-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WLTUPnF2n1iooiDZOhU+j2QaZsW4f7fRh8HsE1RFGXXl5SAYr2ycCsfQUu7vVSni 89unteaCJKsMxSHo+Lh0Mg== 0000950130-99-002553.txt : 19990503 0000950130-99-002553.hdr.sgml : 19990503 ACCESSION NUMBER: 0000950130-99-002553 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 19990430 GROUP MEMBERS: GEC ACQUISITION CORP GROUP MEMBERS: GEC INCORPORATED GROUP MEMBERS: THE GENERAL ELECTRIC COMPANY, P.L.C. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: FORE SYSTEMS INC /DE/ CENTRAL INDEX KEY: 0000920000 STANDARD INDUSTRIAL CLASSIFICATION: COMPUTER COMMUNICATIONS EQUIPMENT [3576] IRS NUMBER: 251628117 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-43653 FILM NUMBER: 99607609 BUSINESS ADDRESS: STREET 1: 1000 FORE DRIVE CITY: WARRENDALE STATE: PA ZIP: 15086-7502 BUSINESS PHONE: 7247424444 MAIL ADDRESS: STREET 1: 1000 FORE DRIVE CITY: WARRENDALE STATE: PA ZIP: 15086-7502 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: GEC ACQUISITION CORP CENTRAL INDEX KEY: 0001060339 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 522093449 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: C/O NI HOLDINGS INC STREET 2: 5700 TOUHY AVE. CITY: NILES STATE: IL ZIP: 60714-4690 SC 13D 1 SCHEDULE 13D ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------- SCHEDULE 13D Under the Securities Exchange Act of 1934 ----------------- FORE Systems, Inc. (Name of Issuer) Common Stock, Par Value $.01 Per Share (Title of Class of Securities) 34 5449 102 (CUSIP Number of Class of Securities) Patricia A. Hoffman GEC Incorporated 1500 Mittel Boulevard Wood Dale, IL 60191-1073 (c/o Videojet Systems International, Inc.) (630) 238-3995 (Name, Address and Telephone Number of Persons Authorized to Receive Notices and Communications on Behalf of Bidders) Copies To: Philip A. Gelston, Esq. Jeffrey I. Gordon, Esq. Cravath, Swaine & Moore Mayer, Brown & Platt Worldwide Plaza Bucklersbury House 825 Eighth Avenue 3 Queen Victoria Street New York, NY 10019 London EC4N 8EL Telephone: (212) 474-1000 England Telephone: 011-44-171-246-6200 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) April 26, 1999 (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Section 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box [___]. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Section 240.13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the act (however, see the Notes). ================================================================================ CUSIP No. 34 5449 102 - -------------------------------------------------------------------------------- 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person GEC Acquisition Corp. - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds AF - -------------------------------------------------------------------------------- 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization Delaware - -------------------------------------------------------------------------------- 7. Sole Voting Power Number of ---------------------------------------------------------------- Shares 8. Shared Voting Power Beneficially Owned by 28,118,876 Each --------------------------------------------------------------- Reporting 9. Sole Dispositive Power Person With ---------------------------------------------------------------- 10. Shared Dispositive Power 28,118,876 - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 28,118,876 - -------------------------------------------------------------------------------- 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] (See Instructions) - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) Approximately 24.13% of the Common Stock Outstanding - -------------------------------------------------------------------------------- 14. Type of Reporting Person CO - -------------------------------------------------------------------------------- *See Note on page 5. 2 CUSIP No. 34 5449 102 - -------------------------------------------------------------------------------- 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person GEC Incorporated - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds BK - -------------------------------------------------------------------------------- 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization Delaware - -------------------------------------------------------------------------------- 7. Sole Voting Power Number of ------------------------------------------------------------- Shares 8. Shared Voting Power Beneficially Owned by 28,118,876 Each ------------------------------------------------------------- Reporting 9. Sole Dispositive Power Person With ------------------------------------------------------------- 10. Shared Dispositive Power 28,118,876 - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 28,118,876 - -------------------------------------------------------------------------------- 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] (See Instructions) - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) Approximately 24.13% of the Common Stock - -------------------------------------------------------------------------------- 14. Type of Reporting Person CO - -------------------------------------------------------------------------------- *See Note on page 5. 3 CUSIP No. 34 5449 102 - -------------------------------------------------------------------------------- 1. Name of Reporting Person S.S. or I.R.S. Identification No. of Above Person The General Electric Company, p.l.c. - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds BK, OO - -------------------------------------------------------------------------------- 5. Check Box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization England - -------------------------------------------------------------------------------- 7. Sole Voting Power Number of ----------------------------------------------------------- Shares 8. Shared Voting Power Beneficially Owned by 28,118,876* Each ----------------------------------------------------------- Reporting 9. Sole Dispositive Power Person With ----------------------------------------------------------- 10. Shared Dispositive Power 28,118,876* - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 28,118,876* - -------------------------------------------------------------------------------- 12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] (See Instructions) - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) Approximately 24.13% of the Common Stock - -------------------------------------------------------------------------------- 14. Type of Reporting Person CO - -------------------------------------------------------------------------------- *See Note on page 5. 4 On April 26, 1999, GEC Acquisition Corp. (the "Purchaser"), a wholly owned subsidiary of GEC Incorporated ("Parent"), and FORE Systems, Inc. (the "Company") entered into a Stock Option Agreement (the "Stock Option Agreement"), pursuant to which the Company granted to the Purchaser an option ("Option") to purchase up to 23,187,340 shares of Common Stock, par value $0.01 per share (the "Shares"), of the Company at a price per Share equal to the Offer Price (as defined in the Offer to Purchase referred to below). In no event will the number of Shares subject to the Option exceed 19.9% of the outstanding Shares. The Option is exercisable in most cases when the Termination Fee (as defined in the Offer to Purchase) is payable under the Merger Agreement (as defined in the Offer to Purchase). In addition, the Option is exercisable following the Purchaser's acceptance of Shares for payment pursuant to the Offer (as defined in the Offer to Purchase) to the extent the effect of such exercise would result in Parent owning, directly or indirectly, immediately after such exercise 90% of the then outstanding Shares. In addition, on April 26, 1999, Parent and the Purchaser entered into a Stockholder Agreement (the "Stockholder Agreement") with two of the founding stockholders of the Company (the "Founding Stockholders"), pursuant to which each Founding Stockholder has agreed, among other things, to sell to the Purchaser immediately following the Offer all the Shares that he beneficially owns at a price per Share equal to the Offer Price. The Founding Stockholders have also agreed to tender such Shares in the Offer at a price per Share equal to the Offer Price if directed to do so by the Purchaser. In addition, each Founding Stockholder has granted the Purchaser an option to purchase all his Shares at a price equal to the Offer Price under certain circumstances and subject to certain conditions. Under the Stockholder Agreement, each Founding Stockholder has granted to certain individuals designated by Parent an irrevocable proxy with respect to the Shares subject to the Stockholder Agreement to vote such Shares under certain circumstances. The Purchaser's right to purchase and vote the Shares subject to the Stock Option Agreement and the Stockholder Agreement is reflected in Rows 8 and 10 of each of the tables above. A copy of each of the Stock Option Agreement and the Stockholder Agreement is attached hereto as an Exhibit, and each of the Stock Option Agreement and the Stockholder Agreement is described more fully in Section 12 of the Offer to Purchase dated April 30, 1999 (the "Offer to Purchase") attached hereto as Exhibit 2(a). Item 1. Security and Issuer (a) This Schedule 13D relates to the Common Stock, par value $0.01 per share, of FORE Systems, Inc. (b) The Issuer is FORE Systems, Inc., a Delaware corporation. (c) The address of the Issuer's principal executive office is 1000 FORE Drive, Warrendale, Pennsylvania 15086-7502. Item 2. Identity and Background (a)-(c) and (f) This Schedule 13D is being filed by the Purchaser, a Delaware corporation and a wholly owned subsidiary of Parent, a Delaware corporation, which is a wholly owned subsidiary of The General Electric Company, p.l.c., a public limited company organized under the laws of England and Wales ("GEC, p.l.c."). Information concerning the principal business and the address of the principal offices of the Purchaser, Parent and GEC, p.l.c. is set forth in Section 9 ("Certain Information Concerning the Purchaser, Parent and GEC, p.l.c.") of the Offer to Purchase and is incorporated herein by reference. This filing shall not be construed as an admission that GEC, p.l.c. is, for purposes of Regulation 13D under the Securities Exchange Act of 1934, as amended, a bidder on whose behalf this tender offer is being made. The name, citizenship, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of the Purchaser, Parent and GEC, p.l.c. is set forth in Schedule I to the Offer to Purchase and is incorporated herein by reference. (d) and (e) During the last five years, none of the Purchaser, Parent or GEC, p.l.c. or, to the best knowledge of the Purchaser, Parent or GEC, p.l.c., any of their respective executive officers or directors, has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors), nor has any of them been 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 financial order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. Item 3. Source and amount of Funds or Other Consideration The information set forth in Section 10 ("Source and Amount of Funds") of the Offer to Purchase is incorporated herein by reference. Item 4. Purpose of Transaction (a)-(g) and (j) The information set forth in Section 12 ("Purpose of the Offer, the Merger Agreement; the Stock Option Agreement; the Stockholder Agreement; Other Agreements; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. 5 (h) and (i) The information set forth in Section 7 ("Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act Registration; Margin Regulations") of the Offer to Purchase is incorporated herein by reference. Item 5. Interest in Securities of the Issuer (a)(c) The information set forth in "Introduction", Section 9 ("Certain Information Concerning the Purchaser, Parent and GEC, p.l.c.") and Section 12 ("Purpose of the Offer, the Merger Agreement; the Stock Option Agreement; the Stockholder Agreement; Other Agreements; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. Item 6. Contracts, Arrangements, Understanding or Relationships with Respect to Securities of the Issuer The information set forth in "Introduction", Section 9 ("Certain Information Concerning the Purchaser, Parent and GEC, p.l.c"), Section 11 ("Contacts and Transactions with the Company; Background of the Offer") and Section 12 ("Purpose of the Offer; the Merger Agreement; the Stock Option Agreement; the Stockholder Agreement; Other Agreements; Plans for the Company") of the Offer to Purchase is incorporated herein by reference. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS (1) The Euro 6,000,000,000 Syndicated Credit Facility dated March 25, 1998, among GEC, p.l.c., HSBC Investment Bank PLC, as Agent, Marine Midland Bank, as US Swingline Agent, and certain other financial institutions. (2)(a) Offer to Purchase. (2)(b) Agreement and Plan of Merger dated as of April 26, 1999, among the Purchaser, Parent and the Company. (2)(c) Stock Option Agreement dated as of April 26, 1999, between the Company and the Purchaser. (2)(d) Stockholder Agreement dated as of April 26, 1999, among the Purchaser, Parent and certain stockholders of the Company. (3) See Exhibits 2(a), 2(b), 2(c) and 2(d). 6 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: April 30, 1999 GEC ACQUISITION CORP., By /s/ John C. Mayo -------------------------------- Name: John C. Mayo Title: President GEC INCORPORATED, By /s/ Michael Lester --------------------------------- Name: Michael Lester Title: Director THE GENERAL ELECTRIC COMPANY, P.L.C., By /s/ John C. Mayo --------------------------------- Name: John C. Mayo Title: Director 7
EXHIBIT INDEX Exhibit Page Number Exhibit Name Number (1) The Euro 6,000,000,000 Syndicated Credit Facility dated March 25, 1998, among GEC, p.l.c., HSBC Investment Bank PLC, as Agent, Marine Midland Bank, as US Swingline Agent, and certain other financial institutions (2)(a) Offer to Purchase (2)(b) Agreement and Plan of Merger dated as of April 26, 1999, among the Purchaser, Parent and the Company (2)(c) Stock Option Agreement dated as of April 26, 1999, between the Company and the Purchaser (2)(d) Stockholder Agreement dated as of April 26, 1999, among the Purchaser, Parent and certain stockholders of the Company (3) See exhibits 2(a), 2(b), 2(c) and 2(d)
8 EX-99.1 2 SYNDICATED CREDIT FACILITY Exhibit (1) CONFORMED COPY AGREEMENT DATED 25TH MARCH, 1998 EURO 6,000,000,000 SYNDICATED CREDIT FACILITY FOR THE GENERAL ELECTRIC COMPANY, p.l.c. ARRANGED BY BANCA COMMERCIALE ITALIANA S.p.A., LONDON BRANCH BANQUE NATIONALE DE PARIS BARCLAYS CAPITAL CHASE MANHATTAN plc MIDLAND BANK plc J. P. MORGAN SECURITIES LTD. SBC WARBURG DILLON READ WESTDEUTSCHE LANDESBANK GIROZENTRALE as Joint Lead Arrangers with HSBC INVESTMENT BANK PLC as Agent and MARINE MIDLAND BANK as US Swingline Agent ALLEN & OVERY CLIFFORD CHANCE London London for the Borrower for the Banks - -------------------------------------------------------------------------------- INDEX Clause Page 1. Interpretation........................................................1 2. The Facilities.......................................................16 3. Purpose..............................................................18 4. Conditions Precedent.................................................18 5. Advance Facilities...................................................18 6. Bill Facility........................................................22 7. Bills................................................................24 8. Repayment............................................................25 9. Prepayment and Cancellation..........................................26 10. Interest.............................................................29 11. Payments.............................................................30 12. Taxes................................................................33 13. Market Disruption....................................................37 14. Availability of Currencies...........................................38 15. Increased Costs......................................................40 16. Illegality and Mitigation............................................41 17. Guarantee............................................................42 18. Representations and Warranties.......................................44 19. Undertakings.........................................................46 20. Default..............................................................47 21. The Agents and the Joint Lead Arrangers..............................49 22. Fees.................................................................54 23. Expenses.............................................................56 24. Stamp Duties.........................................................56 25. Indemnities..........................................................56 26. Evidence and Calculations............................................57 27. Amendments and Waivers...............................................58 28. Changes to the Parties...............................................59 29. Disclosure of Information............................................62 30. Set-Off..............................................................63 31. Pro Rata Sharing.....................................................63 32. Severability.........................................................64 33. Counterparts.........................................................64 34. Notices..............................................................64 35. Language.............................................................66 36. Jurisdiction.........................................................66 37. Governing Law........................................................67 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Schedule Page 1. Part I - Banks and Commitments.......................................68 Part II - Swingline Banks and Swingline Commitments..................69 2. Original Borrowers...................................................70 3. Conditions Precedent Documents.......................................71 Part I - To Be Delivered Before The First Advance....................71 Part II - To Be Delivered By An Additional Borrower..................72 4. Calculation of the MLA Cost..........................................73 5. Form of Request......................................................75 6. Forms of Accession Documents.........................................76 Part I - Novation Certificate........................................76 Part II - Borrower Accession Agreement...............................78 Part III - Form of Borrower Novation Agreement.......................79 7. Form of Bill.........................................................81 Signatories...................................................................82 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- THIS AGREEMENT is dated 25th March, 1998 BETWEEN: (1) THE GENERAL ELECTRIC COMPANY, p.l.c. (Company No. 67307) (the "Parent"); (2) THE SUBSIDIARIES OF THE PARENT listed in Schedule 2 (if any) as original borrowers (the "Original Borrowers"); (3) BANCA COMMERCIALE ITALIANA S.p.A., LONDON BRANCH, BANQUE NATIONALE DE PARIS, BARCLAYS CAPITAL, CHASE MANHATTAN plc, MIDLAND BANK plc, J. P. MORGAN SECURITIES LTD., SWISS BANK CORPORATION (acting through its division SBC WARBURG DILLON READ), WESTDEUTSCHE LANDESBANK GIROZENTRALE each as a joint lead arranger (each a "Joint Lead Arranger"); (4) THE FINANCIAL INSTITUTIONS listed in Schedule 1 as banks; (5) HSBC INVESTMENT BANK PLC as agent (the "Agent"); and (6) MARINE MIDLAND BANK as US swingline agent (in this capacity the "US Swingline Agent"). IT IS AGREED as follows: 1. INTERPRETATION 1.1 Definitions In this Agreement: "Acceptance Commission Rate" means 0.175 per cent, per annum. "Additional Borrower" means a Subsidiary of the Parent which becomes a Borrower in accordance with Clause 28.4 (Additional Borrowers). "Advance" means a Tranche A Advance, a Tranche B Advance or a Swingline Advance. "Advance Facility" means the facility to draw Tranche A Advances, Tranche B Advances or Swingline Advances referred to in sub-clauses 2.1(a), (b) and (c) (Facilities) respectively. "Affiliate" for the purposes of this Agreement means a Subsidiary or a holding company (as defined in Section 736 of the Companies Act 1985) of a person and any other Subsidiary of that holding company. - -------------------------------------------------------------------------------- 2 - -------------------------------------------------------------------------------- "Agent's Spot Rate of Exchange" means the spot rate of exchange as determined by the Agent for the purchase of the relevant Optional Currency in the London foreign exchange market with euros at the relevant time on a particular day, but for the purpose of any conversion after the Commencement Date between the euro and a national currency unit (and vice versa) the rate shall be that determined in accordance with EMU legislation. "Agreed Percentage" means in relation to a Bank (other than a Swingline Bank) and a Swingline Advance, the amount of its Tranche B Commitment expressed as a percentage of the Tranche B Total Commitments. "Anniversary" means an anniversary of the Signing Date. "Applicable Taxes" means any tax levied or imposed by the United Kingdom or any country in which any Borrower is incorporated or any jurisdiction from or through which any payment under this Agreement is made. "Banks" means those financial institutions listed in Schedule 1 and their respective successors and assigns which are for the time being participating in the Facilities. "Barclays Capital" means Barclays Capital Group, the investment banking division of Barclays Bank PLC. "Bill" means a Sterling bill of exchange substantially in the form of Schedule 7. "Bill Facility" means the facility to draw Bills for acceptance by the Banks under Tranche A or Tranche B referred to in sub-clauses 2.1(a) and (b) (Facilities) respectively. "Borrower" means the Parent, the Original Borrowers and each Additional Borrower. "Borrower Accession Agreement" means a letter substantially in the form of Part II of Schedule 6 with such amendments as the Agent may, at the request of the Parent, approve. - -------------------------------------------------------------------------------- 3 - -------------------------------------------------------------------------------- "Borrowings" means any indebtedness (whether as principal or surety) for or in respect of money borrowed (including amounts raised by acceptances under any acceptance credit, bills, bonds, debentures and similar securities and finance leases arranged primarily to raise finance) and the net amount of any liability under any treasury transaction with a bank or financial institution but excluding in each case any such indebtedness: (a) arising for or in respect of assets or services acquired or sold in the ordinary course of business (except to the extent it is a treasury transaction or would be treated as a loan, overdraft or obligation under a finance lease in the audited consolidated annual accounts of the Group); and (b) owing by one member of the Group to another member of the Group. "Business Day" means: (a) a day (other than a Saturday or Sunday) on which banks are open for general interbank business (other than operation only of business in euros) in: (i) London in relation to the day any Request (except a Request for Swingline Advances in U.S. Dollars or euros) is made and, unless (b) below applies, for any other purpose; (ii) if a payment is required in an Optional Currency (including but not limited to Sterling), the principal financial centre of the country of that Optional Currency; and (iii) if a payment is required in ECU (at any time prior to the Commencement Date), Paris and Brussels; and (b) in relation to a payment or rate fixing in or other matter relating to euros, a day on which the Trans-European Automated Real-time Gross settlement Express Transfer system (TARGET) is operating. "Code" means, on any date, the United States Internal Revenue Code of 1986, as amended and the regulations promulgated and rulings issued thereunder, all as the same may be in effect at such date. "Commencement Date" means the date of commencement of the third stage of EMU as contemplated by the Treaty (at the date of this Agreement, expected to be 1st January, 1999). - -------------------------------------------------------------------------------- 4 - -------------------------------------------------------------------------------- "Commitment" means, in respect of a Bank, the aggregate of its Tranche A Commitment and Tranche B Commitment (including its Swingline Commitment or the Swingline Commitment of its Swingline Affiliate, if applicable), in each case to the extent not cancelled or reduced under this Agreement. "Controlled Group" means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with any Obligor are treated as a single employer under Section 414 of the Code. "Default" means an Event of Default or an event which, with the giving of any notice or expiry of any grace period, in each case specified in Clause 20 (Default), would constitute an Event of Default. "EBDR" means the rate determined by the Agent to be the arithmetic mean (rounded, if necessary, to the nearest five decimal places with the midpoint rounded upwards) of the respective rates notified to the Agent by the Reference Banks (provided at least two Reference Banks are quoting) at or about 10.30 a.m. on the Utilisation Date for a Bill at which Eligible Bills with a face amount of (Pounds)1,000,000 and of an equivalent tenor can be discounted in the London discount market at or about that time. "ECU" means the ECU, as referred to in Article 109g of the Treaty and as defined in Council Regulation (EC) No. 3320/94, that is from time to time used as the unit of account of the European Communities; changes to the ECU may be made by the European Communities, in which event the ECU will change accordingly. "Eligible Bill" means a Sterling bill of exchange eligible for rediscounting at the Bank of England. "EMU" means Economic and Monetary Union as contemplated in the Treaty. "EMU legislation" means legislative measures of the European Council for the introduction of, changeover to, or operation of, a single or unified European currency. - -------------------------------------------------------------------------------- 5 - -------------------------------------------------------------------------------- "ERISA" means the U.S. Employee Retirement Income Security Act of 1974, as amended from time to time and any successor statute of similar import, together with any rule or regulation issued thereunder. "euro" or "euros" means the single currency to be introduced on the Commencement Date but, prior to the Commencement Date, references to the "euro" or to "euros" will be read as references to ECU in accordance with Clause 11.4(b) (Currency). "euro unit" means a unit of the euro as defined in EMU legislation. "Event of Default" means an event specified as such in Clause 20 (Default). "Facility" means any of the Advance Facilities or the Bill Facility. "Facility Office" means the office(s) notified by a Bank to the Agent and the Parent: (a) on or before the date it becomes a Bank; or (b) subject to Clause 28.6 (Change of Facility Office), by not less than five Business Days' notice to the Agent and the Parent, as the office(s) through which it will perform all or any of its obligations under this Agreement. "Federal Funds Rate" means, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight United States Federal funds transactions with members of the United States Federal Reserve System arranged by Federal funds brokers, as published for such day (or, if such day is not a New York Business Day, for the immediately preceding New York Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a New York Business Day, the average of the quotations for such day on such transactions received by the US Swingline Agent from three Federal funds brokers of recognised standing selected by it. "Fee Letters" means each letter dated on or about the Signing Date: (a) between the Agent and the Parent; and - -------------------------------------------------------------------------------- 6 - -------------------------------------------------------------------------------- (b) between the Joint Lead Arrangers and the Parent, in each case setting out the amount of various fees referred to in Clause 22 (Fees). "Finance Document" means this Agreement, each Fee Letter, a Bill, a Novation Certificate, a Borrower Accession Agreement, each Novation Agreement entered into as contemplated by Clause 9.5(b)(iii) (Changes to Borrowers) or any other document designated in writing as such by the Agent and the Parent. "Finance Party" means each Joint Lead Arranger, a Bank, the Agent and the US Swingline Agent. "Group" means the Parent and its Subsidiaries. "Interest Period" in relation to a Term-out Advance, has the meaning given to it in Clause 10.1 (Interest Periods for Term-out Advances). "LIBOR" means in relation to any Advance or unpaid sum: (a) the rate per annum of the offered quotation for deposits in the currency of the relevant Advance or unpaid sum for a period equal to or as near as possible to the required period which appears on Telerate Page 3750 or Telerate Page 3740 (as appropriate) at or about 11.00 a.m. on the applicable Rate Fixing Day; or (b) if the rate cannot be determined under paragraph (a) above, the rate determined by the Agent to be the arithmetic mean (rounded, if necessary, to the nearest five decimal places with the midpoint rounded upwards) of the respective rates notified to the Agent by each of the Reference Banks quoting (provided that at least two Reference Banks are quoting) as the rate at which it is offering deposits in the required currency and for the required period in an amount comparable to the participation of that Reference Bank (or, if it is not a Bank, the participation of its Affiliate which is a Bank) in the Advance or unpaid sum to prime banks in the London interbank market at or about 11.00 a.m. on the Rate Fixing Day for such period. For the purpose of this definition: (i) "required period" means the applicable Interest Period for a Term-out Advance, the Term for Tranche A Advances (except Term-out Advances) or for Tranche B Advances or the period in respect of which LIBOR falls to be determined in relation to such unpaid sum; and - -------------------------------------------------------------------------------- 7 - -------------------------------------------------------------------------------- (ii) "Telerate Page 3750" means the display designated as Page 3750, and "Telerate Page 3740" means the display designated as Page 3740, in each case on the Telerate Service (or such other pages as may replace page 3750 or Page 3740 on that service or such other service as may be nominated by the British Bankers' Association (including the Reuters Screen) as the information vendor for the purposes of displaying British Bankers' Association Interest Settlement Rates for deposits in the currency concerned). "Majority Banks" means, at any time: (a) if any Utilisations are outstanding, Banks with an aggregate Original Euro Amount of Advances or Bills at that time of more than 66 2/3 per cent. of the aggregate Original Euro Amount of all Advances and Bills then outstanding; or (b) if no Utilisations are outstanding, Banks whose Commitments then aggregate more than 66 2/3 per cent. of the Total Commitments (or, if the Total Commitments have been reduced to zero, aggregated more than 66 2/3 per cent. of the Total Commitments immediately before the reduction). "Mandatory Prepayment Event" means the event specified in Clause 9.4 (Mandatory Prepayment Event). "Margin" means 0.175 per cent. per annum. "Maturity Date" means the last day of the Term of an Advance or a Bill. "MLA Cost" means in relation to an Advance in Sterling, the cost of compliance with the Mandatory Liquid Assets requirements of the Bank of England during its Term or Interest Period, determined in accordance with Schedule 4. "national currency unit" means the unit of currency (other than a euro unit) of a Treaty Country. "New York Business Day" means a day (other than a Saturday or Sunday) on which banks are open for interbank business generally in New York. "Novation Certificate" has the meaning given to it in Clause 28.3(a)(i) (Procedure for novations). - -------------------------------------------------------------------------------- 8 - -------------------------------------------------------------------------------- "Obligor" means the Parent and each Borrower. "Optional Currency" means, in relation to any Advance or proposed Advance, Sterling, U.S. Dollars or any other currency other than euros which is readily available and freely transferable in the London foreign exchange market in sufficient amounts to fund that Advance. "Original Euro Amount" means: (a) the principal amount of an Advance denominated in euros; or (b) the principal amount of an Advance denominated in any other currency or a Bill, translated into euros on the basis of the Agent's Spot Rate of Exchange on the date of receipt by the Agent of the Request for that Advance or Bill. "Party" means a party to this Agreement. "PBGC" means the U.S. Pension Benefit Guaranty Corporation, or any successor thereto. "Permitted Security Interest" means: (a) a lien or right of set-off arising by operation of law (or by agreement evidencing a lien or right of set-off) and in each case in the ordinary course of business; (b) any Security Interest securing any Borrowings of any Obligor which becomes a member of the Group after the Signing Date which was in existence when that Obligor became a member of the Group and was not created in contemplation of that Obligor becoming a member of the Group; (c) a Security Interest over an asset acquired by an Obligor after the Signing Date and to which such asset was subject at the time of such acquisition provided it was not created in contemplation of that acquisition; (d) any Security Interest the principal purpose and effect of which is to allow the setting-off or netting of obligations: (i) with those of a financial institution; or (ii) under swaps or other derivative agreements, in the ordinary course of the cash management arrangements of the Group; - -------------------------------------------------------------------------------- 9 - -------------------------------------------------------------------------------- (e) any retention of title reserved by any seller of goods or any Security Interest imposed, reserved or granted over goods supplied by such seller in the ordinary course of business; (f) any Security Interest arising out of or in connection with pre- judgement legal process or a judgement or a judicial award relating to security for costs; (g) a Security Interest securing any refinancing of amounts secured under (b) or (c)above provided the amount secured does not exceed the amount originally secured; (h) a Security Interest which the Majority Banks have at any time agreed in writing shall be a Permitted Security Interest; and (i) Security Interests (other than Security Interests permitted by paragraphs (a) to (h) above) which secure, in aggregate, Borrowings in an amount not exceeding 15 per cent. of the Total Consolidated Assets of the Group. "Plan" means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which an Obligor or any member of the Controlled Group has any obligation to contribute. "Prime Rate" means the prime commercial lending rate for U.S. Dollars from time to time announced by the US Swingline Agent. Each change in the interest rate on a Swingline Advance which results from a change in the Prime Rate becomes effective on the day on which the change in the Prime Rate becomes effective. "Qualifying Bank" means a bank or institution which is: (a) a bank as defined in Section 840A of the Income and Corporation Taxes Act 1988 which is within the charge to corporation tax as regards any interest received by it under this Agreement; or (b) resident (as such term is defined in the appropriate double taxation treaty) in a country with which the United Kingdom has an appropriate double taxation treaty under which that institution is entitled to exemption from United Kingdom tax on interest and is entitled to apply under the Double Taxation Relief (Taxes on Income) (General) Regulations 1970 to have interest paid to its Facility Office without withholding or deduction for or on account of United Kingdom tax (and does not carry on business in the United Kingdom through a permanent establishment with which the investments under this Agreement in respect of which the interest is paid are effectively connected); and for this purpose "double taxation treaty" means any convention or agreement between the government of the United Kingdom and any other government for the - -------------------------------------------------------------------------------- 10 - -------------------------------------------------------------------------------- avoidance of double taxation and the prevention of fiscal evasion with respect to taxes on income and capital gains. "Rate Fixing Day" means: (a) the Utilisation Date for an Advance denominated in Sterling; and (b) the second Business Day before the Utilisation Date for an Advance denominated in euros or any Optional Currency other than Sterling (or such other day as is generally treated as the rate fixing day by market practice in the London interbank market for the currency concerned). "Reference Banks" means, subject to Clause 28.5 (Reference Banks), Barclays Bank PLC, National Westminster Bank Plc and Midland Bank plc. "Reportable Event" means a reported event as defined in Section 4043 of ERISA and the regulations issued under such section with respect to a Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code. "Request" means a request made by a Borrower to utilise a Facility, substantially in the form of Schedule 5. "Requested Amount" means the amount requested in a Request. "Rollover" means, in relation to a particular date, one or more Advances (including, but not limited to, the Term-out Advances): (a) whose proposed Utilisation Date is the same as the Maturity Date of one or more existing Advances; (b) whose aggregate principal amount is the same as or less than the aggregate outstanding principal amount of all existing Advances whose Maturity Date is the same as that Utilisation Date; and (c) which are to be denominated in the same currency or a legal denomination of the currency as the existing Advance(s) whose Maturity Date is the same as that - -------------------------------------------------------------------------------- 11 - -------------------------------------------------------------------------------- Utilisation Date (or, if there is more than one such existing Advance and such Advances are denominated in different currencies, in the same or lesser respective amounts of the same or legally equivalent currencies as for such existing Advances). "Security Interest" means a mortgage, charge, pledge, lien or similar security interest. "Signing Date" means the date of this Agreement. "Subsidiary" means a subsidiary within the meaning of Section 736 of the Companies Act 1985, as amended by Section 144 of the Companies Act 1989. "Swingline Advance" means an advance made or to be made by a Swingline Bank under the Swingline Facility. "Swingline Affiliate" means, in relation to a Bank, any Swingline Bank that is an Affiliate of that Bank and which is notified to the Agent and the US Swingline Agent by that Bank in writing to be its Swingline Affiliate. "Swingline Bank" means, subject to Clause 28.2 (Transfers by Banks), a Bank listed in Part II of Schedule 1. "Swingline Commitment" means in respect of a Swingline Bank, the amount in euros set opposite its name in Part II of Schedule 1 to the extent not transferred, cancelled or reduced under this Agreement. "Swingline Facility" means the committed swingline facility available in U.S. Dollars, Sterling or euros, forming part of Tranche B and referred to in Clause 2.1(c) (Facilities). "Swingline Rate" means, on any day: (a) in relation to Swingline Advances in U.S. Dollars, the higher of: (i) the Prime Rate; and - -------------------------------------------------------------------------------- 12 - -------------------------------------------------------------------------------- (ii) the aggregate of the Federal Funds Rate and one per cent. per annum, on that day; and (b) in relation to Swingline Advances in Sterling, the aggregate of: (i) one per cent. per annum; (ii) the Bank of England's fixed repo rate (being the Bank of England's operational rate) at which it conducts its daily money market operations as at the time the Request is served and at 9.00 a.m. for each subsequent day; and (iii) the MLA Cost, on that day; and (c) in relation to Swingline Advances in euros, the aggregate of: (i) one per cent. per annum; and (ii) the cost of same day euro funds certified to the Agent by each Swingline Bank for each day the relevant Swingline Advance in euros is outstanding as at the time the Request is served and at 9.00 a.m. for each subsequent day, on that day. "Swingline Total Commitments" means the aggregate for the time being of the Swingline Commitments, being euro 1,000,000,000 at the date of this Agreement. "Term" means the period selected by a Borrower in a Request for which the relevant Advance or Bill is to be outstanding. "Term-out Advances" means the Tranche A Advances, if any, drawn under Clause 8.1(b) (Repayment of Tranche A Advances). "Total Commitments" means the aggregate of the Tranche A Total Commitments and Tranche B Total Commitments (including the Swingline Total Commitments) from time to time. "Total Consolidated Assets" means the aggregate from time to time of the Group's consolidated fixed assets (including investments but excluding goodwill and intangible assets) and consolidated current assets, all determined in accordance with applicable accounting standards from time to time used in preparation of the Group's audited consolidated annual accounts. - -------------------------------------------------------------------------------- 13 - -------------------------------------------------------------------------------- "Tranche A" has the meaning given to it in Clause 2.1(a) (Facilities). "Tranche A Advance" means an Advance made by a Bank under Tranche A. "Tranche A Availability Period" means the period from the Signing Date up to and including 24th March, 1999 (being the date which is 364 days after the Signing Date). "Tranche A Commitment" means, in respect of a Bank, the amount in euros set opposite the name of that Bank in Column 1 of Part I of Schedule 1 to the extent not cancelled or reduced under this Agreement. "Tranche A Term Date" means the last day of the Tranche A Availability Period or, if that day is not a Business Day, the preceding Business Day. "Tranche A Term-out Option" means the option available to the Borrowers to draw Term-out Advances under Tranche A pursuant to Clause 8.1(b) (Repayment of Tranche A Advances). "Tranche A Total Commitments" means the aggregate for the time being of the Tranche A Commitments, being euro 1,500,000,000 at the date of this Agreement. "Tranche B" has the meaning given to it in Clause 2.1 (b) (Facilities). "Tranche B Advance" means an Advance made by a Bank under Tranche B. "Tranche B Availability Period" means the period from and including the Signing Date to and including the Tranche B Final Maturity Date. "Tranche B Commitment" means, in respect of a Bank, the amount in euros set opposite the name of that Bank in Column 2 of Part I of Schedule 1 to the extent not cancelled or reduced under this Agreement. "Tranche B Final Maturity Date" means the fifth Anniversary or such later date as may be agreed in accordance with Clause 5.7 (Extension of Tranche B Availability Period). - -------------------------------------------------------------------------------- 14 - -------------------------------------------------------------------------------- "Tranche B Total Commitments" means the aggregate for the time being of the Tranche B Commitments, being euro 4,500,000,000 at the date of this Agreement (up to euro 1,000,000,000 of which is available under the Swingline Facility). "Treaty" means the Treaty Establishing the European Community being the Treaty of Rome of 25th March, 1957, as amended by the Single European Act 1986 and the Maastricht Treaty (which was signed at Maastricht on 7th February, 1992 and came into force on 1st November, 1993), as amended from time to time. "Treaty Country" means each state described as a participating Member State in any EMU legislation, whether in the first wave or subsequently. "U.K." or "United Kingdom" means the United Kingdom of Great Britain and Northern Ireland. "United States" means the United States of America. "U.S. Borrower" means a Borrower incorporated in any state of the United States. "U.S. Qualifying Bank" has the meaning given to it in Clause 12.3(a) (U.S. Taxes). "Utilisation" means: (a) in the case of a Utilisation comprising Advances, all the Advances made or to be made; or (b) in the case of a Utilisation comprising Bills, all the Bills accepted or to be accepted, following the giving by a Borrower of a Request for those Advances or Bills. "Utilisation Date" means: (a) in the case of an Advance or Utilisation comprising Advances, the date for the making of the relevant Advance or Advances; and - -------------------------------------------------------------------------------- 15 - -------------------------------------------------------------------------------- (b) in the case of a Bill or Utilisation comprising Bills, the date for the acceptance of the relevant Bill or Bills. 1.2 Construction (a) In this Agreement, unless the contrary intention appears, a reference to: (i) a "month" is a reference to a period starting on one day in a calendar month and ending on the numerically corresponding day in the next calendar month, except that, if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last Business Day in that calendar month; a "principal amount" in relation to a Bill is a reference to the face amount of that Bill; a "regulation" includes any regulation, rule, official directive, request or guideline (whether or not having the force of law but, if not, being of a type which banks operating in the relevant jurisdiction generally and the Bank affected in particular are accustomed to complying with) of any governmental body, agency, department or regulatory, self-regulatory or other authority or organisation; a reference to the currency of a country is to the lawful currency or currencies of that country for the time being, "(Pounds)" and "Sterling" is a reference to the lawful currency or currencies of the United Kingdom for the time being and "U.S. $" and "U.S. Dollars" is a reference to the lawful currency of the United States for the time being; and a "treasury transaction" is a reference to any interest rate or cross-currency swap; (ii) a provision of a law is a reference to that provision as amended or re-enacted; (iii) a Clause or a Schedule is a reference to a clause of or a schedule to this Agreement; (iv) a person includes its permitted successors, transferees and assigns; (v) a Finance Document or another document is a reference to that Finance Document or that other document as amended, novated or supplemented; and (vi) a time of day is a reference to London time. (b) Unless the contrary intention appears, a term used in any other Finance Document or in any notice given under or in connection with any Finance Document has the same meaning in that Finance Document or notice as in this Agreement. (c) The index to and the headings in this Agreement are for convenience only and are to be ignored in construing this Agreement. (d) Any provision of this Agreement that states that it will come into effect as from the Commencement Date shall, to the extent that any such provision relates to any currency of a state which is not a Treaty Country on the Commencement Date, come into effect in relation to the currency of such state on and from the date on which such state becomes a Treaty Country. - -------------------------------------------------------------------------------- 16 - -------------------------------------------------------------------------------- 2. THE FACILITIES 2.1 Facilities The Banks grant to the Borrowers the following facilities: (a) a committed multicurrency revolving 364 day credit facility, with an option to draw Term-out Advances, to be designated as Tranche A, under which the Banks will, when requested by a Borrower, make cash advances in euros or Optional Currencies to (or accept Bills in Sterling drawn by) that Borrower on a revolving basis during the Tranche A Availability Period; (b) a committed multicurrency revolving credit facility, to be designated as Tranche B, under which the Banks will, when requested by a Borrower, make cash advances in euros or Optional Currencies to (or accept Bills in Sterling drawn by) that Borrower on a revolving basis during the Tranche B Availability Period; and (c) a committed swingline advance facility (which is a sub-division of Tranche B) under which the Swingline Banks will, when requested by a Borrower, make to that Borrower Swingline Advances in U.S. Dollars, Sterling or euros during the Tranche B Availability Period except that Swingline Advances in euros will only be made subject to availability of same day funding in euros in the London interbank market, in all cases subject to the terms of this Agreement. 2.2 Overall facility limit (a) Notwithstanding any other provision of this Agreement, the aggregate Original Euro Amount of all outstanding Utilisations: (i) under Tranche A, shall not at any time exceed the Tranche A Total Commitments at that time; (ii) under Tranche B (including the Swingline Facility), shall not at any time exceed the Tranche B Total Commitments at that time; (iii) under the Swingline Facility, shall not at any time exceed the Swingline Total Commitments at that time; and (iv) under all the Facilities, shall not at any time exceed the Total Commitments. (b) Notwithstanding any other provision of this Agreement, the aggregate Original Euro Amount of: (i) Tranche A Advances made, and the principal amount of Bills under Tranche A accepted, by a Bank shall not at any time exceed its Tranche A Commitment at that time; - -------------------------------------------------------------------------------- 17 - -------------------------------------------------------------------------------- (ii) Tranche B Advances (including Swingline Advances) made, and the principal amount of Bills under Tranche B accepted, by a Bank plus that Bank's and, if applicable, that Bank's Swingline Affiliate's outstanding Swingline Advances shall not at any time exceed its Tranche B Commitment at that time; and (iii) Swingline Advances made by a Swingline Bank shall not at any time exceed its Swingline Commitment at that time. 2.3 Number of Requests and Advances No more than one Request may be delivered on any one day, but that Request may specify any number of Utilisations and Terms from either Tranche A or Tranche B (or a Swingline Advance) or all of them. A maximum of 20 Utilisations may be outstanding at any one time (unless the Agent and the Parent otherwise agree). 