latter especially in the Americas.
<TABLE>
<CAPTION>
PRINCIPAL ASSUMPTIONS USED TO DETERMINE RETIREMENT BENEFIT COSTS AND PROJECTED BENEFIT OBLIGATIONS:
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Weighted average rates: 1997 1996
---------------------------------------------------------------------------------------------------------------------------
Discount rate 6.8% 7.4%
---------------------------------------------------------------------------------------------------------------------------
Rate of compensation increase 4.0% 4.5%
---------------------------------------------------------------------------------------------------------------------------
Expected long-term rate of return on plan assets 7.6% 7.9%
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
Auditors' Report
As auditors of the Group, we have audited the consolidated financial
statements (balance sheet, income statement, statement of cash flows and
notes) of ABB Asea Brown Boveri Ltd for the year ended December 31, 1997.
These consolidated financial statements are the responsibility of the Board
of Directors. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit. We confirm that we meet
the legal requirements concerning professional qualification and
independence.
Our audit was conducted in accordance with auditing standards promulgated by
the profession, which require that an audit be planned and performed to
obtain reasonable assurance about whether the consolidated financial
statements are free from material misstatement. We have examined on a test
basis evidence supporting the amounts and disclosures in the consolidated
financial statements. We have also assessed the accounting principles used,
significant estimates made and the overall consolidated financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements give a true and fair
view of the financial position of ABB Asea Brown Boveri Ltd as of December
31, 1997 and of the results of its operations and of its cash flows for the
year then ended in accordance with International Accounting Standards and
comply with the law as well as the accounting principles prescribed by the
Listing Rules of the Swiss Exchange.
We recommend that the consolidated financial statements submitted to you be
approved.
KPMG KLYNVELD PEAT ERNST & YOUNG AG
MARWICK GOERDELER SA
B. A. MATHERS J. BIRGERSON
B. J. DEBLANC E. RUFLI
AUDITORS IN CHARGE
ZURICH, FEBRUARY 25,1998
54
<PAGE>
MAJOR SUBSIDIARIES
COUNTRY/COMPANY GROUP ACTIVITY /2/
INTEREST /1/
ARGENTINA
Asea Brown Boveri S.A., Buenos Aires A MS
AUSTRALIA
Asea Brown Boveri Pty. Ltd., Sydney, NSW A HO
ABB EPT Management Ltd., Sydney. NSW A HO
ABB Industry Pty Ltd., Revesby, NSW A MS
ABB Transmission & Distritution Ltd.,
Moorebank, NSW A MS
AUSTRIA
Asea Brown Boveri Aktiengesellschaft, Vienna A HO
BELGIUM
Asea Brown Boveri S.A., Brussels A SA
BRAZIL
Asea Brown Boveri Ltda., Osasco A MS
CANADA
Asea Brown Boveri Inc., St. Laurent, Quebec A HO
CHINA
Asea Brown Boveri (China) Investments Ltd.,
Beijing A HO
ABB Industrial and Building Systems Ltd.,
Hong Kong A SA
COLOMBIA
Asea Brown Boveri Ltda., Bogota A MS
CZECH REPUBLIC
Asea Brown Boveri s.r.o., Prague A SA
ABB EJF Brno a.s., Brno A MS
ABB Elektro-Praga s.r.o., Jablonec nad Nisou A MS
ABB Energeticke, Systemy s.r.o., Brno A MS
DENMARK
Asea Brown Boveri A/S, Odense A HO
ABB Electric A/S, Fredericia A MS
ABB Energi & Industri A/S, Skovlunde A MS
EGYPT
Asea Brown Boveri S.A.E., Cairo A HO
FINLAND
ABB Oy, Helsinki A HO
ABB Control Oy Vaasa A MS
ABB Industry Oy, Helsinki A MS
ABB Installaatiot Oy, Paimio A MS
ABB Service Oy, Helsinki A MS
ABB Transmit Oy, Vaasa A MS
FRANCE
Asea Brown Boveri S.A., Paris La Defense A HO
ABB Flexible Automation S.N.C.,
Saint-Ouen-l'Aumone A MS
ABB Industrie S.A.S., Champagne-sur-Seine A MS
GERMANY
Asea Brown Boveri Aktiengesellschaft,
Mannheim A HO
ABB Calor Emag Schaltanlagen AG, Ratingen A MS
ABB Energieanlagenbau GmbH, Dresden A MS
ABB Flexible Automation GmbH, Butzbach A MS
ABB Gebaudetechnik AG, Ladenburg A MS
ABB Industrietechnik AG, Mannheim A MS
ABB Kraftwerke Aktiengesellschaft, Mannheim A MS
ABB Kraftwerksleittechnik GmbH, Mannheim A MS
ABB Schaltanlagentechnik GmbH, Ladenburg A MS
ABB Stotz-Kontakt GmbH, Mannheim A MS
ABB Turbinen Nurnberg GmbH, Nuremberg A MS
Busch-Jaeger Elektro GmbH
Marnnheim/Ludenscheid A MS
GREECE
Asea Brown Boveri S.A., Athens A SA
HUNGARY
Asea Brown Boveri Ltd., Budapest A SA
COUNTRY/COMPANY GROUP ACTIVITY/2/
INTEREST/1/
INDIA
Asea Brown Boveri Ltd., Bombay B MS
ABB ABL Ltd., New Delhi B MS
INDONESIA
PT ABB Energy Systems Indonesia,
Surabaya B MS
IRELAND
Asea Brown Boveri Ltd. Dublin A MS
ITALY
Asea Brown Boveri S.p.A., Milan A HO
ABB Adda S.p.A. Lodi A MS
ABB Elettrocondutture S.p.A., Vittuone, MI A MS
ABB Sace S.F.A. Bergamo A MS
ABB Sadelmi S.p.A., Milan A MS
ABB SAE S.p.A., Milan A MS
ABB Sistemi Industriali S.p.A.,
Sesto San Giovanni, MI A MS
SOIMI Soc. Impianti Ind. S.p.A.,
Sesto San Giovanni, MI A MS
JAPAN
ABB K.K., Kobe A HO
KOREA, REPUBLIC OF
Asea Brown Boveri Ltd., Seoul A MS
MALAYSIA
Asea Brown Boveri Holdings Sdn. Bhd.,
Kuala Lumpur A HO
MEXICO
Asea Brown Boveri S.A. de C.V., Mexico City A HO
NETHERLANDS
Asea Brown Boveri BV, Rotterdam A HO
ABB Capital, B.V., Amsterdam A FS
ABB Lummus Crest Holding B.V., Voorburg A MS
NEW ZEALAND
Asea Bronvn Boveri Ltd., Auckland A MS
NORWAY
Asea Brown Boveri AS, Billingstad A HO
ABB Installasjon AS, Billingstad A MS
ABB Kraft AS, Drammen A MS
ABB Norsk Kabel AS, Drammen A MS
ABB Offshore Technology AS, Sandnes A MS
PHILIPPINES
Asea Brown Boveri Inc., Paranaque,
Metro Manila A HO
POLAND
Asea Brown Boveri Ltd., Warsaw A HO
ABB Dolmel Ltd., Wroclaw A MS
ABB Elpar Sp.z.o.o., Lodz A MS
ABB Elta Sp.z.o.o., Lodz B MS
ABB Zamech Ltd., Elblag A MS
PORTUGAL
Asea Brown Boveri S.G.P.S., S.A., Amadora A HO
ROMANIA
Asea Brown Boveri SRL, Bucharest A HO
RUSSIA
Asea Brown Boveri Ltd., Moscow A HO
SAUDI ARABIA
ABB Electrical Industries Ltd., Riyadh C MS
SINGAPORE
Asea Brown Boveri Holdings Pte. Ltd.,
Singapore A HO
SOUTH AFRICA
Asea Brown Boveri (Pty) Ltd, Sandton A HO
COUNTRY/COMPANY GROUP ACTIVITY/2/
INTEREST /1/
SPAIN
Asea Brown Boveri S.A., Madrid A HO
ABB Generacion S.A., Valle de Trapaga
(Vizcaya) A MS
ABB Trafo S.A., Zaragoza A MS
SWEDEN
Asea Brown Boveri AB, Vasteras A HO
ABB Atom AB, Vasteras A MS
ABB Financial Services AB, Stockholm A FS
ABB Flakt Industri AB, Vaxjo A MS
ABB Generation AB, Vasteras A MS
ABB Industrial Systems AB, Vasteras A MS
ABB Installatiorn AB, Vasteras A MS
ABB Power Systems AB, Ludvika A MS
ABB Service AB, Vasteras A SA
ABB Stal AB, Finspang A MS
ABB Svenska Flakt AB, Stockholm A SA
ABB Switchgear AB, Ludvika A MS
ABB Ventilation Products AB, Jankaping A MS
SWITZERLAND
Asea Brown Boveri AG, Baden A HO
ABB Hochspannungstechnik AG, Zurich A MS
ABB Industrie AG, Baden A MS
ABB Kraftwerke AG, Baden A MS
ABB Network Partner AG, Baden A MS
ABB Turbo-Systems AG, Baden A MS
TAIWAN
Asea Brown Boveri Ltd., Taipei A MS
THAILAND
Asea Brown Boveri Ltd., Bangkok A HO
TURKEY
Asea Brown Boveri Holding A.S., Istanbul A HO
UKRAINE
Asea Brown Boveri Ltd., Kiev A HO
UNITED KINGDOM
Asea Brown Boveri Ltd, London A HO
ABB Industrial Systems Ltd, Stevenage A MS
ABB Kent plc, Luton A HO
ABB Power T&D Ltd, Telford A MS
ABB Vetco Gray U.K. Ltd., Aberdeen A MS
William Steward (Holdings) Ltd., London A HO
UNITED STATES
Asea Brown Boveri Inc., Norwalk, CT A HO
ABB Air Preheater Inc., Wellsville, NY A MS
ABB C-E Services Inc., Windsor, CT A MS
ABB Flexible Automation Inc., New Berlin, WI A MS
ABB Industrial Systems Inc., Columbus, OH A MS
ABB Lummus Global Inc., Bloomfield, NJ A MS
ABB Power Generation Inc., Midlothian, VA A SA
ABB Power T&D Company Inc., Raleigh, NC A MS
ABB Service Inc., Massillon, OH A MS
ABB Susa, Inc., North Brunswick, NJ A MS
ABB Vetco Gray Inc., Houston, TX A MS
Combustion Engineering Inc., Norwalk, CT A HO
VENEZUELA
Asea Brown Boveri S.A., Caracas A MS
VIETNAM
ABB Transformers Ltd., Hanoi B MS
Proportionately consolidated:
GERMANY
ABB Daimler-Benz Transportation GmbH 50% HO
(with subsidiaries in over 25 countries)
55
55
<PAGE>
Board of Directors
- --------------------------------------------------------------------------------
Percy N. Barnevik (born 1941) Chairman
- --------------------------------------------------------------------------------
Chairman: Investor, Sandvik
- --------------------------------------------------------------------------------
Board Member: General Motors, Du Pont
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Gerhard Cromme (born 1943)
- --------------------------------------------------------------------------------
CEO: Fried. Krupp Hoesch-Krupp
- --------------------------------------------------------------------------------
Board Member: Allianz, Suez Lyonnaise des Eaux, Veba
- --------------------------------------------------------------------------------
and Volkswagen
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Claes Dahlback (born 1947)
- --------------------------------------------------------------------------------
President: Investor
- --------------------------------------------------------------------------------
Chairman: The Swedish Wine & Spirits Corp.
- --------------------------------------------------------------------------------
Deputy Chairman: Skandinaviska Enskilda Banken
- --------------------------------------------------------------------------------
Board Member: Astra, Electrolux, STORA
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Robert A. Jeker (born 1935)
- --------------------------------------------------------------------------------
Chairman: ABB AG, Batigroup, Messe Basel, Stratec,
- --------------------------------------------------------------------------------
Swiss Steel
- --------------------------------------------------------------------------------
Vice Chairman: Georg Fischer
- --------------------------------------------------------------------------------
Board Member: Neue Zurcher Zeitung
- --------------------------------------------------------------------------------
Former President: Credit Suisse
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Yotaro Kobayashi (born 1933)
- --------------------------------------------------------------------------------
Chairman and Co-CEO: Fuji XEROX
- --------------------------------------------------------------------------------
Board Member: Xerox Corporation
- --------------------------------------------------------------------------------
Japanese Chairman: The Trilateral Commission
- --------------------------------------------------------------------------------
Vice Chairman: Keizai Doyokai (Japan Association
of Corporate Executives)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Bernd H. Muller-Berghoff (born 1930)
- --------------------------------------------------------------------------------
Chairman: Fuchs Petrolub AG Oel + Chemie
- --------------------------------------------------------------------------------
Board Member: Hannover Ruckversicherung
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Donald H. Rumsfeld (born 1932)
- --------------------------------------------------------------------------------
Chairman: Gilead Sciences
- --------------------------------------------------------------------------------
Board Member: Gulfstream Aerospace, Kellogg,
- --------------------------------------------------------------------------------
Sears Roebuck, Tribune Company
- --------------------------------------------------------------------------------
Former U.S. Ambassador to NATO, U.S. Secretary of
- --------------------------------------------------------------------------------
Defense, CEO of G.D. Searle & Co., and CEO of General
- --------------------------------------------------------------------------------
Instrument Corp.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Edwin Somm (born 1933)
- --------------------------------------------------------------------------------
Chairman: The Association of Swiss Engineering
- --------------------------------------------------------------------------------
Employers, The Association of Machinery
- --------------------------------------------------------------------------------
Manufacturers
- --------------------------------------------------------------------------------
Board Member: Georg Fischer, Swiss Steel
- --------------------------------------------------------------------------------
Peter D. Sutherland (born 1946)
- --------------------------------------------------------------------------------
Chairman and Managing Director: Goldman
- --------------------------------------------------------------------------------
Sachs International
- --------------------------------------------------------------------------------
Chairman: British Petroleum
- --------------------------------------------------------------------------------
Board Memember: Ericsson, Investor
- --------------------------------------------------------------------------------
Former Director-General GATT and WTO,
- --------------------------------------------------------------------------------
Former EU Commissioner
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Bjorn Svedberg (born 1937)
- --------------------------------------------------------------------------------
Chairman: ABB AB, Ericsson
- --------------------------------------------------------------------------------
Board Member: Incentive, STORA, Volvo
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Lodewijk C. van Wachem (born 1931)
- --------------------------------------------------------------------------------
Chairman: Royal Dutch Petroleum
- --------------------------------------------------------------------------------
Board Member: Akzo Nobel, ATCO, Bayer, BMW, IBM
- --------------------------------------------------------------------------------
Philips, Zurich Versicherungen
- --------------------------------------------------------------------------------
Former President and CEO: Royal Dutch/Shell
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Thomas P. Gasser, Secretary to the Board
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Auditors
- --------------------------------------------------------------------------------
KPMG Klynveld Peat Marwick Goerdeler SA
- --------------------------------------------------------------------------------
Zurich
- --------------------------------------------------------------------------------
Ernst & Young AG
- --------------------------------------------------------------------------------
Zurich
- --------------------------------------------------------------------------------
Changes in the ABB Board
Messrs. Bernd H. Muller-Berghoff and Claes Dahlback have announced their
intention to resign from the ABB Board of Directors at the Annual General
Meeting on April 2, 1998. Mr. Bernd H. Muller-Berghoff, after serving 11 years
on the ABB AG (formerly BBC) and ABB Group Boards, and Mr. Claes Dahlback, after
serving 13 years on the ABB AB (formerly ASEA) and ABB Group Boards, have
decided not to stand for reelection to the ABB Group Board. The Board thanks
them for their outstanding contributions to the company.
The Board will propose to the shareholders on April 2, 1998 to newly elect to
the ABB Group Board Mr. Jurgen Dormann, CEO of Hoechst AG in Frankfurt, Germany
and Mr. Agostino Rocca, President and CEO of TECHINT Group, in Buenos Aires,
Argentina. Mr. Dormann will also be proposed for election to the Board of ABB
AG, the Group's Swiss Parent Company. Further, the remaining members will be
proposed for reelection to the ABB Board. Mr. Percy N. Barnevik will be proposed
for election to the Board of ABB AB, the Group's Swedish Parent Company.
Furthermore, the ABB Group Board has declared its intention to reelect Mr.
Barnevik as Chairman of the ABB Group Board and to elect Mr. Robert A. Jeker as
Vice Chairman.
Mr. Thomas P. Gasser has announced his resignation as Secretary to the Board.
Mr. Gasser has been a member of BBC's and ABB's management for 13 years. The
Board expresses its highest appreciation for his contribution to the company.
The Board has elected Mr. Beat Hess, General Counsel of the ABB Group, as the
new Secretary to the Board.