2.4 Nature of a Finance Party's rights and obligations (a) The obligations of a Finance Party under the Finance Documents are several. Failure of a Finance Party to carry out those obligations does not relieve any other Party of its obligations under the Finance Documents. No Finance Party is responsible for the obligations of any other Finance Party under the Finance Documents. (b) The rights of a Finance Party under the Finance Documents are divided rights and accordingly a Finance Party may, except as otherwise stated in the Finance Documents, separately enforce those rights. 2.5 Obligors' Representative Each Obligor irrevocably authorises the Parent to give and receive as representative on its behalf all notices (including Requests) and sign all documents in connection with the Finance Documents on its behalf (including Novation Agreements under Clause 9.5(b) (Changes to Borrowers)) and take such other action as may be necessary or desirable under or in connection with the Finance Documents and confirms that it will be bound by any action taken by the Parent under or in connection with the Finance Documents. 2.6 Actions of Parent The respective liabilities of each of the Obligors under the Finance Documents shall not be in any way affected by: (a) any irregularity (or purported irregularity) in any act done by or any failure (or purported failure) by the Parent; or (b) the Parent acting (or purporting to act) in any respect outside any authority conferred upon it by any Obligor; or (c) the failure (or purported failure) by, or inability (or purported inability) of, the Parent to inform any Obligor of receipt by it of any notification under a Finance Document. - -------------------------------------------------------------------------------- 18 - -------------------------------------------------------------------------------- 3. PURPOSE (a) Each Utilisation will be applied: (i) in the case of Tranche A Advances or Bills, in or towards providing bridging and liquidity finance for the Group's financial requirements including, but not limited to, meeting dividend and tax payments and for backing commercial paper programmes (or refinancing Swingline Advances); and (ii) in the case of Tranche B Advances (including Swingline Advances) or Bills, in or towards the general corporate purposes of the Group including, but not limited to, acquisitions, capital expenditure, working capital financing, share buy-backs and other capital distributions and supporting commercial paper programmes (provided that a Swingline Advance may not be applied in or towards refinancing another Swingline Advance). (b) Without affecting the obligations of any Borrower in any way, no Finance Party is bound to monitor or verify the application of the proceeds of any Advance. 4. CONDITIONS PRECEDENT 4.1 Documentary conditions precedent The obligations of each Finance Party to any Borrower under this Agreement are subject to the condition precedent that the Agent has notified the Parent and the Banks that it has received all of the documents set out in Part I of Schedule 3 in form and substance satisfactory to the Agent. The Agent will promptly notify the Parent upon such receipt. 4.2 Further conditions precedent The obligations of each Bank to participate in a Utilisation (or make any payment under Clause 5.10(b)(ii)) are subject to the further conditions precedent that on the date of the Request and on its Utilisation Date: (a) except in the case of a Rollover, the representations and warranties in Clause 18 (Representations and Warranties) to be repeated in accordance with Clause 18.2 (Times for making representations and warranties) on those dates are correct and will be correct immediately after the Utilisation; and (b) except in the case of a Rollover, no Default has occurred which is continuing or would result from the Utilisation and no notice has been given by the Parent under Clause 9.4 (Mandatory Prepayment Event). 5. ADVANCE FACILITIES 5.1 Receipt of Requests (a) A Borrower may borrow Advances under Tranche A or Tranche B if the Agent receives, not later than 3.00 p.m. on the third Business Day before the proposed Utilisation Date, or, in the - -------------------------------------------------------------------------------- 19 - -------------------------------------------------------------------------------- case of an Advance in Sterling, not later than 3.00 p.m. one Business Day before the proposed Utilisation Date, a duly completed Request copied to the US Swingline Agent. (b) A Borrower may borrow Swingline Advances if: (i) in the case of Swingline Advances in U.S. Dollars, the US Swingline Agent receives, not later than 11.00 a.m. (New York City time) on the proposed Utilisation Date; (ii) in the case of Swingline Advances in Sterling or euros, the Agent receives, not later than 9.00 a.m. (London time) on the proposed Utilisation Date, a duly completed Request (copied to the Agent or US Swingline Agent as the case may be). 5.2 Completion of Requests for non Swingline Advances A Request (other than a Request for a Swingline Advance) will not be regarded as having been duly completed unless: (a) the Utilisation Date is a Business Day during the Tranche A Availability Period (in respect of a Tranche A Advance) or Tranche B Availability Period (in respect of a Tranche B Advance); (b) only one currency is specified for each separate Advance, such currency is the euro or an Optional Currency, and the Requested Amount for each separate Advance is: (i) in the case of Advances denominated in euros, a minimum of euro 100,000,000 or, if more, in integral multiples of euro 10,000,000; or (ii) in the case of any currency other than the euro, a minimum Original Euro Amount of euro 100,000,000 or, if more, in integral multiples of euro 10,000,000; or (iii) the undrawn balance of the Tranche A Total Commitments or the Tranche B Total Commitments (as the case may be); or (iv) such other amount as the Agent and the Parent may agree, and the Agent and the Parent may agree to round the amount of Advances which are not denominated in euros on such basis as they may reasonably consider to be appropriate; (c) only one Term or, in the case of Term-out Advances, Interest Period, for each separate Advance is specified which: (i) does not overrun the Tranche A Term Date (in respect of a Tranche A Advance (other than a Term-out Advance)) or the Tranche B Final Maturity Date (in respect of a Tranche B Advance); and (ii) is a period of one month, two, three or six months (which, in the case of Term-out Advances only, does not overrun the third Anniversary) or, in any case, - -------------------------------------------------------------------------------- 20 - -------------------------------------------------------------------------------- such other period as all the banks may previously have agreed for the purposes of such Advance; and (d) the currencies specified are either euros or subject to Clause 11.4(c) (Currency), Optional Currencies. 5.3 Completion of Requests for Swingline Advances A Request for Swingline Advances will not be regarded having been duly completed unless: (a) the Utilisation Date is: (i) in the case of Swingline Advances in U.S. Dollars, a New York Business Day; or (ii) in the case of Swingline Advances in Sterling or euros, a Business Day, in each case falling before the Tranche B Final Maturity Date; (b) it is specified that the Swingline Advances are to be made in U.S. Dollars, Sterling or euros under the Swingline Facility; (c) the Requested Amount is a minimum Original Euro Amount of euro 10,000,000 or such other amount as the Agent or, as the case may be, US Swingline Agent and the relevant Borrower may agree which, if borrowed, would not cause the Original Euro Amount of all Utilisations under Tranche B to exceed the Tranche B Total Commitments; (d) only one Term is specified, which: (i) does not overrun the Tranche B Final Maturity Date; and (ii) is a period not exceeding 7 days. 5.4 Amount of each Bank's Advance The amount of a Bank's Advance will be the proportion of the Requested Amount which: (a) in the case of a Tranche A Advance, its Tranche A Commitment bears to Tranche A Total Commitments; (b) in the case of a Tranche B Advance, its Tranche B Commitment bears to the Tranche B Total Commitments; and (c) in the case of a Swingline Advance, its Swingline Commitment bears to the Swingline Total Commitments, in each case on the date of receipt of the relevant Request. - -------------------------------------------------------------------------------- 21 - -------------------------------------------------------------------------------- 5.5 Notification of the Banks The Agent (or, in the case of Swingline Advances in U.S. Dollars, the US Swingline Agent) will promptly notify each Bank (or, as the case may be, Swingline Bank) of the details of the requested Advances and the amount of its Advance. 5.6 Payment of Proceeds Subject to the terms of this Agreement, each Bank (or, as the case may be, Swingline Bank) will make its Advance available to the Agent (or, in the case of Swingline Advances in U.S. Dollars, the US Swingline Agent) for the Borrower for value on the relevant Utilisation Date. 5.7 Extension of Tranche B Availability Period The Tranche B Final Maturity Date in respect of each Bank's Tranche B Commitment may, at the Parent's request, be extended from time to time for any period up to a date falling no later than seven years from the Signing Date. However, each Bank may, in its sole discretion, decline to extend the Tranche B Maturity Date in respect of its own Tranche B Commitment, in which case: (a) the Tranche B Commitment of that Bank will automatically cancel on the then applicable Tranche B Final Maturity Date; and (b) that Bank will be repaid in full upon the then applicable Tranche B Final Maturity Date and will cease to be a Bank at such time, irrespective of whether any other Bank has agreed to extend the Tranche B Availability Period in respect of its own Tranche B Commitment. 5.8 Currency and limit on ECU drawings No Request may specify an Advance or Advances denominated in ECU to be drawn down on the same day in an aggregate principal amount exceeding ECU 1,000,000,000, and in any event not more than ECU 2,000,000,000 of Advances denominated in ECU may be outstanding at any one time (but this Clause 5.8 does not apply after the Commencement Date). 5.9 Currency of Term-out Advances Subject to Clause 11.4 (Currency), once the currency of a Term-out Advance has been selected in the applicable Request, it will remain in that currency throughout its Term. 5.10 Term-out Advances in Optional Currencies (a) If a Term-out Advance is denominated in an Optional Currency (other than an Optional Currency that is redenominated under Clause 11.4 (Currency)), there shall be calculated in respect of each applicable Interest Period the difference between the amount of the Term-out Advance (in that Optional Currency) for the current Interest Period and for the next Interest Period. The amount of the Term-out Advance for the next Interest Period will be determined by notionally converting into that Optional Currency the Original Euro Amount of the Term- - -------------------------------------------------------------------------------- 22 - -------------------------------------------------------------------------------- out Advance on the basis of the Agent's Spot Rate of Exchange three Business Days before the start of that Interest Period. (b) At the end of the current Interest Period (but subject always to paragraph (c) below): (i) if the amount of the Term-out Advance for the next Interest Period is less than for the preceding Interest Period, the relevant Borrower shall repay the difference; or (ii) if the amount of the Term-out Advance for the next Interest Period is greater, each Bank shall, provided the conditions specified in Clause 4.2 (Further Conditions Precedent) are satisfied, forthwith make available to the Agent for the relevant Borrower its participation in the difference. (c) If the Agent's Spot Rate of Exchange for the next Interest Period shows an appreciation or depreciation of the Optional Currency against the euro of less than five per cent. when compared with the Original Exchange Rate, no amounts are payable in respect of the difference. In this Clause 5.10 and in Clause 5.11 (Prepayments and repayments) "Original Exchange Rate" means the Agent's Spot Rate of Exchange used for determining the amount of the Optional Currency for the Interest Period which is the later of the following: (i) the first Interest Period applicable to the Term-out Advance; and (ii) the most recent Interest Period immediately prior to which a difference was required to be paid under this Clause 5.10. 5.11 Prepayments If a Term-out Advance is to be prepaid by reference to an Original Euro Amount, the Optional Currency amount to be prepaid shall be determined by reference to the Agent's Spot Rate of Exchange last used for determining the Optional Currency amount of that Term-out Advance under this Clause 5 or, if applicable, the Original Exchange Rate (as defined in Clause 5.10 (Term-out Advances in Optional Currencies)). 5.12 Notification The Agent shall notify the Banks and the Parent of Optional Currency amounts (and the applicable Agent's Spot Rate of Exchange) promptly after they are ascertained. 6. BILL FACILITY 6.1 Receipt of Requests Each Borrower may utilise the Bill Facility under Tranche A or Tranche B if the Agent receives, not later than 10.00 a.m. on the Business Day before the proposed Utilisation Date, a duly completed Request. 6.2 Form of Requests A Request will not be regarded as being duly completed unless: - -------------------------------------------------------------------------------- 23 - -------------------------------------------------------------------------------- (a) the Utilisation Date is a Business Day; (b) the Requested Amount is a minimum of (Pounds)50,000,000 (or the undrawn balance of the Tranche A Total Commitments or Tranche B Total Commitments as the case may be) or such other amount as the Agent and the Borrower may agree; and (c) only one Term is specified which: (i) does not overrun the Tranche A Term Date (in respect of Tranche A Bills) or the Tranche B Final Maturity Date (in respect of Tranche B Bills); and (ii) is a period of between 14 days and 187 days. 6.3 Amount of Bills to be accepted by each Bank The aggregate principal amount of the Bills to be accepted by a Bank will be the proportion of the Requested Amount which: (a) in the case of Tranche A Bills, its Tranche A Commitment bears to the Tranche A Total Commitments; and (b) in the case of Tranche B Bills, its Tranche B Commitment bears to the Tranche B Total Commitments, in each case on receipt of the relevant Request. 6.4 Notification of the Banks The Agent shall, not later than 1.00 p.m. on the Business Day before the proposed Utilisation Date, notify each Bank of the details of the requested Bills and the aggregate principal amount of the Bills to be accepted by it. 6.5 Acceptance of Bills (a) The Agent shall, not later than 11.00 a.m. on the proposed Utilisation Date, deliver to each Bank Bills completed in accordance with Clause 7.1 (Holding and completion of Bills). (b) Each Bank shall accept the Bills delivered to it in accordance with paragraph (a) above by the proposed Utilisation Date. (c) The Agent shall, not later than 11.30 a.m. on the proposed Utilisation Date, notify the Parent and each Bank of the applicable EBDR. (d) Subject to the terms of this Agreement, each Bank shall pay to the Agent for the relevant Obligor an amount equal to: (i) the amount which the Bank would have received as the proceeds of discounting if it had discounted the Bills accepted by it at the applicable EBDR; less - -------------------------------------------------------------------------------- 24 - -------------------------------------------------------------------------------- (ii) commission calculated at the Acceptance Commission Rate on the aggregate principal amount of those Bills. 6.6 Advances as an alternative (a) If it is unlawful, impracticable or contrary to the Bank of England's limits on the discounting of Bills applicable to any Bank for a Bank to accept any Bills, or if a Bank's acceptances are ineligible for discounting at the Bank of England, then it may notify the Agent accordingly by no later than 4.00 p.m. on the Business Day before the proposed Utilisation Date. (b) If a Bank notifies the Agent in accordance with paragraph (a) above, then, subject to the terms of this Agreement, the Bank shall instead make an Advance in accordance with Clause 5 (Advance Facilities) in Sterling on the relevant Utilisation Date in a principal amount equal to the aggregate principal amount of the Bills which it would otherwise have been obliged to accept pursuant to this Clause 6 (Bill Facility) and for a Term equal to the Term of those Bills. 7. BILLS 7.1 Holding and completion of Bills (a) Each Borrower shall ensure that the Agent has a sufficient stock of Bills before delivering any Request for a Utilisation comprising Bills. (b) Each Bill shall: (i) be drawn by the Borrower in its own favour and endorsed by it in blank; (ii) be undated; (iii) have the Maturity Date, the drawee and the face amount left blank; and (iv) be claused in a manner which complies with the Bank of England's requirements for Eligible Bills at that time. (c) Subject to the terms of this Agreement, the Agent shall and is irrevocably authorised by the Borrowers to: (i) sign each Bill on behalf of the Borrower concerned and date it with its Utilisation Date; (ii) insert in each Bill the name of the Bank on which it is drawn, its face amount and its Maturity Date; and (iii) deliver each completed Bill to the Bank on which it is drawn for acceptance in accordance with this Agreement. (d) The Agent shall at the request of a Borrower notify that Borrower what stock of Bills (and in what denominations) are held by the Agent. - -------------------------------------------------------------------------------- 25 - -------------------------------------------------------------------------------- 7.2 Rounding of principal amount of Bills If necessary, the Agent may round the principal amount of the relevant Bills to be accepted by each Bank to ensure that each Bill has a principal amount of an integral multiple of (Pounds)10,000, being not less than (Pounds)250,000 nor more than (Pounds)5,000,000. 7.3 Discounting of Bills Each Bank may arrange for a Bill accepted by it to be discounted on its behalf in the London discount market or elsewhere or discount the Bill itself. 7.4 Information relating to Bills Each Borrower shall, promptly on request by a Finance Party, supply to the Agent for that Finance Party any information relating to any Bill (including the underlying trade transaction for that Bill) as that Finance Party may reasonably require or which may be required by the Bank of England or any other fiscal or monetary authority in the U.K. 7.5 Eligible Bills Each Borrower shall ensure that any Bill drawn by it and accepted by a Bank is, assuming that the relevant Bank is a bank whose acceptances are then being treated as eligible acceptances by the Bank of England, eligible for rediscounting at the Bank of England. 8. REPAYMENT 8.1 Repayment of Tranche A Advances (a) Each Borrower shall repay each Tranche A Advance made to it in full on its Maturity Date to the Agent for the relevant Bank but since Tranche A is available on a revolving basis amounts repaid may be reborrowed subject to the terms of this Agreement. Subject to paragraph (b) below, no Tranche A Advance may be outstanding after the Tranche A Term Date. (b) At any time and from time to time prior to the Tranche A Term Date, any Borrower may, by delivery of a duly completed Request to the Agent under Clause 5 (Advance Facilities) (who shall send a copy of the same to the Banks), elect to draw one or more Advances (each a "Term-out Advance") under Tranche A with a Maturity Date after the Tranche A Term Date. No Term-out Advance, once repaid or prepaid, may be reborrowed (other than under Clause 5.10 (b) (Term-out Advances in Optional Currencies)). (c) No Tranche A Advance, other than a Term-out Advance, may be outstanding after the Tranche A Term Date. No Term-out Advance may be outstanding after the date falling on the third Anniversary. 8.2 Repayment of Tranche B Advances Each Borrower shall repay each Tranche B Advance made to it in full on its Maturity Date to the Agent for the relevant Banks but since Tranche B is available on a revolving basis amounts repaid may be reborrowed subject to the terms of this Agreement. No Tranche B Advance may be outstanding after the Tranche B Final Maturity Date. - -------------------------------------------------------------------------------- 26 - -------------------------------------------------------------------------------- 8.3 Payment of Bills Each Borrower shall pay an amount equal to the principal amount of each Bill on its Maturity Date to the Agent for the relevant Bank. No Tranche A Bill may be outstanding after the Tranche A Term Date and no Tranche B Bill may be outstanding after the Tranche B Final Maturity Date. 8.4 Repayment of Swingline Advances (a) Each Borrower shall repay each Swingline Advance made to it on its Maturity Date to the Agent or, in the case of Swingline Advances in U.S. Dollars, the US Swingline Agent for the Swingline Banks. No Swingline Advance may be outstanding after the Tranche B Final Maturity Date. (b) Each Swingline Advance shall be repaid on its Maturity Date in accordance with paragraph (a) above. In the event that a Swingline Advance is not so repaid each Bank (other than a Swingline Bank) will within four Business Days of a demand to that effect from the Agent or, as the case may be, the US Swingline Agent pay to the Agent or, as the case may be, the US Swingline Agent on behalf of the Swingline Banks and their Swingline Affiliates an amount equal to its Agreed Percentage of the principal of such Swingline Advance and accrued interest (including default interest) thereon to the date of actual payment by such Bank. The relevant Borrower shall forthwith reimburse the Banks (through the Agent or, as the case may be, the US Swingline Agent) in full for each payment made by the Banks under this paragraph (b). Each amount the relevant Borrower is required to reimburse to the Banks under this paragraph (b) shall be deemed to be an overdue amount under Clause 10.4 (Default Interest) which fell due for payment by the relevant Borrower on the day on which the payment by the Banks giving rise to the reimbursement obligation was made and shall accrue default interest under Clause 10.4 (Default Interest) accordingly. 9. PREPAYMENT AND CANCELLATION 9.1 Automatic Cancellation of the Total Commitments (a) The undrawn Tranche A Commitment of each Bank shall be automatically cancelled at the close of business in London on the last day of the Tranche A Availability Period. (b) The Tranche B Commitment of each Bank (including the Swingline Commitments of the Swingline Banks) shall be automatically cancelled at the close of business in London on the last day of the Tranche B Availability Period. 9.2 Voluntary Cancellation (a) The Parent may, by giving not less than five days' prior written notice to the Agent specifying the relevant Tranche(s), cancel the unutilised portion of the Tranche A Total Commitments or the Tranche B Total Commitments or both, in whole or in part (but, if in part, in a minimum amount of euro 50,000,000 and in integral multiples of euro 10,000,000 in aggregate for both Tranches). Any cancellation in part of the Tranche B Total Commitments shall be applied against the Tranche B Commitment of each Bank pro rata. Any cancellation in part of the - -------------------------------------------------------------------------------- 27 - -------------------------------------------------------------------------------- Tranche B Total Commitments shall be applied against the Tranche B Commitment of each Bank pro rata. (b) Whenever part of the Tranche B Total Commitments are cancelled, the Swingline Commitments shall not be cancelled unless (i) the amount of the Swingline Total Commitments would exceed the Tranche B Total Commitments after such cancellation or (ii) the Swingline Commitment of any Swingline Bank would exceed its Tranche B Commitment after such cancellation. In any such case, the Swingline Total Commitments shall, at the same time as the cancellation of the Tranche B Total Commitments takes effect, be cancelled by such amount as is necessary to ensure that after the relevant cancellation of the Tranche B Total Commitments the Swingline Total Commitments do not exceed the Tranche B Total Commitments and the Swingline Commitment of each Swingline Bank does not exceed its Tranche B Commitment. 9.3 Voluntary prepayment (a) Any Borrower may, by giving not less than five days' prior notice to the Agent, prepay without premium or penalty the whole or any part of any Advance made to it under Tranches A or B (but, if in part, in an aggregate minimum Original Euro Amount, taking all prepayments made by all the Borrowers under both Tranches on the same day together, of euro 50,000,000 and in integral multiples of euro 10,000,000). (b) Any voluntary prepayment under paragraph (a) above will: (i) be applied against Tranche A or B in such proportions as may be specified by the Borrower in the notice of prepayment or, if not specified, against Tranche A; and (ii) be applied against all the Advances of all the Banks in the relevant Tranche(s) pro rata. 9.4 Mandatory Prepayment Event If at any time any single person, or group of persons acting in concert (as defined in the City Code on Takeovers and Mergers), acquires control (as defined in Section 416 of the Income and Corporation Taxes Act 1988) of the Parent then the Parent will notify the Agent within thirty days and the Agent will, if instructed to do so by the Majority Banks, by notice to the Parent given no earlier than ninety days after the date that notice is given to the Agent: (a) call for prepayment of all the Advances on such date as it may specify in such notice whereupon all the Advances shall become due and payable on such date together with accrued interest and any other sums then owed by the Obligors under the Finance Documents; (b) call for each Borrower to perform its obligations under Clause 8.3 (Payment of Bills) in respect of all outstanding Bills on such date as it may specify in such notice as if such date were the Maturity Date of each of those Bills; and (c) declare that the Total Commitments shall be cancelled, whereupon the Total Commitments shall be cancelled and the Commitment of each Bank shall be cancelled and reduced to zero. - -------------------------------------------------------------------------------- 28 - -------------------------------------------------------------------------------- 9.5 Changes to Borrowers (a) Any Borrower (other than the Parent) in respect of which no Utilisation, interest or related amount is outstanding may, at the request of the Parent, cease to be a Borrower by giving not less than two Business Days' notice to the Agent, which, upon taking effect, shall discharge that Borrower's obligations under this Agreement. No such discharge will take effect, however, if at the time or immediately thereafter any Default has occurred which is continuing. (b) Any Borrower (the "Existing Borrower") will be released from its obligations under this Agreement as a Borrower (and thereupon cease to be a "Borrower") upon another Borrower (the "Substitute Borrower") assuming the obligations in respect thereof of the Existing Borrower provided that: (i) any such substitution shall take effect on and from the later of the day upon which the Agent notifies the Parent in writing that it is satisfied with the compliance with the matters set out in paragraph (b)(iii) below and the date for substitution specified in the relevant notice under paragraph (b)(ii) below; (ii) notice of the proposed substitution has been delivered by the Parent to the Agent not less than two Business Days prior to the proposed substitution; and (iii) the Substitute Borrower enters into a Novation Agreement with the Existing Borrower, the Parent and the Agent on behalf of the Finance Parties in the form of Part III of Schedule 6 together with such amendments as the Agent may, at the request of the Parent, approve. Each Bank authorises the Agent to sign on its behalf any Novation Agreement entered into in accordance with this paragraph (b). 9.6 Right of prepayment and cancellation If any Borrower is required to pay or is notified by any Bank in writing that it will be required to pay any amount to a Bank under Clause 12 (Taxes) or Clause 15 (Increased Costs), or if circumstances exist such that a Borrower will be required to pay any amount to a Bank under Clause 12 (Taxes), the Parent may, whilst the circumstances giving rise or which will give rise to the requirement continue, serve a notice of prepayment and cancellation on that Bank through the Agent. On the date falling three Business Days after the date of service of the notice: (a) each Borrower shall prepay all outstanding Advances made to it by that Bank; (b) each Borrower shall perform its obligations under Clause 8.3 (Payment of Bills) in respect of all outstanding Bills accepted by that Bank as if such third Business Day were the Maturity Date of each of those Bills; and (c) the Bank's Tranche A Commitment, and its Tranche B Commitment (including its Swingline Commitment (if any)) shall be permanently cancelled on the date of service of the notice. - -------------------------------------------------------------------------------- 29 - -------------------------------------------------------------------------------- 9.7 Miscellaneous provisions (a) Any notice of prepayment and/or cancellation under this Agreement is irrevocable. The Agent shall notify the Banks promptly of receipt of any such notice. (b) All prepayments under this Agreement shall be made together with accrued interest on the amount prepaid and any other amounts due under this Agreement in respect of that prepayment (including, but not limited to, any amounts payable under Clause 25.2(b) (Other indemnities) if not made on a Maturity Date for the relevant Tranche A Advance, Tranche B Advance or Swingline Advance). (c) No prepayment or cancellation is permitted except in accordance with the express terms of this Agreement. (d) Subject to the terms of this Agreement, any amount prepaid under Clause 9.3 (Voluntary prepayment) in respect of Tranche A (other than in respect of a Term-out Advance) or Tranche B may be reborrowed. No amount of the Tranche A Total Commitments or Tranche B Total Commitments (including the Swingline Total Commitments) cancelled under this Agreement may subsequently be reinstated. 10. INTEREST 10.1 Interest Periods for Term-Out Advances The life of each Term-out Advance is divided into successive periods (each an "Interest Period") for the calculation of interest. The first Interest Period will be the period selected in the Request for that Term-out Advance and each subsequent Interest Period will be the period selected by the relevant Borrower by notice to the Agent received not later than 3.00 p.m. on the third Business Day before the end of the then current Interest Period or, in the case of a Term-out Advance in Sterling, not later than 3.00 p.m. on the day before the last day of the then current Interest Period (being one month, two, three or six months or in any case such other period as the Agent and all the Banks may agree from time to time which does not overrun the third Anniversary). If no such selection notice is received within the time limit mentioned above, the new Interest Period will be three months or such shorter period as is required to ensure that it does not overrun the third Anniversary. 10.2 Interest rate for all Advances (a) The rate of interest on each Tranche A Advance (except a Term-out Advance) and Tranche B Advance for its Term and for each Term-out Advance for its Interest Period is the rate per annum determined by the Agent to be the aggregate of: (i) the Margin; (ii) LIBOR; and (iii) the MLA Cost, if applicable. - -------------------------------------------------------------------------------- 30 - -------------------------------------------------------------------------------- (b) The rate of interest on each Swingline Advance during its Term is the rate per annum determined by the Agent or, in respect of Swingline Advances in U.S. Dollars, the US Swingline Agent, to be the Swingline Rate for each day during its Term. 10.3 Due dates Except as otherwise provided in this Agreement, accrued interest on each Advance is payable by the relevant Borrower on its Maturity Date (or the last day of an Interest Period for a Term-out Advance) and also, in the case of any Advance with a Term or Interest Period longer than six months, at six-monthly intervals during its Term or Interest Period for so long as the Term or Interest Period continues. 10.4 Default interest (a) If a Borrower fails to pay any amount payable by it under this Agreement, it shall forthwith on demand by the Agent pay interest on the overdue amount from the due date up to the date of actual payment, both before and after judgment, at a rate (the "default rate") determined by the Agent or, as the case may be, the US Swingline Agent to be one per cent. per annum above the rate which would have been payable if the overdue amount had, during the period of non-payment, constituted a Tranche A Advance in the currency of the overdue amount for such successive Terms of such duration as the Agent may determine (each a "Designated Term") provided that, in the case of principal falling due before its Maturity Date, the default rate up to that Maturity Date will be one per cent. per annum above the rate applicable to that principal immediately before it fell due. (b) The default rate will be determined on each Business Day or the first day of, or two Business Days before the first day of, the relevant Designated Term, as appropriate. (c) If the Agent or, as the case may be, the US Swingline Agent determines that deposits in the currency of the overdue amount are not at the relevant time being made available by the Reference Banks to leading banks in the London interbank market, the default rate will be determined by reference to the cost of funds to each Bank from whatever sources it may reasonably select after consultation with the Reference Banks. (d) Default interest will be compounded at the end of each Designated Term. 10.5 Notification of rates of interest The Agent or, as the case may be, the US Swingline Agent will promptly notify each relevant Party of the determination of a rate of interest under this Agreement. 11. PAYMENTS 11.1 Place of Payment All payments by an Obligor or a Bank under this Agreement shall be made to the Agent or (if the payment relates to Swingline Advances in U.S. Dollars) the US Swingline Agent to its account at such office or bank in the principal financial centre of the country of the currency concerned (or, in the case of euros, in the principal financial centre of such of the Treaty - -------------------------------------------------------------------------------- 31 - -------------------------------------------------------------------------------- Countries or London as it may reasonably specify) as it may notify to the Obligor or Bank for this purpose. 11.2 Funds Payments under this Agreement to the Agent or (if the payment relates to Swingline Advances in U.S. Dollars) the US Swingline Agent shall be made for value on the due date at such times and in such funds as it may specify to the Party concerned as being customary at the time for the settlement of transactions in the relevant currency in the place for payment. 11.3 Distribution (a) Each payment received by the Agent or, as the case may be, the US Swingline Agent, under this Agreement for another Party shall, subject to paragraphs (b) and (c) below, be made available by the Agent or, as the case may be, the US Swingline Agent to that Party by payment (on the date and in the currency and funds of receipt) to its account with such bank in the principal financial centre of the country of the relevant currency (or, in the case of euros, in the principal financial centre of such of the Treaty Countries or London as the Agent or, as the case may be, the US Swingline Agent, may reasonably specify) as it may notify to the Agent or, as the case may be, the US Swingline Agent, for this purpose by not less than five Business Days' prior notice. (b) The Agent or, as the case may be, the US Swingline Agent may apply any amount received by it for an Obligor in or towards payment (on the date and in the currency and funds of receipt) of any amount due from an Obligor under this Agreement or in or towards the purchase of any amount of any currency to be so applied. (c) Where a sum is to be paid under this Agreement to the Agent or, as the case may be, the US Swingline Agent for the account of another Party, the Agent or, as the case may be, the US Swingline Agent is not obliged to pay that sum to that Party until it has established that it has actually received that sum. The Agent or, as the case may be, the US Swingline Agent may, however, assume that the sum has been paid to it in accordance with this Agreement and, in reliance on that assumption, make available to that Party a corresponding amount. If the sum has not been made available but the Agent or, as the case may be, the US Swingline Agent has paid a corresponding amount to another Party, that Party shall forthwith on demand refund the corresponding amount to the Agent or, as the case may be, the US Swingline Agent, together with interest on that amount from the date of payment to the date of receipt, calculated at a rate reasonably determined by the Agent or, as the case may be, the US Swingline Agent, to reflect its cost of funds. 11.4 Currency (a) In this Agreement: (i) a repayment or prepayment of an Advance is payable in the currency in which the Advance is denominated; (ii) interest is payable in the currency in which the relevant amount in respect of which it is payable is denominated; - -------------------------------------------------------------------------------- 32 - -------------------------------------------------------------------------------- (iii) amounts payable in respect of costs, expenses, taxes and the like are payable in the currency in which they are incurred; and (iv) any other amount payable under this Agreement is, except as otherwise provided in this Agreement, payable in euros. (b) Until the Commencement Date, all references to euros will be construed as references to ECU and will be payable in or calculated by reference to ECU at the rate of one ECU for one euro. (c) On and after the Commencement Date: (i) any Advance in the currency of a Treaty Country will be made in the euro unit; (ii) each obligation under this Agreement which has been denominated in a national currency unit shall only be redenominated into the euro unit at the time provided for and in accordance with EMU legislation; and (iii) any amount payable by the Agent to the Banks under this Agreement in the currency of a Treaty Country will be paid in the euro unit. (d) If and to the extent that any EMU legislation provides that an amount denominated either in the euro unit or in the national currency unit of a given Treaty Country and payable within that Treaty Country by crediting an account of the creditor can be paid by the debtor either in the euro unit or in that national currency unit, each Party shall be entitled to pay or repay that amount either in the euro unit or in the national currency unit. 11.5 Set-off and counterclaim All payments made by an Obligor under this Agreement shall be made without set-off or counterclaim. 11.6 Non-Business Days (a) If a payment under this Agreement is due on a day which is not a Business Day, the due date for that payment shall instead be the next Business Day in the same calendar month (if there is one) or the preceding Business Day (if there is not). If, however, the extension of the due date would mean that a Bill would have a Term of more than 187 days, then the due date for that payment shall instead be the preceding Business Day. (b) During any extension of the due date for payment of any principal under this Clause 11.6 interest is payable on the principal at the rate payable on the original due date. 11.7 Partial payments If the Agent receives a payment insufficient to discharge all the amounts then due and payable by an Obligor under this Agreement, the Agent shall apply that payment towards the obligations of the Obligors under this Agreement in the following order: (a) first, in or towards payment pro rata of any unpaid costs, fees and expenses of the Agent under this Agreement; - -------------------------------------------------------------------------------- 33 - -------------------------------------------------------------------------------- (b) secondly, in or towards payment of any accrued fees due but unpaid under Clause 22.3 (Up-front fee); (c) thirdly, in or towards payment pro rata of any accrued fees due but unpaid under Clauses 22.1 (Commitment fee) and 22.4 (Utilisation fee); (d) fourthly, in or towards payment pro rata of any interest due but unpaid under this Agreement; (e) fifthly, in or towards payment pro rata of any principal due but unpaid under this Agreement; and (f) sixthly, in or towards payment pro rata of any other sum due but unpaid under this Agreement. The Agent shall, if so directed by all the Banks, vary the order set out in paragraphs (c), (d) and (e) above. 12. TAXES 12.1 Gross-up (a) All payments by an Obligor under the Finance Documents shall be made free and clear of and without deduction for or on account of any Applicable Taxes, except to the extent that the Obligor is required by law to make payment subject to any Applicable Taxes. Subject to paragraph (b) below and Clauses 12.2 (Qualifying Bank) and 12.3 (U.S. Taxes), if any Applicable Taxes or amounts in respect of Applicable Taxes must be deducted or withheld from any amounts payable or paid by an Obligor, or paid or payable by the Agent or, as the case may be, the US Swingline Agent, to a Finance Party under the Finance Documents, the Obligor shall pay such additional amounts as may be necessary to ensure that the relevant Finance Party receives and retains (after any deduction or withholding in respect of such additional amounts) a net amount equal to the full amount which it would have received and so retained had payment not been made subject to Applicable Taxes. (b) An Obligor is not obliged to pay any additional amount pursuant to paragraph (a) above in respect of any deduction which would not have been required if the relevant Finance Party had obtained any exemption from the deduction or withholding of Applicable Taxes which it is able to obtain. (c) Each Obligor will, within thirty days of the later of: (i) any payment being made in respect of which tax is required by law to be deducted or withheld; or (ii) the date on which the Obligor is required to account for the amount deducted or withheld to the appropriate tax authority, deliver to the Agent for the relevant Bank evidence (including any relevant tax receipts) that the amount deducted or withheld has been duly accounted for to the appropriate tax authority. - -------------------------------------------------------------------------------- 34 - -------------------------------------------------------------------------------- 12.2 Qualifying Bank (a) If: (i) on the Signing Date, any Bank which is a Party on the Signing Date is not a Qualifying Bank; or (ii) after the Signing Date, a Bank ceases to be a Qualifying Bank other than as a result of the introduction of, suspension, withdrawal or cancellation of, or change in, or change in the official interpretation, administration or official application of, any law, regulation having the force of law, tax treaty or any published practice or published concession of the U.K. Inland Revenue or any other relevant taxing or fiscal authority in any jurisdiction with which the relevant Bank has a connection, occurring after the Signing Date; or (iii) on the date of any novation, transfer or assignment under Clause 28 (Changes to the Parties), a New Bank (as such term is defined in that Clause) is not a Qualifying Bank, then no Obligor shall be liable to pay to that Bank under Clause 12.1 (Gross-up) any amount in respect of taxes levied or imposed by the U.K. or any taxing authority of or in the U.K. in excess of the amount it would have been obliged to pay if that Bank had been a Qualifying Bank on such date or had not ceased to be a Qualifying Bank. (b) Each Bank represents to each Obligor that on the date on which it becomes a Party to this Agreement (and on the date that the Bank designates a new Facility Office) it is a Qualifying Bank and a U.S. Qualifying Bank. Each Bank will notify the Parent through the Agent as soon as practicable if it ceases to be a Qualifying Bank or a U.S. Qualifying Bank. 12.3 U.S. Taxes (a) No U.S. Borrower shall be required to pay any additional amount pursuant to Clause 12.1 (Gross-up) in respect of United States federal income, branch profits or franchise taxes with respect to a sum payable by it pursuant to this Agreement to a Bank if such Bank: (i) on the date it becomes a Party to this Agreement or has designated a new Facility Office either: (1) in the case of a Bank which is not a United States person (as such term is defined in Section 7701(a)(30) of the Code), is not entitled to submit a Form 1001 or Form W-8 (relating to such Bank and claiming a complete exemption from withholding on interest payable pursuant to this Agreement) or a Form 4224 (relating to interest payable pursuant to this Agreement) (or any successor forms) with respect to interest payable pursuant to this Agreement; or (2) in the case of a Bank which is a United States person, if Clause 12.1 (Gross-up) would apply (other than as a result of the introduction of, suspension, withdrawal or cancellation of, or change in the official interpretation, administration or official application of, any law, regulation having the force - -------------------------------------------------------------------------------- 35 - -------------------------------------------------------------------------------- of law, tax treaty or any published practice or published concession of the United States Internal Revenue Service or any other relevant taxing or fiscal authority in any jurisdiction with which the relevant Bank has a connection, occurring after the date the Bank becomes a Party to this Agreement or has designated a new Facility Office); or (ii) has failed to submit any form, certificate or other information with respect to such sum payable that it was required to file pursuant to paragraph (b) below and is entitled to file under applicable law, and a Bank (or its Facility Office designated in respect of payments made by a U.S. Borrower) will be a "U.S. Qualifying Bank" for the purposes of lending to a U.S. Borrower unless it falls within paragraphs (i) or (ii) above. (b) If a Bank is not a United States person (as such term is defined in Section 7701(a)(30) of the Code) it shall (if and to the extent that it is entitled to do so under applicable law) submit as soon as reasonably practicable in duplicate to each U.S. Borrower duly completed and signed copies of either Form 1001 (or, in the case of payment made after 31st December, 1998, Form W-8) of the United States Internal Revenue Service (relating to such Bank and claiming complete exemption from withholding on all amounts (to which such withholding would otherwise apply) to be received by such Bank, including fees, pursuant to this Agreement in connection with any borrowing by such U.S. Borrower) as a result of a tax treaty concluded with the United States or Form 4224 of the United States Internal Revenue Service (relating to all amounts (to which such withholding would otherwise apply) to be received by such Bank, including fees, pursuant to this Agreement in connection with any borrowing by such U.S. Borrower). Thereafter and from time to time at the request of a U.S. Borrower, such Bank shall (if and to the extent that it is entitled to do so under applicable law) submit to each U.S. Borrower such additional duly completed and signed copies of one or the other such Forms (or such successor Forms as shall be adopted from time to time by the relevant United States taxation authorities) or any additional information as may be required under then current United States law or regulations to claim the inapplicability of or exemption from United States withholding taxes on payments in respect of all amounts (to which such withholding would otherwise apply) to be received by such Bank, including fees, pursuant to this Agreement in connection with any borrowing by such U.S. Borrower. (c) If a Bank is a United States person (as such term is defined in Section 7701(a)(30) of the Code) it shall, on the date hereof, and thereafter upon the request of each U.S. Borrower, submit in duplicate to each U.S. Borrower a certificate to the effect that it is such a United States person and shall (if and to the extent that it is entitled to do so under applicable law) upon the request of a U.S. Borrower submit any additional information that may be necessary to avoid United States withholding taxes on all payments, including fees, (to which such withholding would otherwise apply) to be received pursuant to this Agreement in connection with any borrowing by such U.S. Borrower. (d) To the extent that any U.S. Borrower becomes aware of the need for any other such Form or information it will notify the relevant Banks as soon as reasonably practicable thereafter and such Bank shall (if and to the extent that it is entitled to do so under applicable law) submit as soon as practicable in duplicate to each U.S. Borrower duly completed and signed copies of any such Form or information. - -------------------------------------------------------------------------------- 36 - -------------------------------------------------------------------------------- 12.4 Collecting Agents Rules In relation to the Facilities, each Bank represents to the Agent that, on the date on which it becomes a Party to this Agreement, it is: (a) either: (i) not resident in the United Kingdom for United Kingdom tax purposes; or (ii) a bank as defined in section 840A of the Income and Corporation Taxes Act 1988 and resident in the United Kingdom; and (b) beneficially entitled to the principal and interest payable by the Agent to it under this Agreement, and it shall forthwith notify the Agent if either representation ceases to be correct. 12.5 Tax Credit (a) If an Obligor makes a payment pursuant to Clause 12.1 (Gross up) for the account of any Finance Party and such Finance Party has received or been granted a credit against, or relief or remission or repayment of, any tax paid or payable by it (a "Tax Credit") which is attributable to that payment or the corresponding payment under the Finance Document such Finance Party shall, to the extent that it can do so without prejudice to the retention of the amount of such credit, relief, remission or repayment, pay to the Obligor concerned such amount as is attributable to such payments and which will leave the Finance Party (after such payment) in no better or worse position than it would have been if the Obligor concerned had not been required to make any deduction or withholding. (b) Nothing in this Clause 12.5 shall interfere with the right of a Finance Party to arrange its tax affairs in whatever manner it thinks fit and without limiting the foregoing no Finance Party shall be under any obligation to claim a Tax Credit or to claim a Tax Credit in priority to any other claims, relief, credit or deduction available to it (however, each Bank shall, if practicable, seek any Tax Credit available to it consequent upon any deductions for tax being made from any payment to it under Clause 12.1 (Gross up)). No Finance Party shall be obliged to disclose any confidential information relating to its tax affairs or any computations in respect thereof. (c) If any Finance Party makes any payment to an Obligor pursuant to paragraph (a) above and that Finance Party (acting reasonably) subsequently determines that the credit, relief, remission or repayment in respect of which such payment was made was not available to it or has been withdrawn from it or that it was unable to use such credit, relief, remission or repayment in full, the Obligor shall reimburse that Finance Party to the extent (but not exceeding the relevant payment by that Finance Party under paragraph (a) above) that it determines (acting reasonably) to have been required to place it in the same after-tax position as it would have been in if such credit, relief, remission or repayment had been obtained and fully used and retained by that Finance Party. - -------------------------------------------------------------------------------- 37 - -------------------------------------------------------------------------------- 13. MARKET DISRUPTION 13.1 Absence of quotations If, in relation to any Advance, LIBOR is to be determined in accordance with paragraph (b) of its definition but a Reference Bank does not supply an offered rate by 1.00 p.m. on a Rate Fixing Day, the applicable LIBOR shall, subject to Clause 13.2 (Market disturbance), be determined on the basis of the quotations of the remaining Reference Banks. 13.2 Market disturbance Notwithstanding anything to the contrary herein contained, if and each time that prior to or on a Utilisation Date relative to an Advance to be made: (a) LIBOR is to be determined in accordance with paragraph (b) of its definition and only one or no Reference Bank supplies a rate for the purposes of determining LIBOR; or (b) only one or no Reference Bank supplies a rate for the purposes of determining EBDR; or (c) the Agent is notified by the Majority Banks that: (i) deposits in the currency of that Advance are not in the ordinary course of business available in the London interbank market for a period equal to the Term or Interest Period concerned in amounts sufficient to fund their participations in that Advance; or (ii) by reason of circumstances affecting the London interbank market generally, adequate and fair means do not exist for ascertaining the LIBOR applicable to such Advance during its Term or Interest Period or LIBOR does not adequately represent the cost of funding to the Majority Banks; or (iii) adequate and fair means do not exist for ascertaining EBDR, the Agent shall promptly give written notice of such determination or notification to the Parent and to each of the Banks. 13.3 Alternative Rates If the Agent gives a notice under Clause 13.2 (Market disturbance): (a) the Parent and the Banks may (through the Agent) agree that, if not already drawn, the Advances concerned shall not be borrowed or Bills should not be drawn; or (b) in the absence of such agreement: (i) the Term or Interest Period of the Advances concerned shall be one month; - -------------------------------------------------------------------------------- 38 - -------------------------------------------------------------------------------- (ii) in the case of Clause 13.2(c) (Market disturbance), the Advances shall be made in euros, in an amount equal to the Original Euro Amount of the Advance concerned; (iii) in the case of Bills where Clauses 13.2(b) and (c)(iii) apply, the relevant Bills shall not be accepted and the relevant Banks will instead make an Advance in Sterling in accordance with Clause 6.6 (Advances as an alternative); and (iv) during the Term or Interest Period of each Advance concerned (other than an Advance under (b)(iii) above unless Clause 13.2(a) or (c) (Market Disturbance) applies to that Advance) the rate of interest applicable to the participation of each Bank in such Advance shall be the Margin plus, if applicable, MLA Cost plus the rate per annum notified by the Bank concerned to the Agent before the last day of such Term or Interest Period to be that which expresses as a percentage rate per annum the cost to such Bank of funding its participation in such Advance from whatever sources it may reasonably select with a view to providing funding at the lowest reasonably practicable rate. 14. AVAILABILITY OF CURRENCIES 14.1 Revocation of currency If the currency selected in accordance with Clause 5.2(b) (Completion of Requests) is an Optional Currency other than Sterling or U.S. Dollars, and, before 9.30 a.m. on any Rate Fixing Day relating to the start of any Term, the Agent receives notice from a Bank that: (a) it is impossible for that Bank to fund its participation in the relevant Advance in the relevant Optional Currency during its Term in the ordinary course of business in the London interbank market; and/or (b) the use of the proposed Optional Currency would contravene any law or regulation, the Agent shall give notice to the relevant Borrower to that effect before 11.00 a.m. on that day. In this event: (i) the relevant Borrower and the Bank may agree that the Advance will not be made; or (ii) in the absence of agreement: (1) that Bank's participation in the Advance (or, if more than one Bank is similarly affected, those Banks' participations in the Advance) shall be treated as a separate Advance denominated in Sterling; and (2) in the definition of "LIBOR" (insofar as it applies to that Advance) in Clause 1.1 (Definitions) there shall be substituted for the time "11.00 a.m." the time "1.00 p.m.". - -------------------------------------------------------------------------------- 39 - -------------------------------------------------------------------------------- 14.2 ECU (a) If, at any time prior to the Commencement Date: (i) the ECU ceases to be utilised as the basic accounting unit of the European Union, (otherwise than as a result of the introduction of the euro); or (ii) the ECU ceases to be used in the European Monetary System (otherwise than as a result of the introduction of the euro); or (iii) for reasons affecting the market in ECU generally, ECU are not freely traded between banks in the London interbank market; or (iv) it becomes illegal or impossible for payments to be made under this Agreement in ECU, then: (1) the Agent shall notify the Parent and the Banks promptly upon becoming aware of the event; (2) the Banks shall not be obliged to make any Advances denominated in ECU on or after the date of that notification; and (3) subsequently each amount which would otherwise have been payable by the Borrowers under this Agreement in ECU shall be paid by the Borrowers in Sterling or another currency acceptable to the Majority Banks (the "replacement currency") and the amount of the replacement currency so payable will be determined in accordance with paragraph (b) below. (b) (i) The equivalent in the replacement currency of any Advance in ECU for the purposes of paragraph (a) above will be calculated by the Agent as the sum of the equivalent in the replacement currency of the components of the ECU; (ii) the components of the ECU for this purpose will be the currency amounts that were components of the ECU when the ECU was most recently used in the European Monetary System, except that, if the ECU is being used for the settlement of transactions by public institutions of or within the European Community, or was so used after its most recent use in the European Monetary System, the components will be: (1) the currency amounts that are components of the ECU as so used on the day the calculation of the amount of the replacement currency is to be made (the "day of valuation"); or (2) the currency amounts that were components of the ECU when it was most recently so used, as appropriate; (iii) the rates to be used by the Agent for the above purposes will be its rates for the purchase in the London foreign exchange market of the replacement currency with each - -------------------------------------------------------------------------------- 40 - -------------------------------------------------------------------------------- of the components at or about 11.00 am on the day of valuation for value on the day the relevant payment in the replacement currency is due; and (iv) the day of valuation will be the day determined by the Agent for the purposes of calculating the equivalent in the replacement currency of any amount in ECU and will be the day two Business Days before the relevant payment in the replacement currency is due. (c) Clauses 14.2 (a) and (b) will not apply after the Commencement Date. 15. INCREASED COSTS 15.1 Increased costs (a) Subject to Clause 15.2 (Exceptions), the Parent shall within five Business Days of demand by a Finance Party pay that Finance Party the amount of any increased cost incurred by it or any of its holding companies as a result of any change in (or change in any official or judicial interpretation of) or introduction of any law or regulation (including any relating to taxation or reserve asset, special deposit, cash ratio, liquidity or capital adequacy requirements or any other form of banking or monetary control). (b) In this Agreement "increased cost" means: (i) an additional cost incurred by a Finance Party or any of its holding companies as a result of it performing, maintaining or funding its obligations under, this Agreement; or (ii) that portion of an additional cost incurred by a Finance Party or any of its holding companies in making, funding or maintaining all or any advances comprised in a class of advances formed by or including the Advances made or to be made by it under this Agreement as is attributable to it making, funding or maintaining its Advances; or (iii) a reduction in any amount payable to a Finance Party or the effective return to a Finance Party under this Agreement or on its capital (or the capital of any of its holding companies); or (iv) the amount of any payment made by a Finance Party, or the amount of interest or other return foregone by a Finance Party, calculated by reference to any amount received or receivable by a Finance Party from any other Party under this Agreement. (c) A Finance Party shall notify the Parent promptly upon becoming aware that it has incurred an increased cost as a result of any law or regulation referred to in paragraph (a) above and shall provide calculations in reasonable detail of the basis of such increased cost and its allocation to this Agreement. 15.2 Exceptions Clause 15.1 (Increased costs) does not apply to any increased cost: (a) compensated for by the payment of the MLA Cost; or - -------------------------------------------------------------------------------- 41 - -------------------------------------------------------------------------------- (b) any part of which is attributable to the delay by a Bank in notifying the Parent of the increased cost; or (c) attributable to any tax or amounts in respect of tax which must be deducted from any amounts payable or paid by a Borrower or paid or payable by the Agent to a Finance Party under the Finance Documents (or which would have been payable but for Clause 12.2 (Qualifying Bank)); or (d) which is, or is attributable to, any tax on the overall net income, profits or gains of a Bank or any of its holding companies (or the overall net income, profits or gains of a division or branch of the Bank or any of its holding companies); or (e) resulting from a Finance Party breaching a regulation imposed on it after the Signing Date by any fiscal, monetary or other regulatory authority; or (f) which is attributable to the introduction of the euro (other than an increased cost which the Majority Banks reasonably determine is being incurred generally and on a consistent basis by banks (or a class of banks of which a Bank forms part) transacting euro business in the London interbank market). 16. ILLEGALITY AND MITIGATION 16.1 Illegality If it becomes unlawful or contrary to any regulation in any jurisdiction for a Bank to give effect to any of its obligations as contemplated by this Agreement or to fund or maintain any Advance, then the Bank may notify the Parent through the Agent accordingly and thereupon: (a) each Borrower shall, to the extent required and within the period allowed by such regulation or, if no period is allowed, forthwith: (i) repay any Advances made to it by that Bank together with all other amounts payable by it to that Bank under this Agreement; and (ii) perform its obligations under Clause 8.3 (Payment of Bills) in respect of all outstanding Bills accepted by that Bank as if that day were the Maturity Date of each of those Bills; and (b) the Bank's Tranche A Commitment and Tranche B Commitment shall be cancelled. 16.2 Mitigation Notwithstanding the provisions of Clauses 12 (Taxes), 15 (Increased Costs) and 16.1 (Illegality), if in relation to a Bank or (as the case may be) the Agent circumstances arise which would result in: (a) any deduction, withholding or payment of the nature referred to in Clause 12 (Taxes); or (b) any increased cost of the nature referred to in Clause 15 (Increased Costs); or - -------------------------------------------------------------------------------- 42 - -------------------------------------------------------------------------------- (c) a notification pursuant to Clause 16.1 (Illegality), then without in any way limiting, reducing or otherwise qualifying the rights of such Bank or the Agent, such Bank shall promptly upon becoming aware of the same notify the Agent thereof (whereupon the Agent shall promptly notify the Parent) and such Bank shall endeavour to transfer its participation in the Facility and its rights hereunder and under the Finance Documents to another financial institution or Facility Office not affected by the circumstances having the results set out in (a), (b) or (c) above and shall otherwise take such reasonable steps as may be open to it to mitigate the effects of such circumstances. No Bank, however, is required to take any action which would be prejudicial to it or which would conflict with its general banking policies, or give rise to any material cost or expense. 17. GUARANTEE 17.1 Guarantee The Parent irrevocably and unconditionally: (a) as principal obligor, guarantees to each Finance Party prompt performance by each Borrower (other than the Parent) of all its obligations under the Finance Documents; (b) undertakes with each Finance Party that whenever a Borrower does not pay any amount when due under or in connection with any Finance Document, the Parent shall upon demand by the Agent given no earlier than on the expiry of any grace period applicable under Clause 20 (Default) pay that amount as if the Parent instead of the relevant Borrower were expressed to be the principal obligor; and (c) indemnifies each Finance Party on demand against any loss or liability suffered by it if any obligation guaranteed by the Parent is or becomes unenforceable, invalid or illegal. 17.2 Continuing guarantee This guarantee is a continuing guarantee and will extend to the ultimate balance of all sums payable by the Borrowers under the Finance Documents, regardless of any intermediate payment or discharge in whole or in part. 17.3 Reinstatement (a) Where any discharge (whether in respect of the obligations of any Borrower or any security for those obligations or otherwise) is made in whole or in part or any arrangement is made on the faith of any payment, security or other disposition which is avoided or must be restored on insolvency, liquidation or otherwise without limitation, the liability of the Parent under this Clause 17 shall continue as if the discharge or arrangement had not occurred (but only to the extent that such payment, security or other disposition is avoided or restored). (b) Each Finance Party may concede or compromise any claim that any payment, security or other disposition is liable to avoidance or restoration. - -------------------------------------------------------------------------------- 43 - -------------------------------------------------------------------------------- 17.4 Waiver of defences The obligations of the Parent under this Clause 17 will not be affected by any act, omission, matter or thing which, but for this provision, would reduce, release or prejudice any of its obligations under this Clause 17 or prejudice or diminish those obligations in whole or in part, including (whether or not known to it or any Finance Party): (a) any time or waiver granted to, or composition with, any Borrower or other person; (b) the taking, variation, compromise, exchange, renewal or release of, or refusal or neglect to perfect, take up or enforce, any rights against, or security over assets of, any Borrower or other person or any non-presentation or non-observance of any formality or other requirement in respect of any instrument or any failure to realise the full value of any security; (c) any incapacity or lack of powers, authority or legal personality of or dissolution or change in the members or status of a Borrower or any other person; (d) any variation (however fundamental) or replacement of a Finance Document or any other document or security so that references to that Finance Document in this Clause 17 shall include each variation or replacement; (e) any unenforceability, illegality or invalidity of any obligation of any person under any Finance Document or any other document or security, to the intent that the Parent's obligations under this Clause 17 shall remain in full force and its guarantee be construed accordingly, as if there were no unenforceability, illegality or invalidity; and (f) any postponement, discharge, reduction, non-provability or other similar circumstance affecting any obligation of any Borrower under a Finance Document resulting from any insolvency, liquidation or dissolution proceedings or from any law, regulation or order so that each such obligation shall for the purposes of the Parent's obligations under this Clause 17 be construed as if there were no such circumstance. 17.5 Immediate recourse The Parent waives any right it may have of first requiring any Finance Party (or any trustee or agent on its behalf) to proceed against or enforce any other rights or security or claim payment from any person before claiming from the Parent under this Clause 17. 17.6 Appropriations Until all amounts which may be or become payable by the Borrowers under or in connection with the Finance Documents have been irrevocably paid in full, each Finance Party (or any trustee or agent on its behalf) may: (a) refrain from applying or enforcing any other moneys, security or rights held or received by that Finance Party (or any trustee or agent on its behalf) in respect of those amounts, or apply and enforce the same in such manner and order as it sees fit (whether against those amounts or otherwise) and the Parent shall not be entitled to the benefit of the same; and - -------------------------------------------------------------------------------- 44 - -------------------------------------------------------------------------------- (b) hold in a suspense account (bearing interest at a commercial rate) any moneys received from the Parent or on account of the Parent's liability under this Clause 17, without liability to pay interest on those moneys. 17.7 Non-competition Until all amounts which may be or become payable by the Borrowers under or in connection with the Finance Documents have been paid in full, the Parent shall not, after a claim has been made and by virtue of any payment or performance by it under this Clause 17: (a) be subrogated to any rights, security or moneys held, received or receivable by any Finance Party (or any trustee or agent on its behalf) or be entitled to any right of contribution or indemnity in respect of any payment made or moneys received on account of the Parent's liability under this Clause 17; or (b) claim, rank, prove or vote as a creditor of any Borrower or its estate in competition with any Finance Party (or any trustee or agent on its behalf); or (c) receive, claim or have the benefit of any payment, distribution or security from or on account of any Borrower or exercise any right of set-off as against any Borrower. The Parent shall within five Business Days of receipt pay or transfer to the Agent for the Finance Parties any payment or distribution or benefit of security received by it contrary to this Clause 17.7. 17.8 Additional security This guarantee is in addition to and is not in any way prejudiced by any other security now or hereafter held by any Finance Party. 18. REPRESENTATIONS AND WARRANTIES 18.1 Representations and warranties Each Obligor represents and warrants that: (a) due incorporation: it has been duly incorporated in accordance with the laws of its place of incorporation and is validly existing; (b) powers and authority: this Agreement is within its powers and the execution, delivery and performance thereof has been duly authorised; (c) validity: subject to any qualifications as to matters of law in the relevant forms of opinion referred to in Schedule 3, this Agreement constitutes its legal, valid and binding obligation; and (d) no breach: this Agreement and the transactions hereby contemplated do not and will not contravene in any material respect (i) its constitutional documents, (ii) any law or - -------------------------------------------------------------------------------- 45 - -------------------------------------------------------------------------------- regulation in its country of incorporation, or (iii) any loan stock, debenture, mortgage or other contract in respect of any Borrowings to which it is party; (e) no Event of Default: no Event of Default has occurred and is continuing; (f) accounts: the most recent audited annual consolidated profit and loss account and balance sheet of the Parent which have been delivered to the Agent from time to time together with the notes thereto give a true and fair view of the results of the operations of the Parent and its Subsidiaries for the period to which they relate and the financial position of the Parent and its Subsidiaries as at the date to which they were prepared; (g) U.S. Borrowers: no U.S. Borrower is an investment company under the United States Investment Company Act of 1940, as amended, or is exempt from the provisions of that Act pursuant to an exemption under that Act, all of the conditions of which have been and are being fulfilled; (h) ERISA: if there is a U.S. Borrower, each member of the Controlled Group is in compliance with the applicable provisions of law, including ERISA, the Code and the applicable minimum funding standard requirements of ERISA and the Code with respect to each Plan except where such non compliance could reasonably be expected not to have a material adverse effect on the ability of any Obligor to perform its obligations under the Finance Documents. No Reportable Event which has or could reasonably be expected to result in any material liability has occurred with respect to any Plan. No member of the Controlled Group has: (i) sought a waiver of the minimum funding standard under Section 412 of the Code in respect of any Plan; or (ii) made any amendment to any Plan, which has resulted or could result in the imposition of a lien or the posting of a bond or other security under ERISA or the Code; and (i) Margin Stock: none of the proceeds of any Advance shall be used, directly or indirectly, and whether immediately, ultimately or incidentally, for any purpose which entails a violation of, or that is inconsistent with, the provisions of Regulation U or Regulation X of the regulations of the Board of Governors of the Federal Reserve System of the United States. None of the Obligors nor any of their respective Subsidiaries is engaged principally, or as one of its important activities, in the business of extending credit for the purpose of buying or carrying "margin stock" (within the meaning of such Regulation U). 18.2 Times for making representations and warranties The representation and warranties contained in Clause 18.1: (a) will be made by the Parent and the Original Borrowers on the Signing Date; (b) will be deemed to be repeated by each Obligor on each Utilisation Date and first day of each Interest Period for Term-out Advances with reference to the facts and circumstances then existing; and - -------------------------------------------------------------------------------- 46 - -------------------------------------------------------------------------------- (c) will be deemed to be made by an Additional Borrower on the date it executes a Borrower Accession Agreement under Clause 28.4 (Additional Borrowers) with reference to the facts and circumstances then existing. 19. UNDERTAKINGS 19.1 Financial Information The Parent will supply to the Agent in sufficient copies for the Banks: (a) as soon as practicable after publication (and in any event within the periods specified below): (i) in the case of the Parent, the audited consolidated accounts of the Group for that financial year, within 180 days of the end of each of its financial years; and (ii) in the case of any other Borrower, its unaudited (or, if available, audited) unconsolidated accounts for that financial year, within 180 days of the end of each of its financial years; and (b) as soon as practicable after publication (and in any event within 90 days of the end of the first half of each of its financial years) the unaudited consolidated interim accounts of the Group for that half- year; and (c) all documents despatched by it to its shareholders (or any class of them) in their capacity as such as soon as practicable after the time they are so despatched. 19.2 Authorisations Each Obligor will promptly obtain, maintain and comply with the terms of any authorisation required under any law or regulation in any applicable jurisdiction to enable it to perform its obligations under, or for the validity or enforceability of, this Agreement in all material respects. 19.3 Pari passu ranking Each Obligor will procure that its obligations under this Agreement do and will rank at least pari passu with all its other present and future unsecured and unsubordinated obligations, except for obligations which are mandatorily preferred by law. 19.4 Negative Pledge No Obligor will create or permit to subsist any Security Interest over all or any part of its assets to secure any Borrowings except for any Permitted Security Interest. 19.5 Notification of Event of Default Each Obligor will notify the Agent of the occurrence of any Event of Default (and the steps, if any, being taken to remedy it) promptly upon becoming aware of it. - -------------------------------------------------------------------------------- 47 - -------------------------------------------------------------------------------- 20. DEFAULT 20.1 Events of Default Each of the events set out in Clauses 20.2 (Non-Payment) to 20.12 (Material Adverse Change), both inclusive, is an Event of Default (whether or not caused by any reason whatsoever outside the control of any Obligor). 20.2 Non-Payment Any Obligor fails to pay within five Business Days of the Agent giving notice to the Parent of such non-payment any amount payable by it under this Agreement in respect of principal or interest at the place at and in the currency in which it is expressed to be payable. 20.3 Breach of other obligations Any Obligor fails to comply with any provision of this Agreement (other than those referred to in Clause 20.2 (Non-Payment)) and, if that default is capable of remedy, the Obligor fails to cure that default within thirty days of the Agent giving notice to the Parent requiring remedy. 20.4 Misrepresentation Any representation or warranty made or repeated in this Agreement is incorrect in any material respect when made or deemed to be repeated and, in the case of a matter capable of being remedied, is not remedied within thirty days of the Agent giving notice to the Parent requiring remedy. 20.5 Cross Acceleration Any other Borrowings of any Obligor are: (a) declared due and payable prior to their normal maturity date as a result of a default (however described) by that Obligor; or (b) not paid within five Business Days of their due date or, if longer, within any applicable grace period, unless, in any such case, the aggregate amount of the Borrowings is less than euro 50,000,000 or its equivalent or the payment in question is being contested by the Obligor owing the amount by reason of a bona fide dispute. 20.6 Suspension of payments Any Obligor is unable to pay its debts as they fall due or suspends making payments (whether of principal or interest) with respect to all or any class of its debts as a result of financial difficulties. - -------------------------------------------------------------------------------- 48 - -------------------------------------------------------------------------------- 20.7 Insolvency proceedings A resolution is passed at a meeting of any Obligor for (or to petition for) its winding up or administration or any Obligor presents any petition for the winding up or administration of that Obligor or an order for the winding up or administration of that Obligor is made unless in each case it is a voluntary solvent winding up, amalgamation, reconstruction or reorganisation or part of a solvent scheme of arrangement. 20.8 Creditors' arrangements An Obligor agrees to any kind of composition, rescheduling, scheme, compromise or arrangement involving that Obligor and its creditors generally (or any class of them) as a result of financial difficulties. 20.9 Creditors' process Any administrative or other receiver or any manager of substantially all of the assets of an Obligor is appointed or an encumbrancer takes possession of, or any execution or distress is levied against, substantially all of the assets of any Obligor, in all cases: (a) in respect of Borrowings in an aggregate principal amount of not less than euro 50,000,000 or its equivalent; and (b) which is not paid out or discharged within thirty days after such appointment, taking of possession or levy. 20.10 Insolvency equivalent There occurs, in relation to any Obligor, in any country or territory in which it carries on business or to the jurisdiction of whose courts it or any of its assets are subject, any event which corresponds in that country or territory with any of those mentioned in Clauses 20.7 (Insolvency proceedings), 20.8 (Creditors' arrangements) or 20.9 (Creditors' process) inclusive above (subject to the same thresholds, grace periods and exceptions). 20.11 Ownership of Borrowers Any Borrower ceases to be a wholly-owned Subsidiary of the Parent (unless the Majority Banks have otherwise agreed). 20.12 Material Adverse Change There has been a material adverse change in the financial condition of the Group taken as a whole since the date of the latest annual accounts delivered to the Agent pursuant to Clause 19.1 (Financial information) which has had or will have a material adverse effect on the ability of the Parent to comply with its payment obligations under this Agreement. - -------------------------------------------------------------------------------- 49 - -------------------------------------------------------------------------------- 20.13 Acceleration On and at any time after the occurrence of an Event of Default, provided that the event is continuing, the Agent may, and shall if so directed by the Majority Banks, by notice to the Parent: (a) declare the Advances to be forthwith due and payable together with interest thereon and all other amounts payable hereunder, notwithstanding that their respective Maturity Dates may not have occurred, and the same shall thereupon become due and payable; and/or (b) declare that each Borrower's obligations under Clause 8.3 (Payment of Bills) in respect of all outstanding Bills are immediately due and payable, whereupon they shall become immediately due and payable; and/or (c) cancel the Total Commitments (or such part of them as may be specified in such notice); and/or (d) demand that all Advances and obligations in respect of Bills be payable on demand, whereupon they will immediately become payable on demand. 21. THE AGENTS AND THE JOINT LEAD ARRANGERS 21.1 Appointment and duties of the Agents Each Finance Party (other than the Agent) irrevocably appoints the Agent to act as its agent under and in connection with the Finance Documents and each Swingline Bank appoints the US Swingline Agent to act as its agent in relation to the US Swingline Facility, and each Finance Party irrevocably authorises the Agent or, as the case may be, the US Swingline Agent on its behalf to perform the duties and to exercise the rights, powers and discretions that are specifically delegated to it under or in connection with the Finance Documents, together with any other incidental rights, powers and discretions. The Agent or, as the case may be, the US Swingline Agent shall have only those duties which are expressly specified in this Agreement. Those duties are solely of a mechanical and administrative nature. 21.2 Role of the Joint Lead Arrangers Except as otherwise provided in this Agreement, the Joint Lead Arrangers have no obligations of any kind to any other Party under or in connection with any Finance Document. 21.3 Relationship The relationship between the Agent or, as the case may be, the US Swingline Agent and the other Finance Parties is that of agent and principal only. Nothing in this Agreement constitutes the Agent or, as the case may be, the US Swingline Agent as trustee or fiduciary for any other Party or any other person and the Agent or, as the case may be, the US Swingline Agent need not hold in trust any moneys paid to it for a Party or be liable to account for interest on those moneys. - -------------------------------------------------------------------------------- 50 - -------------------------------------------------------------------------------- 21.4 Majority Banks' directions The Agent or, as the case may be, the US Swingline Agent will be fully protected if it acts in accordance with the instructions of the Majority Banks in connection with the exercise of any right, power or discretion or any matter not expressly provided for in the Finance Documents. Any such instructions given by the Majority Banks will be binding on all the Banks. In the absence of such instructions the Agent or, as the case may be, the US Swingline Agent may act as it considers to be in the best interests of all the Banks. 21.5 Delegation The Agent or, as the case may be, the US Swingline Agent may act under the Finance Documents through its personnel and agents. 21.6 Responsibility for documentation Neither the Agent, the US Swingline Agent nor any of the Joint Lead Arrangers is responsible to any other Party for: (a) the execution, genuineness, validity, enforceability or sufficiency of any Finance Document or any other document; or (b) the collectability of amounts payable under any Finance Document; or (c) the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document. 21.7 Default (a) The Agent or, as the case may be, the US Swingline Agent is not obliged to monitor or enquire as to whether or not a Default or a Mandatory Prepayment Event has occurred. Neither the Agent nor the US Swingline Agent will be deemed to have knowledge of the occurrence of a Default or a Mandatory Prepayment Event. However, if the Agent or, as the case may be, the US Swingline Agent receives notice from a Party referring to this Agreement, describing the Default or Mandatory Prepayment Event and stating that the event is a Default or a Mandatory Prepayment Event, it shall promptly notify the Banks. (b) The Agent or, as the case may be, the US Swingline Agent may require the receipt of security satisfactory to it, whether by way of payment in advance or otherwise, against any liability or loss which it will or may incur in taking any proceedings or action arising out of or in connection with any Finance Document before it commences these proceedings or takes that action. 21.8 Exoneration (a) Without limiting paragraph (b) below, the Agent or, as the case may be, the US Swingline Agent will not be liable to any other Party for any action taken or not taken by it under or in connection with any Finance Document, unless directly caused by its gross negligence or wilful misconduct. - -------------------------------------------------------------------------------- 51 - -------------------------------------------------------------------------------- (b) No Party may take any proceedings against any officer, employee or agent of the Agent or, as the case may be, the US Swingline Agent in respect of any claim it might have against the Agent or, as the case may be, the US Swingline Agent or in respect of any act or omission of any kind (including gross negligence or wilful misconduct) by that officer, employee or agent in relation to any Finance Document. 21.9 Reliance The Agent or, as the case may be, the US Swingline Agent may: (a) rely on any notice or document believed by it to be genuine and correct and to have been signed by, or with the authority of, the proper person; (b) rely on any statement made by a director or employee of any person regarding any matters which may reasonably be assumed to be within his knowledge or within his power to verify; and (c) engage, pay for and rely on legal or other professional advisers selected by it (including those in the Agent's or, as the case may be, the US Swingline Agent's employment and those representing a Party other than the Agent or, as the case may be, the US Swingline Agent). 21.10 Credit approval and appraisal Without affecting the responsibility of any Obligor for information supplied by it or on its behalf in connection with any Finance Document, each Bank confirms that it: (a) has made its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Agent, the US Swingline Agent or a Joint Lead Arranger in connection with any Finance Document; and (b) will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities while any amount is or may be outstanding under the Finance Documents or any Commitment is in force. 21.11 Information (a) The Agent or, as the case may be, the US Swingline Agent shall promptly forward to the person concerned the original or a copy of any document which is delivered to the Agent or, as the case may be, the US Swingline Agent by a Party for that person. (b) The Agent shall promptly supply a Bank with a copy of each document received by the Agent under Clauses 4 (Conditions Precedent) and 28.4 (Additional Borrowers) upon the request of that Bank. (c) Except where this Agreement specifically provides otherwise, the Agent or, as the case may be, the US Swingline Agent is not obliged to review or check the accuracy or completeness of any document it forwards to another Party. - -------------------------------------------------------------------------------- 52 - -------------------------------------------------------------------------------- (d) Except as provided above, the Agent or, as the case may be, the US Swingline Agent has no duty: (i) either initially or on a continuing basis to provide any Bank with any credit or other information concerning the financial condition or affairs of any Obligor or any related entity of any Obligor whether coming into its possession or that of any of its related entities before, on or after the date of this Agreement; or (ii) unless specifically requested to do so by a Bank in accordance with this Agreement, to request any certificates or other documents from any Obligor. 21.12 The Agents and the Joint Lead Arrangers individually (a) If it is also a Bank, each of the Agent, the US Swingline Agent and the Joint Lead Arrangers has the same rights and powers under this Agreement as any other Bank and may exercise those rights and powers as though it were not the Agent, the US Swingline Agent or a Joint Lead Arranger. (b) Each of the Agent, the US Swingline Agent and the Joint Lead Arrangers may: (i) carry on any business with an Obligor or its related entities; (ii) act as agent or trustee for, or in relation to any financing involving, an Obligor or its related entities; and (iii) retain any profits or remuneration in connection with its activities under this Agreement or in relation to any of the foregoing. 21.13 Indemnities (a) Without limiting the liability of any Obligor under the Finance Documents, each Bank shall forthwith on demand indemnify the Agent or, as the case may be, the US Swingline Agent for its proportion of any liability or loss incurred by the Agent or, as the case may be, the US Swingline Agent in any way relating to or arising out of its acting as the Agent or, as the case may be, the US Swingline Agent, except to the extent that the liability or loss arises directly from the Agent's or, as the case may be, the US Swingline Agent's gross negligence or wilful misconduct. (b) A Bank's proportion of the liability or loss set out in paragraph (a) above is the proportion which the Original Euro Amount of its Utilisation(s) bears to the Original Euro Amount of all Utilisation(s) outstanding on the date of the demand. If, however, no Utilisation(s) are outstanding on the date of demand, then the proportion will be the proportion which its Commitment bears to the Total Commitments at the date of demand or, if the Total Commitments have been cancelled, bore to the Total Commitments immediately before being cancelled. (c) The Parent shall within five Business Days of demand reimburse each Bank for any payment made by it under paragraph (a) above. - -------------------------------------------------------------------------------- 53 - -------------------------------------------------------------------------------- 21.14 Compliance (a) The Agent or, as the case may be, the US Swingline Agent may refrain from doing anything which might, in its opinion, constitute a breach of any law or regulation or be otherwise actionable at the suit of any person, and may do anything which, in its opinion, is necessary or desirable to comply with any law or regulation of any jurisdiction. (b) Without limiting paragraph (a) above, the Agent or, as the case may be, the US Swingline Agent need not disclose any information relating to any Obligor or any of its related entities if the disclosure might, in the opinion of the Agent, or, as the case may be, the US Swingline Agent, constitute a breach of any law or regulation or any duty of secrecy or confidentiality or be otherwise actionable at the suit of any person. 21.15 Resignation and removal of Agents (a) The Majority Banks may, by notice to the Agent or, as the case may be, the US Swingline Agent, remove either or both of them and replace them with a successor agent approved by the Parent (such approval not to be unreasonably withheld). (b) Notwithstanding its irrevocable appointment, the Agent or, as the case may be, the US Swingline Agent may resign by giving notice to the Banks and the Parent, in which case the Agent or, as the case may be, the US Swingline Agent may forthwith appoint one of its Affiliates as successor Agent, or as the case may be successor US Swingline Agent or, failing that, the Majority Banks may, with the prior written consent of the Parent (such consent not to be unreasonably withheld), appoint a successor Agent or, as the case may be, successor US Swingline Agent. (c) If the appointment of a successor Agent or, as the case may be, successor US Swingline Agent is to be made by the Majority Banks under paragraph (b) above but they have not, within 30 days after notice of resignation, appointed a successor Agent or, as the case may be, successor US Swingline Agent which accepts the appointment, the retiring Agent or, as the case may be, retiring US Swingline Agent may, with the prior written consent of the Parent (such consent not to be unreasonably withheld), appoint a successor Agent or, as the case may be, successor US Swingline Agent. (d) The resignation or removal of the retiring Agent or, as the case may be, retiring US Swingline Agent and the appointment of any successor Agent or, as the case may be, successor US Swingline Agent will both become effective only upon the successor Agent or, as the case may be, successor US Swingline Agent notifying all the Parties that it accepts the appointment and provided the successor Agent or, as the case may be, successor US Swingline Agent has, if required under paragraphs (a), (b) or (c) above, been approved by the Parent. On giving the notification and receiving such approval, the successor Agent or, as the case may be, successor US Swingline Agent will succeed to the position of the retiring Agent or, as the case may be, retiring US Swingline Agent and the term "Agent" or, as the case may be, "US Swingline Agent" will mean the successor Agent or, as the case may be, successor US Swingline Agent. (e) The retiring Agent or, as the case may be, retiring US Swingline Agent shall, at its own cost, make available to the successor Agent or, as the case may be, successor US Swingline Agent such documents and records and provide such assistance as the successor Agent or, as the case may be, successor US Swingline Agent may reasonably request for the purposes of performing - -------------------------------------------------------------------------------- 54 - -------------------------------------------------------------------------------- its functions as the Agent or, as the case may be, the US Swingline Agent under this Agreement. (f) Upon its resignation or removal becoming effective, this Clause 21 shall continue to benefit the retiring Agent or, as the case may be, retiring US Swingline Agent in respect of any action taken or not taken by it under or in connection with the Finance Documents while it was the Agent or, as the case may be, the US Swingline Agent, and, subject to paragraph (e) above, it shall have no further obligation under any Finance Document. 21.16 Banks The Agent or, as the case may be, US Swingline Agent may treat each Bank as a Bank, entitled to payments under this Agreement and as acting through its Facility Office(s) until it has received notice from the Bank to the contrary by not less than five Business Days prior to the relevant payment. 21.17 Chinese Wall In acting as Agent, US Swingline Agent or Joint Lead Arranger, the agency and syndications division of each of the Agent, US Swingline Agent and Joint Lead Arrangers shall be treated as a separate entity from its other divisions and departments. Any information acquired at any time by the Agent, US Swingline Agent or any Joint Lead Arranger otherwise than in the capacity of Agent, US Swingline Agent or Joint Lead Arranger through its agency and syndications division (whether as financial advisor to any member of the Group or otherwise) may be treated as confidential by the Agent, US Swingline Agent or Joint Lead Arranger and shall not be deemed to be information possessed by the Agent, US Swingline Agent or Joint Lead Arranger in its capacity as such. Each Finance Party acknowledges that the Agent, US Swingline Agent and the Joint Lead Arrangers may, now or in the future, be in possession of, or provided with, information relating to the Obligors which has not or will not be provided to the other Finance Parties. Each Finance Party agrees that, except as expressly provided in this Agreement, neither the Agent, US Swingline Agent nor the Joint Lead Arrangers will be under any obligation to provide, or under any liability for failure to provide, any such information. 22. FEES 22.1 Commitment fee (a) The Parent shall pay to the Agent for distribution to each Bank pro rata to the proportion its Commitment bears to the Tranche A Total Commitments or, as the case may be, Tranche B Commitment bears to the Tranche B Total Commitments, from time to time a commitment fee at the rate of: (i) 0.035 per cent. per annum in relation to the Tranche A Commitments; and (ii) 0.075 per cent. per annum in relation to the Tranche B Commitments, on, in each case, any undrawn, uncancelled amount of the Tranche A Total Commitments or the Tranche B Total Commitments, as the case may be, on each day. - -------------------------------------------------------------------------------- 55 - -------------------------------------------------------------------------------- (b) The commitment fee is calculated and accrues on a daily basis from the Signing Date and is payable quarterly in arrear with the first payment due three months after the Signing Date. Accrued commitment fee is also payable to the Agent for the relevant Bank(s) on the cancelled amount of its Tranche A Commitment or, as the case may be, Tranche B Commitment at the time the cancellation takes effect. 22.2 Agent's fee The Parent shall pay to the Agent for its own account an agency fee in the amounts and on the dates agreed in the relevant Fee Letter. 22.3 Up-front fee The Parent shall pay to the Joint Lead Arrangers an up-front fee, in each case in the amount and on the dates specified in the relevant Fee Letter. 22.4 Utilisation Fee (a) The Parent shall pay to the Agent for distribution to each Bank (pro rata to the proportion the principal amount of its outstanding Tranche B Advances and Bills drawn under Tranche B bears to the aggregate principal outstanding Tranche B Advances and Bills drawn under Tranche B in each currency on each day) a utilisation fee on the aggregate principal amount each day of all outstanding Utilisations under Tranche B at the rate specified in Column (1) below if on that day the Original Euro Amount of all outstanding Utilisations under Tranche B falls within the range set opposite that rate in Column (2) below: (1) (2) UTILISATION FEE ORIGINAL EURO AMOUNT OF ALL % PER ANNUM OUTSTANDING DRAWN TRANCHE B ADVANCES AND TRANCHE B BILLS Nil 0-2,500,000,000 0.025 Above 2,500,000,000 up to and including 3,500,000,000 0.050 Above 3,500,000,000 (b) Utilisation fee is calculated and, if payable, accrues on a daily basis and is payable quarterly in arrear in the same currencies as the Utilisations to which it relates with the first such payment, if any, due three months after the Signing Date. Accrued utilisation fee, if any, is also payable to the Agent for the relevant Banks on the Tranche B Final Maturity Date. (c) The Parent shall pay an additional utilisation fee of 0.05 per cent. flat on the principal amount of any Term-out Advance in the same currency as that Term-out Advance to the Agent for distribution to each Bank (pro rata to the participation of that Bank in that Term-out Advance). Such amount, if any, is payable on the Utilisation Date for that Term-out Advance. - -------------------------------------------------------------------------------- 56 - -------------------------------------------------------------------------------- 23. EXPENSES 23.1 Initial costs The Parent shall within five Business Days of demand pay the Joint Lead Arrangers the amount of all their out-of-pocket costs (including travel, telecommunication and printing expenses) and other expenses (including the legal fees of no more than one firm of solicitors and any value added tax thereon) reasonably incurred by them in connection with: (a) the arranging, underwriting and primary syndication of the Facilities; and (b) the negotiation, preparation, printing and execution of this Agreement and any other documents referred to in this Agreement. 