56
<PAGE>
MANAGEMENT
Group Executive Committee
- --------------------------------------------------------------------------------
Goran Lindahl (born 1945) President and Chief Executive Officer
- --------------------------------------------------------------------------------
Business Segment: Financial Services
- --------------------------------------------------------------------------------
Corporate Staffs: Supply Management, Audit, Environmental
- --------------------------------------------------------------------------------
Affairs, Corporate Communications,
- --------------------------------------------------------------------------------
Corporate Development, Management
- --------------------------------------------------------------------------------
Resources, Legal Affairs, Investor Relations,
- --------------------------------------------------------------------------------
Information Systems
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Sune Carlsson (born 1941) Executive Vice President
- --------------------------------------------------------------------------------
Business Segment: Industrial and Building Systems
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Renato Fassbind (born 1955) Executive Vice President
- --------------------------------------------------------------------------------
Business Function: Chief Financial Officer
- --------------------------------------------------------------------------------
Corporate Staffs: Accounting, Reporting and Control,
- --------------------------------------------------------------------------------
Risk Management and Insurance,
- --------------------------------------------------------------------------------
Real Estate, Taxes and Finance
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Alexis Fries (born 1955) Executive Vice President
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Business Region: Asia
- --------------------------------------------------------------------------------
Sune Karlsson (born 1946) Executive Vice President
- --------------------------------------------------------------------------------
Business Segment: Power Transmission and Distribution
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Eberhard von Koerber (born 1938) Executive Vice President
- --------------------------------------------------------------------------------
Business Regions: Europe, Middle East and Africa
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Armin Meyer (born 1949) Executive Vice President
- --------------------------------------------------------------------------------
Business Segment: Power Generation
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Howard Pierce (born 1941) Executive Vice President
- --------------------------------------------------------------------------------
Business Region: Americas
- --------------------------------------------------------------------------------
BUSINESS SEGMENT MANAGER
- --------------------------------------------------------------------------------
Jan Roxendal (born 1953) Financial Services
- --------------------------------------------------------------------------------
Senior Corporate Officers
- --------------------------------------------------------------------------------
Markus Bayegan (born 1944)
- --------------------------------------------------------------------------------
Group Responsibility: Research and Development, Technology
- --------------------------------------------------------------------------------
Evaluation, Process Technology
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Tomas Ericsson (born 1935) Corporate Projects/Finance and Administration
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
57
<PAGE>
MANAGEMENT
- -------------------------------------------------------------------------------
Corporate Staffs
- -------------------------------------------------------------------------------
Accounting, Reporting and
- -------------------------------------------------------------------------------
Control Jimmy Yap
- -------------------------------------------------------------------------------
Audit Adelheid Schilliger
- -------------------------------------------------------------------------------
Corporate Communications Volker Leichsering
- -------------------------------------------------------------------------------
Corporate Development/
- -------------------------------------------------------------------------------
President's Office Eric Elzvik
- -------------------------------------------------------------------------------
Global Key Account
- -------------------------------------------------------------------------------
Management Michael Pohr
- -------------------------------------------------------------------------------
Government Affairs and
- -------------------------------------------------------------------------------
Multilateral Banks Richard O'Toole
- -------------------------------------------------------------------------------
Environmental Affairs Jan Stromblad
- -------------------------------------------------------------------------------
Investor Relations Manfred Ebling
- -------------------------------------------------------------------------------
Legal Affairs Beat Hess
- -------------------------------------------------------------------------------
Management Resources Arne Olsson
- -------------------------------------------------------------------------------
Real Estate Walter Stucklin
- -------------------------------------------------------------------------------
Risk Management and
- -------------------------------------------------------------------------------
Insurance Charles Salek
- -------------------------------------------------------------------------------
Supply Management/
- -------------------------------------------------------------------------------
Export Control Roland Andersson
- -------------------------------------------------------------------------------
Taxes and Finance Alfred Storck
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Corporate Research & Development
- -------------------------------------------------------------------------------
- - in Finland Juhani Pylkkanen
- -------------------------------------------------------------------------------
- - in Germany Kurt-Volker Boos
- -------------------------------------------------------------------------------
- - in Italy Giandomenico Testi
- -------------------------------------------------------------------------------
- - in Norway Jan Bugge
- -------------------------------------------------------------------------------
- - in Sweden Harry Frank
- -------------------------------------------------------------------------------
- - in Switzerland Maurice Campagna
- -------------------------------------------------------------------------------
- - Corporate Programs Gernot Gessinger
- -------------------------------------------------------------------------------
- - Technology Evaluation Klaus Ragaller
- -------------------------------------------------------------------------------
- - Process Technology Halvard Nyman
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Business Area Managers
- -------------------------------------------------------------------------------
Power Generation
- -------------------------------------------------------------------------------
District Heating Bengt Kristiansson
- -------------------------------------------------------------------------------
Environmental Systems Even Bakke
- -------------------------------------------------------------------------------
Fossil Combustion Systems
- -------------------------------------------------------------------------------
and Services Fritz Gautschi
- -------------------------------------------------------------------------------
Gas Turbine and
- -------------------------------------------------------------------------------
Combined-Cycle Plants Rolf Kehlhofer
- -------------------------------------------------------------------------------
Hydro Power Plants Jose Garcia Reis
- -------------------------------------------------------------------------------
Nuclear Power Plants Michael F. Barnoski
- -------------------------------------------------------------------------------
Power Generation Industry Ulf Berg
- -------------------------------------------------------------------------------
Power Plant Control Michael Hirth
- -------------------------------------------------------------------------------
Utility Steam Power Plants Hubert Lienhard
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
All Power Generation Business Areas
- -------------------------------------------------------------------------------
- - in Germany Hubert Lienhard
- -------------------------------------------------------------------------------
- - in Sweden Lennart Fogelstrom/
- -------------------------------------------------------------------------------
Leif Nilsson/*/
- -------------------------------------------------------------------------------
- - in Switzerland Rolf Kehlhofer
- -------------------------------------------------------------------------------
- - in Italy Andrea Brentan
- -------------------------------------------------------------------------------
- - in the U.S. Fritz Gautschi
- -------------------------------------------------------------------------------
- - Asia Jakob Disch
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Power Transmission and Distribution
- -------------------------------------------------------------------------------
Cables Petter Arvidson
- -------------------------------------------------------------------------------
Distribution Transformers Ake Almgren
- -------------------------------------------------------------------------------
High-Voltage Switchgear Kurt Hakansson
- -------------------------------------------------------------------------------
Medium-Voltage Equipment Andrew Eriksson
- -------------------------------------------------------------------------------
Network Control and Protection Mikko Niinivaaro
- -------------------------------------------------------------------------------
Power Lines Luigi Ruggieri
- -------------------------------------------------------------------------------
Power Systems Bo Normark
- -------------------------------------------------------------------------------
Power Transformers Francois Gabella
- -------------------------------------------------------------------------------
All Power Transmission and Distribution Business Areas
- -------------------------------------------------------------------------------
- - in Germany Joachim Schneider
- -------------------------------------------------------------------------------
- - in Sweden Sten Jakobsson
- -------------------------------------------------------------------------------
- - in Switzerland Josef Durr
- -------------------------------------------------------------------------------
- - in the U.S. Richard Siudek
- -------------------------------------------------------------------------------
- - Asia Bo Waern
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Industrial and Building Systems
- -------------------------------------------------------------------------------
Automation and Drives Jorgen Centerman
- -------------------------------------------------------------------------------
Oil, Gas and Petrochemical Kjell Almskog
- -------------------------------------------------------------------------------
Flexible Automation Stelio Demark
- -------------------------------------------------------------------------------
Instrumentation John Notley
- -------------------------------------------------------------------------------
Motors Birger Titusson
- -------------------------------------------------------------------------------
Contracting Tom Sjokvist
- -------------------------------------------------------------------------------
Low-Voltage Systems Tom Sjokvist
- -------------------------------------------------------------------------------
Low-Voltage Apparatus Tom Sjokvist
- -------------------------------------------------------------------------------
Installation Material Georg Demling
- -------------------------------------------------------------------------------
Air Handling Equipment Ulf Bennet
- -------------------------------------------------------------------------------
Service Jan Coene
- -------------------------------------------------------------------------------
Superchargers Daniel Arnet
- -------------------------------------------------------------------------------
All Industrial and Building Systems Business Areas
- -------------------------------------------------------------------------------
- - in Germany Georg Demling/
- -------------------------------------------------------------------------------
Rolf Karg
- -------------------------------------------------------------------------------
- - in Sweden Lars-Erik Lindback
- -------------------------------------------------------------------------------
- - in Switzerland Felix Bagdasarjanz
- -------------------------------------------------------------------------------
- - in the U.S. John Trostheim
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
/*/ as of March 1998
- -------------------------------------------------------------------------------
58
<PAGE>
- ------------------------------------------------------
Financial Services
- ------------------------------------------------------
Segment Manager Jan Roxendal
- ------------------------------------------------------
Energy Ventures Peter Giller
- ------------------------------------------------------
Insurance Goran Thorstensson
- ------------------------------------------------------
Investment Management Kjell Sundstrom
- ------------------------------------------------------
Leasing & Financing Johan Lowenhielm
- ------------------------------------------------------
Project & Trade Finance Gunnar Johannesson
- ------------------------------------------------------
Structured Finance Lennart Blecher
- ------------------------------------------------------
Treasury Centers
- ------------------------------------------------------
- - in Northern Europe Peter Carlsson
- ------------------------------------------------------
- - in Western Europe Thomas Meyer
- ------------------------------------------------------
- - in the Americas Stephan Carlquist
- ------------------------------------------------------
- ------------------------------------------------------
Regional and Country Managers
- ------------------------------------------------------
- ------------------------------------------------------
Europe, Middle East and Africa
- ------------------------------------------------------
Austria Rudolf Petsche
- ------------------------------------------------------
Belgium Peter Smits
- ------------------------------------------------------
Denmark S. A. Koch-Christensen
- ------------------------------------------------------
Finland Matti Ilmari
- ------------------------------------------------------
France Soren Lind
- ------------------------------------------------------
Germany Horst Dietz
- ------------------------------------------------------
Greece Costas Cosmadakis
- ------------------------------------------------------
Ireland Diarmuid O'Sullivan
- ------------------------------------------------------
Italy Umberto Di Capua
- ------------------------------------------------------
Netherlands Jacques de Raad
- ------------------------------------------------------
Norway Kjell Almskog
- ------------------------------------------------------
Portugal Carlos Dias
- ------------------------------------------------------
Spain Fernando Conte
- ------------------------------------------------------
Sweden Anders Narvinger
- ------------------------------------------------------
Switzerland Alois Sonnenmoser
- ------------------------------------------------------
Turkey Alfred Barth
- ------------------------------------------------------
United Kingdom Eric Drewery
- ------------------------------------------------------
- ------------------------------------------------------
Central and Eastern Europe Ranieri de Ferrante
- ------------------------------------------------------
Czech Republic Frank Duggan
- ------------------------------------------------------
Hungary Peter Hegedus
- ------------------------------------------------------
Poland Miroslaw Gryszka
- ------------------------------------------------------
Romania Peter Simon
- ------------------------------------------------------
Russia Michel Tchesnakoff
- ------------------------------------------------------
Ukraine Ake Davidsson
- ------------------------------------------------------
- ------------------------------------------------------
Middle East and Africa Max Abitbol
- ------------------------------------------------------
Egypt Aref Hakki
- ------------------------------------------------------
Saudi Arabia Bengt Andersson
- ------------------------------------------------------
South Africa Max Abitbol
- ------------------------------------------------------
- ------------------------------------------------------
Americas
- ------------------------------------------------------
Argentina Ulises de la Orden
- ------------------------------------------------------
Bolivia Nelson Izquierdo
- ------------------------------------------------------
Brazil Cedric Lewis
- ------------------------------------------------------
Canada Paul Kefalas
- ------------------------------------------------------
Chile Victor Ballivian
- ------------------------------------------------------
Colombia Napoleao Olmedo
- ------------------------------------------------------
Ecuador Julio Barriga
- ------------------------------------------------------
Mexico Benny Olsson
- ------------------------------------------------------
Peru Eduardo Soldano
- ------------------------------------------------------
USA Peter S. Janson
- ------------------------------------------------------
Venezuela Oswald Weinreich
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
Australia/New Zealand Tommie Bergman
- ------------------------------------------------------
China/Hong Kong SAR Rolf Schaumann
- ------------------------------------------------------
Japan Lave Lindberg
- ------------------------------------------------------
Korea Hakan Borin
- ------------------------------------------------------
Malaysia Zubir Zainal Abidin
- ------------------------------------------------------
Philippines Bo Hedenstrom
- ------------------------------------------------------
Singapore Paul Ziegler
- ------------------------------------------------------
Taiwan Felix Vest
- ------------------------------------------------------
Thailand Terawat Thisabhiramya
- ------------------------------------------------------
Vietnam Ulf Rolander
- ------------------------------------------------------
- ------------------------------------------------------
South Asia Narsim Shenoy
- ------------------------------------------------------
India Arun Thiagarajan
- ------------------------------------------------------
59
<PAGE>
ABB ASEA BROWN BOVERI LTD, ZURICH
Income Statement
(Swiss Francs in thousands)
- --------------------------------------------------------------------------------
Year ended December 31 1997 1996
- --------------------------------------------------------------------------------
Revenues 181,357 167,935
- --------------------------------------------------------------------------------
Personnel expenses -95,055 -69,109
- --------------------------------------------------------------------------------
Other expenses -141,762 -135,593
- --------------------------------------------------------------------------------
Depreciation of fixed assets -20,671 -20,528
- --------------------------------------------------------------------------------
Unusual items - 5,454
- --------------------------------------------------------------------------------
Dividend income 1,094,007 1,237,745
- --------------------------------------------------------------------------------
Interest income 31,193 94,307
- --------------------------------------------------------------------------------
Interest expense -43,231 -30,097
- --------------------------------------------------------------------------------
Capital gains on sales of shares
and participations 110,598 1,361,166
- --------------------------------------------------------------------------------
Write-down of shares
and participations -151,363 -1,445,506
- --------------------------------------------------------------------------------
Income before taxes 965,073 1,165,774
- --------------------------------------------------------------------------------
Taxes -23,562 -5,811
- --------------------------------------------------------------------------------
Net Income 941,511 1,159,963
- --------------------------------------------------------------------------------
Notes to the Financial Statements
(Swiss Francs in thousands)
Note 1, Cash and marketable securities
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Cash and bank 601,551 1,934,102
- --------------------------------------------------------------------------------
Marketable securities 189,307 66,345
- --------------------------------------------------------------------------------
Total 790,858 2,000,447
- --------------------------------------------------------------------------------
Note 2, Receivables
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Non-trade receivables 156,742 89,873
- --------------------------------------------------------------------------------
Prepaid expenses/accrued income 6,039 19,365
- --------------------------------------------------------------------------------
Total 162,781 109,238
- --------------------------------------------------------------------------------
Note 3, Current liabilities
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Payables 610,517 244,674
- --------------------------------------------------------------------------------
Accrued expenses/deferred income 107,016 180,072
- --------------------------------------------------------------------------------
Short-term loans - 206,795
- --------------------------------------------------------------------------------
Total 717,533 631,541
- --------------------------------------------------------------------------------
Balance Sheet
(Swiss Francs in thousands)
- --------------------------------------------------------------------------------
December 31 Notes 1997 1996
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Current Assets
- --------------------------------------------------------------------------------
Cash and marketable securities 1 790,858 2,000,447
- --------------------------------------------------------------------------------
Receivables 2 162,781 109,238
- --------------------------------------------------------------------------------
Total Current Assets 7 953,639 2,109,685
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fixed Assets
- --------------------------------------------------------------------------------
Loans granted 7 404,475 327,001
- --------------------------------------------------------------------------------
Shares and participations 8 7,384,883 6,062,264
- --------------------------------------------------------------------------------
Trademarks 8,492 17,100
- --------------------------------------------------------------------------------
Machinery and equipment 9 4,195 7,230
- --------------------------------------------------------------------------------
Total Fixed Assets 7,802,045 6,413,595
- --------------------------------------------------------------------------------
Total Assets 8,755,684 8,523,280
- --------------------------------------------------------------------------------
Fiduciary assets (ABB Group) 238,735 196,142
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Liabilities and Equity
- --------------------------------------------------------------------------------
Liabilities
- --------------------------------------------------------------------------------
Current liabilities 3, 7 717,533 631,541
- --------------------------------------------------------------------------------
Provisions 29,874 26,973
- --------------------------------------------------------------------------------
Medium- and long-term loans 7 180,600 328,600
- --------------------------------------------------------------------------------
Bonds 4 300,000 300,000
- --------------------------------------------------------------------------------
Total Liabilities 1,228,007 1,287,114
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Stockholders' Equity
- --------------------------------------------------------------------------------
Share capital 2,768,000 2,768,000
- --------------------------------------------------------------------------------
Legal reserve 5 553,600 553,600
- --------------------------------------------------------------------------------
Other reserves 1,869,866 1,869,866
- --------------------------------------------------------------------------------
Retained earnings 1,394,700 884,737
- --------------------------------------------------------------------------------
Net income 941,511 1,159,963
- --------------------------------------------------------------------------------
Total Stockholders' Equity 7,527,677 7,236,166
- --------------------------------------------------------------------------------
Total Liabilities and Equity 8,755,684 8,523,280
- --------------------------------------------------------------------------------
Fiduciary liabilities (ABB Group) 238,735 196,142
- --------------------------------------------------------------------------------
Contingent liabilities 6 45,117 26,740
- --------------------------------------------------------------------------------
Note 4, Bonds
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
1992-2002 7.00 % 150,000 150,000
- --------------------------------------------------------------------------------
1992-2002 7.25 % 150,000 150,000
- --------------------------------------------------------------------------------
Total 300,000 300,000
- --------------------------------------------------------------------------------
60
<PAGE>
Note 5, Legal reserve
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Balance at the beginning of the year 553,600 544,471
- --------------------------------------------------------------------------------
Allocation to legal reserve - 9,129
- --------------------------------------------------------------------------------
Balance at the end of the year 553,600 553,600
- --------------------------------------------------------------------------------
Note 6, Contingent liabilities
- --------------------------------------------------------------------------------
1997 1996
- --------------------------------------------------------------------------------
Guarantees related to financial operations 45,117 26,740
- --------------------------------------------------------------------------------
In addition to the above stated contingent liabilities the company has provided
certain guarantees, indemnities and similar instruments ("Guarantees") securing
the performance by Group companies of contracts and undertakings entered into in
the normal course of business. Quantified guarantees amount to 185,545 thousand
Swiss Francs (328,841 thousand Swiss Francs in 1996). Unquantified guarantees
relate to contracts and undertakings of an aggregate value of approximately
1,967,335 thousand Swiss Francs (1,609,748 thousand Swiss Francs in 1996). The
extent of the Company's potential exposure can, however, not reliably be
assessed on the basis of such values and no liabilities are expected to arise
from the Guarantees.