23.2 Enforcement costs The Parent shall within five Business Days of demand pay to each Finance Party the amount of all reasonable costs and expenses (including legal fees) properly incurred by it in connection with the enforcement of, or the preservation of any rights under, any Finance Document. 24. STAMP DUTIES The Parent shall pay and within five Business Days of demand indemnify each Finance Party against any liability it incurs in respect of any stamp, registration and similar tax which is or becomes payable in the U.K. or the jurisdiction of the place of incorporation of any Borrower directly attributable to the entry into, performance or enforcement of this Agreement (other than a Novation Certificate). 25. INDEMNITIES 25.1 Currency indemnity Subject to Clause 11.4 (Currency), if a Finance Party receives an amount in respect of an Obligor's liability under the Finance Documents or if that liability is converted into a claim, proof, judgment or order in a currency other than the currency (the "contractual currency") in which the amount is expressed to be payable under the relevant Finance Document: (a) that Obligor shall indemnify that Finance Party as an independent obligation against any loss or liability arising out of or as a result of the conversion; (b) if the amount received by that Finance Party, when converted into the contractual currency at a market rate in the usual course of its business, is less than the amount owed in the contractual currency, the Obligor concerned shall within five Business Days of demand pay to that Finance Party an amount in the contractual currency equal to the deficit; and (c) the Obligor shall pay to the Finance Party concerned on demand any exchange costs and taxes payable properly incurred in connection with any such conversion. - -------------------------------------------------------------------------------- 57 - -------------------------------------------------------------------------------- 25.2 Other indemnities The Parent shall forthwith on demand indemnify each Finance Party against any loss or liability which that Finance Party directly incurs as a consequence of: (a) the occurrence of any Event of Default or Mandatory Prepayment Event; (b) any payment of principal or an overdue amount being received from any source otherwise than: (i) in the case of Tranche A Advances and Tranche B Advances, on its Maturity Date (and, for the purposes of this paragraph (b), the Maturity Date of an overdue amount is the last day of each Designated Term (as defined in Clause 10.4 (Default interest))); or (ii) in the case of Term-out Advances, on the last day of its applicable Interest Period; (c) (other than by reason of negligence or default by a Finance Party) a Utilisation not being effected after a Borrower has delivered a Request for that Utilisation. The Parent's liability in each case includes any loss or expense (other than loss of Margin) on account of funds borrowed, contracted for or utilised to fund any amount payable under any Finance Document, any amount repaid or prepaid or any Advance or Bill. 26. EVIDENCE AND CALCULATIONS 26.1 Accounts Accounts maintained by a Finance Party in connection with this Agreement are, in the absence of manifest error, prima facie evidence of the matters to which they relate. 26.2 Certificates and determinations Any certification or determination by a Finance Party of a rate or amount under this Agreement is, in the absence of manifest error, prima facie evidence of the matters to which it relates. 26.3 Calculations Interest (and any MLA Cost) and the fees payable under Clause 22.1 (Commitment fee) and Clause 22.4 (Utilisation fee) accrue from day to day and are calculated on the basis of the actual number of days elapsed and a year of 360 days, or, in the case of interest payable on an amount denominated in Sterling, 365 days. Acceptance commission is calculated on the basis of the number of days in the relevant Term and a year of 365 days. - -------------------------------------------------------------------------------- 58 - -------------------------------------------------------------------------------- 27. AMENDMENTS AND WAIVERS 27.1 Procedure (a) Subject to Clause 27.2 (Exceptions), any provision of the Finance Documents may be amended or waived with the agreement of the Parent and the Majority Banks. The Agent will and is authorised to effect, on behalf of the Finance Parties, an amendment or waiver to which the Majority Banks (or all Banks) and the Parent have agreed. (b) In addition to (a) above, the Agent may agree with the Parent (after consultation by the Agent with the Banks) that any references in this Agreement to a Business Day, day-count fraction or other convention (whether for the calculation of interest, determination of payment dates or otherwise) shall, with effect from or after the Commencement Date, if different, be amended to comply with any generally accepted conventions and market practice from time to time applicable to euro-denominated obligations in the London interbank market. The agreement of the Agent and the Parent under this Clause 27.1(b) is not to be unreasonably withheld or delayed. (c) The Agent shall promptly notify the other Parties of any amendment or waiver effected under paragraphs (a) or (b) above, and any such amendment or waiver shall be binding on all the Parties. 27.2 Exceptions An amendment or waiver under paragraph 27.1(a) above which relates to: (a) the definition of "Majority Banks" in Clause 1.1 (Definitions); or (b) an extension of the date for, or a decrease in an amount or a change in the currency of, any payment under the Finance Documents; or (c) an increase in a Bank's Commitment; or (d) a term of a Finance Document which expressly requires the consent of each Bank; or (e) Clause 31 (Pro Rata Sharing) or this Clause 27 (Amendments and Waivers); or (f) a change to, or the release of the Parent from any of its obligations under, Clause 17 (Guarantee), may not be effected without the consent of each Bank. No amendment may be effected under this Clause 27 which would increase the obligations, rights or duties of the Agent without the consent of the Agent. 27.3 Waivers and remedies cumulative The rights of each Finance Party under the Finance Documents: (a) may be exercised as often as necessary; - -------------------------------------------------------------------------------- 59 - -------------------------------------------------------------------------------- (b) are cumulative and not exclusive of its rights under the general law; and (c) may be waived only in writing and specifically. Delay in exercising or non-exercise of any such right is not a waiver of that right. 28. CHANGES TO THE PARTIES 28.1 Transfers by Obligors Subject to Clause 9.5 (Changes to Borrowers), no Obligor may assign, transfer, novate or dispose of any of, or any interest in, its rights and/or obligations under this Agreement. 28.2 Transfers by Banks (a) A Bank (the "Existing Bank") may at any time assign, transfer or novate any of its rights and/or obligations under this Agreement, but only to another bank or institution which is a Qualifying Bank and a U.S. Qualifying Bank (the "New Bank"), and only with the prior written consent of the Parent (such consent not to be unreasonably withheld or delayed), unless the New Bank is another Bank or an Affiliate of a Bank in which case no such consent is required. Any such assignment, transfer or novation must be in a minimum aggregate amount of euro 25,000,000 (unless to an Affiliate or the Agent and the Parent agree otherwise) and, except in the case of an assignment, transfer or novation to an Affiliate, must be pro rata between Tranches A and B. In the case of an assignment, transfer or novation by a Swingline Bank, a portion of that Swingline Bank's Swingline Commitment must also be assigned, transferred or novated to the extent necessary (if at all) to ensure that the Swingline Bank's Swingline Commitment does not exceed its Tranche B Commitment after the assignment, transfer or novation. (b) A Bank may at any time sub-participate any of its rights and/or obligations under this Agreement but only with the prior written consent of the Parent (such consent not to be unreasonably withheld or delayed), unless the sub-participant is another Bank or an Affiliate of a Bank in which case no consent is required. (c) The consent of the Parent will be deemed to be given under paragraph (a) or, as the case may be, (b) above if: (i) the Existing Bank has given notice to the Parent addressed to the Treasurer and the Finance Director requesting such consent (which expressly states that the consent of the Parent is required under this Clause 28.2, specifies the full name of the New Bank and amount of the proposed transaction and states that consent will be deemed to have been given if no response is given by the Parent within the period specified in this paragraph (c)) and the Parent has not responded within 10 days; and (ii) after expiry of that 10 day period the Existing Bank has given a further notice to the Parent addressed in the same way and in similar terms (referring to the earlier notice) and the Parent has not responded within a further five London Business Days (being business days when banks in London are open for business generally in the London interbank market). - -------------------------------------------------------------------------------- 60 - -------------------------------------------------------------------------------- (d) A transfer of obligations will be effective only if either: (i) the obligations are novated in accordance with Clause 28.3 (Procedure for novations); or (ii) the New Bank confirms to the Agent and the Parent that it undertakes to be bound by the terms of this Agreement as a Bank in form and substance satisfactory to the Agent and the Parent. On the transfer becoming effective in this manner the Existing Bank shall be relieved of its obligations under this Agreement to the extent that they are transferred to the New Bank. (e) On each occasion an Existing Bank assigns, transfers or novates any of its rights and/or obligations under this Agreement, the New Bank shall, on the date the assignment, transfer and/or novation takes effect, pay to the Agent for its own account a fee of (Pounds)750. (f) An Existing Bank is not responsible to a New Bank for: (i) the execution, genuineness, validity, enforceability or sufficiency of any Finance Document or any other document; or (ii) the collectability of amounts payable under any Finance Document; or (iii) the accuracy of any statements (whether written or oral) made in or in connection with any Finance Document. (g) Each New Bank confirms to the Existing Bank and the other Finance Parties that it: (i) has made its own independent investigation and assessment of the financial condition and affairs of each Obligor and its related entities in connection with its participation in this Agreement and has not relied exclusively on any information provided to it by the Existing Bank in connection with any Finance Document; and (ii) will continue to make its own independent appraisal of the creditworthiness of each Obligor and its related entities while any amount is or may be outstanding under this Agreement or any Commitment is in force. (h) Nothing in any Finance Document obliges an Existing Bank to: (i) accept a re-transfer from a New Bank of any of the rights and/or obligations assigned, transferred or novated under this Clause; or (ii) support any losses incurred by the New Bank by reason of the non- performance by any Obligor of its obligations under this Agreement or otherwise. (i) Any reference in this Agreement to a Bank includes a New Bank but excludes a Bank if no amount is or may be owed to or by it under this Agreement and its Commitment has been cancelled or reduced to nil. - -------------------------------------------------------------------------------- 61 - -------------------------------------------------------------------------------- 28.3 Procedure for novations (a) A novation is effected if: (i) the Existing Bank and the New Bank deliver to the Agent (with a copy to the Parent) a duly completed certificate (a "Novation Certificate"), substantially in the form of Part I of Schedule 6 or such other form as the Agent and the Parent may agree (which may be delivered by fax and confirmed by delivery of a hard copy original but the fax will be effective irrespective of whether confirmation is received); and (ii) the Agent executes it. (b) Each Party (other than the Existing Bank and the New Bank) irrevocably authorises the Agent to execute any duly completed Novation Certificate on its behalf. (c) To the extent that they are expressed to be the subject of the novation in the Novation Certificate: (i) the Existing Bank and the other Parties (the "existing Parties") will be released from their obligations to each other (the "discharged obligations"); (ii) the New Bank and the existing Parties will assume obligations towards each other which differ from the discharged obligations only insofar as they are owed to or assumed by the New Bank instead of the Existing Bank; (iii) the rights of the Existing Bank against the existing Parties and vice versa (the "discharged rights") will be cancelled; and (iv) the New Bank and the existing Parties will acquire rights against each other which differ from the discharged rights only insofar as they are exercisable by or against the New Bank instead of the Existing Bank, all on the date of execution of the Novation Certificate by the Agent or, if later, the date specified in the Novation Certificate. 28.4 Additional Borrowers (a) If the Parent wishes one of its Subsidiaries to become an Additional Borrower, then it may deliver to the Agent the documents listed in Part II of Schedule 3. Any Additional Borrower must be a wholly owned Subsidiary of the Parent unless the Majority Banks agree otherwise. (b) On delivery of a Borrower Accession Agreement, executed by the relevant Subsidiary and the Parent, the Subsidiary concerned will become an Additional Borrower. However, it may not submit a Request or become a Substitute Borrower under Clause 9.5(b) (Changes to Borrowers) until the Agent confirms to the other Finance Parties and the Parent that it has received all the documents referred to in paragraph (a) above. (c) Delivery of a Borrower Accession Agreement, executed by the relevant Subsidiary and the Parent, constitutes confirmation: - -------------------------------------------------------------------------------- 62 - -------------------------------------------------------------------------------- (i) by that Subsidiary and the Parent that the representations and warranties set out in Clause 18.1 (Representations and warranties) to be made by them on the date of the Borrower Accession Agreement are correct, as if made by them with reference to the facts and circumstances then existing; and (b) by the Parent that such Subsidiary is a wholly owned Subsidiary of the Parent (unless the Majority Banks have otherwise agreed). 28.5 Reference Banks If a Reference Bank (or, if a Reference Bank is not a Bank, the Bank of which it is an Affiliate) ceases to be a Bank, the Agent shall (in consultation with the Parent) appoint another Bank or an Affiliate of a Bank which is not a Reference Bank to replace that Reference Bank. 28.6 Change of Facility Office Each Bank will participate in any Utilisation and receive the benefit of any payment due to it under this Agreement at its Facility Office. No Bank may change its Facility Office to a different jurisdiction to that notified to the Agent and the Parent on or before the date it became a Bank without the prior written consent of the Parent (such consent not to be unreasonably withheld or delayed). 28.7 Additional Costs If, at the time of or immediately after any novation, transfer, sub- participation or assignment by a Bank or any change of Facility Office, circumstances exist which, but for this Clause 28.7, would require any Obligor to pay to the New Bank, transferee or assignee (or, in the case of a change of Facility Office, the Bank concerned) any amount under this Agreement in excess of the amount it would otherwise have been required to pay to that Bank in the absence of that novation, transfer, sub- participation, assignment or change of Facility Office, no Obligor will be required to pay that excess. 28.8 Register The Agent shall keep a register of all the Parties (including in the case of Banks the details of their Facility Office notified to the Agent from time to time) and shall supply any other Party (at that Party's expense) with a copy of the register on request. 29. DISCLOSURE OF INFORMATION (a) Subject to paragraph (b) below, a Bank may disclose to one of its Affiliates or any person with whom it is proposing to enter, or has entered into, any kind of transfer, participation or other agreement in relation to this Agreement: (i) a copy of any Finance Document; and (ii) any information which that Bank has acquired under or in connection with any Finance Document, - -------------------------------------------------------------------------------- 63 - -------------------------------------------------------------------------------- provided that a Bank shall not disclose any such information to a person unless that person has provided to the Parent a confidentiality undertaking addressed to the Parent in such other form as the Parent may reasonably require. (b) If the consent of the Parent is required under Clause 28.2 (Transfers by Banks) for any proposed assignment, transfer, novation, or sub- participation then a Bank may only disclose confidential information referred to in paragraph (a)(ii) above to a proposed New Bank if it has obtained the Parent's prior written consent (such consent not to be unreasonably withheld). 30. SET-OFF After an Event of a Default which is continuing, a Finance Party may set off any matured obligation owed by an Obligor under this Agreement (to the extent beneficially owned by that Finance Party) against any obligation (whether or not matured) owed by that Finance Party to that Obligor, regardless of the place of payment, booking branch or currency of either obligation. If the obligations are in different currencies, the Finance Party may convert either obligation at a market rate of exchange in its usual course of business for the purpose of the set-off. If either obligation is unliquidated or unascertained, the Finance Party may set off in an amount estimated by it in good faith to be the amount of that obligation. 31. PRO RATA SHARING 31.1 Redistribution If any amount owing by an Obligor under this Agreement to a Finance Party (the "recovering Finance Party") is discharged by payment, set-off or any other manner other than through the Agent in accordance with Clause 11 (Payments) (a "recovery"), then: (a) the recovering Finance Party shall, within three Business Days, notify details of the recovery to the Agent; (b) the Agent shall determine whether the recovery is in excess of the amount which the recovering Finance Party would have received had the recovery been received by the Agent and distributed in accordance with Clause 11 (Payments); (c) subject to Clause 31.3 (Exception), the recovering Finance Party shall, within three Business Days of demand by the Agent, pay to the Agent an amount (the "redistribution") equal to the excess; (d) the Agent shall treat the redistribution as if it were a payment by the Obligor concerned under Clause 11 (Payments); and (e) after payment of the full redistribution, the recovering Finance Party will be subrogated to the portion of the claims paid under paragraph (d) above and that Obligor will owe the recovering Finance Party a debt which is equal to the redistribution, immediately payable and of the type originally discharged. - -------------------------------------------------------------------------------- 64 - -------------------------------------------------------------------------------- 31.2 Reversal of redistribution If under Clause 31.1 (Redistribution): (a) a recovering Finance Party must subsequently return a recovery, or an amount measured by reference to a recovery, to an Obligor; and (b) the recovering Finance Party has paid a redistribution in relation to that recovery, each Finance Party shall, within three Business Days of demand by the recovering Finance Party through the Agent, reimburse the recovering Finance Party all or the appropriate portion of the redistribution paid to that Finance Party. Thereupon the subrogation in Clause 31.1(e) (Redistribution) will operate in reverse to the extent of the reimbursement. 31.3 Exceptions (a) A recovering Finance Party need not pay a redistribution to the extent that it would not, after the payment, have a valid claim against the Obligor concerned in the amount of the redistribution pursuant to Clause 31.1(e) (Redistribution). (b) If a Finance Party has become a recovering Finance Party by virtue of having started an action or proceeding in any court to enforce it rights, that recovering Finance Party will not be required to share any portion of any recovery with any Bank that has the legal right to, but does not join such action or proceeding or start a separate action or proceeding to enforce its rights in the same or another court. Any Finance Party instituting legal proceedings to recover sums owing to it under this Agreement will, as soon as practicable thereafter, give notice to the Agent which will, as soon as practicable, give notice to all the other Finance Parties. 32. SEVERABILITY If a provision of any Finance Document is or becomes illegal, invalid or unenforceable in any jurisdiction, that shall not affect: (a) the legality, validity or enforceability in that jurisdiction of any other provision of the Finance Documents; or (b) the legality, validity or enforceability in other jurisdictions of that or any other provision of the Finance Documents. 33. COUNTERPARTS This Agreement may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement. 34. NOTICES 34.1 Giving of notices All notices or other communications under or in connection with this Agreement shall be given in writing or by facsimile. Any such notice will be deemed to be given as follows: - -------------------------------------------------------------------------------- 65 - -------------------------------------------------------------------------------- (a) if in writing, when delivered; and (b) if by facsimile, when received. However, a notice given in accordance with the above but received on a non- working day or after business hours in the place of receipt will only be deemed to be given on the next working day in that place. Facsimile requests are to be confirmed by the relevant Borrower in writing (but may be relied upon by the Agent and the Banks irrespective of receipt of such confirmation). 34.2 Addresses for notices (a) The address and facsimile number of each Party (other than the Agent, the US Swingline Agent and the Parent) for all notices under or in connection with this Agreement are: (i) that notified by that Party for this purpose to the Agent on or before it becomes a Party; or (ii) any other notified by that Party for this purpose to the Agent by not less than five Business Days' notice. (b) The address and facsimile numbers of the Agent are: HSBC Investment Bank plc Vinters Place 68 Upper Thames Street London EC4V 3BJ Contact: Specialised Financing Support Facsimile: (0171) 336 9293 (0171) 336 9302, or such other as the Agent may notify to the other Parties by not less than five Business Days' notice. (c) The address and facsimile numbers of the US Swingline Agent are: Marine Midland Bank 26th Floor One Marine Midland Center Buffalo, NY 14203 U.S.A. Contact: Lynn M. Griffin Telephone: 001 716 841 1362 Facsimile: 001 716 841 2325, - -------------------------------------------------------------------------------- 66 - -------------------------------------------------------------------------------- or such other as the US Swingline Agent may notify to the other Parties by not less than five New York Business Days' notice. (d) The address and facsimile numbers of the Parent are: One Bruton Street London W1X 8AQ Attention: The Secretary Facsimile: 0171 493 1974, or such other as the Parent may notify to the other Parties by not less than five Business Days' notice. (e) The Agent shall, promptly upon request from any Party, give to that Party the address or facsimile number of any other Party applicable at the time for the purposes of this Clause. 35. LANGUAGE (a) Any notice given under or in connection with any Finance Document shall be in English. (b) All other documents provided under or in connection with any Finance Document shall be: (i) in English; or (ii) if not in English, accompanied by a certified English translation and, in this case, the English translation shall prevail unless the document is a statutory or other official document. 36. JURISDICTION 36.1 Submission For the benefit of each Finance Party, each Obligor agrees that the courts of England have jurisdiction to settle any disputes in connection with any Finance Document and accordingly submits to the jurisdiction of the English courts. 36.2 Service of process Without prejudice to any other mode of service, each Obligor (other than an Obligor incorporated in England and Wales): (a) irrevocably appoints the Parent as its agent for service of process relating to any proceedings before the English courts in connection with any Finance Document; (b) agrees that failure by a process agent to notify the Obligor of the process will not invalidate the proceedings concerned; and - -------------------------------------------------------------------------------- 67 - -------------------------------------------------------------------------------- (c) consents to the service of process relating to any such proceedings by prepaid posting of a copy of the process to its address for the time being applying under Clause 34.2 (Addresses for notices). 36.3 Forum convenience and enforcement abroad Each Obligor: (a) waives objection to the English courts on grounds of inconvenient forum or otherwise as regards proceedings in connection with a Finance Document; and (b) agrees that a judgment or order of an English court in connection with a Finance Document is conclusive and binding on it and may be enforced against it in the courts of any other jurisdiction. 36.4 Non-exclusivity Nothing in this Clause 36 limits the right of a Finance Party to bring proceedings against an Obligor in connection with any Finance Document: (a) in any other court of competent jurisdiction; or (b) concurrently in more than one jurisdiction. 37. GOVERNING LAW This Agreement is governed by English law. THIS AGREEMENT has been entered into on the date stated at the beginning of this Agreement. - -------------------------------------------------------------------------------- 68 - -------------------------------------------------------------------------------- SCHEDULE 1 PART I BANKS AND COMMITMENTS
Column 1 Column 2 Bank Tranche A Tranche B Commitments Commitments euro euro Banca Commerciale Italiana S.p.A., London Branch 65,250,000 195,750,000 Barclays Bank PLC 65,250,000 195,750,000 Banque Nationale de Paris 65,000,000 195,000,000 The Chase Manhattan Bank 65,000,000 195,000,000 Midland Bank plc 65,000,000 195,000,000 Morgan Guaranty Trust Company of New York 65,000,000 195,000,000 Swiss Bank Corporation 65,000,000 195,000,000 Westdeutsche Landesbank Girozentrale 65,000,000 195,000,000 Banca Nazionale del Lavoro S.p.A., London Branch 62,500,000 187,500,000 Bayerische Landesbank Girozentrale London Branch 62,500,000 187,500,000 Citibank, N.A. 62,500,000 187,500,000 Credit Suisse First Boston 62,500,000 187,500,000 Den Danske Bank Aktieselskab 62,500,000 187,500,000 Deutsche Bank AG London 62,500,000 187,500,000 National Westminster Bank Plc 62,500,000 187,500,000 Australia and New Zealand Banking Group Limited (acting 60,500,000 181,500,000 through its ANZ Investment Bank division) Banco Central Hispanoamericano, S.A. London Branch 60,500,000 181,500,000 Commerzbank Aktiengesellschaft, London Branch 60,500,000 181,500,000 The Royal Bank of Scotland plc 60,500,000 181,500,000 L-Bank 50,000,000 150,000,000 ABN AMRO Bank N.V. London Branch 31,250,000 93,750,000 Banca di Roma S.p.A. - London Branch 31,250,000 93,750,000 Banca Monte dei Paschi di Siena SpA 31,250,000 93,750,000 Banco Bilbao Vizcaya 31,250,000 93,750,000 The Bank of Tokyo-Mitsubishi, Ltd. 31,250,000 93,750,000 CARIPLO - Cassa di Risparmio delle Provincie Lombarde 31,250,000 93,750,000 S.p.A., London Branch Credito Italiano SpA 31,250,000 93,750,000 Istituto Bancario San Paolo di Torino S.p.A. 31,250,000 93,750,000 ----------------- ----------------- euro 1,500,000,000 euro 4,500,000,000 ----------------- -----------------
- -------------------------------------------------------------------------------- 69 - -------------------------------------------------------------------------------- SCHEDULE 1 PART II SWINGLINE BANKS AND SWINGLINE COMMITMENTS Swingline Bank* Swingline Commitments euro Banca Commerciale Italiana S.p.A., London Branch 125,000,000 Barclays Bank PLC 125,000,000 Banque Nationale de Paris 125,000,000 The Chase Manhattan Bank 125,000,000 Midland Bank plc 125,000,000 Morgan Guaranty Trust Company of New York 125,000,000 Swiss Bank Corporation 125,000,000 Westdeutsche Landesbank Girozentrale 125,000,000 -------------------- Total euro 1,000,000,000 -------------------- - --------------------- * in each case lending through its Facility Office in the United States notified to the Agent for the purposes of US Swingline Advances. - -------------------------------------------------------------------------------- 70 - -------------------------------------------------------------------------------- SCHEDULE 2 ORIGINAL BORROWERS (if any) - -------------------------------------------------------------------------------- 71 - -------------------------------------------------------------------------------- SCHEDULE 3 CONDITIONS PRECEDENT DOCUMENTS PART I TO BE DELIVERED BEFORE THE FIRST ADVANCE 1. A copy (certified as a true copy by a director or officer of an Obligor) of the memorandum and articles of association and certificate of incorporation (or equivalent constitutional documents) of each Obligor. 2. A copy (certified as a true copy by a director or officer of an Obligor) of a resolution of the board of directors of each Obligor: (a) approving the terms of, and the transactions contemplated by, the Finance Documents and resolving that it execute and, where applicable, deliver the Finance Documents to which it is a party; (b) authorising a specified person or persons to execute and, where applicable, deliver the Finance Documents to which it is a party on its behalf; and (c) authorising a specified person or persons, on its behalf, to sign and endorse Bills and to sign and/or despatch all documents and notices (including Requests) to be signed and/or despatched by it under or in connection with the Finance Documents. 3. A specimen of the signature of each person authorised by the resolution referred to in paragraph 2 above. 4. A favourable legal opinion of Clifford Chance in relation to English law. - -------------------------------------------------------------------------------- 72 - -------------------------------------------------------------------------------- PART II TO BE DELIVERED BY AN ADDITIONAL BORROWER 1. A Borrower Accession Agreement, duly executed by the Additional Borrower and the Parent. 2. A copy (certified as a true copy by a director or officer of the Additional Borrower) of the memorandum and articles of association and certificate of incorporation (or equivalent constitutional documents) of the Additional Borrower. 3. A copy (certified as a true copy by a director or officer of the Additional Borrower) of a resolution of the board of directors of the Additional Borrower: (a) approving the terms of, and the transactions contemplated by, the Borrower Accession Agreement and resolving that it execute the Borrower Accession Agreement; (b) authorising a specified person or persons to execute the Borrower Accession Agreement on its behalf; and (c) authorising a specified person or persons, on its behalf, to sign and endorse Bills and to sign and/or despatch all other documents and notices (including Requests) to be signed and/or despatched by it under or in connection with this Agreement. 4. A specimen of the signature of each person authorised by the resolution referred to in paragraph 3 above. 5. A favourable legal opinion from lawyers approved by the Agent and the Parent in the place of incorporation of the Additional Borrower, addressed to the Finance Parties. - -------------------------------------------------------------------------------- 73 - -------------------------------------------------------------------------------- SCHEDULE 4 CALCULATION OF THE MLA COST (a) The MLA Cost for an Advance denominated in Sterling is calculated in accordance with the following formula: BY + L(Y-X) + S(Y-Z) % per annum = MLA Cost -------------------- 100-(B + S) where on the day of application of the formula: B is the arithmetic mean of the respective percentage of each Reference Bank's eligible liabilities which the Bank of England requires that Reference Bank to hold on a non-interest-bearing deposit account in accordance with its cash ratio requirements; Y is the arithmetic mean of the respective rates at which Sterling deposits are offered by each Reference Bank to leading banks in the London interbank market at or about 11.00 a.m. on that day for the relevant period; L is the arithmetic mean of the respective percentage of eligible liabilities which the Bank of England requires each Reference Bank to maintain as secured money with members of the London Discount Market Association and/or as secured call money with certain money brokers and gilt-edged primary market makers; X is the arithmetic mean of the respective rates at which secured Sterling deposits in the relevant amount may be placed by each Reference Bank with members of the London Discount Market Association and/or as secured call money with certain money brokers and gilt-edged primary market makers at or about 11.00 a.m. on that day for the relevant period; S is the arithmetic mean of the respective percentage of each Reference Bank's eligible liabilities which the Bank of England requires that Reference Bank to place as a special deposit; and Z is the interest rate per annum allowed by the Bank of England on special deposits. (b) For the purposes of this Schedule 4: (i) "eligible liabilities" and "special deposits" have the meanings given to them at the time of application of the formula by the Bank of England; (ii) "relevant period" in relation to an Advance, means: (A) if its Term or Interest Period is three months or less, its Term or Interest Period; or - -------------------------------------------------------------------------------- 74 - -------------------------------------------------------------------------------- (B) if its Term or Interest Period is more than three months, each successive period of three months and any necessary shorter period comprised in that Term or Interest Period. (c) In the application of the formula, B, Y, L, X, S and Z are included in the formula as figures and not as percentages, e.g. if B = 0.5% and Y = 15%, BY is calculated as 0.5 x 15. (d) (i) The formula is applied on the first day of each relevant period comprised in the Term or Interest Period of the relevant Advance. (ii) Each rate calculated in accordance with the formula is, if necessary, rounded upward to four decimal places. (e) If a change in circumstances has rendered, or will render, the formula inappropriate, the Agent (after consultation with the Reference Banks and the Parent) shall notify the Parent of the manner in which the MLA Cost will subsequently be calculated so as to leave the Obligors and the Banks, so far as is practicable, in no better or worse a position than they were in prior to that change. The manner of calculation so notified by the Agent shall, in the absence of manifest error, be binding on all the Parties. - -------------------------------------------------------------------------------- 75 - -------------------------------------------------------------------------------- SCHEDULE 5 FORM OF REQUEST To: HSBC Investment Bank plc as Agent/Marine Midland Bank as US Swingline Agent* From: [BORROWER] Date: [ ] The General Electric Company, p.l.c. -- euro 6,000,000,000 Syndicated Credit Facility dated 25th March, 1998 We wish to utilise Tranche A* and/or*/Tranche B* by way of Advance(s)* and/or Bills and/or Swingline Advances as follows: (a) Utilisation Date: Tranche A: [ ]* Tranche B: [ ]* Swingline Facility [ ]* (b) Requested Amount (including currency): Tranche A: [ ]* Tranche B: [ ]* Swingline Facility [ ]* (c) Term*: Tranche A: [ ]* Tranche B: [ ]* Swingline Facility [ ]* (d) Payment Instructions: Tranche A: [ ]* Tranche B: [ ]* Swingline Facility [ ]* (e) Initial Interest Period (for Term-out Advances only)* (f) Maturity Date (for Term-out Advances only)* Tranche A: [ ]* (g) Clausing (for Bills only)* Tranche A: [ ]* Tranche B: [ ]* We confirm that no Default has occurred which is continuing and the representations and warranties in Clause 18 (Representations and Warranties) to be repeated in accordance with Clause 18.2 (Times for making representations and warranties) on those dates are correct and will be correct immediately after the Utilisation referred to above except in all cases to the extent waived by the Majority Banks. By: [BORROWER] Authorised Signatory - ----------------------------------- * Delete as appropriate. - -------------------------------------------------------------------------------- 76 - -------------------------------------------------------------------------------- SCHEDULE 6 FORMS OF ACCESSION DOCUMENTS PART I NOVATION CERTIFICATE To: HSBC Investment Bank plc as Agent and on behalf of the Obligors From: [THE EXISTING BANK] and [THE NEW BANK] Date: [ ] The General Electric Company, p.l.c. - euro 6,000,000,000 Syndicated Credit Agreement dated 25th March, 1998 We refer to Clause 28.3 (Procedure for novations). 1. We [ ] (the "Existing Bank") and [ ] (the "New Bank") agree to the Existing Bank and the New Bank novating all the Existing Bank's rights and obligations referred to in the Schedule in accordance with Clause 28.3 (Procedure for novations). 2. The specified date for the purposes of Clause 28.3(c) (Procedure for novations) is [date of novation]. 3. The prior written consent of The General Electric Company, p.l.c. [is not required]* [has been obtained]* in accordance with Clause 28 (Changes to the Parties). 4. The Facility Office and address for notices of the New Bank for the purposes of Clause 34.2 (Addresses for notices) are set out in the Schedule. 5. This Novation Certificate is governed by English law. - ---------------------------------- * Delete as appropriate. - -------------------------------------------------------------------------------- 77 - -------------------------------------------------------------------------------- THE SCHEDULE Rights and obligations to be novated [Details of the rights and obligations of the Existing Bank to be novated]. [New Bank] [Facility Office Address for notices] [Existing Bank] [New Bank] [ ] By: By: By: Date: Date: Date: - -------------------------------------------------------------------------------- 78 - -------------------------------------------------------------------------------- PART II BORROWER ACCESSION AGREEMENT To: HSBC Investment Bank plc as Agent From: [PROPOSED BORROWER] and The General Electric Company, p.l.c. [Date] The General Electric Company, p.l.c. -- euro 6,000,000,000 Syndicated Credit Facility dated 25th March, 1998 (the "Credit Agreement") We refer to Clause 28.4 (Additional Borrowers). [Name of company] of [address] (Registered no. [ ], if any) (the "Proposed Borrower") is a Subsidiary of The General Electric Company, p.l.c. as required by the Credit Agreement and agrees to become an Additional Borrower and to be bound by the terms of the Credit Agreement as an Additional Borrower in accordance with Clause 28.4 (Additional Borrowers). The address for notices of the Proposed Borrower for the purposes of Clause 34.2 (Addresses for notices) is: [ ] This Agreement is governed by English law. By: [PROPOSED BORROWER] Authorised Signatory By: THE GENERAL ELECTRIC COMPANY, P.L.C. Authorised Signatory - -------------------------------------------------------------------------------- 79 - -------------------------------------------------------------------------------- PART III FORM OF BORROWER NOVATION AGREEMENT A NOVATION AGREEMENT dated [ ] BETWEEN: (1) [ ] (the "Existing Borrower"); (2) [ ] (the "Substitute Borrower"); (3) THE GENERAL ELECTRIC COMPANY, p.l.c. on behalf of itself and each other Borrower (as such capitalised term is defined in the Credit Agreement referred to below) (the "Parent"); and (4) HSBC INVESTMENT BANK PLC as agent (the "Agent") on behalf of itself and the Banks (as defined in the Credit Agreement referred to below), and is supplemental to the Syndicated Credit Agreement dated [ ], 1998 (the "Credit Agreement") and made between The General Electric Company, p.l.c., the subsidiaries of the Parent listed in Schedule 2 thereto, the financial institutions listed in Schedule 1 thereto, and the Agent. IT IS AGREED: 1. Novation In consideration of a payment made by the Existing Borrower to the Substitute Borrower and the release of the Existing Borrower from its obligations and liabilities (actual or contingent) specified in the Schedule hereto under the Credit Agreement and with effect on and from [ ] (the "Effective Date") the Substitute Borrower hereby undertakes to observe and perform all the obligations and liabilities (actual or contingent) of the Existing Borrower under the Credit Agreement in respect of the Advances and Bills specified in the Schedule. 2. Integration This Novation Agreement shall be read as one with the Credit Agreement so that any reference therein to "this Agreement", "hereunder" and similar shall include and be deemed to include this Novation Agreement. 3. Continuing Liability The Parent acknowledges and confirms that its obligations under Clause 17 of the Credit Agreement apply to the obligations and liabilities assumed by the Substitute Borrower hereunder. - -------------------------------------------------------------------------------- 80 - -------------------------------------------------------------------------------- SCHEDULE [ ] IN WITNESS whereof the parties hereto have caused this Novation Agreement to be duly executed on the date first written above. ......................................... For and on behalf of [The Existing Borrower] ......................................... For and on behalf of [The Substitute Borrower] ......................................... For and on behalf of the Parent ......................................... For and on behalf of each Bank and the Agent - -------------------------------------------------------------------------------- 81 - -------------------------------------------------------------------------------- SCHEDULE 7 FORM OF BILL Face of Bill No. for (Pounds) .............. ....................19.... To On.................19.. pay against this Bill of Exchange to our order the sum of ............................... for value received against [ ]. Accepted by: For and on behalf of For and on behalf of [ACCEPTING BANK] [BORROWER] ........................... ........................... Authorised signatory Authorised signatory Reverse of Bill For and on behalf of [BORROWER] ........................... Authorised signatory - -------------------------------------------------------------------------------- 82 - -------------------------------------------------------------------------------- SIGNATORIES Parent THE GENERAL ELECTRIC COMPANY, p.l.c. By: John Mayo Original Borrowers [if any] Joint Lead Arrangers BANCA COMMERCIALE ITALIANA S.p.A., LONDON BRANCH By: Stephen Byrne BANQUE NATIONALE DE PARIS By: S. Juyoung Shin BARCLAYS CAPITAL By: G.M. Rody CHASE MANHATTAN plc By: Janin Campos MIDLAND BANK plc By: Doug Lack J. P. MORGAN SECURITIES LTD. By: S. Juyoung Shin SBC WARBURG DILLON READ By: Annette P. Alford WESTDEUTSCHE LANDESBANK GIROZENTRALE By: Caroline Powell Tony Dennis - -------------------------------------------------------------------------------- 83 - -------------------------------------------------------------------------------- Agent HSBC INVESTMENT BANK PLC By: David Stent US Swingline Agent MARINE MIDLAND BANK By: David Stent Banks BANCA COMMERCIALE ITALIANA S.p.A., LONDON BRANCH By: Stephen Byrne BARCLAYS BANK PLC By: G.M. Rody BANQUE NATIONALE DE PARIS By: S. Juyoung Shin THE CHASE MANHATTAN BANK By: Sinead English MIDLAND BANK plc By: D.G. Lack MORGAN GUARANTY TRUST COMPANY OF NEW YORK By: S. Juyoung Shin SWISS BANK CORPORATION By: Annette P. Alford WESTDEUTSCHE LANDESBANK GIROZENTRALE By: Caroline Powell Tony Dennis BANCA NAZIONALE DEL LAVORO S.p.A., LONDON BRANCH By: L.F. Wybraniec D.A. Rosser - -------------------------------------------------------------------------------- 84 - -------------------------------------------------------------------------------- BAYERISCHE LANDESBANK GIROZENTRALE LONDON BRANCH By: Kevin Buck CITIBANK, N.A. By: J.W.G. Parsons CREDIT SUISSE FIRST BOSTON By: L. Smith-Morgan Andrew Nimmo DEN DANSKE BANK AKTIESELSKAB By: S. Juyoung Shin DEUTSCHE BANK AG LONDON By: B.D. Stevenson R.H. Sedlacek NATIONAL WESTMINSTER BANK Plc By: A.J. Gill AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACTING THROUGH ITS ANZ INVESTMENT BANK DIVISION) By: R.J. Heyhoe BANCO CENTRAL HISPANOAMERICANO, S.A. LONDON BRANCH By: H.J.W. Bright J.M. Inches COMMERZBANK AKTIENGESELLSCHAFT, LONDON BRANCH By: Bernd Meist James Weber THE ROYAL BANK OF SCOTLAND plc By: Dean White L-BANK By: S. Juyoung Shin - -------------------------------------------------------------------------------- 85 - -------------------------------------------------------------------------------- ABN AMRO BANK N.V. LONDON BRANCH By: S. Juyoung Shin BANCA DI ROMA S.p.A. - LONDON BRANCH By: J.G. Connolly Raymond Pandolfino BANCA MONTE DEI PASCHI DI SIENA SpA By: G.N.H. Furzland Roberto Boccanera BANCO BILBAO VIZCAYA By: S. Juyoung Shin BANK OF TOKYO-MITSUBISHI, LTD By: C.B. Griffiths CARIPLO - CASSA DI RISPARMIO DELLE PROVINCIE LOMBARDE S.p.A., LONDON BRANCH By: L.K. Barnes CREDITO ITALIANO SpA By: Robert G.A. Sanderson ISTITUTO BANCARIO SAN PAOLO DI TORINO S.p.A. By: S. Juyoung Shin - -------------------------------------------------------------------------------- EX-99.2(A) 3 OFFER TO PURCHASE Exhibit (2)(a) Offer to Purchase for Cash All Outstanding Shares of Common Stock of FORE Systems, Inc. at $35.00 Per Share by GEC Acquisition Corp. A Wholly Owned Subsidiary of GEC Incorporated A Wholly Owned Subsidiary of The General Electric Company, p.l.c. (Not affiliated with the U.S. based corporation with a similar name) THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, MAY 27, 1999, UNLESS THE OFFER IS EXTENDED. THE BOARD OF DIRECTORS OF FORE SYSTEMS, INC. (THE "COMPANY") HAS UNANIMOUSLY APPROVED THE OFFER AND THE MERGER REFERRED TO HEREIN AND DETERMINED THAT THE TERMS OF THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT THE STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES (AS DEFINED HEREIN). THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER SUCH NUMBER OF SHARES THAT WOULD CONSTITUTE AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES ON A FULLY DILUTED BASIS. IMPORTANT Any stockholder desiring to tender all or any portion of such stockholder's 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, have such stockholder's signature thereon guaranteed if required by Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of Transmittal (or such facsimile), or, in the case of a book-entry transfer effected pursuant to the procedure set forth in Section 2, an Agent's Message (as defined herein), and any other required documents to the Depositary (as defined herein) and either deliver the certificates for such Shares to the Depositary along with the Letter of Transmittal (or a facsimile thereof) or deliver such Shares pursuant to the procedure for book-entry transfer set forth in Section 2 or (ii) request such stockholder's broker, dealer, bank, trust company or other nominee to effect the transaction for such stockholder. A stockholder having Shares registered in the name of a broker, dealer, bank, trust company or other nominee must contact such broker, dealer, bank, trust company or other nominee if such stockholder desires to tender such Shares. If a stockholder desires to tender Shares and such stockholder's certificates for Shares are not immediately available or the procedure for book-entry transfer cannot be completed on a timely basis, or time will not permit all required documents to reach the Depositary prior to the expiration of the Offer, such stockholder's tender may be effected by following the procedure for guaranteed delivery set forth in Section 2. Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent or to 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: Warburg Dillon Read LLC April 30, 1999 TABLE OF CONTENTS
Page ---- INTRODUCTION.............................................................. 1 1. Terms of the Offer.................................................. 3 2. Procedure for Tendering Shares...................................... 4 3. Withdrawal Rights................................................... 7 4. Acceptance for Payment and Payment.................................. 7 5. Certain Federal Income Tax Consequences............................. 9 6. Price Range of the Shares; Dividends on the Shares.................. 10 7. Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act Registration; Margin Regulations....................... 11 8. Certain Information Concerning the Company.......................... 12 9. Certain Information Concerning the Purchaser, Parent and GEC, p.l.c.................................................................. 14 10. Source and Amount of Funds.......................................... 16 11. Contacts and Transactions with the Company; Background of the Offer.................................................................. 17 12. Purpose of the Offer; the Merger Agreement; the Stock Option Agreement; the Stockholder Agreement; Other Agreements; Plans for the Company.............................................................. 19 13. Dividends and Distributions......................................... 30 14. Certain Conditions of the Offer..................................... 31 15. Certain Legal Matters............................................... 32 16. Fees and Expenses................................................... 36 17. Miscellaneous....................................................... 36