Note 7, Transactions with related parties
- --------------------------------------------------------------------------------
The balance sheet includes the following amounts
resulting from transactions with subsidiaries: 1997 1996
- --------------------------------------------------------------------------------
Current assets 648,486 1,926,667
- --------------------------------------------------------------------------------
Loans granted 383,227 320,424
- --------------------------------------------------------------------------------
Current liabilities 392,524 447,501
- --------------------------------------------------------------------------------
Medium- and long-term loans 180,600 180,600
- --------------------------------------------------------------------------------
The balance sheet includes the following amounts
resulting from transactions with shareholders:
- --------------------------------------------------------------------------------
Marketable securities 9,307 66,345
- --------------------------------------------------------------------------------
Medium- and long-term loans - 148,000
- --------------------------------------------------------------------------------
Note 8, Shares and participations
- --------------------------------------------------------------------------------
Major subsidiaries of ABB Asea Brown Boveri Ltd are listed on page 55.
Note 9, Insurance value of machinery and equipment
- --------------------------------------------------------------------------------
The insurance value of machinery and equipment amounts to 13.0 million Swiss
Francs at the end of 1997 (13.8 million Swiss Francs in 1996).
There are no further items which require disclosure in accordance with
Art. 663 b of the Swiss Code of Obligations.
Proposed Appropriation of Profit
- --------------------------------------------------------------------------------
(Swiss Francs in thousands) 1997 1996
- --------------------------------------------------------------------------------
Net Income for the year 941,511 1,159,963
- --------------------------------------------------------------------------------
Carried forward from previous year 1,394,700 884,737
- --------------------------------------------------------------------------------
2,336,211 2,044,700
- --------------------------------------------------------------------------------
Dividend on class A-shares
in favor of ABB AB -350,000 -325,000
- --------------------------------------------------------------------------------
Dividend on class B-shares
in favor of ABB AG -350,000 -325,000
- --------------------------------------------------------------------------------
Balance to be carried forward 1,636,211 1,394,700
- --------------------------------------------------------------------------------
Auditors' Report
As statutory auditors, we have audited the accounting records and the financial
statements (balance sheet, income statement and notes) of ABB Asea Brown Boveri
Ltd, Zurich for the year ended December 31, 1997.
These financial statements are the responsibility of the Board of Directors. Our
responsibility is to express an opinion on these financial statements based on
our audit. We confirm that we meet the legal requirements concerning
professional qualification and independence.
Our audit was conducted in accordance with auditing standards promulgated by the
profession, which require that an audit be planned and performed to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. We have examined on a test basis evidence supporting the
amounts and disclosures in the financial statements. We have also assessed the
accounting principles used, significant estimates made and the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the accounting records, financial statements and the proposed
appropriation of available earnings comply with the law and the company's
articles of incorporation.
We recommend that the financial statements submitted to you be approved.
KPMG Klynveld Peat Marwick Goerdeler SA
B.A. Mathers B.J. DeBlanc
Auditors in charge
Zurich, February 25, 1998
61
<PAGE>
STATISTICAl GROUP DATA
(US$ in millions)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Consolidated Income Statement 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------------------
Revenues/1/ 31,265 33,767 32,751 28,758 27,521 29,109 28,443 26,337 20,260 17,562
- ------------------------------------------------------------------------------------------------------------------------------------
Depreciation of Fixed Assets -997 -1,044 -1,021 -893 -844 -901 -819 -750 -549 -514
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Earnings after Depreciation/1/ 1,137 2,113 2,181 1,574 1,311 1,219 1,417 1,386 918 543
- ------------------------------------------------------------------------------------------------------------------------------------
Income before Taxes/1/ 853 1,901 2,003 1,362 520 861 997 1,052 872 495
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income before Minority Interest 595 1,242 1,361 795 72 528 633 628 628 409
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income 572 1,233 1,315 760 68 505 609 590 589 386
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Consolidated Balance Sheet
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and Marketable Securities 5,790 5,553 6,831 7,612 5,700 5,534 5,211 4,975 4,332 3,496
- ------------------------------------------------------------------------------------------------------------------------------------
Other Current Assets 14,846 15,606 15,437 12,348 10,672 11,432 12,688 12,848 10,470 9,272
- ------------------------------------------------------------------------------------------------------------------------------------
Fixed Assets 9,148 9,737 9,808 9,095 8,532 8,983 10,157 10,286 7,743 4,597
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 29,784 30,896 32,076 29,055 24,904 25,949 28,056 28,109 22,545 17,365
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Current Liabilities 16,520 17,147 17,302 15,458 13,390 13,203 15,394 15,441 13,209 9,193
- ------------------------------------------------------------------------------------------------------------------------------------
Advances from Customers 2,612 2,610 3,576 3,417 2,567 2,983 2,820 2,798 1,768 1,794
- ------------------------------------------------------------------------------------------------------------------------------------
Medium- and Long-Term Loans 2,511 1,823 2,644 3,049 2,866 2,993 2,496 2,712 1,746 1,541
- ------------------------------------------------------------------------------------------------------------------------------------
Other Long-Term Liabilities 2,538 3,094 2,971 2,732 2,244 2,384 2,547 2,442 1,447 1,329
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity incl. Minority Interest 5,603 6,222 5,583 4,399 3,837 4,386 4,799 4,715 4,375 3,508
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Consolidated Statement of Cash Flows
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities 1,791 834 951 2,135 1,515 1,942 2,128 1,044 1,437 833
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities -726 -1,118 -402 -501 -839 -373 -316 -1,024 -3,951 -580
- ------------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities -417 -855 -1,696 -122 -54 -477 -1,528 218 3,323 -867
- ------------------------------------------------------------------------------------------------------------------------------------
Effects of Translation Differences -411 -139 366 400 -456 -769 -48 405 27 -492
- ------------------------------------------------------------------------------------------------------------------------------------
Net Change in Cash and Marketable Securities 237 -1,278 -781 1,912 166 323 236 643 836 -1,106
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Other Data
- ------------------------------------------------------------------------------------------------------------------------------------
Orders Received /1/,/2/ 34,803 33,884 35,163 30,827 28,644 31,153 29,209 28,938 21,348 17,572
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Expenditure for Tangible Fixed
Assets 1,093 1,168 1,171 935 816 957 1,035 961 783 736
- ------------------------------------------------------------------------------------------------------------------------------------
Capital Expenditure for Acquisitions 302 333 315 196 212 253 612 677 3,090 544
- ------------------------------------------------------------------------------------------------------------------------------------
Expenditure for Research and Development 2,657 2,638 2,627 2,353 2,271 2,386 2,342 1,931 1,361 1,255
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends Declared Pertaining to
Fiscal Year (Swiss francs in millions) 700 650 520 370 340 340 330 300 290 200
- ------------------------------------------------------------------------------------------------------------------------------------
Number of Employees 213,057 214,894 209,637 207,557 206,490 213,407 214,399 215,154 189,493 169,459
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash/net debt position 1,564 1,204 1,997 1,686 242 -7 -950 -2,110 -1,760 576
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Earnings/Revenues/1/ 3.6% 6.3% 6.7% 5.5% 4.8% 4.2% 5.0% 5.3% 4.5% 3.1%
- ------------------------------------------------------------------------------------------------------------------------------------
Return on Equity 10.3% 22.2% 28.4% 20.2% 1.8% 11.8% 13.9% 14.5% 16.8% 12.5%
- ------------------------------------------------------------------------------------------------------------------------------------
Return on Capital Employed/1/ 12.2% 19.9% 21.8% 16.9% 15.4% 14.7% 14.7% 17.3% 15.1% 11.6%
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ 1988 to 1996 restated; refer to section N in the Principles of
Consolidation.
/2/ 1996 and 1997 restated to reflect the indefinite delay of the Bakun project.
62
<PAGE>
ABB PARENT COMPANIES' ANNUAL REPORTS 1997
ABB AB Shareholders ABB AG Shareholders [PHOTO]
ABB AB ABB AG
Stockholm Baden
Sweden Switzerland
50% 50% [PHOTO]
ABB Asea Brown Boveri Ltd
Zurich
Switzerland
[PHOTO]
ABB Asea Brown Boveri Group
1,000 Companies
37 Business Areas organized into
4 Business Segments [PHOTO]
ABB AB (Sweden) and ABB AG (Switzerland) are the two sole owners in equal parts
of ABB Asea Brown Boveri Ltd, Zurich (Switzerland), which is the holding company
of the ABB Group with approximately 1,000 companies around the world. The two
parent companies each provide a transparent vehicle for investing in ABB as
virtually all of their income and stockholders' equity comes from their
respective 50-percent shares of the ABB Group income and equity. For a full
report on the development of the ABB Group, refer to pages 1-62 in the combined
Annual Report.
ABB companies throughout the world report their income and financial position in
local currencies, which are then translated to U.S. dollars to establish the ABB
Group's consolidated accounts. In order to compute the income of the two parent
companies, ABB AB (Sweden) and ABB AG (Switzerland), their 50-percent shares of
ABb Group income are translated from U.S. dollars to Swedish Krona (SKr) and
Swiss Francs (SFr), respectively.
63
<PAGE>
ABB AB ANNUAL REPORT 1997
ABB AB BOARD OF DIRECTORS AND AUDITORS
- --------------------------------------------------------------------------------
Honorary Chairman
- --------------------------------------------------------------------------------
Curt Nicolin (born 1921).
- --------------------------------------------------------------------------------
President of ASEA 1961-1975.
- --------------------------------------------------------------------------------
Chairman 1976-1991.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Members elected by the shareholders
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Chairman
- --------------------------------------------------------------------------------
Bjorn Svedberg (born 1937). Elected 1991.
- --------------------------------------------------------------------------------
Chairman: Ericsson.
- --------------------------------------------------------------------------------
Board Member: ABB Asea Brown Boveri Ltd, Incentive,
- --------------------------------------------------------------------------------
STORA, Volvo. Shares held: 0.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
President
- --------------------------------------------------------------------------------
Claes Dahlback (born 1947). Elected 1985.
- --------------------------------------------------------------------------------
President: Investor.
- --------------------------------------------------------------------------------
Chairman: The Swedish Wine & Spirits Corp.
- --------------------------------------------------------------------------------
Deputy Chairman: Skandinaviska Enskilda Banken.
- --------------------------------------------------------------------------------
Board Member: ABB Asea Brown Boveri Ltd,
- --------------------------------------------------------------------------------
Astra, Electrolux, STORA. Shares held: 5,000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Donald H. Rumsfeld (born 1932). Elected 1996.
- --------------------------------------------------------------------------------
Chairman: Gilead Sciences.
- --------------------------------------------------------------------------------
Board Member: ABB Asea Brown Boveri Ltd,
- --------------------------------------------------------------------------------
Gulfstream Aerospace, Kellogg,
- --------------------------------------------------------------------------------
Sears Roebuck, Tribune Company.
- --------------------------------------------------------------------------------
Former U.S. Ambassador to NATO, U.S. Secretary of
- --------------------------------------------------------------------------------
Defense, CEO of G.D. Searle & Co., and CEO of General
- --------------------------------------------------------------------------------
Instrument Corp. Shares held: 100 (ADR).
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Peter D. Sutherland (born 1946). Elected 1996.
- --------------------------------------------------------------------------------
Chairman and Managing Director: Goldman
- --------------------------------------------------------------------------------
Sachs International.
- --------------------------------------------------------------------------------
Chairman: British Petroleum.
- --------------------------------------------------------------------------------
Board Member: ABB Asea Brown Boveri Ltd,
- --------------------------------------------------------------------------------
Ericsson, Investor.
- --------------------------------------------------------------------------------
Former Director-General GATT and WTO,
- --------------------------------------------------------------------------------
Former EU Commissioner. Shares held: 0
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ABB AB's Statutory Auditors and Group Auditors
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Gunnar Widhagen (born 1938). Elected 1985.
- --------------------------------------------------------------------------------
(Elected Deputy Auditor 1973.)
- --------------------------------------------------------------------------------
Authorized Public Accountant.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Carl-Gustaf Gutberg (born 1946). Elected 1994.
- --------------------------------------------------------------------------------
(Elected Deputy Auditor 1988.)
- --------------------------------------------------------------------------------
Authorized Public Accountant.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Deputy Auditors:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Torbjorn Hanson (1943). Elected 1985.
- --------------------------------------------------------------------------------
Authorized Public Accountant.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Jan Birgerson (1954). Elected 1996.
- --------------------------------------------------------------------------------
Authorized Public Accountant.
- --------------------------------------------------------------------------------
64
<PAGE>
THE BOARD OF DIRECTORS REPORT
ABB AB and associated company
ABB AB's share of ABB Group's earnings before taxes and after minority interests
for 1997 was $ 409 million (1996: $ 939 million), a decrease of 56 percent. The
decrease is mainly due to the $ 866 million extraordinary restructuring charge
taken by the ABB Group in 1997. The average US$ exchange rate increased 13
percent from SKr 6.71/US$ during 1996 to SKr 7.61/US$ in 1997. The year-end
exchange rate was up 15 percent from SKr 6.89/US$ at the close of 1996 to
SKr 7.90/US$ at December 31, 1997. After exchange rate changes, ABB AB's share
of earnings before taxes and after minority interests from the ABB Group
decreased from SKr 6,304 million in 1996 to SKr 3,116 million in 1997. ABB AB's
income before taxes, including associated company, amounted to SKr 3,114 million
(1996: 6,312 million) in 1997. After taxes of SKr 940 million (1996: 2,168
million), net income amounted to SKr 2,174 million (1996: 4,144 million) for the
year.
Net income per share amounted to SKr 2.32 in 1997. Net income per share in
1996, adjusted for the 10:1 stock split in ABB AB shares in April 1997, amounted
to SKr 4.42. Excluding ABB AB's portion of the restructuring charge, net income
per share increased 8 percent to SKr 4.77.
ABB AB, parent company
For fiscal year 1997, ABB AB will receive a dividend of SFr 350 million from ABB
Asea Brown Boveri Ltd. In order for profits generated by the ABB Group in 1997
to be made available to ABB AB shareholders in the spring of 1998, the amount in
SKr of 1,920 million was anticipated in the parent company's 1997 financial
statements.
Administrative and personnel expenses decreased from SKr 18 million
in 1996 to SKr 11 million in 1997, and interest net decreased from SKr 26
million to SKr 9 million. Net income amounted to SKr 1,925 million (1996: 1,660
million) for the year.
The Board of Directors of ABB AB has proposed a dividend of SKr 2.10 per share,
totaling SKr 1,970 million (1996: 1,641 million). Dividend per share in 1996,
adjusted for the 10:1 stock split in ABB AB shares in April 1997, amounted to
SKr 1.75.
For information on ABB AB's employees and on wages and salaries paid, see Note
2, "ABB AB Notes to the Financial Statement", on page 69.
Stock split in ABB AB shares
On April 3, 1997, the Annual General Meeting of ABB AB approved a 10:1 split of
the ABB AB A and B shares, thereby lowering the par value of the shares from
SKr 50 to SKr 5. Each old share conferred the right to 10 new shares of the same
class. The total number of shares now amounts to 937,913,020. Trading in the new
shares started on April 21, 1997.
Board of Directors
Mr. Claes Dahlback has announced his intention to resign from the Board of
Directors of ABB AB at the next Annual General Meeting on April 2, 1998 and
decided not to stand for reelection to the Board of ABB Group. After serving 13
years on the ABB AB and ABB Group Boards, Mr. Claes Dahlback has rendered great
and lasting services on behalf of the company and the Board expresses its
sincere gratitude and recognition for his valuable efforts. The remaining
members are proposed to be reelected to the ABB AB Board. Mr. Percy N. Barnevik,
Chairman of the ABB Group, will be proposed for election to the Board of ABB AB.
PROPOSED APPROPRIATION OF PROFITS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
At the disposal of the Annual General Meeting are the following earnings:
- -------------------------------------------------------------------------------------------------------------
<S> <C>
income for the year 1,925
- -------------------------------------------------------------------------------------------------------------
and the balance carried forward 1,274
- -------------------------------------------------------------------------------------------------------------
Total 3,199
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
The board of Directors and the President propose that the earnings be appropriated as follows:
- -------------------------------------------------------------------------------------------------------------
to the Shareholders, a dividend of SKr 2.10 per share, totaling 1,970
- -------------------------------------------------------------------------------------------------------------
to be carried forward 1,229
- -------------------------------------------------------------------------------------------------------------
Total 3,199
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
No transfer to restricted equity is required
- -------------------------------------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
ABB AB IN BRIEF
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
ABB AB and associated company, five-year overview
(Swedish krona in millions)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
Share in ABB Group earnings before taxes
and after minority interests/1/ 3,116 6,304 6,904 5,057 1,964
- -------------------------------------------------------------------------------------------------------------
Parent Company's result before taxes
(excluding dividend from ABB) -2 8 7 -7 -13
- -------------------------------------------------------------------------------------------------------------
Income before taxes/1/ 3,114 6,312 6,911 5,050 1,951
- -------------------------------------------------------------------------------------------------------------
Net income 2,174 4,144 4,682 2,923 252
- -------------------------------------------------------------------------------------------------------------
Stockholders' equity 21,053 20,413 17,655 15,029 14,710
- -------------------------------------------------------------------------------------------------------------
/1/ 1993-1996 restated to reflect changes in ABB Group accounts concerning
"Current taxes, other", see page 46.