Schedule I--Directors and Executive Officers To the Holders of Shares of FORE Systems, Inc. INTRODUCTION GEC Acquisition Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of GEC Incorporated, a Delaware corporation ("Parent"), which is a wholly owned subsidiary of The General Electric Company, p.l.c., a public limited company organized under the laws of England and Wales ("GEC, p.l.c."), hereby offers to purchase all outstanding shares of Common Stock (the "Common Stock"), par value $.01 per share (the "Shares"), of FORE Systems, Inc., a Delaware corporation (the "Company"), at $35.00 per Share (the "Offer Price"), net to seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements hereto or thereto, collectively constitute the "Offer"). The Offer is being made pursuant to the Agreement and Plan of Merger dated as of April 26, 1999 (the "Merger Agreement"), among Parent, the Purchaser and the Company pursuant to which, as soon as practicable following the consummation of the Offer and the satisfaction or waiver of certain conditions, the Purchaser will be merged with and into the Company (the "Merger"), with the Company (the "Surviving Corporation") surviving the Merger as a wholly owned subsidiary of Parent. At the effective time of the Merger (the "Effective Time"), each outstanding Share (other than Shares held by stockholders who perfect their appraisal rights under Delaware law, Shares owned by the Company as treasury stock, and Shares owned by Parent or any direct or any indirect wholly owned subsidiary of Parent or of the Company) will be converted into the right to receive $35.00 in cash (the "Per Share Merger Consideration"), without interest thereon. The Merger Agreement provides that the Purchaser may assign any or all of its rights and obligations (including the right to purchase Shares in the Offer) to any affiliate of Parent, but no such assignment shall relieve the Purchaser of its obligations under the Merger Agreement. The Merger is subject to a number of conditions, including the adoption of the Merger Agreement by stockholders of the Company, if required by applicable law. In the event the Purchaser acquires 90% or more of the outstanding Shares pursuant to the Offer or otherwise, the Purchaser would be able to effect the Merger pursuant to the short-form merger provisions of the Delaware General Corporation Law (the "DGCL"), without prior notice to, or any action by, any other stockholder of the Company. In such event, the Purchaser could, and intends to, effect the Merger without prior notice to, or any action by, any other stockholder of the Company. See Section 12. Simultaneously with entering into the Merger Agreement, the Purchaser and the Company have entered into a Stock Option Agreement dated as of April 26, 1999, pursuant to which the Company has granted the Purchaser an option (the "Option") to purchase up to 19.9% of the outstanding Shares of the Company at a price per Share equal to the Offer Price. The Option is exercisable in most cases when the Termination Fee (as defined herein) is payable under the Merger Agreement. In addition, the Option is exercisable following the Purchaser's acceptance of Shares for payment pursuant to the Offer to the extent the effect of such exercise would result in Parent owning, directly or indirectly, immediately after such exercise 90% of the then outstanding Shares. In addition, on April 26, 1999, Parent and the Purchaser entered into a Stockholder Agreement (the "Stockholder Agreement") with two of the founding stockholders of the Company (the "Founding Stockholders"), pursuant to which each Founding Stockholder has agreed, among other things, to sell to the Purchaser all the Shares that he beneficially owns at a price per Share equal to the Offer Price. The Founding Stockholders have also agreed to tender such Shares in the Offer at a price per Share equal to the Offer Price if directed to do so by the Purchaser. The Founding Stockholders collectively own approximately 4.2% of all outstanding Shares. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer. Shareholders who hold their Shares through their broker or bank should consult with such institution as to whether there are any fees applicable to a tender of Shares. Parent will pay all fees and expenses of Warburg Dillon Read LLC, which is acting as Dealer Manager (the "Dealer Manager" or "Warburg Dillon Read"), ChaseMellon Shareholder Services, L.L.C., which is acting as the Depositary (the "Depositary"), and Georgeson & Company Inc., which is acting as Information Agent (the "Information Agent"), incurred in connection with the Offer. See Section 16. 1 The Board of Directors of the Company (the "Board") has unanimously approved the Offer and the Merger and determined that the terms of the Offer and the Merger are fair to, and in the best interests of, the Company's stockholders and unanimously recommends that the Company's stockholders accept the Offer and tender their Shares pursuant to the Offer. The factors considered by the Board in arriving at its decision to approve the Offer and the Merger and to recommend that stockholders of the Company accept the Offer and tender their Shares are described in the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which also is being mailed to stockholders of the Company. The Company's financial advisor, Goldman, Sachs & Co. ("Goldman Sachs") has delivered its opinion to the Board dated April 26, 1999 that, as of such date, and subject to the conditions and limitations set forth therein, the consideration to be received by holders of Shares in the Offer and the Merger is fair, from a financial point of view. Such opinion is set forth in full as an exhibit to the Schedule 14D-9. The Company has advised Parent and the Purchaser that each member of the Board and each of the Company's executive officers intends to tender all Shares owned by such persons pursuant to the Offer, except to the extent of any restrictions created by Section 16(b) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Offer is conditioned upon, among other things, (a) there being validly tendered and not withdrawn prior to the expiration of the Offer that number of Shares which would represent at least a majority of all outstanding Shares on a fully diluted basis (the "Minimum Condition"), (b) any waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), applicable to the purchase of Shares pursuant to the Offer having expired or been terminated (the "HSR Act Condition"), (c) the period of time for any applicable review process by the Committee on Foreign Investment in the United States ("CFIUS") relating to the determination of any threat to national security having expired or terminated, and CFIUS not having taken any action or made any recommendation to the President of the United States to block or to prevent consummation of the Offer or the Merger, in each case under Section 721 of the Defense Production Act of 1950, as amended (the "Exon-Florio Act") (the "Exon-Florio Act Condition") and (d) receiving the regulatory and antitrust clearances that are described in greater detail in Section 4 from the applicable authorities in Germany, Italy, Ireland, Sweden and the United Kingdom (the "European Regulatory Conditions" and, collectively, with the HSR Act Condition and the Exon-Florio Condition, the "Regulatory Conditions"). The Purchaser reserves the right (subject to the terms of the Merger Agreement and the applicable rules and regulations of the Securities and Exchange Commission (the "SEC")) to waive or reduce the Minimum Condition and to elect to purchase, pursuant to the Offer, fewer than the minimum number of Shares necessary to satisfy the Minimum Condition. For purposes herein, Shares on a fully diluted basis means all outstanding Shares, after giving effect to the exercise or conversion of all options, warrants, rights and securities exercisable or convertible into Shares. See Sections 1 and 14. The Company has informed the Purchaser that, as of April 26, 1999, there were 116,519,333 Shares outstanding and 21,815,997 Shares authorized for issuance pursuant to the exercise of outstanding options to purchase Shares ("Stock Options"). As a result, as of such date, the Minimum Condition would be satisfied if the Purchaser acquired 69,167,666 Shares. Certain Federal income tax consequences of the sale of Shares pursuant to the Offer are described in Section 5. THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 2 THE TENDER OFFER 1.Terms of the Offer Upon the terms and subject to the conditions of the Offer, the Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn in accordance with Section 3. The term "Expiration Date" means 12:00 Midnight, New York City time, on Thursday, May 27, 1999, unless and until the Purchaser 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, will expire. The Purchaser expressly reserves the right to modify the terms of the Offer, except that without the consent of the Company, the Purchaser shall not (a) reduce the number of Shares to be subject to the Offer, (b) reduce the Offer Price, (c) modify or add to the conditions to the Offer in any manner adverse to the holders of the Shares, (d) except as provided in the next paragraph, extend the Offer, (e) change the form of consideration payable in the Offer or (f) otherwise amend the Offer in any manner adverse to the holders of Shares. Notwithstanding the foregoing, the Purchaser may, without the consent of the Company, (a) extend the Offer, if at the scheduled Expiration Date of the Offer (the initial scheduled Expiration Date being 20 business days following the commencement of the Offer), any of the conditions to the Purchaser's obligation to accept for payment, and pay for, Shares are not satisfied, until such time as such conditions are satisfied or waived; provided, however, that the Expiration Date shall not be later than the Termination Date (as defined herein) as a result of such extension, (b) extend the Offer for a period of not more than 10 business days beyond the latest Expiration Date that would otherwise be permitted under clause (a) of this sentence, if on the date of such extension (x) less than 90% of the outstanding Shares on a fully diluted basis have been validly tendered and not properly withdrawn pursuant to the Offer and (y) the Purchaser has permanently waived all of the conditions to the Offer (other than the conditions that are not legally capable of being waived and conditions that have not been satisfied because of the willful or intentional action or inaction of the Company) and (c) extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer. If on any scheduled Expiration Date, any of the conditions of the Offer have not been satisfied or waived and such unsatisfied conditions are still capable of being satisfied, the Company may require Purchaser to extend the Expiration Date for a period of not more than 10 business days; provided, however, that Purchaser shall not be required to extend the Expiration Date later than the Termination Date. Subject to the terms of the Merger Agreement and applicable rules and regulations of the SEC, the Purchaser reserves the right, in its sole discretion, at any time and from time to time, and regardless of whether or not any of the events or facts set forth in Section 14 hereof shall have occurred, to (a) extend the period of time during which the Offer is open and thereby delay acceptance for payment of and the payment for any Shares, by giving oral or written notice of such extension to the Depositary and (b) except as set forth above, amend the Offer in any other respect by giving oral or written notice of such amendment to the Depositary. Under no circumstances will interest be paid on the purchase price for tendered Shares, whether or not the Purchaser exercises its right to extend the Offer. If by 12:00 Midnight, New York City time, on Thursday, May 27, 1999 (or any date or time then set as the Expiration Date), any of or all of the conditions to the Offer have not been satisfied or waived, the Purchaser reserves the right (but shall not be obligated), subject to the terms and conditions contained in the Merger Agreement and to the applicable rules and regulations of the SEC, to (a) terminate the Offer and not accept for payment or pay for any Shares and return all tendered Shares to tendering stockholders, (b) except as set forth above with respect to the Minimum Condition, waive all the unsatisfied conditions and accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not theretofore withdrawn, (c) extend the Offer and, subject to the right of stockholders to withdraw Shares until the Expiration Date, retain the Shares that have been tendered during the period or periods for which the Offer is extended or (d) amend the Offer. There can be no assurance that the Purchaser will exercise its right to extend the Offer, except if required to do so. Any extension, amendment or termination will be followed as promptly as practicable by public announcement. In the case of an extension, Rule 14e-1(d) under the Exchange Act requires that the 3 announcement be issued no later than 9:00 a.m., New York City time on the next business day after the previously schedule Expiration Date in accordance with the public announcement requirements of Rule 14d-4(c) under the Exchange Act. Subject to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act, which require that any material change in the information published, sent or given to stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform stockholders of such change), and without limiting the manner in which the Purchaser may choose to make any public announcement, the Purchaser will not have any obligation to publish, advertise or otherwise communicate any such public announcement other than by making a release to the Dow Jones News Service. If the Purchaser extends the Offer or if the Purchaser is delayed in its acceptance for payment of Shares (whether before or after its acceptance for payment of Shares) or it is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (but subject to compliance with Rule 14e- 1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after termination or withdrawal of a tender offer, and the terms of the Merger Agreement), the Depositary may nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 3. If the Purchaser makes a material change in the terms of the Offer or the information concerning the Offer or waives a material condition of the Offer (including, subject to the Merger Agreement, a waiver of the Minimum Condition), the Purchaser will disseminate additional tender offer materials and 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 10 business days is generally required to allow for adequate dissemination to stockholders. The Company has provided or will provide the Purchaser with the Company's stockholder list and security position listing for the purpose of disseminating the Offer to holder of Shares. This Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed by the Purchaser to record holders of Shares and will be furnished to brokers, dealers, banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the Company's stockholder list, or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. 2.Procedure for Tendering Shares Valid Tender. For a stockholder validly to tender Shares pursuant to the Offer, either (a) a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), together with any required signature guarantees 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 certificates for tendered Shares must be received by the Depositary at one of such addresses or such Shares must be delivered pursuant to the procedures for book-entry transfer set forth below (and a confirmation of such delivery, including an Agent's Message (as defined below), must be received by the Depositary), in each case prior to the Expiration Date or (b) the tendering stockholder must comply with the guaranteed delivery procedures set forth below. The Depositary will establish accounts with respect to the Shares at The Depository Trust Company (the "Book-Entry Transfer Facility") for purposes of the Offer within two business days after the date of this Offer to Purchase. 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 in accordance with the Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book- entry transfer into the Depositary's account at the Book-Entry Transfer Facility, the 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 required documents, must, in any case, be transmitted to, and received by, the Depositary at one of its addresses set forth 4 on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedures described below. The confirmation of a book-entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility as described above is referred to herein as a "Book-Entry Confirmation." 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. The term "Agent's Message" means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and 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 the participant. The method of delivery of Shares, the Letter of Transmittal and all other required documents, including delivery through the Book-Entry Transfer Facility, is at the election and risk of the tendering stockholder. Shares will be deemed delivered only when actually received by the Depositary (including, in the case of a book-entry transfer, by Book-Entry Confirmation). 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. Signature Guarantees. No signature guarantee is required on the Letter of Transmittal (a) if the Letter of Transmittal is signed by the registered holder(s) of Shares (which term for purposes of this Section, includes any participant in any of the Book-Entry Transfer Facility's system whose name appears on a security position listing as the owner of the Shares) tendered therewith and such registered holder has not completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (b) if such Shares are tendered for the account of a firm that is a participant in the Security Transfer Agents Medallion Program or the New York Stock Exchange Guarantee Program or the Stock Exchange Medallion Program or by any other "eligible guarantor institution", as such term is defined in Rule 17Ad-15 under the Exchange Act (each, an "Eligible Institution"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. See Instructions 1 and 5 to the Letter of Transmittal. If the certificates for Shares are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made or certificates for Shares not tendered or not accepted for payment are to be returned to a person other than the registered holder of the certificates surrendered, the tendered certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holders or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed in the manner described above. See Instructions 1 and 5 to the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's certificates for Shares are not immediately available or the procedure for book-entry transfer cannot be completed on a timely basis or time will not permit all required documents to reach the Depositary prior to the Expiration Date, such stockholder's tender may be effected if all the following conditions are met: (i) such 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, is received by the Depositary, as provided below, prior to the Expiration Date; and (iii) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation with respect to all such Shares), together with a properly completed and duly executed Letter of Transmittal (or a facsimile thereof), with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and any other required documents are received by the Depositary within three trading days after the date of execution of such Notice of Guaranteed Delivery. A "trading day" is any day on which the Nasdaq National Market (the "Nasdaq National Market") operated by the National Association of Securities Dealers, Inc. (the "NASD") is open for business. The Notice of Guaranteed Delivery may be delivered by hand to the Depositary 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 such Notice of Guaranteed Delivery. 5 Notwithstanding any other provision hereof, 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 for (or a timely Book-Entry Confirmation with respect to) such Shares, (b) a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book-entry transfer, an Agent's Message, and (c) any other documents required by the Letter of Transmittal. Accordingly, tendering stockholders may be paid at different times depending upon when certificates for Shares or Book-Entry Confirmations with respect to such Shares are actually received by the Depositary. Under no circumstances will any interest be paid on the purchase price of the Shares, regardless of any extension of the Offer or any delay in making such payment. The valid tender of Shares pursuant to one of the procedures described above will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. Appointment. By executing a Letter of Transmittal as set forth above, the tendering stockholder will irrevocably appoint designees of the Purchaser as such stockholder's attorneys-in-fact and proxies in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities or rights issued or issuable in respect of such Shares on or after April 26, 1999. All such proxies will be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts for payment Shares tendered by such stockholder as provided herein. Upon such appointment, all prior powers of attorney, proxies and consents given by such stockholder with respect to such Shares or other securities or rights will, without further action, be revoked and no subsequent powers of attorney, proxies, consents or revocations may be given (and, if given, will not be deemed effective). The designees of the Purchaser will thereby be empowered to exercise all voting and other rights with respect to such Shares and other securities or rights in respect of any annual, special or adjourned meeting of the Company's stockholders, actions by written consent in lieu of any such meeting or otherwise, as they in their sole discretion deem proper. The Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares and other securities or rights, including voting at any meeting of stockholders. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any tender of Shares will be determined by the Purchaser in its sole discretion, which determination will be final and binding. The Purchaser reserves the absolute right to reject any or all tenders determined by it not to be in proper form or the acceptance for payment of or payment for which may, in the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves the absolute right to waive any defect or irregularity in the tender of any Shares of any particular stockholder whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects or irregularities relating thereto have been cured or waived. None of the Purchaser, Parent, GEC, p.l.c., 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 tenders or incur any liability for failure to give any such notification. 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. Backup Withholding. In order to avoid "backup withholding" of Federal income tax on payments of cash pursuant to the Offer, a stockholder surrendering Shares in the Offer must, unless an exemption applies, provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury that such TIN is correct and that such stockholder is not subject to backup withholding. If a stockholder does not provide such stockholder's correct TIN or fails to provide the certifications described above, the Internal Revenue Service (the "IRS") may impose a penalty on such stockholder and payment of cash to such stockholder pursuant to the Offer may be subject to backup withholding of 31%. All stockholders surrendering Shares pursuant to the Offer should complete and sign the Substitute Form W-9 included as part of the Letter of Transmittal to provide the information and certification necessary to avoid 6 backup withholding (unless an applicable exemption exists and is proved in a manner satisfactory to the Purchaser and the Depositary). Certain stockholders (including, among others, all corporations and certain foreign individuals and entities) are not subject to backup withholding. Noncorporate foreign stockholders should complete and sign a Form W-8, Certificate of Foreign Status, a copy of which may be obtained from the Depositary, in order to avoid backup withholding. See Instruction 9 to the Letter of Transmittal. 3.Withdrawal Rights Except as otherwise provided in this Section 3, tenders of Shares are irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to the procedures set forth below at any time prior to the Expiration Date and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after Monday, June 28, 1999. 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 and must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and the name of the registered holder of the Shares to be withdrawn, if different from the name of the person who tendered the Shares. If certificates for Shares have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such certificates, the serial numbers shown on such certificates must be submitted to the Depositary and, unless such Shares have been tendered by an Eligible Institution, the signatures on the notice of withdrawal must be guaranteed by an Eligible Institution. If Shares have been delivered pursuant to the procedure for book-entry transfer as set forth in Section 2, 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 and otherwise comply with the Book-Entry Transfer Facility's procedures. Withdrawals of tenders of Shares may not be rescinded, and any Shares properly withdrawn will thereafter be deemed not validly tendered for purposes of the Offer. However, withdrawn Shares may be retendered by again following one of the procedures described in Section 2 at any time prior to the Expiration Date. 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 will be final and binding. None of the Purchaser, Parent, GEC, p.l.c., 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. 4.Acceptance for Payment and Payment 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 accept for payment and will pay for all Shares validly tendered prior to the Expiration Date, and not properly withdrawn in accordance with Section 3, promptly after the Expiration Date. All questions as to the satisfaction of such terms and conditions will be determined by the Purchaser in its sole discretion, which determination will be final and binding. See Sections 1 and 14. The Purchaser expressly reserves the right, in its sole discretion, to delay acceptance for payment of or payment for Shares in order to comply in whole or in part with any applicable law, including, without limitation, the HSR Act and the Exon-Florio Act. Any such delays will be effected in compliance with Rule 14e-1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after termination or withdrawal of a tender offer. GEC, p.l.c. will file a Notification and Report Form with respect to the Offer under the HSR Act. The waiting period under the HSR Act with respect to the Offer will expire at 11:59 p.m., New York City time, on the 15th day after day such form is filed, unless early termination of the waiting period is granted. However, the Antitrust Division of the Department of Justice (the "Antitrust Division") or the Federal Trade Commission (the "FTC") may extend the waiting period by requesting additional information or documentary material from GEC, p.l.c. If such a request is made, such waiting period will expire at 11:59 p.m., New York City time, on the 10th day after substantial compliance by GEC, p.l.c. with such request. See Section 15. 7 The Purchaser and the Company will make a filing under the Exon-Florio Act. The time period for CFIUS to determine whether to undertake an investigation will expire on the 30th day following the acceptance of such filing by CFIUS. In the event that CFIUS determines to undertake an investigation, such investigation must be completed within forty-five days after such determination. The President has fifteen days following the presentation by CFIUS of its recommendation to the President in which to suspend or prohibit the proposed acquisition or seek other appropriate relief. See Section 15. In addition, GEC, p.l.c. is seeking confirmation, in terms satisfactory to GEC, p.l.c. and the Company, from the U.K. Office of Fair Trading ("OFT") that it is not the intention of the U.K. Secretary of State for Trade and Industry ("Secretary of State") to refer the proposed acquisition of the Company to the U.K. Competition Commission under the U.K. Fair Trading Act 1973. There is an informal timetable of up to 45 working days from the date of notification for the Secretary of State to make his decision. The Offer is conditioned upon receiving such confirmation or, in any case, receiving the approval of the proposed acquisition from the applicable U.K. authorities. The proposed acquisition of the Company is also being notified to the German Federal Cartel Office ("FCO") pursuant to the German Act Against Restraints on Competition (the "German Act"). The FCO has one month from the date of notification under the German Act to notify the parties that it has entered into a detailed examination of the proposed acquisition (which can last a maximum of a further three months) or the FCO may issue a confirmation that the conditions for a prohibition in section 36 paragraph 1 of the German Act are not fulfilled. The Offer is conditioned upon receiving such confirmation, or if no such confirmation is received, the one month time limit having expired without being notified by the FCO that is entered into such detailed examination or, in any case, receiving the approval of the proposed acquisition from the applicable German authorities. The proposed acquisition may be notified to the Irish Minister for Enterprise, Trade & Employment (the "Irish Minister") pursuant to the Mergers, Take-Overs and Monopolies (Control) Act, 1978 (as amended) (the "Irish Takeovers Act"). Where applicable, a notification must be made (by both parties) to the Irish Minister within 30 days of an offer capable of being accepted. The Irish Minister has 30 days from the date of notification in which to decide whether to institute further proceedings by referring the proposed acquisition to the Irish Competition Authority. The Offer is conditioned upon receiving confirmation that the Irish Minister will not institute such proceedings, or if no such confirmation is received, such 30 day period limit expiring without the initiation of such proceedings or, in any case, receiving the approval of the proposed acquisition from the applicable Irish authorities. The proposed acquisition of the Company is being notified to the Italian Autorita Garante dell Concorrenza e del Mercato (the "Italian Authority") under Law no. 287 of October 10, 1990. The Italian Authority has 30 days from the date of notification (with the ability to suspend such 30 day term if the information supplied with the notification is incomplete) to notify the parties that it intends to initiate a second stage investigation of the acquisition of the Company or any matters arising therefrom under Article 16 of Law no. 287 of October 10, 1990 (which can last a maximum of a further 75 days, in the case of an opening of a second stage investigation) or to clear the acquisition. The Offer is conditioned upon receiving confirmation that it is not the intention of the Italian Authority to initiate such a second stage investigation or, in any case, receiving the approval of the proposed acquisition from the applicable Italian authorities. The proposed acquisition is being notified to the Swedish Competition Authority (the "SCA") under Section 37 of the Swedish Competition Act. The SCA has 30 calendar days from the date of receipt of a complete notification to either adopt a clearance decision or a decision to initiate a phase two investigation. The Offer is conditioned upon receipt of such clearance decision or, if earlier, receipt of confirmation that the SCA will not initiate such a phase two investigation or, in any case, receiving the approval of the proposed acquisition from the applicable Swedish authorities. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates for (or a timely Book-Entry Confirmation with respect to) such Shares, (b) a Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees, or, in the case of a book- entry transfer, an Agent's Message, and (c) any other documents required by the Letter of Transmittal. The per Share consideration paid to any stockholder pursuant to the Offer will be the highest per Share consideration paid to any other holder of Shares pursuant to the Offer. 8 For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn as, if 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 for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to tendering stockholders. Under no circumstances will interest be paid on the purchase price of any Shares to be paid by the Purchaser, regardless of any extension of the Offer or any delay in making such payment. If the Purchaser extends the Offer or if the Purchaser is delayed in its acceptance for payment of or payment for Shares (whether before or after its acceptance for payment of Shares) or it is unable to accept for payment or pay for Shares pursuant to the Offer for any reason, then, without prejudice to the Purchaser's rights under the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act, which requires that a tender offeror pay the consideration offered or return the tendered securities promptly after termination or withdrawal of a tender offer, and the terms of the Merger Agreement), the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to exercise, and duly exercise, withdrawal rights as described in Section 3. If any tendered Shares are not purchased pursuant to the Offer for any reason, certificates for any such Shares will be returned without expense to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedure set forth in Section 2, such Shares will be credited to an account maintained at the appropriate Book-Entry Transfer Facility) as promptly as practicable after the expiration or termination of the Offer. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to Parent, or to an affiliate of Parent, the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 5.Certain Federal Income Tax Consequences The following is a general discussion of certain United States Federal income tax consequences of the receipt of cash by a holder of Shares pursuant to the Offer or the Merger. Except as specifically noted, this discussion applies only to a U.S. Holder. A "U.S. Holder" means a holder of Shares that is (i) a citizen or resident of the United States, (ii) a corporation or other entity taxable as a corporation created or organized in or under the laws of the United States or any political subdivision thereof or therein, (iii) an estate the income of which is subject to United States Federal income taxation regardless of its source, or (iv) a trust if (x) a court within the United States is able to exercise primary supervision over the administration of the trust and (y) one or more United States fiduciaries have the authority to control all substantial decisions of the trust. A "Non-U.S. Holder" is a holder of Shares that is not a U.S. Holder. The receipt of cash for Shares pursuant to the Offer or the Merger will be a taxable transaction for Federal income tax purposes under the Internal Revenue Code of 1986, as amended (the "Code"), and may also be a taxable transaction under applicable state, local or foreign income or other tax laws. Generally, for Federal income tax purposes, a U.S. Holder will recognize gain or loss equal to the difference between the amount of cash received by the U.S. Holder pursuant to the Offer or the Merger and the aggregate tax basis in the Shares purchased pursuant to the Offer (or canceled pursuant to the Merger). Gain or loss will be calculated separately for each block of Shares purchased pursuant to the Offer (or canceled pursuant to the Merger). Gain (or loss) will be capital gain (or loss), assuming that such Shares are held as a capital asset. Capital gains of individuals, estates and trusts generally are subject to a maximum Federal income tax rate of (i) 39.6% if, at the time the Purchaser accepts the Shares for payment (or the Shares are canceled pursuant to the Merger) 9 the stockholder held the Shares for not more than one year and (ii) 20% if the stockholder held such Shares for more than one year at such time. Capital gains of corporations generally are taxed at the Federal income tax rates applicable to corporate ordinary income. In addition, under present law, the ability to use capital losses to offset ordinary income is limited. A stockholder that tenders Shares pursuant to the Offer or surrenders Shares pursuant to the Merger may be subject to 31% backup withholding unless the stockholder provides its TIN and certifies that such number is correct or properly certifies that it is awaiting a TIN, or unless an exemption applies. A stockholder that does not furnish its TIN may be subject to a penalty imposed by the IRS. See "--Backup Withholding" under Section 2. If backup withholding applies to a stockholder, the Depositary is required to withhold 31% from payments to such stockholder. Backup withholding is not an additional tax. Rather, the amount of the backup withholding can be credited against the Federal income tax liability of the person subject to the backup withholding, provided that the required information is given to the IRS. If backup withholding results in an overpayment of tax, a refund can be obtained by the stockholder upon filing an income tax return. The foregoing discussion may not be applicable with respect to Shares received pursuant to the exercise of employee stock options or otherwise as compensation or with respect to holders of Shares who are subject to special tax treatment under the Code, such as Non-U.S. Holders, life insurance companies, tax-exempt organizations, financial institutions, dealers in securities or currencies, persons who hold Shares as a position in a "straddle" or as part of a "hedging" or "conversion" transaction and persons that have a functional currency other than the U.S. dollar, and may not apply to a holder of Shares in light of individual circumstances. Stockholders are urged to consult their own tax advisors to determine the particular tax consequences to them (including the application and effect of any state, local or foreign income and other tax laws) of the Offer and the Merger. 6.Price Range of the Shares; Dividends on the Shares The Shares are quoted on the Nasdaq National Market under the symbol "FORE". The following table sets forth the range of high and low sale prices per Share as reported on the Nasdaq National Market for the fiscal periods indicated. The information set forth in the table has been adjusted retroactively to reflect a two-for-one stock split which occurred on June 3, 1996.
Price of Shares --------------- High Low ------- ------- Fiscal Year 1997 First Quarter (ended June 30, 1996)........................ $44.750 $27.250 Second Quarter (ended September 30, 1996).................. 43.625 23.500 Third Quarter (ended December 31, 1996).................... 43.500 30.375 Fourth Quarter (ended March 31, 1997)...................... 36.000 14.375 1998 First Quarter (ended June 30, 1997)........................ $17.875 $10.000 Second Quarter (ended September 30, 1997).................. 21.500 13.250 Third Quarter (ended December 31, 1997) 21.813 13.250 Fourth Quarter (ended March 31, 1998) 17.938 13.625 1999 First Quarter (ended June 30, 1998)........................ $26.750 $15.500 Second Quarter (ended September 30, 1998).................. 28.000 14.750 Third Quarter (ended December 31, 1998).................... 20.500 9.250 Fourth Quarter (ended March 31, 1999)...................... 22.063 12.500 2000 First Quarter (through April 29, 1999)..................... 34.625 19.000
10 On April 23, 1999, the last full trading day before the first public announcement of the execution of the Merger Agreement, the last reported sales price of the Shares on the Nasdaq National Market was $24.50 per Share. The Offer Price of $35.00 represents a 43% premium over this closing price. On April 29, 1999, the last full trading day before the commencement of the Offer, the last reported sales price of the Shares on the Nasdaq National Market was $33.625 per Share. The Purchaser has been advised by the Company that the Company has never paid any cash dividends on the Shares. Stockholders are urged to obtain current market quotations for the Shares. 7. Effect of the Offer on the Market for the Shares; Stock Quotation; Exchange Act Registration; Margin Regulations Market for Shares. The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly and could adversely affect the liquidity and market value of the remaining Shares held by the public. Stock Quotation. Depending upon the number of Shares purchased pursuant to the Offer, the Shares may no longer meet the requirements of the NASD for continued inclusion in the Nasdaq National Market, which among other things require that an issuer have either (i) at least 750,000 publicly held shares, held by at least 400 stockholders of round lots, with a market value of at least $5,000,000 and net tangible assets of at least $4,000,000 and at least two registered and active market makers for the shares or (ii) at least 1,100,000 publicly held shares, held by at least 400 stockholders of round lots, with a market value of at least $15,000,000 and either (x) a market capitalization of at least $50,000,000 or (y) total assets and total revenue of at least $50,000,000 each for the most recently completed fiscal year or two of the last three most recently completed fiscal years and at least four registered and active market markers. The Shares might nevertheless continue to be included in the NASD's Nasdaq Stock Market (the "Nasdaq Stock Market") with quotations published in the Nasdaq "additional list" or in one of the "local lists", but if the number of holders of the Shares were to fall below 300, or if the number of publicly held Shares were to fall below 100,000 or there were not at least two registered and active market makers for the Shares, the NASD's rules provide that the Shares would no longer be "qualified" for Nasdaq Stock Market reporting and the Nasdaq Stock Market would cease to provide any quotations. Shares held directly or indirectly by directors, officers or beneficial owners of more than 10% of the Shares are not considered as being publicly held for this purpose. If, as a result of the purchase of Shares pursuant to the Offer or otherwise, the Shares no longer meet the requirements of the NASD for continued inclusion in the Nasdaq National Market or in any other tier of the Nasdaq Stock Market and the Shares are no longer included in the Nasdaq National Market or in any other tier of the Nasdaq Stock Market, as the case may be, the market for Shares could be adversely affected. In the event that the Shares no longer meet the requirements of the NASD for continued inclusion in any tier of the Nasdaq Stock Market, it is possible that the Shares would continue to trade in the over-the-counter market and that price quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would, however, depend upon the number of holders of Shares remaining at such time, the interest in maintaining a market in Shares on the part of securities firms, the possible termination of registration of the Shares under the Exchange Act, as described below, and other factors. Exchange Act Registration. The Shares are currently registered under the Exchange Act. Registration of the Shares under the Exchange Act may be terminated upon application of the Company to the SEC if the Shares are not listed on a national securities exchange, quoted on an automated inter-dealer quotation system or held by 300 or more holders of record. Termination of registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its stockholders and to the SEC 11 and would make certain provisions of the Exchange Act no longer applicable to the Company, such as the short-swing profit recovery provisions of Section 16(b) of the Exchange Act, the requirement of furnishing a proxy statement pursuant to Section 14(a) of the Exchange Act in connection with stockholders' meetings and the related requirement of furnishing an annual report to stockholders and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions. Furthermore, the ability of "affiliates" of the Company and persons holding "restricted securities" of the Company to dispose of such securities pursuant to Rule 144 or 144A promulgated under the Securities Act of 1933, as amended (the "Securities Act"), may be impaired or eliminated. The Purchaser intends to seek to cause the Company to apply for termination of registration of the Shares under the Exchange Act as soon after the completion of the Offer as the requirements for such termination are met. If public quotation and registration of the Shares is not terminated prior to the Merger, then the Shares will no longer be quoted and the registration of the Shares under the Exchange Act will be terminated following the consummation of the Merger. Margin Regulations. The Shares are currently "margin securities" under the regulations 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 the Shares. Depending upon factors similar to those described above regarding listing and market quotations, it is possible that, following the Offer, the Shares would no longer constitute "margin securities" for the purposes of the margin regulations of the Federal Reserve Board and therefore could no longer be used as collateral for loans made by brokers. In any event, the Shares will cease to be "margin securities" if registration of the Shares under the Exchange Act is terminated. 8.Certain Information Concerning the Company According to the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998, the Company is a Delaware corporation and is a leader in the design, development, manufacture and sale of high-performance networking products based on Asynchronous Transfer Mode ("ATM") technology. ATM provides significantly greater scalability, total capacity and resiliency than conventional networking technologies. ATM improves the performance of today's network applications, and also enables new applications that integrate video, audio and data communications. The Company believes that it currently offers the most comprehensive ATM product line available, including ForeRunner(R) ATM switches for enterprise applications, TNX(TM) ATM switches for service provider applications, PowerHub(R) local area network ("LAN") switches, ES- 2810/3810 and 4810 Ethernet switches for ATM connectivity, TS-2800 switches for token ring to ATM connectivity, ForeRunner ATM adapter cards, CellPath(TM) wide area network ("WAN") multiplexing products for WAN access, ForeThought(R) internetworking software, ForView(R) network management software and StreamRunner(TM) ATM video products. The Company's networking products enable customers to connect computers to form clusters, workgroups and LANs, to build backbones for enterprise-wide networks and to provide transparent, end-to-end LAN and WAN connectivity. The Company's networking products are designed to be both flexible and scalable, allowing customers to increase the capacity and extend the utility of their existing networks or to install a new ATM-based network. The Company's principal offices are located at 1000 FORE Drive, Warrendale, Pennsylvania 15086-7502. Set forth below is certain selected consolidated financial information with respect to the Company and its subsidiaries, which is excerpted from the information contained in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998, and the Company's Report on 10-Q for the nine months ended December 31, 1998. More comprehensive financial information is included in such reports and other documents filed by the Company with the SEC, and the following summary is qualified in its entirety by reference to such reports and such other documents and all the financial information (including any related notes) contained therein. Such reports and such other documents should be available for inspection and copies thereof should be obtainable in the manner set forth below under "Available Information". 12 FORE SYSTEMS INC. SELECTED CONSOLIDATED FINANCIAL INFORMATION (Dollars in thousands, except per share data)
Nine Months Ended December 31, Year Ended March 31, ------------------- --------------------------- 1998 1997 1998 1997 1996 --------- -------- -------- -------- -------- Revenue....................... $ 444,208 $327,161 $458,369 $395,347 $235,189 Gross profit.................. $ 243,023 $182,839 $255,196 $226,229 $136,523 Merger-related expenses....... $ -- $ -- $ -- $ 1,747 $ 29,375 Purchased research and development.................. $ 199,316 $ -- $ -- $ -- $ -- Restructuring charges......... $ 5,100 $ -- $ -- $ -- $ -- Income from operations........ $(166,991) $ 23,335 $ 36,572 $ 61,637 $ 10,689 Litigation settlement charges...................... $ -- $ -- $ -- $ (8,257) $ -- Net income.................... $(168,005) $ 22,002 $ 35,155 $ 41,470 $ 9,737 Net income per common share-- basic........................ $ (1.61) $ 0.22 $ 0.35 $ 0.45 $ 0.12 Net income per common share-- diluted...................... $ (1.61) $ 0.22 $ 0.35 $ 0.41 $ 0.11 Total assets.................. $ 704,820 $585,710 $621,207 $538,577 $424,362 Total liabilities............. $ 148,049 $ 95,663 $114,189 $ 84,398 $ 88,372 Total stockholders' equity.... $ 556,771 $490,047 $507,018 $454,179 $335,990
Available Information. The Company is subject to the informational requirements of the Exchange Act and, in accordance therewith, is required to file reports relating to its business, financial condition and other matters. Information as of particular dates concerning the Company's directors and officers, their remuneration, stock options and other matters, the principal holders of the Company's securities and any material interest of such persons in transactions with the Company is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the SEC. Such reports, proxy statements and other information should be available for inspection at the public reference facilities of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the SEC located at Seven World Trade Center, 13th Floor, New York, NY 10049 and Citicorp Center, 500 West Madison Street (Suite 1400), Chicago, IL 60661. Copies of such information should be obtainable, by mail, upon payment of the SEC's customary charges, by writing to the SEC's principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. Such material should also be available for inspection at the offices of Nasdaq Operations, 1735 K Street, N.W., Washington D.C. 20006. The SEC maintains a web site that contains reports, proxy and information statements and other information regarding registrants that file electronically with the SEC. Such reports, proxy and information statements and other information may be found on the SEC's web site address, http://www.sec.gov. Except as otherwise stated in this Offer to Purchase, the information concerning the Company contained herein has been taken from or based upon publicly available documents on file with the SEC and other publicly available information. Although the Purchaser, Parent and GEC, p.l.c. do not have any knowledge that any information is untrue, none of the Purchaser, Parent or GEC, p.l.c. takes any responsibility for the accuracy or completeness of such information or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information. Certain Company Projections. During the course of discussions between representatives of GEC, p.l.c. and the Company, the Company provided GEC, p.l.c. or its representatives with certain non-public business and financial information about the Company. The following is a summary of selected projected financial information provided by the Company.