- -------------------------------------------------------------------------------------------------------------
Per-share data (SKr)/1/
- -------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
Net income 2.32/2/ 4.42 4.99/3/ 3.21 0.28
- -------------------------------------------------------------------------------------------------------------
Stockholders' equity 22.4 21.8 18.8 16.5 16.1
- -------------------------------------------------------------------------------------------------------------
Dividend (1997 proposed) 2.10 1.75 1.60 1.15 1.00
- -------------------------------------------------------------------------------------------------------------
/1/Per-share data 1993-1996 have been adjusted for the 10:1 stock split in ABB
AB shares effective as of April 21, 1997.
/2/Excluding ABB AB's part of the ABB Group restructuring charge in 1997, net
income per share was SKr 4.77.
/3/Excluding ABB AB's part of the gain from the transfer of the ABB Group
transportation activities in 1995, net income per share was SKr 4.04.
- -------------------------------------------------------------------------------------------------------------
Key ratios
- -------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- -------------------------------------------------------------------------------------------------------------
Pay-out ratio (%) 90.6 39.6 32.1 35.9 362.5
- -------------------------------------------------------------------------------------------------------------
Direct yield (%) 2.2 2.3 2.5 2.1 1.7
- -------------------------------------------------------------------------------------------------------------
Market-to-book (%) 418 354 343 329 366
- -------------------------------------------------------------------------------------------------------------
P/E (price/net income) 40.5 17.4 12.9 16.9 213.8
- -------------------------------------------------------------------------------------------------------------
</TABLE>
See "Definitions and key ratios", page 70.
66
<PAGE>
ABB AB INCOME STATEMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
ABB AB and ABB AB,
Notes associated company/1/ parent company
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31 (Swedish krona in millions) 1997 1996/2/ 1997 1996
- -------------------------------------------------------------------------------------------------------------
Administrative expenses -11 -13 -11 -13
- -------------------------------------------------------------------------------------------------------------
Personnel expenses 2 - -5 - -5
- -------------------------------------------------------------------------------------------------------------
Share in ABB Group earnings before taxes and after minority
interests 3,116 6,304 - -
- -------------------------------------------------------------------------------------------------------------
Dividend income/3/ - - 1,927 1,652
- -------------------------------------------------------------------------------------------------------------
Interest income 9 27 9 27
- -------------------------------------------------------------------------------------------------------------
Interest expense 0 -1 0 -1
- -------------------------------------------------------------------------------------------------------------
Income before taxes 3,114 6,312 1,925 1,660
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Taxes 4 -940 -2,168 - 0
- -------------------------------------------------------------------------------------------------------------
Net income 2,174 4,144 1,925 1,660
- -------------------------------------------------------------------------------------------------------------
/1/ABB AB's share in the ABB Group results recognized according to the equity method.
/2/1996 restated to reflect changes in ABB Group accounts concerning "Current taxes, other", see page 46.
/3/of which anticipated in 1997 SKr 1,920 million and in 1996 SKr 1,645 million.
ABB AB STATEMENT OF CASH FLOWS
- -------------------------------------------------------------------------------------------------------------
ABB AB and ABB AB,
associated company parent company
- -------------------------------------------------------------------------------------------------------------
Year ended December 31 (Swedish krona in millions) 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
- -------------------------------------------------------------------------------------------------------------
Income before taxes 3,114 6,312 1,925 1,660
- -------------------------------------------------------------------------------------------------------------
Adjustments for changes in pension liabilities - -42 - -42
- -------------------------------------------------------------------------------------------------------------
Adjustments for earnings in equity accounted company
in excess of dividend -524 -2,639 - -
- -------------------------------------------------------------------------------------------------------------
2,590 3,631 1,925 1,618
- -------------------------------------------------------------------------------------------------------------
Changes in operating assets and liabilities:
- -------------------------------------------------------------------------------------------------------------
Changes in other current receivables 0 1 0 1
- -------------------------------------------------------------------------------------------------------------
Changes in receivables for anticipated dividend - - 0 -155
- -------------------------------------------------------------------------------------------------------------
Changes in accrued expenses - -3 -275 -3
- -------------------------------------------------------------------------------------------------------------
Changes in other current liabilities (excl. taxes due) -1 0 -1 0
- -------------------------------------------------------------------------------------------------------------
2,589 3,629 1,649 1,461
- -------------------------------------------------------------------------------------------------------------
Taxes paid -940 -2,168 0 0
- -------------------------------------------------------------------------------------------------------------
Net cash from operating activities 1,649 1,461 1,649 1,461
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
- -------------------------------------------------------------------------------------------------------------
Changes in financing receivables 4 2 4 2
- -------------------------------------------------------------------------------------------------------------
Acquisition of shares and participations - - 0 -
- -------------------------------------------------------------------------------------------------------------
Net cash from investing activities 4 2 4 2
- -------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
- -------------------------------------------------------------------------------------------------------------
Dividend paid -1,639 -1,501 -1,639 -1,501
- -------------------------------------------------------------------------------------------------------------
Changes in short-, medium- and long-term loans -4 -1 -4 -1
- -------------------------------------------------------------------------------------------------------------
Net cash from financing activities -1,643 -1,502 -1,643 -1,502
- -------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents 10 -39 10 -39
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the beginning of the year 176 215 176 215
- -------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the end of the year 186 176 186 176
- -------------------------------------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
ABB AB BALANCE SHEETS/1/
<TABLE>
<CAPTION>
=============================================================================================================
ABB AB and ABS AB,
Notes associated company/2/ parent company
- -------------------------------------------------------------------------------------------------------------
December 31 (Swedish krona in millions) 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS
- -------------------------------------------------------------------------------------------------------------
FIXED ASSETS
- -------------------------------------------------------------------------------------------------------------
TANGIBLE ASSETS
- -------------------------------------------------------------------------------------------------------------
Machinery and equipment - 0 - 0
- -------------------------------------------------------------------------------------------------------------
FINANCIAL ASSETS
- -------------------------------------------------------------------------------------------------------------
Shares and participations 6 20,868 20,239 8,985 8,985
- -------------------------------------------------------------------------------------------------------------
Financing receivables 1 5 1 5
- -------------------------------------------------------------------------------------------------------------
TOTAL FIXED ASSETS 20,869 20,244 8,986 8,990
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
- -------------------------------------------------------------------------------------------------------------
CURRENT RECEIVABLES
- -------------------------------------------------------------------------------------------------------------
Other current receivables 3 3 3 3
- -------------------------------------------------------------------------------------------------------------
Receivables for anticipated dividend - - 1,920 1,645
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
CASH AND MARKETABLE SECURITIES 186 176 186 176
- -------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 189 179 2,109 1,824
- -------------------------------------------------------------------------------------------------------------
TOTAL ASSETS 21,058 20,423 11,095 10,814
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
EQUITY AND LIABILITIES
- -------------------------------------------------------------------------------------------------------------
EQUITY 5, 7
- -------------------------------------------------------------------------------------------------------------
RESTRICTED EQUITY
- -------------------------------------------------------------------------------------------------------------
Share capital 4,690 4,690 4,690 4,690
- -------------------------------------------------------------------------------------------------------------
Restricted reserves 3,201 3,201 3,201 3,201
- -------------------------------------------------------------------------------------------------------------
Equity method reserve 9,714 7,125 - -
- -------------------------------------------------------------------------------------------------------------
UNRESTRICTED EQUITY
- -------------------------------------------------------------------------------------------------------------
Retained earnings 1,274 1,253 1,274 1,253
- -------------------------------------------------------------------------------------------------------------
Net income 2,174 4,144 1,925 1,660
- -------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 21,053 20,413 11,090 10,804
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
PROVISIONS FOR PENSIONS - 0 - 0
- -------------------------------------------------------------------------------------------------------------
MEDIUM- AND LONG-TERM LOANS 3 1 5 1 5
- -------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------
CURRENT LIABILITIES
- -------------------------------------------------------------------------------------------------------------
Short-term loans 3 3 3 3 3
- -------------------------------------------------------------------------------------------------------------
Other current liabilities 0 1 0 1
- -------------------------------------------------------------------------------------------------------------
Accrued expenses 1 1 1 1
- -------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 4 5 4 5
- -------------------------------------------------------------------------------------------------------------
TOTAL EQUITY AND LIABILITIES 21,058 20,423 11,095 10,814
- -------------------------------------------------------------------------------------------------------------
=============================================================================================================
ASSET PLEDGED - - - -
- -------------------------------------------------------------------------------------------------------------
CONTINGENT LIABILITIES - - - -
- -------------------------------------------------------------------------------------------------------------
/1/Changed format due to the 1997 Swedish Annual Report Act.
/2/ABB AB's investment in the ABB Group accounted according to the equity method.
</TABLE>
68
<PAGE>
ABB AB NOTES TO THE FINANCIAL STATEMENTS
(SWEDISH KRONA IN MILLIONS)
NOTE 1, PRINCIPLES OF ACCOUNTING
Principles of accounting for associated company
The equity method is used in accounting for the interest of ABB AB in the ABB
Group. The method is in accordance with the recommendation issued by the Swedish
Financial Accounting Standard Council. Following the equity method, ABB AB
reports its share in the ABB Group's earnings and stockholders equity only, and
not a full consolidation. The ABB Group accounting is in accordance with the
International Accounting Standards (IAS). There are no deviations from the
recommendations of the Swedish Financial Accounting Standards Council.
Anticipated dividend
In ABB AB's financial statements for 1997, the proposed dividend from ABB Asea
Brown Boveri Ltd for fiscal year 1997 has been anticipated. This procedure was
also used in 1996.
Taxation
Provision is made for all taxes estimated to be payable on reported income.
These taxes are calculated in accordance with the applicable regulations.
Cash and marketable securities
Bank balances and fixed-term deposits of ABB AB are stated at face value.
Foreign currencies
ABB AB's share of ABB Group's earnings is based on the average SKr/US$ exchange
rate and ABB AB's share of ABB Group's stockholders' equity is based on the
year-end SKr/US$ exchange rate. The average SKr/US$ rate during 1997 was
SKr 7.61/US$ (1996: SKr 6.71/US$), while the year-end 1997 SKr/US$ rate was
SKr 7.90/US$ (December 31, 1996: SKr 6.89/US$).
NOTE 2, EMPLOYEES, WAGES AND SALARIES
=====================================================
(Swedish Krona in millions,
unless stated otherwise) ABB AB/1/
- -----------------------------------------------------
Sweden = Total 1997 1996
- -----------------------------------------------------
Average number of employees - 2
- -----------------------------------------------------
Of whom, women, percent - 75
- -----------------------------------------------------
Wages and salaries - 3
- -----------------------------------------------------
Of which, paid to Board of Directors
and President - 2
- -----------------------------------------------------
Social security costs - 1
- -----------------------------------------------------
Pension costs - 1
- -----------------------------------------------------
Of which, paid to Board of Directors
and President - 1
- -----------------------------------------------------
/1/As of July 1, 1996 ABB AB has no employees.
Compensation of the Board of Directors and President
At the 1997 Annual General Meeting, shareholders adopted a resolution stating
that no compensation should be paid to the Board of Directors for the year 1997.
NOTE 3, LOANS (SHORT- AND LONG-TERM PORTION)
Loans consist of bonds designating ABB AB as the formal borrower, although the
loans are actually attributable to Incentive AB and on which ABB AB has a
corresponding receivable. There are two loans, each with an original amount of
SKr 18 million and an interest rate of 7.25% issued 1973 and 1974 and maturing
1998 and 1999. The remaining short-term loan amounts to SKr 3 million (1996:
3 million) and the long-term loan amounts to SKr 1 million (1996: 5 million).
ABS AS AND ASSOCIATED COMPANY
NOTE 4, TAXES
=====================================================
1997 1996
- -----------------------------------------------------
Current taxes, income/1/ 1,434 1,446
- -----------------------------------------------------
Deferred taxes/1/ -494 722
- -----------------------------------------------------
TOTAL 940 2,168
- -----------------------------------------------------
/1/Associated company only - -
<TABLE>
<CAPTION>
NOTE 5, STOCKHOLDERS' EQUITY
======================================================================================================================
Share Restricted Equity meth- Retained Net Total
capital reserves od reserve earnings income
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Opening balance sheet 4,690 3,201 7,125 5,397 20,413
- ----------------------------------------------------------------------------------------------------------------------
Share of earnings in the ABB Group
in excess of dividend 2,485 -2,485
- ----------------------------------------------------------------------------------------------------------------------
Dividend/1/ -1,639 -1,639
- ----------------------------------------------------------------------------------------------------------------------
Equity interest ABB Asea Brown Boveri Ltd
- ----------------------------------------------------------------------------------------------------------------------
Translation differences and other 104 1 105
- ----------------------------------------------------------------------------------------------------------------------
Net income 1997 2,174 2,174
- ----------------------------------------------------------------------------------------------------------------------
CLOSING BALANCE SHEET 4,690 3,201 9,714 1,274 2,174 21,053
- ----------------------------------------------------------------------------------------------------------------------
/1/Dividend paid out 1997 1,641
Correction for dividend not claimed from earlier years -2
Dividend 1,639
</TABLE>
69
<PAGE>
<TABLE>
<CAPTION>
ABB AB, PARENT COMPANY
NOTE 6, SHARES AND PARTICIPATIONS
=============================================================================================================================
Equity Net Number Percent Par value Book value Book value
income of shares holding ABB AB ABB AB and
parent comp. assoc.comp.
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ABB Asea Brown Boveri Ltd,
Zurich, Switzerland/1/ 41,736 4,348 1,384,000 50 SFr 1,384 million 8,935 20,868
- -----------------------------------------------------------------------------------------------------------------------------
ASEA AB, Vasteras, Sweden/2/ SKr 100,000 - 1,000 100 SKr 100,000 0 -
- -----------------------------------------------------------------------------------------------------------------------------
TOTAL 8,935 20,868
- -----------------------------------------------------------------------------------------------------------------------------
/1/No change compared to 1996
/2/Bought during 1997
NOTE 7, STOCKHOLDERS' EQUITY
===============================================================================================================
Share Restricted Retained Net Total
capital reserves earnings income
- ---------------------------------------------------------------------------------------------------------------
Opening balance sheet 4,690 3,201 2,913 10,804
- ---------------------------------------------------------------------------------------------------------------
Dividends -1,639 -1,639
- ---------------------------------------------------------------------------------------------------------------
Net income 1997 1,925 1,925
- ---------------------------------------------------------------------------------------------------------------
CLOSING BALANCE SHEET 4,690 3,201 1,274 1,925 11,090
- ---------------------------------------------------------------------------------------------------------------
DEFINITIONS AND KEY RATIOS
The key ratios below are based on recommenda- 2 STOCKHOLDERS' EQUITY PER SHARE
tions of the Industry and Commerce Committee Stockholders' equity per share is calculated on
of the Stockholm Stock Exchange (NBK). total stockholders' equity in ABB AB and associ-
ated company balance sheet, divided by the
number of shares outstanding at year-end.
I EARNINGS PER SHARE
Earnings per share are calculated in
accordance with the equity accounting 3 MARKET CAPITALIZATION OF ABB AB
method considering ABB AB's share in ABB The market capitalization of ABB AB is calculated
Group net income plus ABB AB's own net on the number of shares outstanding at year-end.
income. Earnings per share are calculated
on the basis of the average number of
shares outstanding during the period.
Stockholm, February 25, 1998
BJORN SVEDBERG (Chairman) CLAES DAHLBACK (President) DONALD H. RUMSFELD PETER D. SUTHERLAND
</TABLE>
AUDITORS' REPORT
To the general meeting of the shareholders of ABB AB.
We have audited the parent company and the consolidated financial statements,
the accounts and the administration of the board of directors and the managing
director of ABB AB for the 12 month period ending on month December 1997. These
accounts and the administration of the Company are the responsibility of the
board of directors and the managing director. Our responsibility is to express
an opinion on the financial statements and the administration based on our
audit.
We conducted our audit in accordance with Generally Accepted Auditing
Standards in Sweden. Those Standards require that we plan and perform the audit
to obtain reasonable assurance that the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and their application by
the board of directors and the managing director, as well as evaluating the
overall presentation of information in the financial statements. We examined
significant decisions, actions taken and circumstances of the Company in order
to be able to determine the possible liability to the Company of any board
member or the managing director or whether they have in some other way acted in
contravention of the Companies Act, the Annual Accounts Act or the Articles of
Association. We believe that our audit provides a reasonable basis for our
opinion set out below.
In our opinion, the parent company and the consolidated financial statements
have been prepared in accordance with the Annual Accounts Act and give a true
and fair view of the result of its operations and of the financial position of
the Parent Company and the Group, and, consequently we recommend that the income
statements and the balance sheets of the Parent Company and the Group be
adopted, and that the profit (loss) of the Parent Company be dealt with in
accordance with the proposal in the Administration Report.
In our opinion, the board members and the managing director have not committed
any act or been guilty of any omission, which could give rise to any liability
to the Company. We therefore recommend that the members of the board of
directors and the managing director be discharged from liability for the
financial year.