Projections for Year Ending March 31, ------------------ 2000 2001 2002 ---- ------ ------ (In millions, except per share data) Net sales.............................................. $901 $1,171 $1,522 Net income............................................. 105 142 188 Net income per share................................... 0.85 1.13 1.44
13 The Company has advised the Purchaser, Parent and GEC, p.l.c. that it does not as a matter of course make public any projections as to future performance or earnings, and the projections set forth above are included in this Offer to Purchase only because the information was provided to GEC, p.l.c. The projections were not prepared with a view to public disclosure or compliance with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants regarding projections or forecasts. The Company's internal operating projections are, in general, prepared solely for internal use and capital budgeting and other management decisions and are subjective in many respects and thus susceptible to various interpretations and periodic revision based on actual experience and business developments. The projections were based on a number of assumptions that are beyond the control of the Company, the Purchaser, Parent or GEC, p.l.c. or their respective financial advisors, including economic forecasting (both general and specific to the Company's business), which is inherently uncertain and subjective. None of the Purchaser, Parent or GEC, p.l.c. or their respective financial advisors assumes any responsibility for the accuracy of any of the projections. The inclusion of the foregoing projections should not be regarded as an indication that the Company, the Purchaser, Parent or GEC, p.l.c. or any other person who received such information considers it an accurate prediction of future events. None of the Company, the Purchaser, Parent or GEC, p.l.c. intends to update, revise or correct such projections if they become inaccurate (even in the short term). 9.Certain Information Concerning the Purchaser, Parent and GEC, p.l.c. The Purchaser, a Delaware corporation, was recently incorporated for the purpose of acting as an acquisition vehicle. It has not conducted any unrelated activities since its incorporation. The principal executive office of the Purchaser is located at 1500 Mittel Boulevard, Wood Dale, IL 60191-1073 (c/o Videojet Systems International, Inc.). All outstanding shares of common stock of Purchaser are owned by Parent. The principal executive office of Parent, a Delaware corporation and a wholly owned indirect subsidiary of GEC, p.l.c., is located at 1500 Mittel Boulevard, Wood Dale, IL 60191-1073 (c/o Videojet Systems International, Inc.). Parent is a holding company of substantially all of the United States operations of GEC, p.l.c. All outstanding shares of common stock of Parent are indirectly owned by GEC, p.l.c. GEC, p.l.c. is a public limited company organized under the laws of England and Wales with its principal executive office at One Bruton Street, London WIX 8AQ. GEC, p.l.c., its subsidiaries and associated companies are principally engaged in the provision and support of intelligent electronic systems. On April 27, 1999, GEC, p.l.c. entered into an agreement with British Aerospace Public Limited Company ("British Aerospace") regarding a reconstruction which would involve the separation from GEC, p.l.c. of its aerospace and defense activities and the merger of such activities with British Aerospace. As part of these transactions, GEC, p.l.c. shareholders will receive ordinary shares in and other securities of British Aerospace. This transaction is subject to, among other things, regulatory, court and shareholder approvals. Upon its completion, GEC, p.l.c. will be a high technology company focused on communications and on technology applied to medical and commercial systems. In addition, on April 8, 1999, a wholly owned subsidiary of GEC, p.l.c. completed a tender offer for the common stock of RELTEC Corporation ("RELTEC"). On April 13, 1999, this subsidiary merged with and into RELTEC, and RELTEC became a wholly owned subsidiary of GEC, p.l.c. The name, citizenship, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of the Purchaser, Parent and GEC, p.l.c. are set forth in Schedule I hereto. Except as described in this Offer to Purchase, none of the Purchaser, Parent or GEC, p.l.c. (together, the "Corporate Entities") or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I or any associate or majority-owned subsidiary of the Corporate Entities or any of the persons so listed, beneficially owns any equity security of the Company, and none of the Corporate Entities or, to the best 14 knowledge of the Corporate Entities, any of the other persons referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of the Company during the past 60 days. See Section 11. Except as described in this Offer to Purchase, (a) there have not been any contacts, transactions or negotiations between the Corporate Entities, any of their respective subsidiaries or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I, on the one hand and the Company or any of its directors, officers or affiliates, on the other hand, that are required to be disclosed pursuant to the rules and regulations of the SEC and (b) none of the Corporate Entities or, to the best knowledge of the Corporate Entities, any of the persons listed in Schedule I has any contract, arrangement understanding or relationship with any person with respect to any securities of the Company. Set forth below is a summary of certain selected consolidated financial information with respect to GEC, p.l.c. for the fiscal years ended March 31, 1996, 1997 and 1998 and the six months ended September 30, 1997 and 1998. The selected consolidated financial information is stated in pounds sterling. Such information is provided for supplemental information purposes only. Because the only consideration in the Offer and Merger is cash and the Offer covers all outstanding Shares, and in view of the absence of a financing condition and the amount of consideration payable in relation to the financial capability of GEC, p.l.c. and its affiliates, the Purchaser believes the financial condition of GEC, p.l.c. and its affiliates is not material to a decision by a holder of Shares whether to sell, tender or hold Shares pursuant to the Offer. On April 29, 1999, The Wall Street Journal reported that, as of April 28, 1999, one pound sterling equaled 1.6145 U.S. dollars. GEC, p.l.c. SELECTED CONSOLIDATED FINANCIAL INFORMATION ((Pounds) millions)
Six Months Ended September 30, Year Ended March 31, --------------------------- ------------------------------------------- 1998 1997 1998 1997 1996 ------------- ------------- ------------- -------------- -------------- Profit and Loss Data: Turnover(1)........... (Pounds)3,352 (Pounds)3,317 (Pounds)7,165 (Pounds)11,147 (Pounds)10,990 Profit on ordinary activities before taxation(2).......... 1,393 415 1,028 707 981 Profit on ordinary activities attributable to the shareholders(2)...... 1,108 261 658 408 623
at September 30, Year Ended March 31, --------------------------- ----------------------------------------- 1998 1997 1998 1997 1996 ------------- ------------- ------------- ------------- ------------- Balance Sheet Data: Fixed assets.......... (Pounds)2,805 (Pounds)1,947 (Pounds)1,717 (Pounds)1,919 (Pounds)2,110 Current assets........ 4,703 4,369 4,094 4,240 4,545 Creditors: due within one year............. 2,936 2,311 2,131 2,333 2,462 Equity shareholders' interest............. 3,607 2,887 2,594 2,687 3,112
- -------- (1) Turnover for the six months ended September 30, 1997 and 1998 and for the fiscal year ended March 31, 1998 includes share of joint ventures. Turnover for the fiscal years ended March 31, 1996 and 1997 includes share of joint ventures and associates. In the Interim Statement for the six months ended September 30, 1998, Alstom, previously a joint venture, is included as an associate and comparative figures for the six months ended September 30, 1997 and for the fiscal year ended March 31, 1998 have been restated accordingly. (2) In the Interim Statement for the six months ended September 30, 1998, the adoption of United Kingdom Financial Reporting Standard 12, Provisions, Contingent Liabilities and Contingent Assets resulted in a charge of (Pounds)27m in exceptional items--continuing operations for the six months to September 30, 1997 and the fiscal year ended March 31, 1998. Profit on ordinary activities before taxation and profit on ordinary activities attributable to the shareholders for these periods have been restated accordingly. 15 Summary of Certain Significant Differences Between U.K. and U.S. GAAP The consolidated accounts of Parent are prepared in accordance with U.K. GAAP, which differs in certain respects from U.S. GAAP. The following is a general summary of the significant differences: Goodwill. Under U.K. GAAP for acquisitions prior to March 31, 1998, the excess of the purchase consideration over the fair value of the attributable net assets of the acquired businesses at the acquisition date is written-off against shareholders' equity. In accordance with United Kingdom Financial Reporting Standard ("FRS") 10--Goodwill and Intangible Assets, which applies to financial statements relating to accounting periods ending on or after December 23, 1998, purchased goodwill arising in respect of acquisitions since April 1, 1998 is capitalized and amortized over its useful economic life, not to exceed 20 years. Under U.S. GAAP, goodwill arising on acquisitions accounted for under the purchase method is capitalized and amortized using the straight line method over its estimated useful life, not to exceed forty years. Goodwill is computed under U.S. GAAP after ascribing fair values to all assets acquired including identifiable intangible assets. Restructuring Costs. Under U.K. GAAP prior to the implementation of FRS 12-- Provisions, Contingent Liabilities and Contingent Assets, provisions were made for severance and other costs related to restructuring at the time the decision to restructure had been made. FRS 12, which applies to financial statements relating to accounting periods ending on or after March 23, 1999, requires an entity to have detailed formal plan and to have raised a valid expectation in those affected that it will carry out the restructuring prior to recording a provision. Under U.S. GAAP, the requirements that have to be satisfied prior to charging restructuring costs to income are significant, particularly for employee termination benefits. Those affected must have been informed and must be aware of their termination package. Other actions arising from the restructuring plan and their completion dates have to be identified by the balance sheet date. Deferred Taxation. Under U.K. GAAP, deferred taxation is provided at the rates at which the taxation is expected to become payable to the extent that it is expected to crystallize in the foreseeable future. Under U.S. GAAP, deferred taxation is provided on a full liability basis at rates at which the taxation would be payable in the relevant future year. Pension Expense. U.K. and U.S. GAAP differ notably in the permitted valuation methods and in the way surpluses and deficits are accounted for. Under U.K. GAAP assets are valued at the discounted present value of income streams while under U.S. GAAP market related values are used. Dividends. Under U.K. GAAP, dividends are included in the financial statements when recommended by the Board of Directors to the shareholders. Under U.S. GAAP, dividends are not included in the financial statements until declared by the Board of Directors. Capitalization of Interest. Under U.K. GAAP, interest on borrowings used to finance assets in the course of construction is not required to be included in the cost of the asset. Under U.S. GAAP, such interest is capitalized during the period of construction until the date that the asset is placed in service. Such interest cost is amortized over the estimated useful life of the related asset. 10.Source and Amount of Funds The Purchaser estimates that the amount of funds required to purchase all outstanding Shares pursuant to the Offer, to pay cash to holders of Stock Options pursuant to the Merger Agreement and to pay fees and 16 expenses related to the Offer will be approximately $4.5 billion ($4.2 billion after taking into account cash available at the Company). The Purchaser will obtain such funds directly or indirectly from GEC, p.l.c. Such funds will be obtained by GEC, p.l.c. from existing cash resources or from borrowings pursuant to the Euro 6,000,000,000 Syndicated Credit Facility dated March 25, 1998 (the "Credit Facility Agreement") among GEC p.l.c., HSBC, p.l.c., HSBC Investment Bank PLC, as Agent, Marine Midland Bank, as U.S. Swingline Agent, and certain other financial institutions. The Credit Facility Agreement includes a 364 day revolving credit facility up to the amount of Euro 1,500,000,000 (the "364 Day Facility") and a five year revolving credit facility up to the amount of Euro 4,500,000,000 (the "Five Year Facility"). Any such borrowings will be unsecured and repayable (with a right to reborrow) on the last day of each borrowing period of up to six months. Such borrowings can be made in Euro, U.K. pounds sterling, U.S. Dollars or in any other currency which is readily available and freely transferable in the London foreign exchange market. The 364 Day Facility will terminate on March 23, 2000 and the Five Year Facility will terminate on March 25, 2003. Any such borrowings would bear interest at a rate equal to the aggregate of the London inter-bank offered rate plus 0.175 percent per annum. On April 29, 1999, The Wall Street Journal reported that, as of April 28, 1999, one Euro equaled 1.0638 U.S. Dollars. The Credit Facility Agreement includes customary covenants and events of default. There are no current plans to refinance any such borrowings made under the Credit Facility Agreement. Parent is a designated borrower under the Credit Facility Agreement. GEC, p.l.c. otherwise intends to make available, directly or indirectly, to the Purchaser funds to enable it to complete the acquisition of all outstanding Shares, upon the terms and conditions set forth in the Merger Agreement. 11. Contacts and Transactions with the Company; Background of the Offer On March 4, 1999, representatives of Warburg Dillon Read, on behalf of GEC, p.l.c., contacted Thomas J. Gill, Chief Executive Officer of the Company, in order to determine whether the Company would be interested in discussing a possible acquisition of the Company by GEC, p.l.c. In addition, in early March 1999, Jack Fryer, the Strategic Planning Director of GEC, p.l.c., contacted Robert Musslewhite, the Senior Vice President of Corporate Development of the Company, to arrange a meeting the following week. On March 11, 1999, John C. Mayo, Finance Director of GEC, p.l.c., and Mr. Fryer met in London, England with Mr. Gill and Mr. Musslewhite regarding various strategic alternatives, including the sale of the Company. At this meeting, Mr. Mayo and Mr. Fryer were presented with information about the Company's business and product plans. On March 17, 1999, representatives of GEC, p.l.c., including Mr. Fryer, met in Pittsburgh, Pennsylvania with Mr. Gill, Mr. Musslewhite and several other executives of the Company. At this meeting, the Company's business and product plans were reviewed. Prior to this meeting, GEC, p.l.c. entered into the Confidentiality Agreement (as defined herein) with the Company under which GEC, p.l.c. agreed, among other things, not to acquire or propose to acquire any securities of the Company or seek a change of control of the management of the Company or the Board, directly or through an affiliate, without the consent of the Board. On April 6, 1999, representatives of GEC, p.l.c., including Mr. Mayo and Mr. Fryer, counsel to GEC, p.l.c. and Warburg Dillon Read, met in Pittsburgh, Pennsylvania with Mr. Gill, Dr. Eric Cooper, the Chairman of the Board of Directors of the Company, and representatives of Goldman Sachs. At this meeting, the parties discussed an outline of general terms and structure regarding the potential acquisition of the Company by GEC, p.l.c. On April 8, 1999, a meeting among representatives of GEC, p.l.c., including Lord Simpson, Chief Executive Officer of GEC, p.l.c., Mr. Mayo and Mr. Fryer, representatives of Warburg Dillon Read and executives of the Company, including Mr. Gill was held by teleconference. At this meeting, the parties discussed the Company's projections for the fiscal years 2000 and 2001 and the potential synergies inherent in a business combination between the Company and GEC, p.l.c. 17 On April 10, 1999, GEC, p.l.c. made a written proposal to acquire the Company. The proposal did not contain a price. The letter transmitting the proposal emphasized GEC, p.l.c.'s experience in completing acquisitions. An attachment to the letter set out a due diligence process and a commitment by GEC, p.l.c. to complete its due diligence review within a three-day time period. The proposal contained protective termination provisions and a grant by the Company of an option to purchase 19.9% of the then outstanding Shares. The letter requested an exclusivity period of sixteen days and expressed a deadline of mid-day on April 11, 1999, following which the proposal would be withdrawn if not accepted. On April 13, 1999, a representative of GEC, p.l.c. communicated to a representative of the Company a price per Share in cash at which GEC, p.l.c. would be willing to purchase the Shares and extended the deadline referenced in the April 10 letter to April 13. The proposal was not accepted by the Company. On April 21, 1999, Lord Simpson and Mr. Mayo, met with Mr. Gill in Pittsburgh, Pennsylvania to discuss the potential acquisition of the Company by GEC, p.l.c. On April 22, 1999, GEC, p.l.c. made a revised written proposal to acquire the Company on substantially the terms set forth in the April 10 proposal. The revised proposal stated that GEC, p.l.c. would complete its due diligence review and execute definitive documents within a four day time period if its offer were accepted and if it was granted an exclusivity period through May 3, 1999. This written proposal requested a response prior to the opening of business on April 23 and increased the cash purchase price per Share proposed by GEC, p.l.c. from the price proposal on April 13. During the night of April 22, Mr. Mayo received a telephone call from Mr. Gill, representatives of Goldman Sachs and representatives of counsel to the Company to discuss the terms of GEC, p.l.c.'s offer and certain modifications thereto requested by the Company. During this conversation, Mr. Mayo was informed that the Company was prepared to accept the proposal made by GEC, p.l.c. and to grant the requested exclusivity period if GEC, p.l.c. raised its price to a specified level and agreed to modify various protective provisions, including a provision which would enable the Company, following execution of definitive agreements, to accept a proposal from any party if such proposal was superior from a financial point of view to the Company's stockholders. Also during this conversation, the scope and scheduling of GEC, p.l.c.'s due diligence review of the Company were discussed. On April 23, 1999, GEC, p.l.c. agreed to increase the cash price per Share proposed by GEC, p.l.c. to the level specified by the Company and agreed to the various modifications requested by the Company to the terms that had been proposed by GEC, p.l.c. On this same date, GEC, p.l.c.'s counsel transmitted drafts of the Merger Agreement, Stockholder Agreement and Stock Option Agreement to counsel for the Company and several conversations about these agreements took place between counsel to the Company and counsel to GEC, p.l.c. From April 23, 1999 through April 26, 1999, representatives of GEC, p.l.c., its counsel and Warburg Dillon Read undertook a due diligence review of the Company's business and financial condition and engaged in various discussions and meetings with management and employees of the Company and representatives of Company counsel and Goldman Sachs in Pittsburgh. During this period, the Merger Agreement, Stockholder Agreement and Stock Option Agreement were negotiated, finalized and entered into among the respective parties thereto and their counsel. On April 26, 1999, Mr. Mayo had a telephone conversation with Mr. Gill and representatives of Goldman Sachs during which Mr. Gill and representatives of Goldman Sachs informed Mr. Mayo that the Offer, the Stockholder Agreement, the Merger Agreement and the Stock Option Agreement were unanimously approved by the Board of Directors of the Company at a meeting that had commenced on April 25, 1999, provided that GEC, p.l.c. would increase the price per Share to $35.00. On April 26, 1999, the Board of Directors of GEC, p.l.c. met in London and approved Parent and the Purchaser entering into the Merger Agreement, the Stockholder Agreement and the Stock Option Agreement. Following this meeting, the Merger Agreement, the Stock Option Agreement, the Stockholder Agreement and the employment agreements described in Section 12 were executed and the transaction was publicly announced. 18 12. Purpose of the Offer; the Merger Agreement; the Stock Option Agreement; the Stockholder Agreement; Other Agreements; Plans for the Company Purpose. The purpose of the Offer is to acquire control of and the entire equity interest in the Company. Following the Offer, the Purchaser and Parent intend to acquire any remaining equity interest in the Company not acquired in the Offer by consummating the Merger. The Merger Agreement. The Merger Agreement provides that following the satisfaction of the conditions described below under "Conditions to the Merger", the Purchaser will be merged with and into the Company, and each outstanding Share (other than Shares held by stockholders who perfect their appraisal rights under Delaware law, Shares owned by the Company as treasury stock and Shares owned by Parent or any direct or indirect wholly owned subsidiary of Parent or of the Company) will be converted into the right to receive the Per Share Merger Consideration, without interest. (1) Vote Required to Approve Merger. The DGCL requires, among other things, that the adoption of any plan of merger or consolidation of the Company be approved by the Board and generally by a majority of the holders of the Company's outstanding voting securities. The Board has approved the Offer and the Merger. Consequently, the only additional action of the Company that may be necessary to effect the Merger is approval by such stockholders if the "short-form" merger procedure described below is not available. Under the DGCL, the affirmative vote of holders of a majority of the outstanding Shares (including any Shares owned by the Purchaser), is generally required to approve the Merger. If the Purchaser acquires, through the Offer or otherwise, voting power with respect to at least a majority of the outstanding Shares (which would be the case if the Minimum Condition were satisfied and the Purchaser were to accept for payment Shares tendered pursuant to the Offer), it would have sufficient voting power to effect the Merger without the vote of any other stockholder of the Company. However, the DGCL also provides that if a parent company owns at least 90% of each class of stock of a subsidiary, the parent company can effect a short-form merger with that subsidiary without the action of the other stockholders of the subsidiary. Accordingly, if, as a result of the Offer or otherwise, the Purchaser acquires or controls the voting power of at least 90% of the outstanding Shares, the Purchaser could, and intends to, effect the Merger without prior notice to, or any action by, any other stockholder of the Company. (2) Conditions to Obligations of Each Party Under The Merger Agreement. The respective obligations of Parent and the Purchaser to effect the Merger under the Merger Agreement are subject to the satisfaction at or prior to the Effective Time of the following conditions, any or all of which may be waived by Parent and the Purchaser, in whole or in part, to the extent permitted by applicable law: (a) the Merger Agreement and the Merger shall have been approved and adopted by the requisite vote of the stockholders of the Company, if required by applicable law; (b) no court or governmental authority shall have enacted, issued, promulgated, enforced or entered any law or order (whether temporary, preliminary or permanent) which is in effect and which has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger; (c) the applicable waiting period under the HSR Act shall have expired or been terminated; and (d) the Purchaser, Parent or their affiliates shall have accepted for payment and purchased Shares pursuant to and subject to the conditions of the Offer. (3) Termination of the Merger Agreement. The Merger Agreement may be terminated and the Offer and the Merger may be abandoned at any time (notwithstanding approval of the Merger by the stockholders of the Company) prior to the Effective Time: (a) by mutual written consent of Parent, the Purchaser and the Company; (b) by Parent, the Purchaser or the Company if any court of competent jurisdiction or other governmental authority shall have issued a final order or taken any other final action restraining, enjoining or otherwise prohibiting the consummation of the Offer or the Merger and such order or other action is or shall have become nonappealable; (c) by Parent or the Purchaser if due to an occurrence or circumstance which would result in a failure to satisfy any of the conditions set forth in Section 14, the Purchaser shall have (i) failed to commence the Offer within the time required by Regulation 14D under the Exchange Act, (ii) terminated the Offer without purchasing the Shares pursuant to the Offer or (iii) failed to accept for payment Shares pursuant to the Offer prior to July 16, 1999, (the "Termination Date"); (d) by the Company if (i) there shall not have been (x) any 19 breach or breaches of any representation or warranty that, individually or in the aggregate, have resulted in or would reasonably be expected to result in a material adverse effect on the Company or (y) any breach or breaches of a covenant or agreement on the part of the Company under this Agreement or the Stock Option Agreement that, individually or in the aggregate, materially adversely affect (or materially delay) the consummation of the Offer and the Purchaser shall have (A) failed to commence the Offer within the time required by Regulation 14D under the Exchange Act, (B) terminated the Offer without purchasing any Shares pursuant to the Offer or (C) failed to accept for payment Shares pursuant to the Offer prior to the Termination Date, or (ii) prior to the purchase of Shares pursuant to the Offer, concurrently with the execution of an Acquisition Agreement (as defined herein) under the circumstances described below under "Acquisition Proposals", provided that such termination under this clause (ii) shall not be effective unless the Company and the Board shall have complied with all their obligations described below under "Acquisition Proposals" and until payment of the Termination Fee (as defined herein); (e) by Parent or the Purchaser prior to the purchase of Shares pursuant to the Offer, if (i) the Purchaser is entitled to terminate the Offer pursuant to clause (a) under Section 14 ("Certain Conditions of the Offer") there shall have been any breach of any covenant or agreement on the part of the Company under this Agreement or the Stock Option Agreement which materially adversely affects (or materially delays) the consummation of the Offer, which shall not have been cured prior to the earlier of (A) 10 days following notice of such breach and (B) two business days prior to the date on which the Offer expires; provided, however, that the Company shall have no right to cure any breach of the provisions described below under "Acquisition Proposals", (iii) the Board or any committee thereof 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, the Merger or the Merger Agreement or shall have recommended to the Company's stockholders a Third Party Acquisition (as defined herein), or (iv) there shall not have been validly tendered and not withdrawn prior to the expiration of the Offer at least a majority of the Shares on a fully diluted basis; or (f) by the Company prior to the purchase of any Shares pursuant to the Offer if (i) there shall have been a breach of any representation or warranty in the Merger Agreement on the part of Parent or the Purchaser which materially adversely affects (or materially delays) the consummation of the Offer or (ii) there shall have been a breach of any covenant or agreement in the Merger Agreement on the part of Parent or the Purchaser which materially adversely affects (or materially delays) the consummation of the Offer which shall not have been cured prior to the earliest of (A) 10 days following notice of such breach and (B) two business days prior to the date on which the Offer expires. (4) Acquisition Proposals. Pursuant to the Merger Agreement, the Company has agreed that it will not, and will not permit any of its subsidiaries, or any of its or their officers, directors, employees, representatives, agents or affiliates, including any investment banker, attorney or accountant retained by the Company or any of its subsidiaries (collectively, "Representatives") to, directly or indirectly, (a) initiate, solicit or encourage or otherwise facilitate (including by way of furnishing information) or take any other action to facilitate, any inquiries or the making of any proposal or offer that constitutes, or may reasonably be expected to lead to, an Acquisition Proposal (as defined herein), (b) enter into or maintain or continue discussions or negotiate with any person regarding an Acquisition Proposal or in furtherance of such inquiries or to obtain an Acquisition Proposal, or (c) agree to, approve, recommend or endorse any Acquisition Proposal, or authorize or permit any of the Representatives of the Company or any of its subsidiaries to take any such action, and the Company shall promptly notify Parent of any such inquiries and proposals hereafter received by the Company or any of its subsidiaries or by any such Representative, relating to any of such matters; provided, however, that nothing contained in the Merger Agreement shall prohibit the Board, at any time prior to the earlier to occur of acceptance for payment of Shares pursuant to the Offer and adoption of the Merger Agreement by the stockholders of the Company, from furnishing information (pursuant to a customary confidentiality agreement no more favorable to the party receiving information than the Confidentiality Agreement (as defined herein) and consistent with the Company's obligations under the Merger Agreement) to, or engaging in discussions or negotiations with, any person in response to an unsolicited bona fide written Acquisition Proposal of such person that the Board determines is reasonably likely to constitute a Qualifying Proposal (as defined herein), if, and only to the extent that, (i) the Board, after consultation with outside legal counsel to the Company, determines in good faith that failure to do so would result in a breach of the fiduciary duty of the Board to the stockholders of the Company under applicable law, and (ii) prior to furnishing such information to, or entering into discussions 20 or negotiations with, such person the Company provides written notice to Parent to the effect that it is furnishing information to, or entering into discussions or negotiations with, such person and the Company complies with certain notification provisions of the Merger Agreement. The Company has also agreed to cease and terminate any existing solicitation, initiation, encouragement, activity, discussion or negotiation with any persons conducted heretofore by it or its Representatives with respect to any Acquisition Proposal. It is understood that any violation of the restrictions described above by any Representative of the Company or any of its subsidiaries, whether or not such person is purporting to act on behalf of the Company or otherwise, shall be deemed to be a breach of the Merger Agreement by the Company. The Merger Agreement provides further that, except as described below neither the Board nor any committee thereof shall (a) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent or the Purchaser, the approval or recommendation by the Board of the Offer or the Merger, (b) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal, or (c) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other similar agreement (each, an "Acquisition Agreement") related to any Acquisition Proposal. Notwithstanding the foregoing, prior to the earlier to occur of acceptance for payment of Shares pursuant to the Offer or adoption of the Merger Agreement by the stockholders of the Company, the Board may terminate the Merger Agreement but only (a) to the extent that the Board after consultation with outside legal counsel to the Company, determines in good faith that failure to do so would result in a breach of the fiduciary duty of the Board to the stockholders of the Company under applicable law, (b) if the Company and the Board have complied with all the provisions described in this subsection on "Acquisition Proposals", (c) after the second business day following Parent's receipt of written notice advising Parent that the Board is prepared to accept a Qualifying Proposal, specifying the principal terms and conditions of such Qualifying Proposal and identifying the person making such Qualifying Proposal (during which two day period the Company will negotiate in good faith with Parent or Purchaser concerning any amendments proposed by Parent or Purchaser) and (d) if concurrently with such termination, the Company enters into an Acquisition Agreement with respect to such Qualifying Proposal and pays to Parent the Termination Fee. In addition, under the Merger Agreement the Company has agreed to promptly advise Parent, orally and in writing, of any request for information or of any Acquisition Proposal, the principal terms and conditions of such request or Acquisition Proposal and the identity of the person making such request or Acquisition Proposal. The Company shall keep Parent reasonably informed of the status and details (including amendments or proposed amendments) of any such request or Acquisition Proposal. Nothing contained in the Merger Agreement shall prohibit the company from taking and disclosing to the stockholders a position contemplated by Rule 14e- 2(a) promulgated under the Exchange Act or from making any disclosure to the Company's stockholders which the Board, after consultation with outside legal counsel to the Company, determines in good faith is required by applicable law; provided that neither the Board nor any committee thereof approves or recommends, or publicly proposes to approve or recommend, an Acquisition Proposal unless the Company and the Board have complied with the terms of the Merger Agreement. Notwithstanding anything to the contrary, the Company will duly call, give notice and hold the stockholders meeting, if required by the DGCL, for the purpose of considering and taking action upon this Agreement and the Merger whether or not the Board has determined at any time after the date hereof it is no longer advisable for the stockholders of the Company to adopt the Merger Agreement. "Acquisition Proposal" means an inquiry, offer or proposal that is made after the date of the Merger Agreement regarding any of the following (other than the transactions contemplated by the Merger Agreement) involving the Company: (a) any merger, consolidation, share exchange, recapitalization, liquidation, dissolution, business combination or other similar transaction; (b) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of a substantial portion of the assets of the Company and its subsidiaries, taken as a whole, or of any Material Business (as defined herein) or of any subsidiary or subsidiaries responsible for a Material Business in a single transaction or series of related transactions; (c) any acquisition of 15% or more of the outstanding shares of capital stock of the Company or the filing of a registration statement under the Securities 21 Act in connection therewith or any other acquisition or disposition the consummation of which would prevent or materially diminish the benefits to Parent of the Merger; or (d) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing. "Qualifying Proposal" means any written proposal made by a third party after the date of the Merger Agreement to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or other similar transaction, all the Shares then outstanding or the assets of the Company and its Subsidiaries as an entirety which the Board determines in good faith (x) (based on the advice of a financial advisor of nationally recognized reputation) that such proposal has a reasonable likelihood of being consummated and (y) (based on the written opinion of a financial advisor of nationally recognized reputation) that such proposal would, if consummated, be superior to the Company's stockholders from a financial point of view (taking into account any changes to the financial terms of the Merger Agreement proposed by Parent or Purchaser in response to such proposal) when compared to the Offer, the Merger and the transactions contemplated by the Merger Agreement, taken as a whole. "Material Business" means any business (or the assets needed to carry out such business) that contributed or represented 15% or more of the net sales, the net income or the assets (including equity securities) of the Company and its subsidiaries taken as a whole. "Third Party Acquisition" means (a) the acquisition of the Company by merger, consolidation, share exchange, recapitalization, liquidation, dissolution, business combination or other similar transaction by any person (which includes for these purposes a "person" as defined in Section 13(d)(3) of the Exchange Act) other than Parent, the Purchaser or any affiliate thereof (a "Third Party"); (b) the acquisition by a Third Party of more than 50% of the assets of the Company and its subsidiaries taken as a whole; (c) the acquisition by a Third Party of 50% or more of the outstanding Shares or 50% or more of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Company; (d) the adoption by the Company of a plan of liquidation or the declaration or payment of an extraordinary dividend; or (e) the purchase by the Company or any of its subsidiaries of more than 30% of the outstanding Shares. (5) Fees and Expenses. Except with respect to the circumstances described below, the Merger Agreement provides that each of Parent, the Purchaser and the Company will bear its own fees and expenses in connection with the Merger Agreement. The Merger Agreement provides that (a) if Parent or the Purchaser terminates the Merger Agreement pursuant to the provisions described above under clause (e)(i) of "Termination of the Merger Agreement" (other than a termination resulting from an event or circumstance that causes a material adverse effect with respect to the Company after the date of the Merger Agreement, which event or circumstance was not caused by the willful or intentional action or inaction by the Company), the provisions described above under clause (e)(ii) of "Termination of the Merger Agreement" (other than as a result of a breach of the provisions described above under "Acquisition Proposals") or the provisions described under clause (e)(iv) of "Termination of the Merger Agreement", and in any such case, any proposal for a Third Party Acquisition shall have been made on or prior to the date of such termination and in any such case, within 12 months thereafter the Company enters into an agreement with respect to the consummation of, or otherwise consummates, a Third Party Acquisition, (b) Parent or the Purchaser terminates the Merger Agreement pursuant to the provisions described above under clause (e)(ii) of "Termination of the Merger Agreement" as a result of a breach of the provisions described above under "Acquisition Proposals" or pursuant to the provisions described above under clause (e)(iii) of "Termination of the Merger Agreement" or (c) the Company terminates the Merger Agreement pursuant to the provisions described above under clause (d)(ii) of "Termination of the Merger Agreement", then, in each case, the Company (A) shall pay to Parent, within two business days following the execution and delivery of such agreement or such occurrence, as the case may be, or simultaneously with such termination pursuant to the provisions described above under clause (d)(ii) of "Termination of the Merger Agreement", a fee, in cash, of $135 million (a "Termination Fee"); plus, in the event that the Stock Option Agreement terminates in connection with the termination of the Merger Agreement giving rise to the Termination Fee, an additional amount, not in excess of $22.5 million, as reimbursement for Expenses (as defined herein). (6) Conduct of Business of the Company. Pursuant to the Merger Agreement, the Company has agreed that, prior to the Effective Time, unless otherwise expressly contemplated by the Merger Agreement or consented 22 to in writing by Parent, it will and will cause each of its subsidiaries to: (a) operate its business in the usual and ordinary course consistent with past practices; (b) use reasonable efforts to preserve intact its business organization, maintain its rights and franchises, retain the services of its respective key employees and maintain its relationships with its respective customers and suppliers and others having business dealings with it; (c) maintain and keep its properties and assets in as good repair and condition as at present, ordinary wear and tear excepted, and maintain supplies and inventories in quantities consistent with its customary business practice; and (d) use reasonable efforts to keep in full force and effect insurance and bonds comparable in amount and scope of coverage to that currently maintained. (7) Prohibited Actions by the Company. Under the Merger Agreement, the Company has agreed that, except as expressly contemplated by the Merger Agreement or otherwise consented to in writing by Parent, from the date of the Merger Agreement until the Effective Time, it will not do, and will not permit any of its subsidiaries to do, any of the following: (a)(i) increase the compensation payable to or to become payable to any director or employee, except for increases in salary or wages of employees in the ordinary course of business and consistent with past practice; (ii) grant any severance or termination pay (other than pursuant to the normal severance policy or practice of the Company or its subsidiaries as in effect on the date of the Merger Agreement) to, or enter into or amend in any material respect any employment or severance agreement with, any employee; (iii) establish, adopt, enter into or amend in any material respect any collective bargaining agreement or Benefit Plan (as defined in the Merger Agreement) of the Company or its subsidiaries except as required by applicable law; or (iv) take any action to accelerate any rights or benefits, or make any material determinations not in the ordinary course of business consistent with past practice, under any collective bargaining agreement or Benefit Plan of the Company or its subsidiaries; (b) declare, set aside or pay any dividend on, or make any other distribution in respect of (whether in cash, stock or property), outstanding shares of capital stock, except for dividends by a wholly owned subsidiary of the Company to the Company or another wholly owned subsidiary of the Company; (c) redeem, purchase or otherwise acquire, or offer to redeem, purchase or otherwise acquire any outstanding shares of capital stock of, or other equity interests in, or any securities that are convertible into or exchangeable for any shares of capital stock of, or other equity interests in, or any outstanding options, warrants or rights of any kind to acquire any shares of capital stock of, or other equity interests in, the Company or any of its subsidiaries (other than (i) any such acquisition by the Company or any of its wholly owned subsidiaries directly from any wholly owned subsidiary of the Company in exchange for capital contributions or loans to such subsidiary or (ii) any purchase, forfeiture or retirement of Shares or the Stock Options occurring pursuant to the terms (as in effect on the date of the Merger Agreement) of any existing Benefit Plan of the Company or any of its subsidiaries; (d) effect any reorganization or recapitalization, or split, combine or reclassify any of the capital stock of, or other equity interests in, the Company or any of its subsidiaries or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of such capital stock or such equity interests; (e) offer, sell, issue or grant, or authorize the offering, sale, issuance or grant of, any shares of capital stock of, or other equity interests in, any securities convertible into or exchangeable for any shares of capital stock of, or other equity interests in, or any options, warrants or rights of any kind to acquire any shares of capital stock of, or other equity interests in, or any bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote or other voting securities, of the Company or any of its subsidiaries, or any "phantom" stock, "phantom" stock rights, stock appreciation rights or stock-based performance units, other than issuances of Shares upon the exercise of the Stock Options outstanding at the date of the Merger Agreement in accordance with the terms thereof (as in effect on the date of the Merger Agreement); (f) acquire or agree to acquire by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or in any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire any assets of any other person (other than the purchase of assets from suppliers or vendors in the ordinary course of business and consistent with past practice); (g) sell, lease, exchange or otherwise dispose of, or grant any lien with respect to any of the properties or assets (including technological assets) of the Company or any of its subsidiaries, except for dispositions of excess or obsolete assets, sales of inventories in the ordinary course of business and consistent with past practice and the licensing of software to customers consistent with past 23 practice; (h) adopt any amendments to its certificate of incorporation or bylaws or other organizational documents; (i) effect any change in any accounting methods, principles or practices of the Company, except as may be required by a change in generally accepted accounting principles, or any change in tax accounting; (j) (i) incur any indebtedness, issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company or any of its subsidiaries, guarantee any debt securities of another person, enter into any "keep well" or other agreement to maintain any financial statement condition of another person or enter into any arrangement having the economic effect of any of the foregoing, except for short-term borrowings incurred in the ordinary course of business consistent with past practice, or (ii) make any loans, advances or capital contributions to, or investments in, any other person other, than to or in the Company or any direct or indirect wholly owned subsidiary of the Company; (k) enter into any contract which, if such contract is entered into, would be a material contract; (l) make or agree to make any new capital expenditure or expenditures other than the capital expenditures contemplated by the Company's annual operating plan for 1999, a copy of which was furnished to Parent prior to the execution of the Merger Agreement; (m) make any non-routine tax election or settle or compromise any material tax liability or refund; (n) (i) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of the Company included in the documents filed with the SEC from April 1, 1997 to the date of the Merger Agreement or incurred in the ordinary course of business consistent with past practice or (ii) cancel any material indebtedness (individually or in the aggregate) or waive any claims or rights of substantial value; (o) enter into any new agreements with, or commitments to, insurance brokers or advisers extending beyond one year or extend any insurance policy beyond one year (including, for the avoidance of doubt, the directors' and officers' liability insurance policies described under "Indemnification of Directors"); or (p) agree in writing or otherwise to do any of the foregoing. (8) Directors. The Merger Agreement provides that promptly upon the acceptance for payment of, and payment by the Purchaser for, any Shares pursuant to the Offer, the Purchaser shall be entitled to designate such number of directors on the Board as will give the Purchaser, subject to compliance with Section 14(f) of the Exchange Act, representation on the Board equal to at least that number of directors, rounded up to the next whole number, which is the product of (a) the total number of directors on the Board (giving effect to the directors elected pursuant to this sentence) multiplied by (b) the percentage that (i) such number of Shares so accepted for payment and paid for by the Purchaser plus the number of Shares otherwise owned by the Purchaser or any other subsidiary of Parent bears to (ii) the number of such Shares outstanding, and the Company shall, at such time, cause the Purchaser's designees to be so elected; provided, however, that in the event that the Purchaser's designees are appointed or elected to the Board, until the Effective Time the Board shall have at least two directors who are directors on the date of the Merger Agreement (the "Independent Directors"); and provided further that, in such event, if the number of Independent Directors shall be reduced below two for any reason whatsoever, the remaining Independent Director shall be entitled to designate a person to fill such vacancies who shall be deemed to be an Independent Director for purposes of the Merger Agreement or, if no Independent Directors then remain, the other directors promptly shall designate two persons to fill such vacancies who shall not be officers, employees, stockholders or affiliates of Parent or the Purchaser, and such persons shall be deemed to be Independent Directors for purposes of the Merger Agreement. Subject to applicable law, the Company has agreed to take all action requested by Parent necessary to effect any such election, including mailing to its stockholders the information statement required under Rule l4f-1 containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, which information statement is attached as Schedule I to the Schedule 14D-9. The Purchaser's designees shall be divided between the classes of directors as necessary to comply with the requirements of the Company's bylaws. In connection with the foregoing, the Company shall, at the option of the Purchaser, either increase the size of the Board or obtain the resignation of such number of its current directors as is necessary to enable Purchaser's designees to be elected or appointed to the Board as provided above. (9) Stock Options. The Merger Agreement provides that upon consummation of the Merger, all then outstanding Stock Options and all Shares subject to a vesting requirement ("Restricted Stock") shall be canceled 24 in exchange for a cash payment to the holder of a Stock Option or Restricted Stock award equal to (a) in the case of Stock Options, the product of (x) the difference between the Per Share Merger Consideration and the per share exercise price of the holder's Company Stock Option multiplied by (y) the number of shares of Company Common Stock subject to the holder's Stock Option and (b) in the case of Restricted Stock, the number of shares of the holder's Restricted Stock times the Per Share Merger Consideration. In the case of all unvested Stock Options, such cash payment shall be made on the date that is 90 days after the Effective Time. Following the expiration of the Offer and the purchase of Shares pursuant thereto and prior to the Effective Time, Parent may, at its option, provide to each holder of an outstanding Stock Option who is an "accredited investor" (within the meaning of the Securities Act of 1933), in lieu of the cash payment pursuant to the foregoing sentence, an alternative, at such holder's option, of converting such Stock Option into phantom stock units, having the same economic value and terms of such Stock Options and the value of which will thereafter be based on the market value of the ordinary shares of GEC, p.l.c. Except as provided in the Merger Agreement or as otherwise agreed to by the parties, (a) the Stock Option Plans shall terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant by the Company or any of its subsidiaries of any interest in respect of the capital stock of the Company or any of its subsidiaries shall be terminated as of the Effective Time, and (b) following the Effective Time no holder of Stock Options or Restricted Stock or any participant in such plans, programs or arrangements shall have any right thereunder to acquire any equity securities of the Company, the Surviving Corporation or any subsidiary thereof. (10) Indemnification of Directors and Officers. In the Merger Agreement, the Purchaser has agreed that all rights to indemnification for acts or omissions occurring prior to the Effective Time in favor of the current or former directors or officers of the Company and its subsidiaries as provided in their respective certificates of incorporation or bylaws shall survive the Merger and shall continue in full force and effect in accordance with their terms for a period of six years from the Effective Time. Parent shall cause to be maintained for a period of six years from the Effective Time the Company's current directors', officers' and employees' insurance and indemnification policy (the "D&O Insurance") and the current fiduciary liability insurance policy (the "Fiduciary Insurance") (provided that Parent may substitute therefor policies or financial guarantees with reputable and financially sound carriers or other obligors of at least the same coverage and amounts containing terms and conditions which are no less advantageous) to the extent that such insurance policies provide coverage for events occurring prior to the Effective Time for all persons who are directors and officers of the Company on the date of the Merger Agreement, so long as the amount per annum to be paid by the Company after the date of the Merger Agreement for such D&O Insurance and Fiduciary Insurance is not greater than 200% of the current annual premiums paid by the Company for such insurance. Parent may cause to be obtained D&O Insurance and Fiduciary Insurance that satisfies the foregoing pursuant to which premiums are paid for the entire six-year period or, if applicable, for the remainder of such period. If, during such six-year period, such insurance coverage cannot be obtained at all or can only be obtained for an amount (including amounts paid by the Company after the date of the Merger Agreement) in excess of the per annum limit described above, Parent shall use all reasonable efforts to cause to be obtained as much D&O Insurance and Fiduciary Insurance as can be obtained for the remainder of such six-year period (including amounts paid by the Company after the date of the Merger Agreement) not in excess of such limit on terms and conditions no less advantageous than the existing D&O Insurance and the existing Fiduciary Insurance, respectively. (11) Reasonable Efforts. The Merger Agreement provides that, subject to the terms of the Merger Agreement, each of the parties has agreed to use all reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable laws to consummate and make effective as soon as reasonably practicable the transactions contemplated by the Merger Agreement; provided, that neither Parent nor any of its subsidiaries shall be required to divest any asset or enter into any consent decree. (12) Directors and Officers. The directors of the Purchaser immediately prior to the Effective Time and/or any individuals designated by Parent shall be the directors of the Surviving Corporation, each to hold office in 25 accordance with the certificate of incorporation and bylaws of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time and/or any individuals designated by Parent shall be the officers of the Surviving Corporation, in each case until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualify. (13) Employment Agreements. Pursuant to the Merger Agreement, Parent acknowledged and agreed that all employment agreements, severance agreements, deferred compensation agreements and supplemental retirement agreements with employees of the Company and its subsidiaries set forth in the Company's Disclosure Letter (as defined in the Merger Agreement) will be binding and enforceable obligations of the Surviving Corporation to the same extent as they were binding and enforceable obligations of the Company and its subsidiaries as of the date of the Merger. (14) Representations and Warranties. The Merger Agreement contains various customary representations and warranties. (15) Procedure for Termination, Amendment, Extension or Waiver. The Merger Agreement provides that in the event the Purchaser's designees are appointed or elected to the Board as described above under "Directors", the approval of a majority of the Independent Directors is required to amend the Merger Agreement, to terminate the Merger Agreement, or to waive any condition to the obligations of the Company. Stock Option Agreement. Pursuant to the Stock Option Agreement, the Company granted to the Purchaser an option ("Option") to purchase up to 19.9% of the outstanding Shares of the Company at a price per Share equal to the Offer Price. The Option is exercisable when the Termination Fee (a "Purchase Event") is payable under the Merger Agreement. In addition, the Option is exercisable following the Purchaser's acceptance of Shares for payment pursuant to the Offer to the extent the effect of such exercise would result in Parent owning, directly or indirectly, immediately after such exercise 90% of the then outstanding Shares. The Option terminates and is of no further force and effect upon the earliest to occur of (i) the Effective Time, (ii) 15 months after the occurrence of a Purchase Event (including any Purchase Event occurring after termination of the Merger Agreement) and (iii) termination of the Merger Agreement in accordance with its terms prior to the occurrence of any Purchase Event, unless, in the case of this clause (iii), the Purchaser is or may be entitled to receive a Termination Fee under the Merger Agreement following such termination, subject to certain exceptions specified in the Stock Option Agreement, in which case the Option shall not terminate pursuant to this clause (iii) until the Purchaser could no longer under any circumstances become entitled to receive a Termination Fee. To the extent the exercise of the Option is the result of a Purchase Event, during the period commencing on such Purchase Event and ending on the termination of the Option, the Purchaser has the right in lieu of exercising the Option, to surrender the Option to the Company for cancellation in exchange for a cash payment at least equal to the value of the Option, subject to a minimal floor which guarantees the Option will have at least some value. In addition, to the extent the exercise of the Option is the result of a Purchase Event, in no event shall the profit that the Purchaser can make from the Option exceed, when aggregated with the Termination Fee, in the aggregate $135 million, plus an additional amount, not in excess of $22.5 million, as reimbursement for out-of-pocket fees and expenses incurred by Parent, Purchaser or their respective affiliates in connection with the transactions contemplated by the Merger Agreement and the Stock Option Agreement, including all fees and expenses of their counsel, accountants, investment bankers, experts and consultants (collectively "Expenses"). The Stockholder Agreement. Pursuant to the Stockholder Agreement, each Founding Stockholder has agreed, among other things, to sell to the Purchaser all the Shares that he beneficially owns at a price per Share equal to the Offer Price. The Founding Stockholders have also agreed to tender such Shares in the Offer at a price per Share equal to the Offer Price if directed to do so by the Purchaser. In addition, each Founding Stockholder has granted the Purchaser an option to purchase all his Shares at a price per Share equal to the Offer Price under certain circumstances and subject to certain conditions. 