Stockholm, February 25, 1998
Gunnar Widhagen Carl-Gustaf Gutberg
Authorized Public Authorized Public
Accountant Accountant
70
<PAGE>
ABB AB Investor Information
Dividend policy and dividend
ABB AB's principal source of revenue is dividend income on its holding of shares
in ABB Asea Brown Boveri Ltd. The Board of Directors' policy is to distribute
the full dividend received from ABB Asea Brown Boveri Ltd to its shareholders.
The amount of the dividend, calculated in SKr, is affected both by the actual
amount paid by ABB in SFr and the SKr/SFr exchange rate on the dividend date.
For fiscal year 1997, ABB AB will receive a dividend of SFr 350 million from ABB
(dividend payment is received in April, 1998). This dividend from ABB Asea Brown
Boveri Ltd has been hedged and equals SKr 1,931 million. In order for profits
generated by the ABB Group in 1997 to be made available to ABB AB shareholders
in the spring of 1998, SKr 1,920 million was anticipated in the Parent Company's
1997 financial statements.
The Board of Directors of ABB AB, accordingly, has resolved to propose a
dividend of SKr 2.10 per share, totaling SKr 1,970 million (1996: 1,641
million). Dividend per share in 1996, adjusted for the I0:1 stock split in ABB
AB shares in April 1997, amounted to SKr 1.75.
During 1997, for fiscal year 1996, ABB AB received a dividend of SFr 325 million
from ABB, corresponding to SKr 1,652 million. In order for profits generated by
the ABB Group in 1996 to be made available to ABB AS shareholders in the spring
of 1997, SKr 1,645 million of the dividend in question was anticipated in the
Parent Company's 1996 financial statements. The dividend that ABB AB received
from ABB Asea Brown Boveri Ltd is not subject to Swedish taxation.
================================================================================
Turnover of ABB AB shares 1993-1997
(millions of shares)
- --------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
Stockholm
Stock Exchange 450 416 435 484 278
- --------------------------------------------------------------------------------
London Stock Exchange
(incl. SEAQ International) 404 423 366 386 383
- --------------------------------------------------------------------------------
NASDAQ (New York), ADR's 6 6 7 6 3
- --------------------------------------------------------------------------------
Other Stock Exchanges 11 1 0 1 1
- --------------------------------------------------------------------------------
Turnover data 1 993-96 have been adjusted for 10:1 stock split in ABB AB shares
effective as of April 21, 1997.
ABB AB shareholders
As of December 31, 1997, the total number of ABB AB shareholders was 170,125
(December 31, 1996: 74,737). About 55 percent of ABB AB's shares are owned by
institutional investors in Sweden. Non-Swedish shareholders own approximately
31.7 percent of the share capital (1996:34.9) and 23.3 percent of the votes
(1996: 24.8).
================================================================================
Ten largest ABB AB shareholders, December 31, 1997*
According to the Swedish Securities Register center, VPC AB
- --------------------------------------------------------------------------------
Number of % of voting % of capital
shares held rights stock
- --------------------------------------------------------------------------------
Incentive AB 117,786,470 16.9 12.6
- --------------------------------------------------------------------------------
Investor AB 62,118,530 8.9 6.6
- --------------------------------------------------------------------------------
Fourth National Pension
Insurance Fund 57,383,250 8.3 6.1
- --------------------------------------------------------------------------------
Swedish Staff Pension
Society (SPP) 37,759,520 3.7 4.0
- --------------------------------------------------------------------------------
Nordbanken funds 32,751,850 2.7 3.5
- --------------------------------------------------------------------------------
AMF Pension (insurance) 18,450,000 1.4 2.0
- --------------------------------------------------------------------------------
Foreningssparbanken funds 17,214,910 2.3 1.8
- --------------------------------------------------------------------------------
Trygg-Hansa Liv 16,786,078 1.8 1.8
- --------------------------------------------------------------------------------
Handelsbanken funds 15,722,254 2.0 1.7
- --------------------------------------------------------------------------------
Skandia (insurance) 14,514,340 1.6 1.5
- --------------------------------------------------------------------------------
/*/ including known changes after this date
================================================================================
Shareholders and shares held, by size of holding, December 31, 1997
- --------------------------------------------------------------------------------
Size of Number of Number of Percent of
holding shareholders shares held capital stock
- --------------------------------------------------------------------------------
1-500 120,706 14,684,413 1.57
- --------------------------------------------------------------------------------
501-1,000 20,404 17,008,766 1.81
- --------------------------------------------------------------------------------
1,001-10,000 26,723 76,328,750 8.14
- --------------------------------------------------------------------------------
10,001-100,000 1,883 47,276,436 5.04
- --------------------------------------------------------------------------------
100,001- 409 782,614,655 83.44
- --------------------------------------------------------------------------------
Total 170,125 937,913,020 100.00
- --------------------------------------------------------------------------------
================================================================================
Net exports (from Sweden) of ABB AB shares, 1993-1997, SKr millions
- --------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
- -3,433 1,470 1,968 4,145 3,222
- --------------------------------------------------------------------------------
71
<PAGE>
Trend of ABB AB share prices during 1997
During 1997, the price of ABB AB A-shares traded on the Stockholm Stock Exchange
increased by 22 percent, which meant that the shares developed less than the
general trend in Stockholm (Affarsvarlden Generalindex: +25%). In New York,
where ABB AB shares are traded in US$, the price trend was positive (+5%), but
below that of the NASDAQ Composite Index (+22%).
Price Trend for ABB AB B shares, Stockholm
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
(adjust for the split)
- --------------------------------------------------------------------------------------------------------------------
AFFV-Index
Year Month High Low AFFV-Index Rebased
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 Jan 67.0 84.5 1765.7 65.8
- --------------------------------------------------------------------------------------------------------------------
Feb 69.6 65.6 1885.4 69.5
- --------------------------------------------------------------------------------------------------------------------
Mar 69.6 67.1 1898.0 70.7
- --------------------------------------------------------------------------------------------------------------------
Apr 71.1 67.8 1933.0 72.0
- --------------------------------------------------------------------------------------------------------------------
May 70.5 68.4 1970.2 73.4
- --------------------------------------------------------------------------------------------------------------------
June 70.3 63.6 1981.5 73.8
- --------------------------------------------------------------------------------------------------------------------
July 70.9 65.8 1899.5 70.7
- --------------------------------------------------------------------------------------------------------------------
Aug 72.8 67.1 2004.4 74.6
- --------------------------------------------------------------------------------------------------------------------
Sep 71.7 69.4 2091.3 77.9
- --------------------------------------------------------------------------------------------------------------------
Oct 75.0 70.7 2139.2 79.7
- --------------------------------------------------------------------------------------------------------------------
Nov 78.2 73.8 2312.3 86.1
- --------------------------------------------------------------------------------------------------------------------
Dec 79.5 75.6 2402.9 89.5
- --------------------------------------------------------------------------------------------------------------------
1997 Jan 91.5 76.5 2572.0 95.8
- --------------------------------------------------------------------------------------------------------------------
Feb 93.4 83.9 2687.9 100.1
- --------------------------------------------------------------------------------------------------------------------
Mar 88.5 83.5 2783.4 103.6
- --------------------------------------------------------------------------------------------------------------------
Apr 95.0 82.5 2679.8 99.8
- --------------------------------------------------------------------------------------------------------------------
May 110.0 96.5 2835.7 105.8
- --------------------------------------------------------------------------------------------------------------------
Jun 114.0 102.5 3024.0 112.6
- --------------------------------------------------------------------------------------------------------------------
July 114.0 105.0 3192.2 118.9
- --------------------------------------------------------------------------------------------------------------------
Aug 126.0 105.5 3040.4 113.2
- --------------------------------------------------------------------------------------------------------------------
Sep 118.0 105.5 3246.3 120.9
- --------------------------------------------------------------------------------------------------------------------
Oct 111.0 82.0 2881.7 107.3
- --------------------------------------------------------------------------------------------------------------------
Nov 96.0 82.5 3023.7 112.8
- --------------------------------------------------------------------------------------------------------------------
Dec 97.5 85.0 2999.9 111.7
</TABLE>
Price Trend for ABB AB ADRs in the United States
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
(adjust for the split)
- --------------------------------------------------------------------------------------------------------------------
NASDAQ
ABB AB ADR ABB AB ADR NASDAQ Index
Year Month High Low COMPOSITION INDES Rebased
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 Jan 100.75 93.50 1059.79 97.13
- --------------------------------------------------------------------------------------------------------------------
Feb 103.50 94.50 1100.05 100.81
- --------------------------------------------------------------------------------------------------------------------
Mar 104.50 98.50 1101.40 100.94
- --------------------------------------------------------------------------------------------------------------------
Apr 104.75 100.75 1190.52 109.11
- --------------------------------------------------------------------------------------------------------------------
May 104.00 100.87 1243.43 113.95
- --------------------------------------------------------------------------------------------------------------------
Jun 106.75 102.13 1185.02 108.60
- --------------------------------------------------------------------------------------------------------------------
July 108.00 101.00 1124.92 103.09
- --------------------------------------------------------------------------------------------------------------------
Aug 109.38 102.63 1141.50 104.61
- --------------------------------------------------------------------------------------------------------------------
Sep 107.50 106.38 1226.89 112.44
- --------------------------------------------------------------------------------------------------------------------
Oct 113.50 108.75 1221.51 111.95
- --------------------------------------------------------------------------------------------------------------------
Nov 117.83 111.50 1292.61 118.46
- --------------------------------------------------------------------------------------------------------------------
Dec 116.50 110.50 1291.03 118.32
- --------------------------------------------------------------------------------------------------------------------
1997 Jan 128.00 111.25 1379.85 126.46
- --------------------------------------------------------------------------------------------------------------------
Feb 128.50 111.75 1309.00 119.96
- --------------------------------------------------------------------------------------------------------------------
Mar 118.38 108.25 1221.70 111.96
- --------------------------------------------------------------------------------------------------------------------
Apr 122.00 107.13 1260.76 115.54
- --------------------------------------------------------------------------------------------------------------------
May 142.88 120.88 1400.32 128.33
- --------------------------------------------------------------------------------------------------------------------
Jun 148.50 132.63 1442.07 132.16
- --------------------------------------------------------------------------------------------------------------------
July 147.63 133.38 1593.81 146.07
- --------------------------------------------------------------------------------------------------------------------
Aug 156.00 131.25 1587.32 145.47
- --------------------------------------------------------------------------------------------------------------------
Sep 151.38 139.94 1685.69 154.49
- --------------------------------------------------------------------------------------------------------------------
Oct 147.00 111.63 1593.61 146.05
- --------------------------------------------------------------------------------------------------------------------
Nov 124.00 110.00 1500.55 146.68
- --------------------------------------------------------------------------------------------------------------------
Dec 125.38 109.00 1570.35 143.92
</TABLE>
- --------------------------------------------------------------------------------
Per-share data/1/ A Shares B Shares
(in Swedish krona)
- --------------------------------------------------------------------------------
1997 1996 1997 1996
- --------------------------------------------------------------------------------
Net income 2.32/2/ 4.42 2.32/2/ 4.42
- --------------------------------------------------------------------------------
Dividend (1997 proposed) 2.10 1.75 2.10 1.75
- --------------------------------------------------------------------------------
Stockholders' equity 22.4 21.8 22.4 21.8
- --------------------------------------------------------------------------------
Price: - High 126.0 79.9 126.0 79.5
- --------------------------------------------------------------------------------
- Low 76.8 64.5 76.5 64.5
- --------------------------------------------------------------------------------
- Year-end 94.0 77.0 93.5 77.2
- --------------------------------------------------------------------------------
Par value 5 50 5 50
- --------------------------------------------------------------------------------
Vote per share 1 1 1/10 1/10
- --------------------------------------------------------------------------------
Key ratios/1/
- --------------------------------------------------------------------------------
Return on equity (%) 11.2 23.4 11.2 23.4
- --------------------------------------------------------------------------------
Direct yield (%) 2.2 2.3 2.2 2.3
- --------------------------------------------------------------------------------
Market-to-book (%) 420 353 417 354
- --------------------------------------------------------------------------------
P/E (price/net income) 40.5 17.4 40.3 17.5
- --------------------------------------------------------------------------------
Number of shares outstanding 668,197,570 66,819,757 269,715,450 26,971,545
- --------------------------------------------------------------------------------
% of total capital stock 71.2 71.2 28.8 28.8
- --------------------------------------------------------------------------------
% of voting rights 96.1 96.1 3.9 3.9
- --------------------------------------------------------------------------------
Number of shares fully diluted 668,197,570 66,819,757 269,715,450 26,971,545
- --------------------------------------------------------------------------------
Stock exchanges listing/3/ Stockholm Stockholm, Copenhagen,
London, NASDAQ (ADR)
- --------------------------------------------------------------------------------
/1/ Per-share data and key ratios are based on year-end figures and the number
of shares outstanding. Per-share data 1996 have been adjusted for 10:1
stock split in ABB AB shares effective as of April 21, 1997.
/2/ Excluding ABB AB's part of the restructuring charge in 1997, net income per
share was SKr 4.77.
/3/ On NASDAQ in the U.S., ABB AB B shares are traded as level-two sponsored
American Depositary Receipts (ADR). 1 ADR represents 10 B shares. ABB AB A
and B shares are traded on SEAQ International, London. ABB AB B shares are
traded on the "Freiverkehr" (third segment) in Munich.
ABB AB has no restriction as to share ownership. At the end of 1997, ABB AB's
market capitalization, based on outstanding shares, was approximately SKr 88.0
billion ($ 11.1 billion), making ABB AB the fourth-largest company in Sweden in
terms of market capitalization.
On April 3, 1997, the Annual General Meeting of ABB AB approved a 10:1 split of
the ABB AB A and B shares, thereby lowering the par value of the shares from SKr
50 to SKr 5. Each old share conferred the right to 10 new shares of the same
class. The total number of shares now amounts to 937,913,020. Trading in the new
shares started on April 21, 1997.
72
<PAGE>
ABB AB ANNUAL GENERAL MEETING
The Annual General Meeting of ABB AB will be held in the Aros Congress Center,
Munkgatan 7, Vasteras, Sweden at 10.00 a.m., Thursday, April 2, 1998.
At the Annual General Meeting, approval is required from the ABB AB
shareholders as to both the composition of the ABB Asea Brown Boveri Ltd Board
and its dividend policy.
For withholding tax reasons, there is no longer any direct connection between
the date of the Annual General Meeting and the date for dividend pay-out and ex-
dividend trading. In 1998, the dividend pay-out and ex-dividend trading will
take place as described in the following text.
NOTICE
Shareholders who wish to participate in the Meeting must notify the Board of
Directors of their intention to attend, not later than 12.00 noon, Monday, March
30, 1998. Written notification should be made to:
ABB AB, S-72160 Vasteras, Sweden. Notification may also be made by telephone
Int + 46-8-670 74 30, + 46-21-41 93 58, or by fax, Int + 46-8-613 65 65.
Shareholders must state their name, address, telephone number, Swedish personal
identity number (where applicable), and the number of shares held. Shareholders
should also indicate whether they plan to be present for lunch and participate
in the plant tour. ABB AB will confirm receipt of notification by sending an
admission card to shareholders not later than Tuesday, March 31, 1998. This card
should be shown when entering the premises for the meeting.
RIGHT TO PARTICIPATE
Only shareholders listed not later than March 23, 1998 in the share register
maintained by Vardepapperscentralen VPC AB (Swedish Securities Register Center)
are entitled to participate in the meeting. To be eligible to participate in the
meeting, shareholders who have transferred their shares to the trust department
of a bank, or to a private broker, must request that the shares be temporarily
registered in their own name in the VPC share register. Shareholders must advise
trustees of this request in ample time before March 23, 1998.
ADR HOLDERS
Registered holders of American Depositary Receipts representing ABB AB "B"
shares have previously been advised by Citibank, N.A., the depositary, of the
steps to be taken to comply with the requirements cited above if they wish to
participate in the Annual General Meeting in person or by proxy. If a holder has
not received these instructions, or desires additional information, the holder
should call the depositary at + 1-800-422-2066.
RECORD DATE OF DIVIDEND
Tuesday, April 7, 1998, is the final day for trading in shares carrying rights
to dividends. The Board of Directors has proposed Tuesday, April 14, 1998 as the
record date for payment of the dividend. If shareholders at the Annual General
Meeting approve this proposal, it is estimated that VPC will dispatch dividend
payments on Tuesday, April 21, 1998. To facilitate dividend payments,
shareholders should have a bank account which is linked to their VP securities
account.
CHANGE OF ADDRESS
VPC automatically performs address changes for individuals who have made the
customary definitive registration of their new address via the Swedish Post
Office, providing that the shareholder has informed his/her bank that his/her VP
account should be subject to this type of "SPAR" updating. This means that there
is no obligation to inform ABB AB or VPC of a change of address. If preferred,
it is possible to register a business address through a designated
account operating institute, instead of using a personal address.
To ensure that dividend payments, information, etc., are sent to the correct
address, legal entities should give notice of any change of address as soon as
possible.
73
<PAGE>
ABB AG ANNUAL REPORT 1997
ABB AG BOARD OF DIRECTORS AND AUDITORS
- --------------------------------------------------------------------------------
Board of Directors
- --------------------------------------------------------------------------------
As of December 31,1997
- --------------------------------------------------------------------------------
Chairman
- --------------------------------------------------------------------------------
Robert A. Jeker (born 1935)
- --------------------------------------------------------------------------------
Chairman: Batigroup, Messe Basel, Stratec, Swiss Steel
- --------------------------------------------------------------------------------
Vice Chairman: Georg Fischer
- --------------------------------------------------------------------------------
Board Member: ABB Asea Brown Boveri Ltd,
- --------------------------------------------------------------------------------
Neue Zurcher Zeitung
- --------------------------------------------------------------------------------
Former President: Credit Suisse
- --------------------------------------------------------------------------------
Elected 1986, term expiring 1999.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Deputy Chairman and President
- --------------------------------------------------------------------------------
Bernd H. Muller-Berghoff (born 1930)
- --------------------------------------------------------------------------------
Chairman: Fuchs Petrolub AG Oel + Chemie
- --------------------------------------------------------------------------------
Board Member: ABB Asea Brown Boveri Ltd,
- --------------------------------------------------------------------------------
Hannover Ruckversicherung
- --------------------------------------------------------------------------------
Elected 1987, term expiring 1999.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Gerhard Cromme (born 1943)
- --------------------------------------------------------------------------------
CEO: Fried. Krupp AG Hoesch-Krupp
- --------------------------------------------------------------------------------
Board Member: ABB Asea Brown Boveri Ltd, Allianz,
- --------------------------------------------------------------------------------
Suez Lyonnaise des Eaux, Veba, Volkswagen
- --------------------------------------------------------------------------------
Elected 1997, term expiring 2001.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Edwin Somm (born 1933)
- --------------------------------------------------------------------------------
Former CEO: ABB Switzerland
- --------------------------------------------------------------------------------
Chairman: The Association of Swiss Engineering
- --------------------------------------------------------------------------------
Employers, The Swiss Association of Machinery
- --------------------------------------------------------------------------------
Manufacturers
- --------------------------------------------------------------------------------
Board Member: ABB Asea Brown Boveri Ltd,
- --------------------------------------------------------------------------------
Georg Fischer, Swiss Steel
- --------------------------------------------------------------------------------
Elected 1997, term expiring 2001.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ABB AG's Statutory Auditors and Group Auditors
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
KPMG Klynveld Peat Marwick Goerdeler SA, Zurich
- --------------------------------------------------------------------------------
74
<PAGE>
THE BOARD OF DIRECTORS REPORT
ABB AG AND ASSOCIATED COMPANY
ABB AG's share of ABB Group's earnings before taxes and after minority interests
for 1997 was $409 million (1996: $939 million), a decrease of 56 percent. The
decrease is mainly due to the $866 million extraordinary restructuring charge
taken by the ABB Group in 1997. The average US$ exchange rate was up 17 percent
from SFr 1.23/US$ during 1996 to SFr 1.44/US$ in 1997. The year-end exchange
rate was up 7 percent from SFr 1.35/US$ at the close of 1996 to SFr 1.45/US$ at
December 31, 1997. After exchange rate changes, ABB AG's share of earnings
before taxes and after minority interests from the ABB Group decreased from SFr
1,156 million in 1996 to SFr 590 million in 1997. ABB AG's own contribution to
results before taxes from cash management activities amounted to SFr 25 million.
This is below the SFr 30 million in 1996 due to the repayment of SFr 463 million
to the shareholders on July 10, 1997. ABB AG's income before taxes, including
associated company, amounted to SFr 615 million (1996: 1,186 million) in 1997.
After taxes of SFr 183 million (1996: 403 million), net income amounted to SFr
432 million (1996: 783 million) for the year.
ABB AG's net income per Bearer share amounted to SFr 46.70 (1996: 85.40) and SFr
9.34 (1996: 17.08) per Registered share. Excluding ABB AG's portion of the
restructuring charge, net income per share increased 10 percent to SFr 93.70 per
Bearer share.
ABB AG, PARENT COMPANY
The dividend from ABB AG's shareholding in ABB Asea Brown Boveri Ltd amounted to
SFr 325 million in 1997 (1996: SFr 260 million). Interest income and income on
securities totaled SFr 30 million (1996: 46 million). Interest income and income
on securities divided by average cash and marketable securities of SFr 650
million amounts to a return of 4.6 percent. Total expenditures decreased to SFr
15 million (1996: 27 million). Net income increased 21 percent from the previous
year.
The proposed capital reduction via lowering of the nominal share value was
approved at the annual general meeting on April 3, 1997. This led to a repayment
of SFr 50 per bearer share and SFr 10 per registered share. A total of SFr 463
million was paid back to the shareholders on July 10, 1997.
For fiscal year 1997, ABB AG will receive a dividend of SFr 350 million from ABB
Asea Brown Boveri Ltd. The Board of Directors proposes that the dividend to
shareholders be increased to SFr 40 gross per Bearer share (1996: 38) and SFr 8
gross per registered share (1996: 7.60), a total of SFr 370 million (1996: 349).
BOARD OF DIRECTORS
Mr. Bernd H. Muller-Berghoff has announced his intention to resign from the
Board of Directors of ABB AG at the next Annual General Meeting on April 2, 1998
and decided not to stand for reelection to the Board of ABB Group. After serving
11 years on the ABB AG and ABB Group Boards, Mr. Bernd H. Muller-Berghoff has
rendered great and lasting services on behalf of the company and the Board
expresses its sincere gratitude and recognition for his valuable efforts. Mr.
Jurgen Dormann, CEO of Hoechst AG in Frankfurt, Germany will be proposed for
election to the Boards of ABB AG and the ABB Group.
75
<PAGE>
ABB AG IN BRIEF
<TABLE>
<CAPTION>
====================================================================================================================
ABB AG and associated company, five-year overview
(Swiss francs in millions)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
Share in ABB Group earnings before taxes/1/
and after minority interests 590 1,156 1,146 899 374
- --------------------------------------------------------------------------------------------------------------------
Parent Company's result before taxes
(excluding dividend from ABB) 25 30 50 -11 44
- --------------------------------------------------------------------------------------------------------------------
Income before taxes/1/ 615 1,186 1,196 888 418
- --------------------------------------------------------------------------------------------------------------------
Net income 432 783 822 505 88
- --------------------------------------------------------------------------------------------------------------------
Stockholders' equity 4,140 4,640 3,604 3,096 3,079
- --------------------------------------------------------------------------------------------------------------------
/1/ 1993-1996 restated to reflect changes in ABB Group accounts concerning
"Current taxes, other", see page 46.
<CAPTION>
====================================================================================================================
<S> <C> <C> <C> <C> <C>
Per-share data (SFr)
- --------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
Net income per:
- --------------------------------------------------------------------------------------------------------------------
- - Bearer share 46.70/1/ 85.40 90.20/2/ 57.30 10.00
- --------------------------------------------------------------------------------------------------------------------
- - Registered share 9.34/1/ 17.08 18.04/2/ 11.46 2.00
- --------------------------------------------------------------------------------------------------------------------
Stockholders' equity per:
- --------------------------------------------------------------------------------------------------------------------
- - Bearer share/3/ 447 506 395 351 349
- --------------------------------------------------------------------------------------------------------------------
- - Registered share/3/ 89 101 79 70 70
- --------------------------------------------------------------------------------------------------------------------
Dividend (1997 proposed) per:
- --------------------------------------------------------------------------------------------------------------------
- - Bearer share 40.00 38.00 30.00 20.00 18.00
- --------------------------------------------------------------------------------------------------------------------
- - Registered share 8.00 7.60 6.00 4.00 3.60
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Excluding ABB AG's part of the ABB Group restructuring charge in 1997, net
income per Bearer share was SFr 93.70 and per Registered share SFr 18.74.
/2/ Excluding ABB AG's part of the gain from the transfer of the ABB Group
transportation activities in 1995, net income per Bearer share was SFr 73.95
and per Registered share SFr 14.79.
/3/ Shareholders' equity per share reduced through lowering of the par value.
This led to a repayment of SFr 50 per bearer share and SFr 10 per
registered share. A total of SFr 463 million was paid back to the
shareholders on July 10, 1997.
<TABLE>
<CAPTION>
====================================================================================================================
Key ratios
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------
Pay-out ratio (%) 85.7 44.5 33.3 34.9 180.3
- --------------------------------------------------------------------------------------------------------------------
Direct yield (%), Bearer share 2.2 2.3 2.2 1.8 1.7
- --------------------------------------------------------------------------------------------------------------------
Market-to-book (%) 410 328 338 319 309
- --------------------------------------------------------------------------------------------------------------------
P/E (price/net income), Bearer share 39.3 19.5 14.9 19.7 108.6
- --------------------------------------------------------------------------------------------------------------------
See "Definitions and key ratios," page 80.
</TABLE>
76
<PAGE>
ABB AG INCOME STATEMENTS
<TABLE>
<CAPTION>
====================================================================================================================
ABB AG and ABB AG,
associated company/1/ parent company
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31 (Swiss francs in millions) 1997 1996/2/ 1997 1996
- --------------------------------------------------------------------------------------------------------------------
Share in ABB Group earnings before taxes and after minority interests 590 1,156 - -
- --------------------------------------------------------------------------------------------------------------------
Dividend income - - 325 260
- --------------------------------------------------------------------------------------------------------------------
Other operating income 5 6 5 6
- --------------------------------------------------------------------------------------------------------------------
Administrative expenses -4 -12 -4 -12
- --------------------------------------------------------------------------------------------------------------------
Interest income 30 46 30 46
- --------------------------------------------------------------------------------------------------------------------
Interest expense -6 -10 -6 -10
- --------------------------------------------------------------------------------------------------------------------
Income before taxes 615 1,186 350 290
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Taxes -183/3/ -403/3/ -5 -5
- --------------------------------------------------------------------------------------------------------------------
Net income 432 783 345 285
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ ABB AG's share in the ABB Group results recognized according to the equity
method.
/2/ 1996 restated to reflect changes in ABB Group accounts concerning "Current
taxes, other", see page 46.
/3/ Contains share in ABB Group taxes.
ABB AG STATEMENT OF CASH FLOWS/1/
<TABLE>
<CAPTION>
====================================================================================================================
<S> <C> <C>
Year ended December 31 (Swiss francs in millions) 1997 1996
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities
- --------------------------------------------------------------------------------------------------------------------
Income before taxes 350 290
- --------------------------------------------------------------------------------------------------------------------
Changes in operating assets and liabilities:
- --------------------------------------------------------------------------------------------------------------------
Changes in other current receivables 5 6
- --------------------------------------------------------------------------------------------------------------------
Changes in other current liabilities (excl. taxes due) -3 0
- --------------------------------------------------------------------------------------------------------------------
352 296
- --------------------------------------------------------------------------------------------------------------------
Taxes paid -9 -4
- --------------------------------------------------------------------------------------------------------------------
Net cash from operating activities 343 292
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
- --------------------------------------------------------------------------------------------------------------------
Changes in financing receivables 148 -1
- --------------------------------------------------------------------------------------------------------------------
Net cash from investing activities 148 -1
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
- --------------------------------------------------------------------------------------------------------------------
Dividend paid -348 -274
- --------------------------------------------------------------------------------------------------------------------
Placement of remaining shares in ABB employee share ownership program 0 22
- --------------------------------------------------------------------------------------------------------------------
Repayment of loan 1987-99 -148 0
- --------------------------------------------------------------------------------------------------------------------
Repayment of share capital through reduction of par value -463 0
- --------------------------------------------------------------------------------------------------------------------
Changes in other financing liabilities -3 6
- --------------------------------------------------------------------------------------------------------------------
Net cash from financing activities -962 -246
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Net change in cash and marketable securities -471 45
- --------------------------------------------------------------------------------------------------------------------
Cash and marketable securities - beginning of year 921 876
- --------------------------------------------------------------------------------------------------------------------
Cash and marketable securities - end of year 450 921
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Cash flows for ABB AG and associated company and for the parent company are
identical.
77
<PAGE>
ABB AG BALANCE SHEETS
<TABLE>
<CAPTION>
====================================================================================================================
ABB AG and ABB AG,
associated company/1/ parent company
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
December 31 (Swiss francs in millions) Notes 1997 1996 1997 1996
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------------------------------------------
Current Assets
- --------------------------------------------------------------------------------------------------------------------
Cash and marketable securities 1 450 921 450 921
- --------------------------------------------------------------------------------------------------------------------
Other current receivables 13 18 13 18
- --------------------------------------------------------------------------------------------------------------------
Total Current Assets 463 939 463 939
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Fixed Assets
- --------------------------------------------------------------------------------------------------------------------
Financing receivables 6 153 6 153
- --------------------------------------------------------------------------------------------------------------------
Shares and participations 2 3,839 3,975 2,363 2,363
- --------------------------------------------------------------------------------------------------------------------
Intangible assets 0 0 0 0
- --------------------------------------------------------------------------------------------------------------------
Land and buildings 3 0 0 0 0
- --------------------------------------------------------------------------------------------------------------------
Total Fixed Assets 3,845 4,128 2,369 2,516
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Total Assets 4,308 5,067 2,832 3,455
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
====================================================================================================================
<S> <C> <C> <C> <C> <C>
Liabilities and equity
- --------------------------------------------------------------------------------------------------------------------
Current Liabilities
- --------------------------------------------------------------------------------------------------------------------
Accrued expenses 2 3 2 3
- --------------------------------------------------------------------------------------------------------------------
Other current liabilities 16 22 16 22
- --------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 18 25 18 25
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Medium- and long-term loans 4 150 402 150 402
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
- --------------------------------------------------------------------------------------------------------------------
Share capital 5 463 925 463 925
- --------------------------------------------------------------------------------------------------------------------
Reserved shares 6 0 -8 0 -8
- --------------------------------------------------------------------------------------------------------------------
Restricted reserves 3,087 2,718 1,698 1,604
- --------------------------------------------------------------------------------------------------------------------
Retained earnings 158 222 158 222
- --------------------------------------------------------------------------------------------------------------------
Net income 432 783 345 285
- --------------------------------------------------------------------------------------------------------------------
Total Stockholders' Equity 8 4,140 4,640 2,664 3,028
- --------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------------------------
Total Liabilities and Equity 4,308 5,067 2,832 3,455
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
/1/ ABB AG's investment in the ABB Group accounted according to the equity
method
78
<PAGE>
ABB AG NOTES TO THE FINANCIAL STATEMENTS
(SWISS FRANCS IN MILLIONS)
ABB AG, parent company
Note 1/*/, Cash and marketable securities
==================================================
1997 1996
- --------------------------------------------------
Bank balances and short-term
deposits 39 58
- --------------------------------------------------
Other fixed-time deposits/1/ 192 545
- --------------------------------------------------
Bonds 214 302
- --------------------------------------------------
Shares 5 16
- --------------------------------------------------
Total 450 921
- --------------------------------------------------
Of which funds invested in
affiliated companies 91 123
- --------------------------------------------------
The carrying amounts approximate fair values.
/1/ At December 31, 1997, the Company had two
interest rate swap contracts with an obligation to
pay floating interest rate and the right to
receive interest at a fixed rate:
Notional amount Expiry date
SFr 47 million January 15, 1999
SFr 12 million June 28, 1999
The positive fair value of these interest rate
swaps of approximately SFr 2 million has not
been reflected in the income statement.
Note 2, Shares and participations
==================================================
1997 1996
- --------------------------------------------------
ABB Asea Brown Boveri, Zurich/1/ 2,354 2,354
- --------------------------------------------------
Other participations 9 9
- --------------------------------------------------
Total 2,363 2,363
- --------------------------------------------------
/1/ Share of participation: 50%
Number of shares: 1,384,000 (ABB total: 2,768,000 shares)
Par value: SFr 1,384 million (ABB total: SFr 2,768 million)
Note 3, Land and buildings
==================================================
1997 1996
- --------------------------------------------------
Insured value (fire) 3 3
- --------------------------------------------------
Note 4/*/, Medium- and long-term loans
==================================================
1997 1996
- --------------------------------------------------
3 1/2% loan 1987-99 (ex option)
early repayment as per July 6, 1997 - 148
- --------------------------------------------------
3 1/2% loan 1989-2000 (ex option)
matures Dec. 12, 2000, earliest
date for calling in (at par) is
Dec. 12, 1998 150 150
- --------------------------------------------------
4% convertible loan 1990-98
was called for early repayment
as per March 24, 1997 - 104
- --------------------------------------------------
Total 150 402
- --------------------------------------------------
Weighted average interest rate 3.50% 3.63%
- --------------------------------------------------
Each SFr 7,500 par value of the 4% convertible
loan 1990-98 was converted into 5 bearer shares of
SFr 100 par value and 5 registered shares of SFr
20 par value with cash payment of SFr 56 on or
before March 24, 1997.
Note 5/*/, Share capital
==================================================
1997 1996
- --------------------------------------------------
8,159,470 bearer shares,
SFr 50 par value (1996: SFr 100) 408 816
- --------------------------------------------------
5,470,750 registered shares,
SFr 10 par value (1996: SFr 20) 55 109
- --------------------------------------------------
Total 463 925
- --------------------------------------------------
The proposed capital reduction via lowering of the
nominal share value was approved at the annual
general meeting on April 3, 1997. This led to a
repayment of SFr 50 per bearer share and SFr 10
per registered share. A total of SFr 463 million
was paid back to the shareholders on July 10,
1997.
- --------------------------------------------------
Note 6*, Share capital - reserved shares
==================================================
1997 1996
- --------------------------------------------------
For the 4% convertible loan 1990-98:
1996: 69,790 bearer and
registered shares each - 8
- --------------------------------------------------
Total - 8
- --------------------------------------------------
These shares have not been entitled to dividends
for 1996, The 4% convertible loan 1990-1998 was
called for early repayment as per March 24, 1997.