26 Each Founding Stockholder severally has agreed that: (a) such Founding Stockholder will not (i) sell, transfer, pledge, assign or otherwise dispose of, or enter into any contract, option or other arrangement (including any profit sharing arrangement) or understanding with respect to the sale, transfer, pledge, assignment or other disposition of such Founding Stockholder's Shares to any person other than the Purchaser or the Purchaser's designee, (ii) enter into any voting arrangement, whether by proxy, voting agreement, voting trust, power-of-attorney or otherwise, with respect to such Founding Stockholder's Shares or (iii) take any other action that would in any way restrict, limit or interfere with the performance of its obligations under the Stockholder Agreement or the transactions contemplated thereby, (b) until the Merger is consummated or the Merger Agreement is terminated, such Founding Stockholder will not, nor will such Founding Stockholder permit any investment banker, financial adviser, attorney, accountant or other representative or agent of such Founding Stockholder to, directly or indirectly (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action designed or reasonably likely to facilitate, any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any Acquisition Proposal or (ii) participate in any discussions or negotiations regarding any Acquisition Proposal, (c) at any meeting of stockholders of the Company called to vote upon the Merger and the Merger Agreement or at any adjournment thereof or in any other circumstances upon which a vote, consent or other approval (including by written consent) with respect to the Merger and the Merger Agreement is sought, such Founding Stockholder will, including by initiating a written consent solicitation if requested by Parent, vote (or cause to be voted) such Founding Stockholder's Shares in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the other transactions contemplated by the Merger Agreement and (d) at any meeting of stockholders of the Company or at any adjournment thereof or in any other circumstances upon which such Founding Stockholder's vote, consent or other approval is sought, such Founding Stockholder will vote (or cause to be voted) such Founding Stockholder's Shares against (i) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by the Company or any other Acquisition Proposal (collectively, "Alternative Transactions") or (ii) any amendment of the Company's certificate of incorporation or bylaws or other proposal or transaction involving the Company or any of its subsidiaries, which amendment or other proposal or transaction would in any manner impede, frustrate, prevent or nullify the Offer, the Merger, the Merger Agreement or any of the other transactions contemplated by the Merger Agreement (collectively, "Frustrating Transactions"). The Stockholder Agreement provides that each Founding Stockholder executed the Stockholder Agreement solely in his or her capacity as the beneficial owner of such Founding Stockholder's Shares and nothing therein shall limit or affect any actions taken by a Founding Stockholder in its capacity as an officer or director of the Company or any subsidiary of the Company to the extent specifically permitted by the Merger Agreement. Under the Stockholder Agreement each Founding Stockholder has irrevocably granted to, and appointed, Patricia Hoffman and Thomas Edeus and any other individual who shall thereafter be designated by Parent, and each of them, such Founding Stockholder's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Founding Stockholder, to vote such Founding Stockholder's Shares, or grant a consent or approval in respect of such Shares, at any meeting of stockholders of the Company or at any adjournment thereof or in any other circumstances upon which their vote, consent or other approval is sought, in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the terms thereof and each of the other transactions contemplated by the Merger Agreement and against any Alternative Transaction or Frustrating Transaction. Employment Agreements. The following are summaries of certain employment arrangements entered into by the Company with certain of its employees in conjunction with the execution of the Merger Agreement. Each of the following agreements are exhibits to the Schedule 14D-9. In addition, it is anticipated that similar arrangements may be made with other employees of the Company prior to the completion of the Merger. 27 Consulting Agreement with Eric Cooper. Dr. Eric Cooper has entered into a Consulting Agreement with the Company, dated April 26, 1999, pursuant to which he agreed that he will (i) retire from employment with the Company immediately prior to the closing of the Merger and (ii) waive any right to separation or other benefits under the Company's Change in Control Separation Plan (the "CIC Plan") (other than tax gross-up protection upon the imposition of excise taxes under Section 280G of the Internal Revenue Code of 1986 (the "Code") under certain circumstances). The Company agreed to retain Dr. Cooper as a consultant for a period of two years from the date of his retirement. In exchange for these consulting services, Dr. Cooper will receive a consulting fee of $300,000, all of which is payable upon the closing of the Merger. In addition, Dr. Cooper agrees that during the term of the agreement and for one year thereafter, he will refrain from competing against the Company, as well as from soliciting the Company's principal customers or employees. As consideration for these noncompetition and nonsolicitation agreements, the Company agreed to pay Dr. Cooper an additional $600,000 in a single lump-sum cash payment. Agreement with Thomas Gill. Mr. Thomas Gill entered into an agreement with the Company, dated April 26, 1999, that becomes effective immediately prior to the closing of the Merger. Under this agreement, Mr. Gill is to continue to be employed by the Company as President and Chief Executive Officer and act as a member of the Board for an indefinite term until terminated in accordance with the terms of the agreement. Mr. Gill agreed to waive any right to separation or other benefits under the CIC Plan (other than tax gross-up protection upon the imposition of excise taxes under Section 280G of the Code under certain circumstances). The agreement with Mr. Gill provides that Mr. Gill will receive, among other things, an initial annual base salary of $500,000, and that he will be entitled to participate in various benefit plans made available to senior executives of the Company. Mr. Gill will (contingent on his purchasing $1 million of ordinary shares of GEC, p.l.c. within 90 days after the effective date of the agreement) receive a grant of $1 million of restricted phantom shares of GEC, p.l.c. (to vest on the second anniversary of the effective date of the agreement) and a phantom option on the number of phantom shares of GEC, p.l.c. equal to $1 million divided by the fair market value of GEC, p.l.c. shares immediately following the closing of the Merger (to vest on the third anniversary of the effective date of the Merger) (in both cases, immediate vesting would occur at death, disability or termination upon a change of control or termination without cause or resignation for good reason). In addition, Mr. Gill agrees that during the term of the agreement and for 24 months following the date of termination of Mr. Gill's employment for any reason, he will refrain from competing against the Company, as well as from soliciting the Company's principal customers or employees. In the event that Mr. Gill's employment is terminated by the Company without cause, or he resigns from employment for good reason, prior to attaining age 65, subject to certain conditions, he will be eligible to receive a cash payment equal to his base compensation (two times his base compensation if such termination occurs during the first two years of the agreement, or thereafter within two years of a subsequent change in control), plus continuation of certain benefits; and as additional consideration for the confidentiality, noncompetition and nonsolicitation agreements, he will receive an additional cash payment equal to his base compensation. Agreement with Robert Sansom. Dr. Robert Sansom entered into an agreement with the Company, dated April 26, 1999, that becomes effective immediately prior to the closing of the Merger. Under this agreement, Dr. Sansom is to continue to be employed by the Company on substantially the same terms and conditions as in effect prior to the closing of the Merger. Dr. Sansom agreed to waive any right to separation or other benefits under the CIC Plan (other than tax gross-up protection upon the imposition of excise taxes under Section 280G of the Code under certain circumstances). The Company agreed that, at Dr. Sansom's election, to be made on or prior to December 31, 1999, it will enter into either a consulting agreement with Dr. Sansom with terms and conditions substantially the same as those in the agreement with Dr. Cooper described above, or an employment agreement with Dr. Sansom with terms and conditions substantially the same as those in the agreement with Mr. Bruce Haney described below. In addition, Dr. Sansom agreed that for 36 months following the effective date of this agreement, he will refrain from competing against the Company, as well as from soliciting the Company's principal customers or employees. Agreement with Bruce Haney. Mr. Bruce Haney entered into an agreement with the Company, dated April 26, 1999, that becomes effective immediately prior to the closing of the Merger. Under this agreement, Mr. Haney is to continue to be employed by the Company for an indefinite term until terminated in accordance with 28 the terms of the agreement . Mr. Haney agreed to waive any right to separation or other benefits under the CIC Plan (other than tax gross-up protection upon the imposition of excise taxes under Section 280G of the Code under certain circumstances). The agreement provides that Mr. Haney will receive, among other things, an initial annual base salary of $275,000. He is also entitled to participate in short-term and long-term incentive compensation programs established by the Company for senior executives. Mr. Haney will receive a phantom option on the number of phantom shares of GEC, p.l.c. equal to twice his base salary divided by the fair market value of GEC, p.l.c. shares immediately following the closing of the Merger (to vest in 25% increments on each of the first four anniversaries of the effective date of the Merger; immediate vesting would occur at death, disability or termination without cause). In addition, Mr. Haney agreed that during the term of the agreement and for 12 months following the termination of his employment for any reason, he will refrain from competing against the Company, as well as from soliciting the Company's principal customers or employees. In the event that Mr. Haney's employment is terminated by the Company without cause, or he resigns from employment for good reason, prior to attaining age 65, subject to certain conditions, he will be eligible to receive a cash payment equal to his base compensation (two times his base compensation if such termination occurs during the first two years of the agreement), plus continuation of certain insurance benefits for two years; and as additional consideration for the confidentiality, noncompetition and nonsolicitation agreements, he will receive an additional cash payment equal to his base compensation. Agreements with Robert Musslewhite, Kevin Nigh, J. Niel Viljoen, Donal Byrne, Ronald McKenzie. Messrs. Musslewhite, Nigh, Viljoen, Byrne and McKenzie have each entered into agreements with the Company, each dated April 26, 1999, that become effective immediately prior to the closing of the Merger. Under these agreements, each of them are to continue to be employed by the Company as executives for an indefinite term until terminated in accordance with the terms of the agreement. These agreements have terms and conditions substantially the same as the agreement with Mr. Haney, except that upon termination by the Company of such party's employment without cause, such party will receive a cash payment equal to one year's base compensation, plus an additional one year's base salary as consideration for the confidentiality, noncompetition and nonsolicitation agreements. Confidentiality Agreement. Pursuant to the Confidentiality Agreement dated March 17, 1999, between GEC, p.l.c. and the Company (the "Confidentiality Agreement"), the Company and GEC, p.l.c. agreed to keep confidential certain information exchanged between such parties. The Confidentiality Agreement also contains customary non-solicitation and standstill provisions. The Merger Agreement provides that the provisions of the Confidentiality Agreement shall remain binding and in full force and effect and that the parties shall comply with and shall cause their respective representatives to comply with, all of their respective obligations under the Confidentiality Agreement until the Purchaser purchases a majority of the outstanding Shares pursuant to the Offer. Appraisal Rights. Holders of Shares do not have dissenters' rights as a result of the Offer. However, if the Merger is consummated, holders of Shares will have certain rights pursuant to the provisions of Section 262 of the DGCL to dissent and demand appraisal of, and to receive payment in cash of the fair value of, their shares. If the statutory procedures were complied with, such rights could lead to a judicial determination of the fair value required to be paid in cash to such dissenting holders for their shares. Any such judicial determination of the fair value of Shares could be based upon considerations other than or in addition to the Offer Price or the market value of the shares, including asset values and the investment value of the Shares. The fair value so determined could be more or less than the Offer Price or the Per Share Merger Consideration. If any holder of shares who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses his right to appraisal, as provide in the DGCL, the shares of such holder will be converted into the Per Share Merger Consideration in accordance with the Merger Agreement. The foregoing discussion is not a complete statement of law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL. 29 Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of such rights. Going Private Transactions. The Merger would have to comply with any applicable Federal law operative at the time of its consummation. 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 Merger unless the Merger is consummated more than one year after the termination of the Offer. If applicable, Rule 13e-3 would require, among other things, that certain financial information concerning the Company and certain information relating to the fairness of the Merger and the consideration offered to minority shareholders be filed with the SEC and disclosed to minority shareholders prior to consummation of the Merger. Plans for the Company. Parent intends to conduct a detailed review of the Company and its assets, corporate structure, dividend policy, capitalization, operations, properties, policies, management and personnel and to consider, subject to the terms of the Merger Agreement, what, if any, changes would be desirable in light of the circumstances then existing, and reserves the right to take such actions or effect such changes as it deems desirable. Such changes could include changes in the Company's business, corporate structure, capitalization, management or dividend policy. Except as otherwise described in this Offer to Purchase, none of the Purchaser, Parent or GEC, p.l.c. have any current plans or proposals that would relate to, or result in, any extraordinary corporate transaction involving the Company or any of its subsidiaries, such as a merger, reorganization or liquidation involving the Company, a sale or transfer of a material amount of assets of the Company or any of its subsidiaries, any change in the Company's capitalization or dividend policy or any other material change in the Company's business, corporate structure or personnel. 13.Dividends and Distributions Pursuant to the terms of the Merger Agreement, the Company is prohibited from taking any of the actions described in the two succeeding paragraphs, and nothing herein shall constitute a waiver by the Purchaser or Parent of any of its rights under the Merger Agreement or a limitation of remedies available to the Purchaser or Parent for any breach of the Merger Agreement, including termination thereof. If, on or after April 26, 1999, the Company should (a) split, combine or otherwise change the Shares of its capitalization, (b) acquire or otherwise cause a reduction in the number of outstanding Shares or other securities or (c) issue or sell additional Shares (other than the issuance of Shares upon the exercise of Stock Options outstanding at April 26, 1999, in accordance with the terms thereof (as in effect on April 26, 1999)), shares of any other class of capital stock, other voting securities or any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, then, subject to the provisions of Section 14, the Purchaser, in its sole discretion, may make such adjustments as it deems appropriate in the Offer Price and other terms of the Offer, including, without limitation, the number or type of securities offered to be purchased. If, on or after April 26, 1999, the Company should declare or pay any cash dividend on the Shares or other distribution on the Shares, or issue with respect to the Shares or any additional Shares, shares of any other class of capital stock, other voting securities of any securities convertible into, or rights, warrants or options, conditional or otherwise, to acquire, any of the foregoing, payable or distributable to stockholders of record on a date prior to the transfer of Shares purchased pursuant to the Offer to the Purchaser or its nominee or transferee on the Company's stock transfer records, then, subject to the provisions of Section 14, (a) the Offer Price may, in the sole discretion of the Purchaser, be reduced by the amount of any such cash dividend or cash distribution and (b) the whole of any such noncash dividend, distribution or issuance to be received by the tendering stockholders will (i) be received and held by the tendering stockholders for the account of the Purchaser and will be required to be promptly remitted and transferred by each tendering stockholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation or transfer, or (ii) at the direction of the Purchaser, be exercised for the benefit of the Purchaser, in which case the proceeds of such exercise will 30 promptly be remitted to the Purchaser. Pending such remittance and subject to applicable law, the Purchaser will be entitled to all rights and privileges as owner of any such noncash dividend, distribution, issuance or proceeds and may withhold the entire Offer Price or deduct from the Offer Price the amount or value thereof, as determined by the Purchaser in its sole discretion. 14.Certain Conditions of the Offer Notwithstanding any other term of the Offer or the Merger Agreement, the Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer), to pay for any Shares tendered pursuant to the Offer unless the Minimum Condition, the HSR Act Condition, the Exon-Florio Condition and the other Regulatory Conditions shall have been satisfied. Furthermore, notwithstanding any other term of the Offer or the Merger Agreement, the Purchaser shall not be required to accept for payment, or subject as aforesaid, pay for any Shares not theretofore accepted for payment or paid for, and may terminate or amend the Offer, with the consent of the Company or if, at any time on or after the date of the Merger Agreement and before the acceptance of Shares for payment or the payment therefor, any of the following conditions exists: (a) any representation and warranty of the Company in the Merger Agreement that is qualified as 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 material respect, as of the date of the Agreement and as of such time, except to the extent such representation and warranty expressly relates to an earlier date (in which case on and as of such earlier date) (provided that, in each case, the condition set forth in this clause (a) shall be deemed satisfied so long as any failures of such representations and warranties to be true and correct, individually or in the aggregate, have not had and would not reasonably be expected to have a material adverse effect on the Company); (b) the Company shall have breached any of its covenants or agreements contained in the Agreement or the Stock Option Agreement which materially adversely affects (or materially delays) the consummation of the Offer; (c) there shall be threatened or pending any suit, action or proceeding by any governmental authority, or any suit, action or proceeding by any other person that has a reasonable likelihood of success, (i) challenging the acquisition by Parent or the Purchaser of any shares, seeking to restrain or prohibit the making or consummation of the Offer or the Merger, or seeking to obtain from the Company, Parent or any of their respective subsidiaries or affiliates any damages in an amount that would result in a material adverse effect in respect of the Company, taken as a whole, and in the case of Parent or any of its subsidiaries or affiliates relating to the transactions contemplated by the Merger Agreement, (ii) seeking to prohibit or limit the ownership or operation by the Company, Parent or any of their respective subsidiaries or affiliates of any material portion of the business or assets of the Company, Parent or any of their respective subsidiaries or affiliates, or to compel the Company, Parent or any of their respective subsidiaries or affiliates to dispose of or hold separate any material portion of the business or assets of the Company, Parent or any of their respective subsidiaries or affiliates, as a result of the Offer, the Merger or any of the other transactions contemplated by the Merger Agreement or (iii) which otherwise is reasonably likely to have a material adverse effect on the Company; (d) there shall be any statute, regulation, legislation, interpretation, judgment, order or injunction threatened, proposed, sought, enacted, entered, enforced, promulgated, amended or issued with respect to, or deemed applicable to, any consent or approval withheld with respect to, (i) Parent, the Company or any of their respective subsidiaries or affiliates or (ii) the Offer or the Merger by any governmental authority that has or is reasonably likely to result, directly or indirectly, in any of the consequences referred to in paragraph (c) above; (e) since the date of the Merger Agreement there shall have occurred any event, change, effect or development that, individually or in the aggregate, has had or is reasonably likely to have, a material adverse effect on the Company; 31 (f) there shall have occurred and be continuing (i) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States or in the United Kingdom, (ii) a declaration of a banking moratorium by any governmental authority or any suspension of payments by any governmental authority in respect of banks in the United States or in the United Kingdom, (iii) any general limitation (whether or not mandatory) by any governmental authority in the United States or in the United Kingdom on the extension of credit by banks or other lending institutions or (iv) in the case of any of the foregoing existing on the date of the Merger Agreement, a material acceleration or worsening thereof; (g) any person (which includes a "person" as such term is defined in Section 13(d)(3) of the Exchange Act) other than the Purchaser, any of its affiliates, or any group of which any of them is a member shall have acquired beneficial ownership of more than 15 percent of the outstanding Shares or shall have entered into a definitive agreement or any agreement in principle with the Company with respect to a tender offer or exchange offer for any Shares or a merger, consolidation or other business combination with or involving the Company or any of its subsidiaries; or (h) the Merger Agreement shall have been terminated in accordance with its terms; which, in the sole and reasonable judgment of the Purchaser or Parent, in any such case, and regardless of the circumstances giving rise to any such condition (including any action or inaction by Parent or any of its affiliates), makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of the Purchaser and Parent and may be asserted by the Purchaser or Parent regardless of the circumstances giving rise to such condition or may be waived by the Purchaser and Parent in whole or in part at any time and from time to time in their sole and reasonable judgment; provided that the Minimum Condition may be waived or modified only by the mutual consent of the Purchaser and the Company. The failure by Parent, the Purchaser or any other affiliate of Parent at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. 15.Certain Legal Matters Except as described in this Section 15, based on a review of publicly available filings made by the Company with the SEC and other publicly available information concerning the Company, none of the Purchaser, Parent or GEC, p.l.c. is aware of 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 adversely affected by the Purchaser's acquisition of Shares (and the indirect acquisition of the stock of the Company's subsidiaries, taken as a whole, that might be adversely affected by the Purchaser's acquisition of Shares (and the indirect acquisition of the stock of the Company's subsidiaries) as contemplated herein or of any approval or other action by any governmental entity 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, Parent and GEC, p.l.c. currently contemplate that such approval or the action will be sought, except as described below under "State Takeover Laws". While, except as otherwise expressly described in this Section 15, the Purchaser does not presently intend to delay the acceptance for payment of or payment for Shares tendered pursuant to the Offer pending the outcome of any such matter, there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that failure to obtain any such approval or other action might not result in consequences adverse to the Company's business or that certain parts of the Company's business might not have to be disposed of if such approvals were not obtained or such other actions 32 were not taken or in order to obtain any such approval or other action. If certain types of adverse action are taken with respect to the matters discussed below, the Purchaser could, subject to the terms and conditions of the Merger Agreement, decline to accept for payment or pay for any Shares tendered. See Section 14 for certain conditions to the Offer. State Takeover Laws. A number of states throughout the United States have enacted takeover statutes that purport, in varying degrees, to be applicable to attempts to acquire securities of corporations that are incorporated or have assets, stockholders, executive offices or places of business in such states. In Edgar v. MITE Corp., the Supreme Court of the United States held that the Illinois Business Takeover Act, which involved state securities laws that make the takeover of certain corporations more difficult, imposed a substantial burden on interstate commerce and therefore was unconstitutional. In CTS Corp. v. Dynamics Corp. of America, however, the Supreme Court of the United States held that a state may, as a matter of corporate law and, in particular, those laws concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation without prior approval of the remaining stockholders, provided that such laws were applicable only under certain circumstances. Subsequently, a number of Federal courts ruled that various state takeover statutes were unconstitutional insofar as they apply to corporations incorporated outside the state of enactment. Section 203 of the DGCL limits the ability of a Delaware corporation to engage in business combinations with "interested stockholders" (defined generally as any beneficial owner of 15% or more of the outstanding voting stock of the corporation) for a period of three years from the time such interested stockholders became the holders of 15% or more of such Shares unless, among other things, the corporation's board of directors had given its prior approval to either the business combination or the transaction which resulted in the stockholder becoming an "interested stockholder". The Board has approved the Merger Agreement and the Stockholder Agreement and the Purchaser's acquisition of Shares pursuant to the Offer and, therefore, Section 203 of the DGCL is inapplicable to the Merger. Except as described herein, the Purchaser has not attempted to comply with any state takeover statutes in connection with the Offer. The Purchaser reserves the right to challenge the validity of applicability of any state law allegedly applicable to the Offer and nothing in this Offer to Purchaser nor any action taken in connection with the Offer or the Merger is intended as a waiver of that right. In the event that any state takeover statute is found applicable to the Offer or the Merger, the Purchaser might be unable to accept for payment or pay for Shares tendered pursuant to the Offer or be delayed in continuing or consummating the Offer or the Merger. In such case, the Purchaser might not be obligated to accept for payment or pay for any Shares tendered. See Section 14. Antitrust. United States Antitrust Law. Under the provisions of the HSR applicable to the Offer, the acquisition of Shares under the Offer may be consummated following the expiration of a 15-calendar day waiting period following the filing by GEC, p.l.c. of a Notification and Report Form with respect to the Offer, unless GEC, p.l.c. receives a request for additional information or documentary material from the Antitrust Division or the FTC or unless early termination of the waiting period is granted. GEC, p.l.c. is in the process of making such filing, If, within the initial 15-day waiting period, either the Antitrust Division or the FTC requests additional information or material from GEC, p.l.c. concerning the Offer, the waiting will 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 GEC, p.l.c. with such request. Only one extension of the waiting period pursuant to a request for additional information is authorized by the HSR Act. Thereafter, such waiting period may be extended only by court order or with the consent of GEC, p.l.c. In practice, complying with a request for additional information or material can take a significant amount of time. In addition, 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 governmental agency concerning possible means of addressing those issues and may agree to delay consummation of the transaction which such negotiations continue. Expiration or termination of the applicable waiting period under the HSR Act is a condition to the Purchaser's obligation to accept for payment and pay for Shares tendered pursuant to the Offer. 33 The Antitrust Division and the FTC frequently scrutinize the legality under the antitrust laws of transactions such as the Purchaser's proposed acquisition of the Company. At any time before or after the Purchaser's acquisition of Shares pursuant to the Offer, 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 purchase of Shares pursuant to the Offeror the consummation of the Merger or seeking the divestiture of Shares acquired by the Purchaser or the divestiture of substantial assets of the Company or its subsidiaries or GEC, p.l.c. or its subsidiaries. Private parties may also bring legal action under the antitrust laws under certain circumstances. Based upon a preliminary examination of information provided by the Company relating to the businesses in which GEC, p.l.c. and the Company are engaged, Parent and the Purchaser believe that the acquisition of Shares by 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 such a challenge is made, of the result thereof. UK Competition Law. Under the UK Fair Trading Act 1973, the OFT has jurisdiction to investigate the proposed acquisition of the Company. The OFT will then advise the Secretary of State whether to refer the proposed acquisition to the U.K. Competition Commission. There is an informal timetable of up to forty five working days from the date of notification for the Secretary of State to make his decision. If the proposed acquisition is referred to the U.K. Competition Commission, the U.K. Competition Commission has a maximum of six months (which is extendible by one additional period of no more than three months) to investigate the acquisition and report to the Secretary of State. If the U.K. Competition Commission determines that the acquisition is likely to operate against the public interest, the Secretary of State may prohibit the acquisition or require undertakings and/or divestments from GEC, p.l.c. It is possible to consummate the Offer prior to receiving clearance in respect of the foregoing, if the Purchaser should wish to do so. German Competition Law. The proposed acquisition of the Company may be required to be notified to the FCO pursuant to section 39 of the German Act. The Offer may not be consummated until confirmation is received from the FCO that the conditions for a prohibition in section 36 paragraph 1 of the German Act are not fulfilled or, if no such confirmation is received, that the one month time limit (from the date of notification) as laid down in section 40 paragraph 1 of the German Act has expired without the parties having been notified by the FCO that it has entered into a detailed examination of the proposed acquisition of the Company (which may take a maximum of a further three months). If the conditions for a prohibition in section 36 paragraph 1 of the German Act are fulfilled, the FCO must prohibit the consummation of the Offer. Irish Competition Law. The proposed acquisition of the Company must be notified to the Irish Minister pursuant to the Irish Takeovers Act. The Irish Minister has 30 days from the date of notification in which to decide whether to institute further proceedings by referring the proposed acquisition to the Irish Competition Authority. The Irish Minister has an additional two months in which to decide whether or not to issue an order prohibiting the proposed acquisition (or issuing a conditional order). If additional information is required in the initial 30-day period, that 30-day period will only continue on receipt of the requested information. The proposed transaction may not be consummated unless the Irish Minister has stated in writing that she has decided not to issue an order prohibiting the proposed acquisition or has decided to issue a conditional order or does not refer the proposed acquisition to the Irish Competition Authority (whichever occurs first). Italian Competition Law. Under Law no. 287 of October 10, 1990, the proposed acquisition must also be notified to the Italian Authority. The Italian Authority has 30 days from the date of notification (with the ability to suspend such 30-day term is the information supplied with the notification is incomplete) in which to decide whether to institute such an investigation (which may take a maximum of a further 75 days, in the case of an opening of a second stage investigation), but there is no prohibition on consummating the Offer prior to receiving clearance, if the Purchaser should wish to do so. If the Italian Authority concludes that the acquisition will create or strengthen a dominant position as a result of which competition is eliminated or substantially reduced in the Italian market, the Italian Authority may prohibit consummation of the Offer, permit consummation subject to conditions or, if the Offer has already been consummated, order divestment. 34 Swedish Competition Law. Under Section 37 of the Swedish Competition Act, the proposed acquisition must be notified to the SCA. The SCA must no later than 30 calendar days after the receipt of a complete notification either adopt a clearance decision or a decision to initiate a phase two investigation. During this initial 30-day investigation period, the parties may not take actions to implement the transaction. If the SCA has decided to proceed with a phase two investigation, it must within three months from such a decision either adopt a clearance decision or initiate proceedings before the District Court of Stockholm (this time limit may exceptionally be extended). If the conditions in Section 34 of the Swedish Competition Act are fulfilled, the Court must prohibit the transaction. Other Laws. Exon-Florio Act. The Exon-Florio Act applies to all acquisitions proposed or pending on or after August 23, 1988, by or with foreign persons which could result in foreign control of persons engaged in interstate commerce in the United States. The Exon-Florio Act empowers the President of the United States to prohibit or suspend mergers, acquisitions or takeovers by or with foreign persons if the President finds, after investigation, credible evidence that the foreign person might take action that threatens to impair the national security of the United States and that other provisions of existing law do not provide adequate and appropriate authority to protect the national security. The President has designated CFIUS as the agency authorized under the Exon- Florio Act to receive notices and other information and to conduct a review process which consists of a determination whether an investigation should be undertaken and making any such investigation. Any determination by CFIUS that an investigation is called for must be made within thirty days after its acceptance of written notification concerning a proposed transaction. In the event that CFIUS determines to undertake an investigation, such investigation must be completed within forty-five days after such determination. Upon completion or termination of any such investigation, CFIUS must report to the President and present its recommendation. The President then has fifteen days in which to suspend or prohibit the proposed transaction or to seek other appropriate relief. In order for the President to exercise his authority to suspend or prohibit a proposed transaction, the President must make two findings: (i) that there is credible evidence that leads the President to believe that the foreign interest exercising control might take action that threatens to impair national security and (ii) that provisions of law other than the Exon-Florio Act and the International Emergency Economic Powers Act do not in the President's judgment provide adequate and appropriate authority for the President to protect the national security in connection with the acquisition. Such findings are not subject to judicial review. If the President makes such findings, he may take action for such time as he considers appropriate to suspend or prohibit the relevant acquisition. The President may direct the Attorney General to seek appropriate relief, including divestment relief, in the District Courts of the United States in order to implement and enforce the Exon-Florio Act. The Exon-Florio Act does not obligate the parties to a proposed acquisition to notify CFIUS of a proposed transaction. However, if notice of a proposed acquisition is not submitted to CFIUS, then the transaction remains indefinitely subject to review by the President under the Exon-Florio Act, unless it is determined that CFIUS does not have jurisdiction over the transaction. The Purchaser and the Company will make a filing under the Exon-Florio Act. There can be no assurance that CFIUS will not determine to conduct an investigation of the proposed acquisition of the Company and, if an investigation is commenced, there can be no assurance regarding the outcome of such investigation. If the results of such investigation are adverse to the Purchaser, the Purchaser is not obligated to accept for payment or pay for any Shares tendered pursuant to the Offer. 35 16.Fees and Expenses Warburg Dillon Read is acting as Dealer Manager in connection with the Purchaser's acquisition of the Company and is acting as financial advisor to GEC, p.l.c. in connection with the Offer. Warburg Dillon Read will receive customary compensation for its services as financial advisor and Dealer Manager in connection with the Offer. GEC, p.l.c. has also agreed to reimburse Warburg Dillon Read for its reasonable out-of-pocket expenses related to such services, including the reasonable fees and expenses of its counsel, and to indemnify Warburg Dillon Read and certain related persons against certain liabilities and expenses, including certain liabilities and expenses under the Federal securities laws. The Purchaser has retained Georgeson & Company Inc. to act as the Information Agent and ChaseMellon Shareholder Services, L.L.C. to serve as the Depositary in connection with the Offer. The Information Agent and the Depositary each will receive reasonable and customary compensation for their services, be reimbursed for certain reasonable out-of-pocket expenses and be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities and expenses under the Federal securities laws. None of the Purchaser, Parent or GEC, p.l.c. will pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, banks and trust companies will be reimbursed by the Purchaser upon request for customary mailing and handling expenses incurred by them in forwarding material to their customers. 17.Miscellaneous The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. To the extent the Purchaser, Parent or GEC, p.l.c. becomes aware of any state law that would limit the class of offerees in the Offer, the Purchaser reserves the right to amend the Offer and, depending on the timing of such amendment, if any, will extend the Offer to provide adequate dissemination of such information to holders of Shares prior to the expiration of the Offer. In any jurisdiction the securities, blue sky or other laws of which require the Offer to be made by a licensed broker or dealer, the Offer is being made on behalf of the Purchaser by the Dealer Manager or one or more registered brokers or dealers licensed under the laws of such jurisdiction. No person has been authorized to give any information or to make any representation on behalf of the Purchaser, Parent or GEC, p.l.c. 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 Purchaser, Parent and GEC, p.l.c. have filed with the SEC the Schedule 14D-1 pursuant to Rule 14d-3 under the Exchange Act, together with exhibits, furnishing certain additional information with respect to the Offer, and may file amendments thereto. In addition, the Company has filed the Schedule 14D-9 pursuant to Rule 14d-9 under the Exchange Act, together with exhibits, setting forth its recommendation with respect to the Offer and the reasons for such recommendation and furnishing such additional related information. Such Schedules and any amendments thereto, including exhibits, should be available for inspection and copies should be obtainable in the manner set forth in Section 8 (except that such material will not be available at the regional offices of the SEC). GEC ACQUISITION CORP. April 30, 1999 36 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF GEC, P.L.C., PARENT AND THE PURCHASER Directors and Executive Officers of The General Electric Company, p.l.c. The following table sets forth the name, business address, present principal occupation or employment and five-year employment history of each of the directors and executive officers of The General Electric Company, p.l.c. All the directors and officers listed below are citizens of the United Kingdom, except for Mr. Seitz, who is a citizen of the United States. Directors are indicated by an asterisk.
Present Principal Occupation or Employment Name and Business Address and Five-Year Employment History - ------------------------------------ ---------------------------------------------------- Sir Roger Hurn* Chairman of The General Electric Company, p.l.c. The General Electric Company, p.l.c. (1998-present); One Bruton Street Chairman of Smiths Industries plc (1994-1998). London, WIX 8AQ (England) Lord Simpson of Dunkeld* Executive Director and Chief Executive of The The General Electric Company, p.l.c. General Electric Company, p.l.c. (1996-present); One Bruton Street Chief Executive of Lucas Industries plc (1994-1996). London, WIX 8AQ (England) Ronald Edward Artus* Non-executive Director and Deputy Chairman of The 8 Mercers Place Securities and Futures Authority Limited (1994- Brook Green present). London, W6 7B (England) William Martin Castell* Chief Executive of Nycomed Amersham plc (formerly Nycomed Amersham plc Amersham International plc) (1994-present). Little Chalfont Buckinghamshire, HP7 9NA (England) The Rt Hon The Baroness Dunn* Executive Director of John Swire & Sons Ltd. (1996- John Swire & Sons Ltd. present); Senior Member of The Hong Kong Executive 59 Buckingham Gate Council (1994-1995). London, SW1E 6AJ (England) Peter Oliver Gershon* Executive Director of The General Electric Company, Marconi Electronic Systems Limited p.l.c. (1994-present); Managing Director of Marconi The Grove, Warren Lane Electronic Systems Limited (formerly GEC-Marconi Stanmore, Middlesex HA7 4LY Limited) (1994-present). (England) Sir Christopher Harding* Chairman of United Utilities PLC (1997-present); United Utilities PLC 55 Grosvenor Chairman of Legal & General Group Plc (1994- Street London, WIX 9DA (England) present). Michael Lester* Executive Director of The General Electric Company, The General Electric Company, p.l.c. p.l.c. (1994-present); Vice Chairman of The General One Bruton Street Electric Company, p.l.c. (1994-present). London, WIX 8AQ (England)
I-1
Present Principal Occupation or Employment Name and Business Address and Five-Year Employment History - ------------------------------------ ---------------------------------------------------- Sir Charles Masefield* Executive Director and Vice Chairman of The General The General Electric Company, p.l.c. Electric Company, p.l.c. (1998-present); Head of One Bruton Street Defence Export Services at the U.K. Ministry of London WIX 8AQ (England) Defence (1994-1998). John Charles Mayo* Finance Director of The General Electric Company, The General Electric Company, p.l.c. p.l.c. (1997-present); Finance Director of ZENECA One Bruton Street Group PLC (1994-1997). London, WIX 8AQ (England) Robert Ian Meakin* Executive Director of The General Electric Company, The General Electric Company, p.l.c. p.l.c. (1998-present); Personnel Director of The One Bruton Street General Electric Company, p.l.c. (1996-present); London, WIX 8AQ (England) Personnel Director of British Aerospace PLC (1994- 1996). Chairman of WS Atkins plc (1997-present); Deputy Dr. Alan Walter Rudge* Chief Executive of British Telecommunications plc WS Atkins plc (1996-1997); Managing Director, Development and 77 Cornhill Procurement, of British Telecommunications plc London, EC3V 3QQ (England) (1994-1995). Hon Raymond G. H. Seitz* Vice Chairman of Lehman Brothers International Lehman Brothers International (Europe) (1995-present); American Ambassador to the One Broadgate Court of St. James's (1994). London, EC2M 7HA (England) Nigel John Stapleton* Chief Executive of Reed Elsevier plc (1998-present); Reed Elsevier plc Chairman of Reed Elsevier plc (1996-1998); Chief 25 Victoria Street Financial Officer of Reed Elsevier plc (1994-1996). London, SW1H OEX (England) Norman Charles Porter Secretary of The General Electric Company, p.l.c. The General Electric Company, p.l.c. (1994-present). One Bruton Street London, WIX 8AQ (England)
I-2 Directors and Executive Officers of GEC Incorporated The following table sets forth the name, business address, present occupation or employment and five-year employment history of each of the directors and executive officers of GEC Incorporated. All the directors and officers listed below are citizens of the United States, except for Mr. Lester, who is a citizen of the United Kingdom. Directors are indicated by an asterisk.
Present Principal Occupation or Employment Name and Business Address and Five-Year Employment History - ------------------------------------ ---------------------------------------------------- Michael Lester* Executive Director of The General Electric Company, The General Electric Company, p.l.c. p.l.c. (1994-present); Vice Chairman of The General One Bruton Street Electric Company, p.l.c. (1994-present). London, WIX 8AQ (England) William B. Korb* President and CEO of Gilbarco Inc. (1994-present). Gilbarco Inc. 7300 W. Friendly Avenue P.O. Box 22087 Greensboro, NC 27420 William Judson Cull, Sr.* Vice President and General Counsel of Picker Picker International, Inc. International, Inc. (1994-present). 595 Miner Road Highland Hts., OH 44143 Thomas R. Edeus Treasurer of GEC Incorporated (1997-present); GEC Incorporated Videojet Systems International, Inc. (1997-present) c/o Videojet Systems International, and A. B. Dick Company (1994-1997). Inc. 1500 Mittel Boulevard Wood Dale, IL 60191-1073 Patricia A. Hoffman Secretary of GEC Incorporated (1997-present); GEC Incorporated Attorney for Videojet Systems International, Inc. c/o Videojet Systems International, (1997-present) and A.B. Dick Company (1994-1997). Inc. 1500 Mittel Boulevard Wood Dale, IL 60191-1073
I-3 Directors and Executive Officers of GEC Acquisition Corp. The following table sets forth the name, business address, present occupation or employment and five-year employment history of each of the directors and executive officers of GEC Acquisition Corp. All the directors and officers listed below are citizens of the United States, except for Mr. Mayo, who is a citizen of the United Kingdom. Directors are indicated by an asterisk.
Present Principal Occupation or Employment Name and Business Address and Five-Year Employment History - ------------------------------------ ---------------------------------------------------- John Charles Mayo* President and Treasurer of GEC Acquisition Corp. The General Electric Company, p.l.c. (1999-present); Finance Director of The General One Bruton Street Electric Company, p.l.c. (1997-present); Finance London, WIX 8AQ (England) Director of ZENECA Group PLC (1994-1997). William B. Korb* Vice President of GEC Acquisition Corp. (1999- Gilbarco Inc. present); President and CEO of Gilbarco Inc. (1994- 7300 W. Friendly Avenue present). P.O. Box 22087 Greensboro, NC 27420 Patricia A. Hoffman* Vice President and Secretary of GEC Acquisition GEC Incorporated Corp. (1999-present); Secretary of GEC Incorporated c/o Videojet Systems International, (1997-present); Attorney for Videojet Systems Inc. International, Inc. (1997-present) and A. B. Dick 1500 Mittel Boulevard Company (1994-1997). Wood Dale, IL 60191-1073
I-4 Manually signed facsimile copies of the Letter of Transmittal, properly completed and duly signed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or such stockholder's broker, dealer, bank, trust company or other nominee to the Depositary at one of its addresses set forth below. The Depositary for the Offer is: ChaseMellon Shareholder Services, L.L.C. By Facsimile Confirm by Telephone: Transmission: (For Eligible Institutions Only) (201) 296-4860 (201) 296-4293 By Mail: By Overnight Courier: By Hand: Reorganization Department Reorganization Reorganization Department P.O. Box 3301 South Department 85 Challenger 120 Broadway 13th Floor Hackensack, NJ 07606 Road Mail Stop--Reorg New York, NY 10271 Ridgefield Park, NJ 07660 Questions and requests for assistance or for additional copies of this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers listed below. You may also contact your broker, dealer, bank, trust company or other nominee for assistance concerning the Offer. The Information Agent for the Offer is: Georgeson & Company Inc. Wall Street Plaza New York, New York 10005 Banks and Brokers Call Collect: (212) 440-9800 All Others Call Toll-Free: (800) 223-2064 The Dealer Manager for the Offer is: Warburg Dillon Read LLC 299 Park Avenue New York, New York 10171 Call Collect: (212) 821-2881 EX-99.(2)(B) 4 AGREEMENT AND PLAN OF MERGER Exhibit (2)(b) EXECUTION COPY ================================================================================ AGREEMENT AND PLAN OF MERGER Among GEC INCORPORATED GEC ACQUISITION CORP. and FORE SYSTEMS, INC. Dated as of April 26, 1999 ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE I Definitions SECTION 1.01. Definitions.................................................................................... 2 SECTION 1.02. Rules of Construction.......................................................................... 2 ARTICLE II The Offer SECTION 2.01. The Offer ................................................................................ 2 SECTION 2.02. Company Actions................................................................................ 4 SECTION 2.03. Stockholder Lists.............................................................................. 5 SECTION 2.04. Composition of the Board of Directors; Section 14(f)..................................................................... 5 ARTICLE III The Merger SECTION 3.01. The Merger..................................................................................... 7 SECTION 3.02. Effective Time ................................................................................ 7 SECTION 3.03. Effect of the Merger........................................................................... 7 SECTION 3.04. Certificate of Incorporation; By-laws....................................................................... 7 SECTION 3.05. Directors and Officers......................................................................... 8 SECTION 3.06. Stock Options ................................................................................ 8 SECTION 3.07. Stockholders' Meeting.......................................................................... 9 ARTICLE IV Conversion of Securities; Exchange of Certificates SECTION 4.01. Merger Consideration; Conversion and Cancellation of Securities...................................................... 10 SECTION 4.02. Exchange of Certificates....................................................................... 11 SECTION 4.03. Dissenting Shares.............................................................................. 13 SECTION 4.04. Closing ................................................................................ 13 SECTION 4.05. Stock Transfer Books........................................................................... 13
Contents, p. 2 Page ---- ARTICLE V Representations and Warranties of the Company --------------------------------------------- SECTION 5.01. Organization and Qualification; Subsidiaries................................................................................ 14 SECTION 5.02. Certificate of Incorporation and By-laws................................................................................. 14 SECTION 5.03. Capitalization................................................................................ 15 SECTION 5.04. Authorization of Agreement.................................................................... 16 SECTION 5.05. Approvals..................................................................................... 17 SECTION 5.06. No Violation.................................................................................. 18 SECTION 5.07. Reports and Financial Statements.................................................................................. 18 SECTION 5.08. No Undisclosed Liabilities.................................................................... 19 SECTION 5.09. No Material Adverse Effect; Conduct..................................................................................... 20 SECTION 5.10. Schedule 14D-9; Offer Documents; Proxy Statement.................................................................. 21 SECTION 5.11. Properties and Assets......................................................................... 22 SECTION 5.12. Material Contracts............................................................................ 22 SECTION 5.13. Litigation; Compliance with Laws........................................................................................ 23 SECTION 5.14. Employee Benefit Plans........................................................................ 23 SECTION 5.15. Labor Matters................................................................................. 26 SECTION 5.16. Taxes......................................................................................... 26 SECTION 5.17. Environmental Matters......................................................................... 28 SECTION 5.18. Intellectual Property......................................................................... 29 SECTION 5.19. Brokers....................................................................................... 33 SECTION 5.20. Opinion of Financial Advisor.................................................................. 33 SECTION 5.21. Year 2000..................................................................................... 33 SECTION 5.22. Insurance..................................................................................... 34 ARTICLE VI Representations and Warranties of the Parent Companies ------------------------------------------------------ SECTION 6.01. Organization and Qualification; Subsidiaries................................................................................ 34 SECTION 6.02. Authorization of Agreement.................................................................... 34 SECTION 6.03. Approvals..................................................................................... 35 SECTION 6.04. No Violation.................................................................................. 35 SECTION 6.05. Proxy Statement; Schedule 14D-9....................................................................................... 36
Contents, p. 3 Page ---- SECTION 6.06. Sufficient Funds.............................................................................. 36 SECTION 6.07. Brokers....................................................................................... 37 ARTICLE VII Covenants --------- SECTION 7.01. Conduct of Business of the Company. .................................................................................. 37 SECTION 7.02. Prohibited Actions by the Company.................................................................................... 37 SECTION 7.03. No Solicitation............................................................................... 40 SECTION 7.04. Access to Information......................................................................... 44 SECTION 7.05. Confidentiality Agreement..................................................................... 44 SECTION 7.06. Reasonable Efforts............................................................................ 45 SECTION 7.07. Public Announcements.......................................................................... 45 SECTION 7.08. Employee Agreements........................................................................... 45 SECTION 7.09. State Takeover Statutes....................................................................... 46 SECTION 7.10. Employee Benefit Plans........................................................................ 46 SECTION 7.11. Indemnification of Directors and Officers............................................................................... 47 SECTION 7.12. Event Notices and Other Actions.................................................................................... 48 SECTION 7.13. Third Party Standstill Agreements; Tortious Interference............................................................................... 49 ARTICLE VIII Closing Conditions ------------------ ARTICLE IX Termination, Amendment and Waiver --------------------------------- SECTION 9.01. Termination................................................................................... 50 SECTION 9.02. Effect of Termination......................................................................... 52 SECTION 9.03. Amendment..................................................................................... 52 SECTION 9.04. Extension; Waiver............................................................................. 52 SECTION 9.05. Fees, Expenses and Other Payments................................................................................... 52
Contents, p. 4 Page ---- ARTICLE X General Provisions ------------------ SECTION 10.01. Nonsurvival of Representations, Warranties and Agreements.....................................................................54 SECTION 10.02. Notices..........................................................................................54 SECTION 10.03. Headings.........................................................................................55 SECTION 10.04. Severability.....................................................................................55 SECTION 10.05. Entire Agreement.................................................................................55 SECTION 10.06. Assignment.......................................................................................56 SECTION 10.07. Parties in Interest..............................................................................56 SECTION 10.08. Failure or Indulgence Not Waiver; Remedies Cumulative....................................................................................56 SECTION 10.09. GOVERNING LAW ...................................................................................56 SECTION 10.10. Enforcement......................................................................................56 SECTION 10.11. Counterparts.....................................................................................57