In 1997 the conversion rights for the remaining
69,790 bearer and registered shares were
exercised.
Note 7/*/, Guarantee commitments
==================================================
1997 1996
- --------------------------------------------------
Total 0 0
- --------------------------------------------------
/*/Notes apply to both parent company and ABB AG and
associated company
ABB AG and associated company
Note 8, Stockholders' equity
<TABLE>
<CAPTION>
========================================================================================================================
Share Reserved Total Restricted Retained Net Total
capital shares reserves earnings income
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Opening balance sheet 925 -8 917 3,216 507 4,640
- ------------------------------------------------------------------------------------------------------------------------
Dividends -349 -349
- ------------------------------------------------------------------------------------------------------------------------
Placement of shares (conversions) 8 8 94 102
- ------------------------------------------------------------------------------------------------------------------------
Capital reduction -462 -462 -462
- ------------------------------------------------------------------------------------------------------------------------
Translation differences and other -223 -223
- ------------------------------------------------------------------------------------------------------------------------
Net income 1997 432 432
- ------------------------------------------------------------------------------------------------------------------------
Closing balance sheet 463 0 463 3,087 158 432 4,140
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
79
<PAGE>
ABB AG Principles of Accounting/
Definitions and Key Ratios
Principles of accounting
1 Principles of accounting for associated company
The equity method is used in accounting for the interest of ABB AG in the ABB
Group. Following the equity method, ABB AG reports its share in the ABB
Group's earnings and stockholders' equity only and not a full consolidation.
ABB Group's consolidated accounts are presented in accordance with
International Accounting Standards (IAS).
2 Cash and Marketable Securities
Bank balances and fixed-term deposits of ABB AG are stated at face value.
Fixed-term deposits in foreign currencies are translated at the exchange rates
on the balance sheet date. Securities are valued at market price. Gains and
losses are included in interest income on the income statement.
3 Foreign currencies
ABB AG's share of ABB Group's earnings is based on the average SFr/US$
exchange rate and ABB AG's share of ABB Group's stockholders' equity is based
on the year-end SFr/US$ exchange rate. The average SFr/US$ rate during 1997
was SFr 1.44/US$ (1996: SFr 1.23/US$), while the year-end 1997 SFr/US$ rate
was SFr 1.45/US$ (December 31, 1996: SFr 1.35/US$).
Definitions and key ratios
1 Earnings per share
Earnings per share are calculated in accordance with the equity accounting
method considering ABB AG's share in ABB Group net income plus ABB AG's own
net income.
Earnings per share are calculated on the basis of the number of shares
outstanding at yearend.
2 Stockholders' equity per share
Stockholders' equity per share is calculated on total stockholders' equity in
ABB AG and associated company balance sheet, divided by the number of shares
outstanding at yearend.
3 Market capitalization of ABB AG
The market capitalization of ABB AG is calculated on the number of shares
outstanding at yearend.
80
<PAGE>
PROPOSAL OF THE BOARD OF DIRECTORS FOR
THE APPROPRIATION OF AVAILABLE EARNINGS OF ABB AG
<TABLE>
========================================================================================================
<S> <C> <C>
(Swiss francs in millions) 1997 1996
- --------------------------------------------------------------------------------------------------------
Profit brought forward from previous year 158 222
- --------------------------------------------------------------------------------------------------------
Net income for the year 345 285
- --------------------------------------------------------------------------------------------------------
Balance sheet profit available to the General Meeting 503 507
- --------------------------------------------------------------------------------------------------------
Dividend of 80% on the share capital of SFr 462,681,000
(1996: 38% on SFr 916,987,200) entitled to dividend 370 349
- --------------------------------------------------------------------------------------------------------
To be carried forward to new account 133 158
- --------------------------------------------------------------------------------------------------------
If this proposal is accepted, the following dividends will be paid from April 21,1998:
- --------------------------------------------------------------------------------------------------------
On bearer shares with a par value of SFr 50:
- --------------------------------------------------------------------------------------------------------
- - against presentation of coupon No. 6 SFr 40.00
- --------------------------------------------------------------------------------------------------------
- - less 35% withholding tax SFr 14.00
- --------------------------------------------------------------------------------------------------------
Net SFr 26.00
- --------------------------------------------------------------------------------------------------------
On registered shares with a par value of SFr 10:
- --------------------------------------------------------------------------------------------------------
- - remittance to shareholders of record on April 21,1998 SFr 8.00
- --------------------------------------------------------------------------------------------------------
- - less 35% withholding tax SFr 2.80
- --------------------------------------------------------------------------------------------------------
Net SFr 5.20
- --------------------------------------------------------------------------------------------------------
Baden, February 25, 1998
</TABLE>
/s/ Robert A. Jeker /s/ Bernd H. Muller-Berghoff
Robert A. Jeker Bernd H. Muller-Berghoff
(Chairman) (Deputy Chairman)
Auditors' Report
Report of the statutory and group auditors to the general meeting on April 2,
1998 of ABB AG, Baden
As statutory and group auditors we have audited the accounting records and the
financial statements (balance sheet, income statement, statement of cash flow
and notes) of the parent company (ABB AG, parent company) and the group (ABB AG
and associated company) for the year ended December 31, 1997. The prior year
comparative figures shown in the parent company and group financial statements
were audited by other auditors.
These parent company and group financial statements are the responsibility of
the Board of Directors. Our responsibility is to express an opinion on these
parent company and group financial statements based on our audit. We confirm
that we meet the legal requirements concerning professional qualification and
independence.
Our audit was conducted in accordance with auditing standards promulgated by the
profession, which require that an audit be planned and performed to obtain
reasonable assurance about whether the financial statements are free from
material misstatement. We have examined on a test basis evidence supporting the
amounts and disclosures in the parent company and group financial statements. We
have also assessed the accounting principles used, significant estimates made
and the overall group financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
ABB AG, parent company
In our opinion, the accounting records and parent company financial statements
and the proposed appropriation of available earnings comply with the law and
the company's articles of incorporation.
We recommend that the parent company financial statements submitted to you be
approved.
ABB AG and associated company
In our opinion, the group financial statements give a true and fair view of the
financial position, the result of operations and the cash flows in accordance
with the the International Accounting Standards (IAS), and they comply with the
law as well as the accounting principles prescribed by the Listing Rules of the
Swiss Exchange.
We recommend that the group financial statements submitted to you be approved.
KPMG Klynveld Peat Marwick Goerdeler SA
B.A. Mathers B.J. De Blanc
Auditors in Charge
Zurich, February 25, 1998
81
<PAGE>
ABB AG INVESTOR INFORMATION
Dividend policy and dividend
ABB AG's principal source of revenue is dividend income on its holding of shares
in ABB Asea Brown Boveri Ltd. The Board of Directors' policy is to distribute
the full dividend received from ABB Asea Brown Boveri Ltd to its shareholders.
For the fiscal year 1997, ABB AG will receive a dividend of SFr 350 million from
ABB (1996: 325 million). The Board of Directors of ABB AG is proposing a
dividend for 1997 of SFr 40 gross per bearer share (1996: 38) and SFr 8 gross
per registered share (1996: 7.60), a total dividend for distribution of SFr 370
million (1996: 349 million). This corresponds to the full dividend received from
ABB Asea Brown Boveri Ltd as well as ABB AG's own result for 1997.
================================================================================
ABB AG shareholder Number of Percent of Percent of
shareholders share capital votes
- --------------------------------------------------------------------------------
Bearer shares
(SFr 50 par value; 1 vote) 37,000/1/ 88.2 59.9
- --------------------------------------------------------------------------------
Registered shares
(SFr 10 par value; 1 vote) 4,709 11.8 40.1
- --------------------------------------------------------------------------------
- - Private persons 4,477 1.4
- --------------------------------------------------------------------------------
- - Banks, finance companies 98 3.2
- --------------------------------------------------------------------------------
- - Insurance companies, pension funds 56 1.3
- --------------------------------------------------------------------------------
- - Industry, commerce,
services, holding companies 49 5.6
- --------------------------------------------------------------------------------
- - Non-provident foundations 21 0.2
- --------------------------------------------------------------------------------
- - Public corporations 8 0.1
- --------------------------------------------------------------------------------
/1/ Estimate
The largest shareholder known to the Company is Technova AG, Glarus. At December
31, 1997, this company together with companies linked to it held 1,895,665
registered shares, which corresponds to 14% of total voting rights.
To the best of the Company's knowledge, no further shareholder holds 5 percent
or more of total voting rights.
Trading volumes ABB AG shares 1993-1997 (SFr million)
================================================================================
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------
Swiss stock exchanges 28,224 16,910 13,839 12,759 10,933
- --------------------------------------------------------------------------------
SEAQ International, London 8,220 5,656 7,460 9,355 6,067
- --------------------------------------------------------------------------------
<PAGE>
- ------------------------------------------------------------------------------
Per-share data/1/ Bearer shares Registered shares
(in Swiss francs)
- ------------------------------------------------------------------------------
1997 1996 1997 1996
- ------------------------------------------------------------------------------
Net income 46.70/2/ 85.40 9.34/2/ 17.08
- ------------------------------------------------------------------------------
Dividend (1997 proposed) 40.00 38.00 8.00 7.60
- ------------------------------------------------------------------------------
Stockholders' equity 447 506 89 101
- ------------------------------------------------------------------------------
Price: - High 2,448 1,682 487 331
- ------------------------------------------------------------------------------
- Low 1,605 1,350 307 264
- ------------------------------------------------------------------------------
- Year end 1,835 1,665 369 324
- ------------------------------------------------------------------------------
Par value 50/*/ 100 10/*/ 20
- ------------------------------------------------------------------------------
Vote per share 1 1 1 1
- ------------------------------------------------------------------------------
KEY RATIOS/1/
- ------------------------------------------------------------------------------
Return on equity (%) 9.8 19.0 9.8 19.0
- ------------------------------------------------------------------------------
Direct yield (%) 2.2 2.3 2.2 2.3
- ------------------------------------------------------------------------------
Market-to-book (%) 410 329 412 320
- ------------------------------------------------------------------------------
P/E (price/net income) 39.3 19.5 39.5 19.0
- ------------------------------------------------------------------------------
Number of shares outstanding/3/ 8,159,470 8,089,680 5,470,750 5,400,960
- ------------------------------------------------------------------------------
% of total capital stock 88.2 88.2 11.8 11.8
- ------------------------------------------------------------------------------
% of voting rights 59.9 60.0 40.1 40.0
- -------------------------------------------------------------------------------
Number of shares fully diluted 8,159,470 8,159,470 5,470,750 5,470,750
- -------------------------------------------------------------------------------
Stock exchanges listing/4/ Swiss Exchange, Swiss Exchange
Frankfurt, Vienna
- -------------------------------------------------------------------------------
/1/ Per-share data and key ratios are based on year-end figures and the number
of shares outstanding.
/2/ Excluding ABB AG's part of the restructuring charge in 1997, net income per
Bearer share was SFr 93.70 and per Registered share SFr 18.74.
/3/ Bearer and registered shares entitled to dividend. The number of shares
outstanding increased in the first quarter of 1997 due to the conversion of
the 1990-1998 4% convertible loan. This resulted in an additional 69,790
bearer shares and 69,790 registered shares. The convertible bond issue was
called for early repayment on March 24, 1997.
/4/ In addition, ABB AG bearer shares are traded as level-one sponsored American
Depositary Receipts (ADR) in the U.S. 10 ADRs represent 1 bearer share. ABB
AG bearer shares are traded on SEAQ International, London and on the
"Freiverkehr" (third segment) in Munich.
ABB AG has no restriction as to share ownership, with the exception that no
single shareholder or group of shareholders can be recorded in the share
register with more than 8.7% of the registered shares issued.
At the end of 1997, ABB AG's market capitalization, based on outstanding
shares, was approximately SFr 17.0 billion ($ 11.7 billion), making ABB AG the
ninth-largest company in Switzerland in terms of market capitalization.
/*/ The capital reduction via lowering of the nominal share value was approved
at the annual general meeting on April 3, 1997. This led to a repayment of SFr
50 per bearer share and SFr 10 per registered share. A total of SFr 463 million
was paid back to the shareholders on July 10, 1997.
Trend of ABB AG share prices during 1997
During 1997, the price of ABB AG Bearer shares traded on the Swiss Stock
Exchange increased by 10 percent, which meant that the shares developed less
than the general trend in Zurich (Swiss Performance Index: + 55%). In New York,
where ABB AG shares are traded in US$, the price trend was positive (+ 2%), but
below that of the NASDAQ Composite Index (+ 22%).
Price Trend for ABB AG Bearer shares, Zurich
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
PRICE TREND FOR ABB AG BEARER SHARES
- --------------------------------------------------------------------------------------------------------------------
ABB AG Bearer Swiss Perf. SSHI-Index
Year Month High Low Index Rebased
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 Jan 1410 1340 2122.3 1375
- --------------------------------------------------------------------------------------------------------------------
Feb 1475 1383 2177.7 1411
- --------------------------------------------------------------------------------------------------------------------
Mar 1475 1402 2325.5 1507
- --------------------------------------------------------------------------------------------------------------------
Apr 1530 1422 2349.8 1522
- --------------------------------------------------------------------------------------------------------------------
May 1526 1472 2299.3 1490
- --------------------------------------------------------------------------------------------------------------------
June 1562 1492 2407.0 1559
- --------------------------------------------------------------------------------------------------------------------
July 1555 1406 2252.0 1459
- --------------------------------------------------------------------------------------------------------------------
Aug 1500 1418 2343.0 1518
- --------------------------------------------------------------------------------------------------------------------
Sep 1534 1467 2394.0 1551
- --------------------------------------------------------------------------------------------------------------------
Oct 1588 1546 2394.1 1551
- --------------------------------------------------------------------------------------------------------------------
Nov 1650 1588 2492.2 1615
- --------------------------------------------------------------------------------------------------------------------
Dec 1671 1807 2512.0 1628
- --------------------------------------------------------------------------------------------------------------------
1997 Jan 1820 1546 2728.3 1788
- --------------------------------------------------------------------------------------------------------------------
Feb 1845 1676 2851.8 1848
- --------------------------------------------------------------------------------------------------------------------
Mar 1769 1670 2946.3 1909
- --------------------------------------------------------------------------------------------------------------------
Apr 1785 1667 3094.7 2005
- --------------------------------------------------------------------------------------------------------------------
May 2025 1795 3195.6 2070
- --------------------------------------------------------------------------------------------------------------------
Jun 2220 2006 3548.4 2299
- --------------------------------------------------------------------------------------------------------------------
July 2306 2075 3752.7 2431
- --------------------------------------------------------------------------------------------------------------------
Aug 2427 2135 3378.8 2189
- --------------------------------------------------------------------------------------------------------------------
Sep 2248 2072 3626.1 2349
- --------------------------------------------------------------------------------------------------------------------
Oct 2235 1680 3475.0 2251
- --------------------------------------------------------------------------------------------------------------------
Nov 1900 1677 3635.0 2355
- --------------------------------------------------------------------------------------------------------------------
Dec 1941 1752 3898.2 2526
</TABLE>
Bars indicate highest and lowest prices paid for shares each month (in Swiss
Francs). Swiss Performance Index (rebased)
Price Trend for JuneABB AG ADRs in the United States
10 ADR represent Juls 1 Bearer share
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
NASDAQ
ABB AG ADR ABB AG ADR NASDAQ INDEX
Year Month High Low COMPOSITION INDEX REBASED
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996 Jan 121.46 112.60 1059.79 117.03
- --------------------------------------------------------------------------------------------------------------------
Feb 124.27 114.81 1100.05 121.48
- --------------------------------------------------------------------------------------------------------------------
Mar 123.41 116.70 1101.40 121.62
- --------------------------------------------------------------------------------------------------------------------
Apr 123.75 117.37 1190.52 131.47
- --------------------------------------------------------------------------------------------------------------------
May 121.50 119.13 1243.43 137.31
- --------------------------------------------------------------------------------------------------------------------
Jun 124.00 118.25 1185.02 130.86
- --------------------------------------------------------------------------------------------------------------------
July 124.00 117.25 1124.92 124.22
- --------------------------------------------------------------------------------------------------------------------
Aug 124.50 119.00 1141.50 126.05
- --------------------------------------------------------------------------------------------------------------------
Sep 123.50 119.00 1226.89 135.48
- --------------------------------------------------------------------------------------------------------------------
Oct 125.00 122.50 1221.51 134.89
- --------------------------------------------------------------------------------------------------------------------
Nov 130.00 122.50 1292.81 142.74
- --------------------------------------------------------------------------------------------------------------------
Dec 125.00 121.25 1291.03 142.57
- --------------------------------------------------------------------------------------------------------------------
1997 Jan 127.00 119.00 1379.85 152.37
- --------------------------------------------------------------------------------------------------------------------
Feb 128.25 114.50 1309.00 144.55
- --------------------------------------------------------------------------------------------------------------------
Mar 119.50 113.25 1221.70 134.91
- --------------------------------------------------------------------------------------------------------------------
Apr 121.70 113.00 1260.76 138.22
- --------------------------------------------------------------------------------------------------------------------
May 142.80 121.75 1400.32 154.63
- --------------------------------------------------------------------------------------------------------------------
Jun 153.25 140.27 1442.07 159.24
- --------------------------------------------------------------------------------------------------------------------
July 157.35 139.00 1593.81 176.00
- --------------------------------------------------------------------------------------------------------------------
Aug 150.09 139.95 1587.32 175.28
- --------------------------------------------------------------------------------------------------------------------
Sep 149.28 143.02 1685.69 186.15
- --------------------------------------------------------------------------------------------------------------------
Oct 153.45 119.44 1593.51 175.98
- --------------------------------------------------------------------------------------------------------------------
Nov 133.05 119.74 1600.55 176.74
- --------------------------------------------------------------------------------------------------------------------
Dec 135.22 122.16 1570.35 173.41
</TABLE>
Bars indicate highest and lowest prices paid for ADRs each month
(in U.S. dollars). NASDAQ Composite Index (rebased)
83
<PAGE>
ABB AG ANNUAL GENERAL MEETING
The 1998 Annual General Meeting of ABB AG will be held on Thursday, April 2,
1998, at 3.30 p.m. in the "Tagerhard" sports center in Wettingen (near Zurich).
At the Annual General Meeting, ABB AG shareholders will be consulted on both the
composition of the ABB Asea Brown Boveri Ltd Board and its dividend policy.
For withholding tax reasons, there is no direct connection between the date of
the Annual General Meeting and the date for dividend pay-out and ex-dividend
trading. In 1998, the dividend pay-out and ex-dividend trading will be April 21.
ADMISSION CARDS
Holders of registered shares of ABB AG will receive their admission cards on
request using the reply form enclosed with the invitation.
Upon depositing their shares, holders of bearer shares can obtain their
admission cards up to March 26, 1998, from one of the following banks:
Swiss Bank Corporation, Zurich
Union Bank of Switzerland, Zurich
Credit Suisse First Boston, Zurich
Credit Suisse, Zurich
Zurcher Kantonalbank, Zurich
Aargauische Kantonalbank, Aarau
Neue Aargauer Bank, Baden
or, against confirmation of having deposited
their shares, directly from ABB AG, Share Office,
CH-5401 Baden.
The full text of the invitation in accordance with Art. 700 of the Swiss Code of
Obligations, was published in Schweizerisches Handelsamtsblatt on March 4, 1998.
84
<PAGE>
[LOGO] ABB
ABB ASEA BROWN BOVERI LTD
Investor Relations
P.O. Box 8131
CH-8050 Zurich
Switzerland
Phone +41 (0)1 317 7111
Telefax +41 (0)1 311 9817
Internet address:
http://www.abb.com
ABB ASEA BROWN BOVERI LTD
Corporate Communications
P.O. Box 8131
CH-8050 Zurich
Switzerland
Phone +41 (0)1 317 7334
Telefax +41 (0)1 311 7958
ABB AB
P.O. Box 7373
S-10391 Stockholm
Sweden
Phone +46 (0)8 613 6560
Telefax +46 (0)8 613 6565
ABB AG
P.O. Box
CH-5401 Baden
Switzerland
Phone +41 (0)56 205 7700
Telefax +41 (0)56 222 1026
ABB ENVIRONMENTAL AFFAIRS
V. Esplanaden 9a, 4 Fl
S-35231 Vaxjo
Sweden
Phone +46 (0)470 22 005
Telefax +46 (0)470 22 002
<PAGE>
Exhibit (g)(2)
<PAGE>
REGISTER OF COMMERCE OF CANTON ZURICH - MAIN REGISTER
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Nr. of Company Legal Name Entry Cancellation Transfer from Transfer to Pages
3.002.023.002 Joint Stock Company 04.01.1988 3.002.023.002/a 1
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
All entries
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
En Ca Company Ref Domicile
- ---------------------------------------------------------------------------------------------------------------------------------
1 ABB Asea Brown Boveri Ltd 1 Zurich
1 (ABB Asea Brown Boveri AG) (ABB Asea Brown Boveri SA)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Ref Share capital (Fr) Paid-up Share denomination Ref Company Address
- ---------------------------------------------------------------------------------------------------------------------------------
1 Fr. 2'380'000'000.-- 1 Affolternstrasse
4 8050 Zurich
22 Fr. 2'768'000'000.-- Fr. 2'768'000'000.-- 2'768'000'000.-- Registered Shares of Fr. 1'000.--
- ----------------------------------------------------------------------------------------------------
Ref PC capital (Fr) Paid-up Participation certificates
- ----------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
En Ca Objects of Company, Remarks Ref Date of Statutes
- ---------------------------------------------------------------------------------------------------------------------------------
1 Holdings and adminstration of participations as well as financing of any nature in the country and 1 21.12.1989
abroad on own account and on account of third parties, in particular in the field of electrotechnics 20 04.12.1995
and electronics; can acquire, mortgage and alienate real estate. 22 29.12.1995
1 The extracts transferred from a previous registration card does not include items deleted before 23 29.02.1996
transfer nor possible previous dates of statutes, or Journal and SHAB references. These 28 03.04.1997
registrations can be inspected on the registration card mentioned in the field "Transfer from". 28 30.04.1997
22 The transferability of the registered shares is restricted in accordance with the statutes. 31 02.04.1998
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
En Ca Contrib. in kind, take over of assets and liabilities, special benefits, bonus certificates Ref Official Publication
- ---------------------------------------------------------------------------------------------------------------------------------
1 Has taken over participations of ASEA AB as well as group receivable in accordance with 1 SHAB
agreement for transfer of assets and liabilities dated 4.1.1988, and appertaining list at a
price of Fr. 1'379'875'998.--
1 Contribution in kind: Participation of the Brown Boveri Group, with appertaining loans as well
as fixed date deposits and securities with total value (book value) of Fr. 2'222'900'000.--
according to agreement dated 5.1.1988 and appertaining list at a price of Fr. 1'645'900'000.--
of which Fr. 800'000'000.-- will be considered for the increase of the share capital.
15 Merger: The company takes over ABB Beteiligungen AG, in Zurich, by way of merger. In
accordance with the merger agreement of 13.12.1994 and the merger balance sheet of 30.09.1994
assets in the amount of Fr. 73'440'024.53 and liabilities in the amount of Fr. 62'038'722.50
are being transferred by operation of late to the company, which already owns all shares of
the non-surviving company. Thereby all said shares are cancelled and the share capital of the
surviving company remains unchanged.
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
En Ca Branch Office En Ca Branch Office En Ca Branch Office En Ca Branch Office
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Sign Ref Journal Nr. Journal Date SHAB SHAB-Date Page Sign Ref Journal Nr. Journal Date SHAB SHAB-Date Page
- ---------------------------------------------------------------------------------------------------------------------------------
SR 0 (omission) (omission) CA 16 5593 14.03.1995 55 20.03.1995 1531
TEA 1 3968 25.02.1991 46 07.03.1991 974 AS 17 19601 21.09.1995 187 27.09.1995 5331
DE 2 10048 23.05.1991 105 04.06.1991 2403 FI 18 21167 11.10.1995 201 17.10.1995 5705
ZU 3 20373 30.10.1991 217 08.11.1991 4795 CA 19 25236 05.12.1995 240 11.12.1995 6721
RO 4 22648 04.12.1991 242 13.12.1991 5360 ER 20 25909 13.12.1995 246 19.12.1995 6881
NA 5 8647 20.05.1992 105 03.06.1992 2545 RR 21 27081 28.12.1995 3 05.01.1996 57
NA 6 9976 15.06.1992 121 26.06.1992 2953 ER 22 228 08.01.1996 8 12.01.1996 223
LO 7 334 22.02.1993 44 04.03.1993 1069 SP 23 7227 03.04.1996 70 11.04.1996 2033
NA 8 8588 14.05.1993 105 03.06.1993 2845 HO 24 14077 01.07.1996 129 05.07.1996 4075
NA 9 11191 22.06.1993 128 06.07.1993 3501 HO 25 15569 18.07.1996 142 24.07.1996 4439
GF 10 18598 17.09.1993 191 01.10.1993 5137 HO 26 25480 25.11.1996 233 29.11.1996 7371
RR 11 27843 29.12.1993 4 06.01.1994 89 HO 27 B 544 10.01.1997 B 9 16.01.1997 285
PA 12 5475 17.03.1994 59 24.03.1999 1597 GF 28 9608 05.05.1997 88 12.05.1997 3163
CC 13 19700 26.09.1994 191 03.10.1994 5445 LO 293 23941 20.10.1998 205 24.10.1997 7745
GF 14 27070 23.12.1994 254 30.12.1994 7153 GI 0 5791 10.03.1998 51 16.03.1998 1815
TR 15 27434 27.12.1994 1 03.01.1995 4 BO 31 8018 07.04.1998 71 15.04.1998 2511
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Abbreviations C - Chairman of BoD BoD - Board of Directors GM - General Manager SS - Sole Signature
VC - Vice Chairman of BoD Liq - Liquidator RT - Restricted to JS - Joint Signature
MD - Managing Director EVP - Executive Vice President HO - Head Office SP - Sole Procura
M - Member of BoD SVP - Senior Vice President BR - Branch JP - Joint Procura
S - Secretary VP - Vice President AS - Authority to Sign Dep - Deputy
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
En Mod Ca Personal data Function Nature of signature power
- ---------------------------------------------------------------------------------------------------------------------------------
1 2 [Text Intentionally Stricken.] G
1 5 [Text Intentionally Stricken.]
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
REGISTER OF COMMERCE OF CANTON ZURICH - MAIN REGISTER
- -----------------------------------------------------------------------------------------------------------------------------------
3.002.023.002 ABB ASEA BROWN LTD ZURICH 2
- -----------------------------------------------------------------------------------------------------------------------------------
ALL ENTRIES
- -----------------------------------------------------------------------------------------------------------------------------------
EN MOD CA PERSONAL DATA FUNCTION NATURE OF SIGNATURE POWER
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 9m [Text Intentionally Stricken]
1 9m [Text Intentionally Stricken]
1 9m [Text Intentionally Stricken]
1 8 [Text Intentionally Stricken]
1 2m [Text Intentionally Stricken]
1 8 [Text Intentionally Stricken]
1 9 [Text Intentionally Stricken]
1 23m [Text Intentionally Stricken]
1 6 [Text Intentionally Stricken]
1 30 [Text Intentionally Stricken]
1 6 [Text Intentionally Stricken]
1 6 [Text Intentionally Stricken]
1 Carlson, Sune, Swedish nationality, in Zurich JS by two
1 11 [Text Intentionally Stricken]
1 9 [Text Intentionally Stricken]
1 En , Haas, Swedish nationality, in Mellon JS by two
1 Ericsson, Torres, Swedish nationality, in Zolliken JS by two
1 30 [Text Intentionally Stricken]
1 6 [Text Intentionally Stricken]
1 Hess, Beal, from Engelberg, in Obertoharbor JS by two
1 von Koerber, Eberhard, German nationality, in Zolliken JS by two
1 6 [Text Intentionally Stricken]
1 Lindahl, Goran Knot, Swedish nationality, in Zolliken JS by two
1 18 [Text Intentionally Stricken]
1 Olson, Arna, Swedish nationality, in Oberriaden JS by two
1 Ragaller, Klaus, Born Wellingen, in Wellingen JS by two
1 30 [Text Intentionally Stricken]
1 6 [Text Intentionally Stricken]
1 11m [Text Intentionally Stricken]
1 Skanza, Bongr, Swedish nationality, in Oberriaden JS by two
1 11 [Text Intentionally Stricken]
1 van Stiphout, Theodorus A, von Warenlingen in Warenlingen JS by two
1 Storak, Alfred, German nationality, in Untrsigganthal JS by two
1 11 [Text Intentionally Stricken]
1 30 [Text Intentionally Stricken]
1 6 [Text Intentionally Stricken]
1 2 3m [Text Intentionally Stricken]
5m [Text Intentionally Stricken]
2 3 9m [Text Intentionally Stricken]
Lock, Dr. Garf, from Obersiggenhal, in Obersiggenhal JP by two
5 5 7m [Text Intentionally Stricken]
7m [Text Intentionally Stricken]
6 18 [Text Intentionally Stricken]
6 Keucgscrubgm Volker, German nationality, in Kilchberg ZH JS by two
6 Sucklin, Walter, from Richon, in Maggen JS by two
6 7 30 [Text Intentionally Stricken]
7 11m [Text Intentionally Stricken]
11m [Text Intentionally Stricken]
8 Dahback, Clacs, Swedish nationality, in Stockholm(8) M without authority to sign
8 9 28 [Text Intentionally Stricken]
9 Molles-Barghoff, Bend H. German nationality, in M without authority to sign
9 Burrefield, Donald H. American nationality, in Chicago (Ill., USA) M without authority to sign
9 28 [Text Intentionally Stricken]
23d [Text Intentionally Stricken]
9 18 [Text Intentionally Stricken]
</TABLE>
Zurich. 28.05. 1998 07:53 Continuation on Page 3
<PAGE>
<TABLE>
<CAPTION>
REGISTER OF COMMERCE OF CANTON ZURICH - MAIN REGISTER
- ---------------------------------------------------------------------------------------------------------------------------------
3.002.023.002 ABB ASEA BROWN BOVERI LTD ZURICH 3
- ---------------------------------------------------------------------------------------------------------------------------------
ALL ENTRIES
- ---------------------------------------------------------------------------------------------------------------------------------
EN MOD CA PERSONAL DATA FUNCTION NATURE OF SIGNATURE POWER
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
9 25 [Text Intentionally Stricken]
10 Hartmann, Peter, from Moriken Wildogg, in Windisch JS by two
10 14 [Text Intentionally Stricken]
11 14m [Text Intentionally Stricken]
11 14m [Text Intentionally Stricken]
11 Fasshind, Renato, from Arth, in Oberweningen JS by two
24 [Text Intentionally Stricken]
11 29 [Text Intentionally Stricken]
25 [Text Intentionally Stricken]
11 Klufer, Karl Heinz, German nationality, in Zurich JS by two
11 Sacklen Mats, Swedish nationality, in Kasnachr, ZH JS by two
11 Sandmeyer, Uda, from Fruenfeld, in Ennethaden JS by two
11 12 [Text Intentionally Stricken]
11 16 [Text Intentionally Stricken]
12 24 [Text Intentionally Stricken]
12 Fries Alexis, from Zurich, in Hong Kong JS by two
13 Ernst & Young AD, in Zurich Auditor Auditors
13 KPMG Klynvold Peat Marwick Goerdeler SA, in Zurich Auditor Auditors
14 21m [Text Intentionally Stricken] C
14 21m [Text Intentionally Stricken]
16 Hahenberger Claudia, from Hirzel, in Meilen JS by two
16 Meyer, Dr. Armin, from Zurich, in Housen near Brugg JS by two
17 30m [Text Intentionally Stricken]
19 de Schidler. Romain, from Fribourg, in Carminboenif JS by two
21 23 [Text Intentionally Stricken] C
21 23 [Text Intentionally Stricken]
23 Barnevik, Percy Nils, Swedish nationality, in Zurich C JS by two
23 32m [Text Intentionally Stricken]
23 Svedberg, Bjorn. Swedish nationality, in Bromma(5) M JS by two
23 Kobayshi, Yotaro, Japanese nationality in Tokyo(5) M without authority to sign
23 Sutherland, Peter Denis, Irish nationality, in Dublin(IRL) M without authority to sign
23 Van Wachern, Lockwijk Christian, Dutch nationality, in Wassenaar(NL) M without authority to sign
26 27m [Text Intentionally Stricken]
26 Pierce, Howard, US citizen, in Westport (Connecticut, USA) JS by two
26 Schilliger, Adelheit, from Weggis, in Wallisellan JS by two
27 Karlsson, Sunc, Swedish nationality, in Hirschberg JS by two
28 Cramma, Gerhard, German nationality, in Essen(D) M without authority to sign
28 So , Edwin, from Sulgen and Buchackern, in Obernhdorf M without authority to sign
29 Schaubia, Genter, German nationality, in Waldshus-Tiengen JS by two
29 Sutherland, Cheryl Ann, US citizen, in Ultiken JS by two
30 Elzvik, Eric, Swedish citizen, in Khanachi ZH JS by two
32 Icker, Robert, from Basel, in Botmington VC JS by two
32 Dermann, Sargen, German nationality, in Konigstein in Tatory(D) M without authority to sign
32 Rocco, Agostino, Italian citizen, in Buenos Aires (Argentina) M without authority to sign
</TABLE>
Zurich, 28.05.1998 This extract from the Cantonal Register of Commerce has
07:53 no validity without the certification of original text
herein. It includes all current entries for this company
as well as all previously valid and now cancelled
entries. On special request an extract can be issued
which includes only all currently valid entries of which
in addition to the currently valid entries includes all
---
entries cancelled as from a certain date.
-------
[SEAL] Certified
[COMMERCIAL REGISTRY
CANTON ZURICH]
extract
The registrar
(Signature)
<PAGE>
This is certified to be a true and valid translation in English language of the
original issued by the responsible Register of Commerce of the Canton Zurich in
German language.
Zurich, June 10, 1998
ABB ASEA BROWN BOVERI LTD.
/s/ Beat Hess /s/ Theodorus A. van Stiphout
- --------------------------- -----------------------------
Beat Hess Theodorus A. van Stiphout
Senior Vice President Vice President
Legalization
- ------------
I hereby certify that the foregoing signatures are the proper handwriting of
Mr. Beat Hess and
Mr. Theodorus A. van Stiphout
both authorized to sign jointly for and on behalf of ABB Asea Brown Boveri Ltd.
at Zurich (Switzerland).
Baden, 12th June 1998
The Notary:
[SEAL OF DR. PETER VOSER - AARGAUISCHER NOTAR]