ANNEXES Annex A - Schedule of Defined Terms Annex B - Conditions of the Offer AGREEMENT AND PLAN OF MERGER dated as of April 26, 1999 (this "Agreement"), among GEC INCORPORATED, a Delaware --------- corporation ("Parent"), GEC ACQUISITION CORP., a Delaware ------ corporation and a wholly owned subsidiary of PARENT ("Purchaser"), and FORE SYSTEMS, INC., a Delaware corporation --------- (the "Company"). Parent and Purchaser are sometimes referred to ------- herein as the "Parent Companies." ---------------- WHEREAS the respective Boards of Directors of the Company, Parent, and Purchaser have unanimously approved the acquisition of the Company by Parent on the terms and subject to the conditions set forth in this Agreement. WHEREAS, in furtherance of such acquisition, Parent proposes to cause Purchaser to make a tender offer (as it may be amended from time to time as permitted under this Agreement, the "Offer") to purchase all the issued and ----- outstanding shares of common stock, par value $0.01 per share, of the Company ("Company Common Stock") at a price per share of Company Common Stock of $35.00, - ---------------------- net to the seller in cash, upon the terms and subject to the conditions set forth in this Agreement. WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with the General Corporation Law of the State of Delaware, Purchaser will merge with and into the Company and the Company will be the Surviving Corporation (as defined below). WHEREAS, simultaneously with the delivery and execution of this Agreement and as an inducement to Parent and Purchaser to enter into this Agreement, the Company and Purchaser are entering into a stock option agreement dated the date hereof (the "Option Agreement"). ---------------- WHEREAS, concurrently with the execution and delivery of this Agreement, Parent and Purchaser, on the one hand, and certain stockholders of the Company are entering into an agreement dated the date hereof (the "Stockholders Agreement") pursuant to which such stockholders have agreed to - ----------------------- take specified actions in furtherance of the transactions contemplated by this Agreement. 2 NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth in this Agreement, the parties hereto agree as follows: ARTICLE I Definitions ----------- SECTION 1.01. Definitions. Certain capitalized and other terms used ------------ in this Agreement are defined in Annex A hereto and are used herein with the meanings ascribed to them therein. SECTION 1.02. Rules of Construction. When a reference is made in ---------------------- this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. Unless the context otherwise requires, as used in this Agreement: (a) a term has the meaning ascribed to it; (b) "or" is not exclusive; (c) whenever the words "include," "includes" or "including" are used, they shall be deemed to be followed by the words "without limitation"; and (d) words in the singular include the plural and words in the plural include the singular. ARTICLE II The Offer --------- SECTION 2.01. The Offer. (a) Subject to the conditions of this ---------- Agreement including those set forth in Annex B hereto, as promptly as practicable but in no event later than five Business Days after the date of this Agreement, Purchaser shall, and Parent shall cause Purchaser to, commence the Offer within the meaning of the applicable Regulations of the SEC. The obligation of Purchaser to, and of Parent to cause Purchaser to, commence the Offer or accept for payment, or pay for, any shares of Company Common Stock tendered pursuant to the Offer shall be subject to the conditions set forth in Annex B (any of which may be waived by Purchaser in its sole and reasonable judgment provided that, without the consent of the Company, Purchaser may not -------- waive the Minimum Tender Condition) and to the other provisions of this Agreement. The initial expiration date of the Offer shall be the 20th Business Day following the commencement of the Offer (determined using Rule 14d-1(e)(6) under the Exchange Act). Purchaser expressly reserves the right to modify the terms of the Offer, except that, without the consent of the Company, Purchaser shall not (i) reduce 3 the number of shares of Company Common Stock subject to the Offer, (ii) reduce the price per share of Company Common Stock to be paid pursuant to the Offer, (iii) modify or add to the conditions set forth in Annex B in any manner adverse to the holders of shares of Company Common Stock, (iv) except as provided in the next sentence, extend the Offer, (v) change the form of consideration payable in the Offer or (vi) otherwise amend the Offer in any manner adverse to the holders of shares of Company Common Stock. Notwithstanding the foregoing, Purchaser may, without the consent of the Company, (i) extend the Offer, if at the scheduled expiration date of the Offer any of the conditions to Purchaser's obligation to purchase shares of Company Common Stock are not satisfied, until such time as such conditions are satisfied or waived; provided, -------- however, that the expiration date shall not be later than the Termination Date - ------- as a result of such extension, (ii) extend the Offer for a period of not more than 10 Business Days beyond the expiration date that would otherwise be permitted under clause (i) of this sentence, if on the date of such extension (x) less than 90% of the Fully Diluted Shares have been validly tendered and not properly withdrawn pursuant to the Offer and (y) Purchaser has permanently waived all of the conditions to the Offer set forth in Annex B (other than conditions that are not legally capable of being satisfied and conditions that have not been satisfied because of the willful or intentional action or inaction of the Company), and (iii) extend the Offer for any period required by any Regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer. If, on any scheduled expiration date of the Offer, any of the conditions set forth in Annex B have not been satisfied or waived and such unsatisfied conditions are still capable of being satisfied, the Company may require Purchaser to extend the expiration date of the Offer for a period of not more than 10 Business Days; provided, however, that Purchaser shall not be -------- ------- required to extend the expiration date later than the Termination Date. On the terms and subject to the conditions of the Offer and this Agreement, Purchaser shall, and Parent shall cause Purchaser to, pay for all shares of Company Common Stock validly tendered and not withdrawn pursuant to the Offer that Purchaser becomes obligated to purchase pursuant to the Offer as soon as practicable after the expiration of the Offer. (b) Notwithstanding anything to the contrary contained in this Agreement, Parent and Purchaser shall not be required to commence the Offer in any jurisdiction other than the United States of America. 4 (c) On the date of the commencement of the Offer, Purchaser shall file with the SEC a Tender Offer Statement on Schedule 14D-1 with respect to the Offer ("Schedule 14D-1") which will contain an offer to purchase and form of the -------------- related letter of transmittal (the Schedule 14D-1 and the documents included therein pursuant to which the Offer will be made, together with any supplements or amendments thereto, collectively, the "Offer Documents"). Parent, Purchaser, --------------- and the Company each agrees promptly to correct any information provided by it for use in the Offer Documents if and to the extent that it shall have become false or misleading in any material respect and Parent and Purchaser further agree to take all steps necessary to cause the Offer Documents as so corrected to be filed with the SEC and be disseminated to holders of shares of Company Common Stock, in each case, as and to the extent required by applicable federal securities Laws. Parent and Purchaser agree to give the Company and its counsel a reasonable opportunity to review and comment on the Offer Documents prior to the filing of the Offer Documents with the SEC. Purchaser agrees to provide the Company and its counsel in writing with any comments Purchaser and its counsel may receive from the SEC or its staff with respect to the Offer Documents promptly after the receipt thereof. SECTION 2.02. Company Actions. The Company hereby consents to the ---------------- Offer and represents that its Board of Directors (at a meeting duly called and held) has unanimously (a) determined that the Offer and the Merger are fair to the stockholders of the Company and are in the best interests of the stockholders of the Company, (b) approved this Agreement, the Offer, the Merger and the other Transaction Agreements, including for purposes of Section 203 of the DGCL, and (c) recommended acceptance of the Offer and approval and adoption of this Agreement and the Merger by the stockholders of the Company which approval constitutes approval of each of the Transactions for purposes of the applicable provisions of the DGCL. The Financial Advisor has delivered to the Board of Directors of the Company its opinion that the consideration to be received by the holders of shares of Company Common Stock in the Offer and the Merger is fair to the holders of shares of Company Common Stock from a financial point of view. The Company hereby agrees to file a Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements thereto, the "Schedule 14D-9") containing such recommendation with the SEC (and -------------- the information required by Section 14(f) of the Exchange Act) and to mail such Schedule 14D-9 to the stockholders of the Company; provided that such -------- recommendation may be withdrawn, modified or amended by the Company's Board of Directors only to the 5 extent permitted by Section 7.03(b). Such Schedule 14D-9 shall be filed on the same date as Purchaser's Schedule 14D-1 is filed and mailed together with the Offer Documents. Each of the Company, Parent, and Purchaser agrees promptly to correct any information provided by it for use in the Schedule 14D-9 if and to the extent that it shall have become false or misleading in any material respect, and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to the holders of shares of Company Common Stock, in each case, as and to the extent required by applicable federal securities Laws. The Company agrees to give Purchaser and its counsel a reasonable opportunity to review and comment on the Schedule 14D-9 prior to the Company's filing of the Schedule 14D-9 with the SEC. The Company agrees to provide Purchaser and its counsel in writing with any comments the Company or its counsel may receive from the SEC or its staff with respect to the Schedule 14D-9 promptly after the receipt thereof. SECTION 2.03. Stockholder Lists. In connection with the Offer, the ------------------ Company will promptly furnish Purchaser with mailing labels, security position listings and any available listing or computer file containing the names and addresses of the record holders of shares of Company Common Stock as of a recent date and of those Persons becoming record holders subsequent to such date (to the extent available), together with all other information in the Company's possession or control regarding the beneficial owners of shares of Company Common Stock and shall furnish Purchaser with such information and assistance (including, to the extent available, updated lists of stockholders, security position listings and computer files) as Purchaser or its agents may reasonably request in communicating the Offer to the record and beneficial holders of shares of Company Common Stock. SECTION 2.04. Composition of the Board of Directors; Section 14(f). ----------------------------------------------------- Promptly upon the acceptance for payment of, and payment by Purchaser for, any shares of Company Common Stock pursuant to the Offer, Purchaser shall be entitled to designate such number of directors on the Board of Directors of the Company as will give Purchaser, subject to compliance with Section 14(f) of the Exchange Act, representation on the Board of Directors of the Company equal to at least that number of directors, rounded up to the next whole number, which is the product of (a) the total number of directors on the Company's Board of Directors (giving effect to the directors elected pursuant to this sentence) multiplied by (b) the percentage that (i) such number of shares of Company Common Stock so accepted for 6 payment and paid for by Purchaser plus the number of shares of Company Common Stock otherwise owned by Purchaser or any other Subsidiary of Parent bears to (ii) the number of such shares outstanding, and the Company shall, at such time, cause Purchaser's designees to be so elected; provided, however, that in the -------- ------- event that Purchaser's designees are appointed or elected to the Board of Directors of the Company, until the Effective Time the Board of the Directors of the Company shall have at least two directors who are directors on the date of this Agreement (the "Independent Directors"); and provided further that, in such --------------------- ---------------- event, if the number of Independent Directors shall be reduced below two for any reason whatsoever, the remaining Independent Director shall be entitled to designate a person to fill such vacancy who shall be deemed to be an Independent Director for purposes of this Agreement or, if no Independent Director then remains, the other directors promptly shall designate two persons to fill such vacancies who shall not be officers, employees, stockholders or Affiliates of Parent or Purchaser, and such persons shall be deemed to be Independent Directors for purposes of this Agreement. Subject to applicable Law, the Company shall take all action reasonably requested by Parent necessary to effect any such election, including mailing to its stockholders the information statement required under Rule 14f-1 containing the information required by Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder, and the Company shall make such mailing with the mailing of the Schedule 14D-9. Purchaser's designees shall be divided between the classes of directors as necessary to comply with the requirements of the Company's bylaws. In connection with the foregoing, the Company shall promptly, at the option of Purchaser, either increase the size of the Board of Directors of the Company or obtain the resignation of such number of its current directors as is necessary to enable Purchaser's designees to be elected or appointed to the Board of Directors of the Company as provided above. The date on which Purchaser's designees constitute a majority of the Company's Board of Directors is herein referred to as the "Control Date." Following the ------------ Control Date but prior to the Effective Time, no amendment or waiver of this Agreement on the Company's behalf pursuant to Sections 9.03 and 9.04, respectively, and no termination of this Agreement pursuant to Section 9.01(a) shall be valid, unless a majority of Independent Directors approve such amendment, waiver or termination, as the case may be. 7 ARTICLE III The Merger ---------- SECTION 3.01. The Merger. Subject to the terms and conditions and in ----------- reliance upon the representations, warranties, covenants and agreements contained herein, Purchaser shall merge with and into the Company at the Effective Time (the "Merger"). The terms and conditions of the Merger and the ------ mode of carrying the same into effect shall be as set forth in this Agreement. As a result of the Merger, the separate corporate existence of Purchaser shall cease and the Company shall continue as the Surviving Corporation. At the election of Parent, subject to Section 10.06, Parent or any Affiliate of Parent may be substituted for Purchaser as a constituent corporation in the Merger. SECTION 3.02. Effective Time. As soon as practicable after the --------------- satisfaction or, if permissible, waiver of the conditions set forth in Article VIII, the parties hereto shall cause the Merger to be consummated by filing a certificate of merger (the "Certificate of Merger") with the Secretary of State --------------------- of the State of Delaware, in such form as required by, and executed in accordance with the relevant provisions of, the DGCL. SECTION 3.03. Effect of the Merger. At the Effective Time, the --------------------- effect of the Merger shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time, except as otherwise provided herein, all the property, rights, privileges, powers and franchises of Purchaser and the Company shall vest in the Surviving Corporation, and all debts, liabilities and duties of Purchaser and the Company shall become the debts, liabilities and duties of the Surviving Corporation. SECTION 3.04. Certificate of Incorporation; By-laws. (a) The -------------------------------------- Certificate of Incorporation of the Purchaser in effect immediately prior to the Effective Time shall be the Certificate of Incorporation of the Surviving Corporation until amended in accordance with applicable law; provided that the -------- name of the Surviving Corporation as set forth in its Certificate of Incorporation shall be changed at the Effective Time to reflect FORE Systems, Inc. as the name of the Surviving Corporation. (b) The By-laws of Purchaser as in effect immediately prior to the Effective Time shall be the by-laws of the Surviving Corporation until thereafter changed or 8 amended as provided therein or by applicable Law; provided, however, that the -------- ------- By-laws of Purchaser shall be amended prior to the Effective Time to the extent necessary to comply with Purchaser's obligations under the first sentence of Section 7.11(a). SECTION 3.05. Directors and Officers. The directors of Purchaser ----------------------- immediately prior to the Effective Time and/or any individuals designated by Parent shall be the directors of the Surviving Corporation, each to hold office in accordance with the certificate of incorporation and bylaws of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time and/or any individuals designated by Parent shall be the officers of the Surviving Corporation, in each case until the earlier of their resignation or removal or until their respective successors are duly elected or appointed and qualify. SECTION 3.06. Stock Options. (a) Except as provided herein, upon -------------- consummation of the Merger, all then outstanding vested and unvested Company Stock Options and all Company Common Stock subject to a vesting requirement ("Restricted Stock") shall be cancelled in exchange for a cash payment from the - ------------------ Company to the holder of a Company Stock Option or Restricted Stock equal to (i) in the case of Company Common Stock Options, the product of (x) the difference between the Per Share Merger Consideration and the per share exercise price of the holder's Company Stock Option multiplied by (y) the number of shares of Company Common Stock subject to the holder's Company Stock Option and (ii) in the case of Restricted Stock, the number of shares of the holder's Restricted Stock multiplied by the per share Merger Consideration. In the case of all unvested Company Stock Options, such cash payment shall be made on the date that is 90 days after the Effective Time. All applicable Taxes shall be withheld from any proceeds payable under this Section 3.06(a). Following the expiration of the Offer and the purchase of Shares pursuant thereto and prior to the Effective Time, Parent may, at its option, provide to each holder of an outstanding Company Stock Option who is an "accredited investor" (within the meaning of the Securities Act), in lieu of the cash payment pursuant to the foregoing sentence, an alternative, at such holder's option, of converting such Company Stock Option into phantom stock units, having the same economic value and terms of such Company Stock Options and the value of which will thereafter be based on the market value of the ordinary shares of The General Electric Company, p.l.c. (b) Except as provided herein or as otherwise agreed to by the parties, (i) the Company Option Plans shall 9 terminate as of the Effective Time and the provisions in any other plan, program or arrangement providing for the issuance or grant by the Company or any of its Subsidiaries of any interest in respect of the capital stock of the Company or any of its Subsidiaries shall be terminated as of the Effective Time, and (ii) following the Effective Time no holder of Company Stock Options or any participant in the Company Option Plans or any other such plans, programs or arrangements shall have any right thereunder to acquire any equity securities of the Company, the Surviving Corporation or any Subsidiary thereof. SECTION 3.07. Stockholders' Meeting. (a) If the adoption of this ---------------------- Agreement by the Company's stockholders is required by Law, the Company shall, at Parent's request, as soon as practicable following the expiration of the Offer, prepare and file with the SEC the Proxy Statement in preliminary form, and each of the Company and Parent shall use its reasonable best efforts to respond as promptly as practicable to any comments of the SEC or its staff with respect thereto. The Company shall notify Parent promptly of the receipt of any comments from the SEC or its staff and of any request by the SEC or its staff for amendments or supplements to the Proxy Statement or for additional information and shall supply Parent with copies of all correspondence between the Company or any of its representatives, on the one hand, and the SEC or its staff, on the other hand, with respect to the Proxy Statement. If at any time prior to receipt of the Company Stockholder Approval there shall occur any event that should be set forth in an amendment or supplement to the Proxy Statement, the Company shall promptly prepare and mail to its stockholders such an amendment or supplement. The Company shall not mail any Proxy Statement, or any amendment or supplement thereto, to which Parent reasonably objects, unless such mailing is required by Law. The Company shall use its reasonable best efforts to cause the Proxy Statement to be mailed to the Company's stockholders as promptly as practicable after filing with the SEC. (b) If the adoption of this Agreement by the Company's stockholders is required by Law, the Company shall, at Parent's request, as soon as practicable following the expiration of the Offer and the purchase of Shares pursuant thereto, duly call, give notice of, convene and hold a meeting of its stockholders (the "Company Stockholders' Meeting") for the purpose of seeking ----------------------------- the Company Stockholder Approval. The Company shall, through the Board of Directors of the Company, give the recommendation referred to in Section 2.02. Without 10 limiting the generality of the foregoing, the Company agrees that its obligations pursuant to this Section 3.07(b) shall not be affected by the commencement, public proposal, public disclosure or communication to the Company of any Acquisition Proposal. Notwithstanding the foregoing, (i) if Purchaser or any other Subsidiary of Parent shall acquire at least 90% of the outstanding shares of Company Common Stock, the parties shall, at the request of Parent, take all necessary and appropriate action to cause the Merger to become effective as soon as practicable after the expiration of the Offer without a stockholders meeting in accordance with Section 253 of the DGCL and (ii) the parties shall, at the request of Parent, take all necessary and appropriate action to effect the Merger through a written consent in lieu of the Company Stockholders' Meeting to the extent permitted by, and in accordance with, applicable Law. (c) Parent will provide the Company with the information concerning Parent and Purchaser required to be included in the Proxy Statement and will vote, or cause to be voted, all shares of Company Common Stock owned by it or its Subsidiaries in favor of the adoption of this Agreement. ARTICLE IV Conversion of Securities; Exchange of Certificates -------------------------------------------------- SECTION 4.01. Merger Consideration; Conversion and Cancellation of ---------------------------------------------------- Securities. At the Effective Time, by virtue of the Merger and without any - ----------- action on the part of the Parent Companies, the Company or the holders of any of the following securities: (a) Subject to Section 4.03, each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (excluding any shares of Company Common Stock described in Section 4.01(c)) shall be converted into the right to receive $35.00 in cash, without interest thereon (the "Per Share Merger Consideration"). ------------------------------ (b) All shares of Company Common Stock converted pursuant to Section 4.01(a) shall cease to be outstanding and shall automatically be cancelled and retired, and each holder of a Certificate previously evidencing such shares of Company Common Stock shall cease to have any rights as a stockholder of the Company, except the right to receive the Per Share Merger Consideration for each such share. 11 (c) Each share of Company Common Stock that is owned by the Company, Parent or Purchaser immediately prior to the Effective Time shall be cancelled and retired and shall cease to exist and no consideration shall be delivered in exchange therefor. Each share of Company Common Stock owned by any Subsidiary of the Company or Parent (other than Purchaser) immediately prior to the Effective Time shall remain outstanding without change. (d) Each share of common stock, par value $.01 per share, of Purchaser issued and outstanding immediately prior to the Effective Time shall continue to be issued and outstanding as one fully paid and nonassessable share of common stock, par value $.01 per share, of the Surviving Corporation. SECTION 4.02. Exchange of Certificates. (a) Exchange Fund. Parent ------------------------- -------------- shall deposit, or cause to be deposited, on a timely basis as and when the Paying Agent requires after the Effective Time with the Paying Agent in the Exchange Fund, for the payment of the Merger Consideration through the Paying Agent upon surrender of Certificates in accordance with Section 4.02(c), cash in an amount sufficient to make the cash payments due under Section 4.01(a). The Exchange Fund shall not be used for any other purpose except as specified in this Section 4.02. (b) Letter of Transmittal. As soon as reasonably practicable after ---------------------- the Effective Time, Parent will cause the Paying Agent to send a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates to the Paying Agent and shall be in a form and have such other provisions as Parent may reasonably specify) to each record holder of shares of Company Common Stock immediately prior to the Effective Time, along with other appropriate materials for use in surrendering Certificates to the Paying Agent. (c) Exchange Procedures. As soon as reasonably practicable after the -------------------- Effective Time, the Paying Agent shall distribute to each former holder of shares of Company Common Stock, upon surrender to the Paying Agent for cancellation of one or more Certificates, the Merger Consideration. If the Merger Consideration is to be paid to a Person other than the Person in whose name the surrendered Certificate or Certificates are registered, it shall be a condition of payment of the Merger Consideration that the surrendered Certificate or Certificates shall be properly endorsed, with signatures guaranteed, or otherwise in proper form for 12 transfer and that the Person requesting such payment shall pay any transfer or other Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of the surrendered Certificate or Certificates or such Person shall establish to the satisfaction of Parent that such Tax has been paid or is not applicable. Until surrendered as contemplated by this Section 4.02(c), each Certificate shall be deemed from and after the Effective Time to represent only the right to receive upon such surrender the Per Share Merger Consideration for each share of Company Common Stock evidenced by such Certificate. In no event shall the holder of any such surrendered Certificate be entitled to receive interest on any cash to be received in the Merger. Neither the Paying Agent nor any party hereto shall be liable to a holder of shares of Company Common Stock for any amount paid to a public official or Governmental Authority pursuant to any applicable abandoned property, escheat, or similar Law. If any Certificate has not been surrendered prior to the date which is five years after the Effective Time (or immediately prior to such earlier date on which Merger Consideration in respect of such Certificate would otherwise escheat to or become the property of any Governmental Authority), any such cash in respect of such Certificate shall, to the extent permitted by applicable Law, become the property of the Surviving Corporation, free and clear of all claims or interest of any Person previously entitled thereto. (d) Termination of Exchange Fund. Any portion of the Exchange Fund ----------------------------- which remains unclaimed by the former holders of shares of Company Common Stock for six months after the Effective Time shall be delivered to Parent, upon demand, and any former holders of shares of Company Common Stock who have not theretofore complied with this Article IV shall thereafter look only to Parent for any cash payment to which they are entitled. (e) Investment of Exchange Fund. The Paying Agent shall invest any ---------------------------- cash included in the Exchange Fund, as directed by Parent, on a daily basis. Any interest and other income resulting from such investments shall be paid to Parent. (f) Withholding of Tax. Parent or any of its Affiliates shall be ------------------- entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any former holder of shares of Company Common Stock such amounts as Parent (or any Affiliate thereof) is required to deduct and withhold with respect to the making of such payment under the Code, or any provision of state, local or 13 foreign Tax Law. To the extent that amounts are so withheld by Parent and paid by Parent to the applicable taxing authority, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the former holder of shares of Company Common Stock in respect of which such deduction and withholding was made by Parent. SECTION 4.03. Dissenting Shares. Notwithstanding anything in this ------------------ Agreement to the contrary, shares of Company Common Stock ("Dissenting Shares") ----------------- which are issued and outstanding immediately prior to the Effective Time and that are held by any Person who is entitled to demand and properly demands appraisal of such Dissenting Shares pursuant to, and who complies in all respects with, Section 262 of the DGCL ("Section 262") shall not be converted as ----------- provided in Section 4.01(a), but rather the holders of Dissenting Shares shall be entitled only to payment of the fair value of such Dissenting Shares in accordance with Section 262; provided, however, that if any such holder shall -------- ------- fail to perfect or otherwise shall waive, withdraw or lose the right to appraisal under Section 262, then the right of such holder to be paid the fair value of such holder's Dissenting Shares shall cease and such Dissenting Shares shall be treated as if they had been converted as of the Effective Time into the Merger Consideration as provided in Section 4.01(a). The Company shall serve prompt notice to Parent of any demands received by the Company for appraisal of any shares of Company Common Stock, and Parent shall have the right to participate in and direct all negotiations and proceedings with respect to such demands. The Company shall not, except with the prior written consent of Parent, make any payment with respect to, or settle or offer to settle, any such demands, or agree to do any of the foregoing. SECTION 4.04. Closing. The closing (the "Closing") of the Merger -------- ------- shall take place at the offices of Cravath, Swaine & Moore, at 825 Eighth Avenue, New York, NY at 10 a.m. on a date as soon as practicable following the date on which the conditions to the Closing (other than those that, by their terms, are to be satisfied at the Closing) have been satisfied or waived, or at such other place, time and date as the parties hereto may agree. At the conclusion of the Closing on the Closing Date, the parties hereto shall cause the Certificate of Merger to be filed with the Secretary of State of the State of Delaware. SECTION 4.05. Stock Transfer Books. At the Effective Time, the stock --------------------- transfer books of the Company shall be closed and there shall be no further registration 14 of transfers of shares of Company Common Stock thereafter on the records of the Company. ARTICLE V Representations and Warranties of the Company --------------------------------------------- Except as set forth in the Company SEC Documents filed and available prior to the date of this Agreement or, with respect to any Section of this Article V, as set forth in the section of the Company's Disclosure Letter that specifically relates to such Section, the Company hereby represents and warrants to the Parent Companies that: SECTION 5.01. Organization and Qualification; Subsidiaries. The --------------------------------------------- Company and each Subsidiary of the Company are legal entities duly organized, validly existing and in good standing under the Laws of their respective jurisdictions of incorporation or organization, have all requisite power and authority and possess all governmental franchises and Permits necessary to enable them to own, lease and operate their respective properties and assets and to carry on their business as it is now being conducted and are duly qualified and in good standing to do business in each jurisdiction in which the nature of the business conducted by them or the ownership or leasing of their respective properties and assets makes such qualification necessary, other than such franchises and Permits and qualifications the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on the Company. Section 5.01 of the Company's Disclosure Letter sets forth, as of the date of this Agreement, a true and complete list of all the Company's directly or indirectly owned Subsidiaries, together with the jurisdiction of incorporation of each Subsidiary and the percentage of each Subsidiary's outstanding capital stock or other equity interests owned of record or beneficially by the Company or another Subsidiary of the Company. Except for such Subsidiaries and as disclosed in Section 5.01 of the Company's Disclosure Letter, neither the Company nor any of its Subsidiaries owns an equity interest in any partnership or joint venture arrangement or other business entity. SECTION 5.02. Certificate of Incorporation and By-laws. The Company ----------------------------------------- has heretofore furnished or made available to Parent complete and correct copies of the certificate of incorporation and the bylaws or the equivalent organizational documents, in each case as amended or restated to the date hereof, of the Company. Neither the 15 Company nor any of its Subsidiaries is in violation of any of the provisions of its certificate of incorporation or bylaws (or equivalent organizational documents). SECTION 5.03. Capitalization. (a) The authorized capital stock of --------------- the Company consists of (i) 300,000,000 shares of Company Common Stock of which, as of April 24, 1999, 116,519,333 shares were issued and outstanding, all of which are duly authorized, validly issued, fully paid and nonassessable and not subject to preemptive rights, and (ii) 5,000,000 shares of preferred stock, none of which are issued and outstanding. As of April 24, 1999, there were 21,815,997 shares of Company Common Stock reserved for future issuance pursuant to outstanding Company Stock Options granted pursuant to the Company Option Plans. (b) Except as set forth in Section 5.03(a), no shares of Company Common Stock are reserved for issuance, and, except for the Company Stock Options, as listed in Section 5.03(b) of the Company's Disclosure Letter, there are no options, warrants, rights, convertible or exchangeable securities, "phantom" stock rights, stock appreciation rights, stock-based performance units, contracts, agreements, commitments or arrangements obligating the Company (i) to offer, sell, issue or grant any shares of, or any options, warrants or rights of any kind to acquire any shares of, or any securities that are convertible into or exchangeable for any shares of, capital stock of the Company, (ii) to redeem, purchase or acquire, or offer to purchase or acquire, any outstanding shares of, or any outstanding options, warrants or rights of any kind to acquire any shares of, or any outstanding securities that are convertible into or exchangeable for any shares of, capital stock of the Company or (iii) to grant any Lien on any shares of capital stock of the Company. (c) Except as set forth in Section 5.03(c) of the Company's Disclosure Letter, (i) the issued and outstanding shares of capital stock of, or other equity interests in, each of the Subsidiaries of the Company that are owned by the Company or any of its Subsidiaries have been duly authorized and are validly issued, and, with respect to capital stock, are fully paid and nonassessable, and were not issued in violation of any preemptive or similar rights of any past or present equity holder of such Subsidiary; (ii) all such issued and outstanding shares, or other equity interests, that are indicated as owned by the Company or one of its Subsidiaries in Section 5.03(c) of the Company's Disclosure Letter are owned (A) beneficially as set forth therein and (B) free and clear of all Liens except as 16 described therein; (iii) no shares of capital stock of, or other equity interests in, any Subsidiary of the Company are reserved for issuance, and there are no options, warrants, rights, convertible or exchangeable securities, "phantom" stock rights, stock appreciation rights, stock-based performance units, contracts, agreements, commitments or arrangements obligating the Company or any of its Subsidiaries (A) to offer, sell, issue, grant, pledge, dispose of or encumber any shares of capital stock of, or other equity interests in, or any options, warrants or rights of any kind to acquire any shares of capital stock of, or other equity interests in, or any securities that are convertible into or exchangeable for any shares of capital stock of, or other equity interests in, any of the Subsidiaries of the Company or (B) to redeem, purchase or acquire, or offer to purchase or acquire, any outstanding shares of capital stock of, or other equity interests in, or any outstanding options, warrants or rights of any kind to acquire any shares of capital stock of, other equity interests in, or any outstanding securities that are convertible into or exchangeable for, any shares of capital stock of, or other equity interests in, any of the Subsidiaries of the Company or (C) to grant any Lien on any outstanding shares of capital stock of, or other equity interests in, any of the Subsidiaries of the Company. (d) Except as set forth in Section 5.03(d) of the Company's Disclosure Letter and the Company Option Plans listed in Section 5.03(b) of the Company's Disclosure Letter, there are no voting trusts, proxies or other agreements, commitments or understandings of any character to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound with respect to the voting of any shares of capital stock of the Company or any of its Subsidiaries or with respect to the future registration of the offering, sale or delivery of any shares of capital stock of the Company or any of its Subsidiaries under the Securities Act. (e) There are not any bonds, debentures, notes or other indebtedness of the Company having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which stockholders of the Company may vote ("Voting Company Debt"). ------------------- SECTION 5.04. Authorization of Agreement. (a) The Company has all --------------------------- requisite corporate power and authority to execute and deliver each Transaction Agreement to which it is a party and each instrument required hereby to be executed and delivered by it prior to or at the Closing, to perform its obligations hereunder and thereunder 17 and to consummate the Transactions. The execution and delivery by the Company of each Transaction Agreement to which it is a party and each instrument required hereby to be executed and delivered by it prior to or at the Closing and the performance of its obligations hereunder and thereunder have been duly and validly authorized by all requisite corporate action on the part of the Company (other than, with respect to the Merger, the adoption of this Agreement by the holders of a majority of the outstanding shares of Company Common Stock in accordance with the DGCL). Each Transaction Agreement to which it is a party has been duly executed and delivered by the Company and (assuming due authorization, execution and delivery hereof by the other parties hereto) constitutes a legal, valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as the same may be limited by (i) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors' rights generally, and (ii) legal principles of general applicability governing the application and availability of equitable remedies. (b) The only vote of holders of any class or series of capital stock of the Company necessary to adopt or approve this Agreement and the Merger is the adoption of this Agreement by the holders of a majority of the outstanding shares of Company Common Stock (the "Company Stockholder Approval"). The ---------------------------- affirmative vote of the holders of any capital stock of the Company, or any of them, is not necessary to consummate the Offer or any other Transaction, other than the Merger. SECTION 5.05. Approvals. Except for the applicable requirements, if ---------- any, of (a) the Exchange Act, (b) state securities Laws or blue sky Laws, (c) the HSR Act, (d) the antitrust laws or regulations of Germany, Ireland, Italy, Sweden and the United Kingdom (the "European Antitrust Laws"), (e) Exon-Florio, ----------------------- (f) the filing and recordation of appropriate merger documents as required by the DGCL and (g) those Laws and Orders noncompliance with which would not reasonably be expected to have a material adverse effect on the ability of the Company to perform its obligations under each Transaction Agreement to which it is a party or to have a Material Adverse Effect on the Company, no filing or registration with, no waiting period imposed by and no Permit or Order of, any Governmental Authority is required under any Law or Order applicable to the Company or any of its Subsidiaries to permit the Company to execute, deliver or perform each Transaction Agreement to which it is a party or any instrument required hereby or thereby to be executed and delivered by it prior to or at the Closing. 18 SECTION 5.06. No Violation. Assuming effectuation of all filings and ------------- registrations with, termination or expiration of any applicable waiting periods imposed by and receipt of all Permits and Orders of, Governmental Authorities indicated as required in Section 5.05 and adoption of this Agreement by the stockholders of the Company as required by the DGCL, neither the execution and delivery by the Company of any Transaction Agreement to which it is a party or any instrument required hereby or thereby to be executed and delivered by it prior to or at the Closing nor the performance by the Company of its obligations hereunder or thereunder will (a) conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a Material benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any Person under, or result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary of the Company under, any provision of (i) any Law or Order applicable to the Company, (ii) the certificate of incorporation or bylaws of the Company or (iii) any contract or agreement to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective properties or assets is bound, or (b) with the passage of time, the giving of notice or the taking of any action by a third Person, have any of the effects set forth in clause (a) of this Section, except in any such case for any matters described in this Section that would not reasonably be expected to have a Material Adverse Effect on the Company. Prior to the execution of this Agreement, the Board of Directors of the Company has taken all necessary action to cause this Agreement and the other Transaction Agreements and the Transactions to be exempt from the provisions of Section 203 of the DGCL. To the Company's Knowledge, no other state takeover statute or similar Law or Regulation applies or purports to apply to the Company with respect to this Agreement, the other Transaction Agreements, the Offer, the Merger or any other Transaction. The Company has been advised by each of its directors and executive officers that each such Person currently intends to tender all shares of Company Common Stock owned by such Person pursuant to the Offer, except to the extent of any restrictions created by Section 16(b) of the Exchange Act. SECTION 5.07. Reports and Financial Statements. (a) The Company has --------------------------------- filed all SEC Reports required to be filed by the Company with the SEC since April 1, 1997 (the "Company SEC Documents"). As of its respective date, each --------------------- Company SEC Document complied in all material respects with 19 the requirements of the Exchange Act or the Securities Act, as the case may be, applicable to such Company SEC Document, and did not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Except to the extent that information contained in any Company SEC Document has been revised or superseded by a later filed Company SEC Document, none of the Company SEC Documents contains any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. No Subsidiaries of the Company are SEC reporting companies. (b) Since March 31, 1998, the Company and its Subsidiaries have filed all Reports required to be filed with any Governmental Authorities other than the SEC, including state securities administrators, except where the failure to file any such Reports of the Company would not reasonably be expected to have a Material Adverse Effect on the Company. Such Reports of the Company, including all those filed after the date of this Agreement and prior to the Effective Time, were or will be prepared in all material respects in accordance with the requirements of applicable Law. (c) The Company Consolidated Financial Statements and any consolidated financial statements of the Company (including any related notes thereto) contained in any SEC Reports of the Company filed with the SEC (i) have been or will have been prepared in accordance with applicable accounting requirements and the published Regulations of the SEC and in accordance with GAAP consistently applied (except (A) to the extent required by changes in GAAP and (B) with respect to SEC Reports of the Company filed prior to the date of this Agreement, as may be indicated in the notes thereto) and (ii) fairly present the consolidated financial position of the Company and its consolidated Subsidiaries as of the respective dates thereof and the consolidated results of their operations and cash flows for the periods indicated (and include, in the case of any unaudited interim financial statements, reasonable accruals for normal year-end adjustments). SECTION 5.08. No Undisclosed Liabilities. (a) Except as set forth in --------------------------- Section 5.08(a) of the Company's Disclosure Letter, there exist no liabilities or obligations of the Company and its Subsidiaries that are Material to the Company, whether accrued, absolute, contingent or otherwise, 20 which would be required to be reflected, reserved for or disclosed under GAAP in consolidated financial statements of the Company (including the notes thereto) as of and for the most recent period ended prior to the date this representation and warranty is given or required to be true to satisfy any condition to the Offer or the Merger, other than (a) liabilities or obligations that are adequately reflected, reserved for or disclosed in the Company's Consolidated Financial Statements and (b) liabilities or obligations incurred in the ordinary course of business of the Company since the Balance Sheet Date. (b) Section 5.08(b) of the Company's Disclosure Letter sets forth a complete and correct list of all Derivative Financial Instruments (including the face, contract or notional amount of and any open position relating to such Derivative Financial Instruments and a brief summary of the nature and terms thereof) as of March 31, 1999 which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries or any of their respective assets or properties is subject or bound (including funds of the Company or any of its subsidiaries invested by any other person). For purposes of this Agreement "Derivative Financial Instrument" means any option, futures, ------------------------------- forward, swap option or swap contract, or any other financial instrument with similar characteristics and/or generally characterized as a "derivative product". SECTION 5.09. No Material Adverse Effect; Conduct. Except as ------------------------------------ disclosed in the Company SEC Documents filed and publicly available prior to the date of this Agreement (the "Filed Company SEC Documents") or in Section 5.09 of --------------------------- the Company's Disclosure Letter, from the date of the most recent audited financial statements included in the Filed Company SEC Documents, the Company has conducted its business only in the ordinary course, and during such period there has not been: (a) any event, change, effect or development that, individually or in the aggregate, has had or could reasonably be expected to have a Material Adverse Effect on the Company; (b) any declaration, setting aside or payment of any dividend on, or other distribution in respect of (whether in cash, stock or property), any capital stock of the Company or any repurchase for value by the Company of any capital stock of the Company; 21 (c) any split, combination or reclassification of any capital stock of the Company or of any other equity interests in the Company, or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock of the Company or of any other equity interests in the Company; (d) (i) any granting by the Company or any Subsidiary of the Company to any director or executive officer of the Company or any Subsidiary of the Company of any increase in compensation, except in the ordinary course of business consistent with past practice or as was required under employment agreements in effect as of the date of the most recent audited financial statements included in the Filed Company SEC Documents, (ii) any granting by the Company or any Subsidiary of the Company to any such director or executive officer of any increase in severance or termination pay, except as was required under any employment, severance or termination agreements in effect as of the date of the most recent audited financial statements included in the Filed Company SEC Documents, or (iii) any entry by the Company or any Subsidiary of the Company into any employment, severance or termination agreement with any such director or executive officer; or (e) any change in accounting methods, principles or practices by the Company or any Subsidiary of the Company materially affecting the consolidated assets, liabilities or results of operations of the Company, except insofar as may have been required by a change in GAAP. SECTION 5.10. Schedule 14D-9; Offer Documents; Proxy Statement. None ------------------------------------------------- of the information supplied or to be supplied by or on behalf of the Company for inclusion or incorporation by reference in the Offer Documents, the Schedule 14D-9 or the Proxy Statement, including any amendments or supplements thereto, at the time such document is filed with the SEC, at any time it is amended or supplemented or at the time it is first published or sent or given to holders of shares of Company Common Stock, and, in the case of the Proxy Statement, at the time that it or any amendment or supplement thereto is mailed to the Company's stockholders, at the time of the Company Stockholders' Meeting or at the Effective Time, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading; provided, that -------- 22 the foregoing shall not apply to information supplied by or on behalf of Parent or the Purchaser specifically for inclusion or incorporation by reference in any such document. Schedule 14D-9 will comply as to form in all material respects with the provisions of the Exchange Act, except that no representation is made by the Company with respect to statements made or incorporated by reference therein based on information supplied by Parent or Purchaser for inclusion or incorporation by reference therein. SECTION 5.11. Properties and Assets. Except as set forth in Section ---------------------- 5.11 of the Company's Disclosure Letter, the Company and its Subsidiaries own or have rights to use all properties and assets necessary to permit the Company and its Subsidiaries to continue to conduct their businesses as currently being conducted except where the failure to own or have the right to use such properties and assets would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company. Except as set forth in Section 5.11 of the Company's Disclosure Letter, each of the Company and its Subsidiaries has good and indefeasible fee title to, or valid leasehold interests in, all its material real property, free and clear of all Liens. SECTION 5.12. Material Contracts. Section 5.12 of the Company's ------------------- Disclosure Letter contains a true and complete list of the SEC Contracts of the Company and its Subsidiaries. The Company has made available to Parent or Purchaser all contracts, agreements, arrangements and understandings to which it is a party that impose liabilities or obligations that, individually or in the aggregate, have or would reasonably be expected to have a Material Adverse Effect in respect to the Company. All Material Contracts to which the Company or any of its Subsidiaries is a party are in full force and effect, the Company or the Subsidiary of the Company that is a party to or bound by such Material Contract has performed its obligations thereunder to date and, to the Knowledge of the Company, each other party thereto has performed its obligations thereunder to date, other than any failure of a Material Contract to be in full force and effect or any nonperformance thereof that would not reasonably be expected to have a Material Adverse Effect on the Company. As of the date of this Agreement, except where the same would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect on the Company, to the Company's Knowledge, neither the Company nor any of its Subsidiaries has received any written notice of the intention of any party to terminate any Material Contract, 23 whether as a termination for convenience or for default of the Company or any Subsidiary thereunder. SECTION 5.13. Litigation; Compliance with Laws. There are no actions, --------------------------------- suits, investigations or proceedings (including any proceedings in arbitration) pending or, to the Knowledge of the Company, threatened against the Company or any of its Subsidiaries, at law or in equity, in any Court or before or by any Governmental Authority, except actions, suits or proceedings that (a) are set forth in Section 5.13 of the Company's Disclosure Letter or as set forth in the Company SEC documents filed and available prior to the date of this Agreement, or (b) individually or, with respect to multiple actions, suits or proceedings that allege similar theories of recovery based on similar facts, in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. Except as set forth in Section 5.13 of the Company's Disclosure Letter, the Company and its Subsidiaries are in compliance with all applicable Laws and Regulations and are not in default with respect to any Order applicable to the Company or any of its Subsidiaries, except such events of noncompliance or defaults that, individually or in the aggregate, have not and would not reasonably be expected to have a Material Adverse Effect on the Company. Since January 1, 1994, to the date hereof, neither the Company nor any Subsidiary of the Company has received any written notice of any administrative or civil or criminal investigation or audit (other than Tax audits) by any Governmental Authority. SECTION 5.14. Employee Benefit Plans. (a) Each Benefit Plan of the ----------------------- Company and its Subsidiaries is listed in Section 5.14(a) of the Company's Disclosure Letter, including, with respect to Terminated Benefit Plans, the date of termination. (b) No event has occurred and, to the Knowledge of the Company, there exists no condition or set of circumstances in connection with which the Company or any of its Subsidiaries could be subject to any liability under the terms of any Benefit Plan, or under ERISA, or, with respect to any Benefit Plan, under the Code or any other applicable Law, other than any condition or set of circumstances that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company. Each of the Benefit Plans has been administered in material compliance with its terms and with the applicable provisions of ERISA, the Code and any other applicable Law. (c) As to any Benefit Plan of the Company intended to be qualified under Section 401 of the Code, such 24 Benefit Plan has been determined by the IRS to satisfy in form the requirements of such Section, no event has occurred that, individually or in the aggregate, could be reasonably expected to result in the disqualification of such Benefit Plan (disregarding correction methods under the Employee Plans Compliance Resolution System) and there has been no termination or partial termination of such Benefit Plan within the meaning of Section 411(d)(3) of the Code. (d) As to any Terminated Benefit Plan intended to have been qualified under Section 401 of the Code, such Terminated Benefit Plan received a favorable determination letter from the IRS with respect to its termination all liabilities with respect to each such plan have been satisfied by the purchase of annuities or otherwise, and each Terminated Benefit Plan has been terminated in accordance with the requirements of law and the terms of the plan. (e) There are no investigations, audits, actions, suits or claims pending (other than routine claims for benefits) or, to the Knowledge of the Company, threatened against, or with respect to, any Benefit Plan or its assets that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on the Company. (f) To the Knowledge of the Company, there is no matter pending (other than routine qualification determination filings) with respect to any Benefit Plan before the IRS, the Department of Labor or the PBGC. (g) All contributions required to be made by the Company or the Company's Subsidiaries to any Benefit Plan pursuant to its terms and provisions have been timely made. (h) As to any Current Benefit Plan subject to Title IV of ERISA, (i) there has been no event or condition which presents a material risk of plan termination, (ii) no accumulated funding deficiency, whether or not waived, within the meaning of Section 302 of ERISA or Section 412 of the Code has been incurred within six years prior to date of this Agreement, (iii) no reportable event within the meaning of Section 4043 of ERISA (for which the disclosure requirements of Regulation Section 2615.3 promulgated by the PBGC have not been waived) has occurred within six years prior to the date of this Agreement, (iv) no notice of intent to terminate such Benefit Plan has been given under Section 4041 of ERISA, (v) no proceeding has been instituted under Section 4042 of ERISA to terminate such Benefit Plan, (vi) no liability to the PBGC has been incurred (other than with respect to required premium payments) and (vii) the 25 assets of the Benefit Plan equal or exceed the actuarial present value of the benefit liabilities, within the meaning of Section 4041 of ERISA, under such Benefit Plan, based upon actuarial assumptions and the asset valuation principles for terminating plans under Section 4044 of ERISA. (i) No employee of the Company or any Subsidiary of the Company or any fiduciary of a Benefit Plan has a material liability with respect to a Benefit Plan. (j) Except as set forth in Section 5.14(j) of the Company's Disclosure Letter, in connection with the consummation of the Transactions, no payments have been or will be made under any Current Benefit Plan or any other program, agreement, policy or arrangement which would be nondeductible under Section 280G of the Code. (k) Except as set forth in Section 5.14(k) of the Company's Disclosure Letter, the execution and delivery of this Agreement and the consummation of the Transactions will not (i) require the Company or any of its Subsidiaries to pay greater compensation or make a larger contribution to, or pay greater benefits or accelerate payment or vesting of a benefit under, any Current Benefit Plan or any other program, agreement, policy or arrangement or (ii) create or give rise to any additional vested rights or service credits under any Current Benefit Plan or any other program, agreement, policy or arrangement. (l) Except as set forth in Section 5.14(l) of the Company's Disclosure Letter, neither the Company nor any of its Subsidiaries is a party to or is bound by any severance agreement, program or policy. True and correct copies of all employment agreements with officers of the Company and its Subsidiaries, and all vacation, overtime and other compensation policies of the Company and its Subsidiaries relating to their employees have been made available to Parent. (m) Except as set forth in Section 5.14(m) of the Company's Disclosure Letter, no Benefit Plan provides retiree medical or retiree life insurance benefits to any Person and neither the Company nor any of its Subsidiaries is contractually or otherwise obligated (whether or not in writing) to provide any Person with life insurance or medical benefits upon retirement or termination of employment, other than as required by the provisions of Sections 601 through 608 of ERISA and Section 4980B of the Code. 26 (n) Neither the Company nor any of its Subsidiaries contributes or has an obligation to contribute, and neither has within six years prior to the date of this Agreement contributed or had an obligation to contribute, to a multiemployer plan within the meaning of Section 3(37) of ERISA. (o) Except as disclosed in Section 5.14(o) of the Company's Disclosure Letter, no compensation payable by the Company or any of its Subsidiaries to any of their employees under any Current Benefit Plan or other program, agreement, policy or arrangement is subject to disallowance under Section 162(m) of the Code. (p) Except as set forth in Section 5.14(p) of the Company's Disclosure Letter, all liabilities of Benefit Plans required to be included in the Company's financial statements under financial accounting standards has been so included in the Financial statements. (q) Except as set forth in Section 5.14(q) of the Company's Disclosure Letter, the Company or a Subsidiary of the Company has retained the right to terminate, suspend or amend any Benefit Plan. SECTION 5.15. Labor Matters. Except as set forth in Section 5.15 of -------------- the Company's Disclosure Letter, no collective bargaining agreement to which the Company or any of its Subsidiaries is a party is currently in effect or is being negotiated by the Company or any of its Subsidiaries. There is no pending or, to the Knowledge of the Company, threatened labor dispute, strike or work stoppage against the Company or any of its Subsidiaries that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on the Company. To the Knowledge of the Company, neither the Company or any of its Subsidiaries nor any representative or employee of the Company or any of its Subsidiaries has committed any unfair labor practices in connection with the operation of the business of the Company and its Subsidiaries, and there is no pending or, to the Knowledge of the Company, threatened charge or complaint against the Company or any of its Subsidiaries by the National Labor Relations Board or any comparable agency of any state of the United States. The Company and its Subsidiaries are in material compliance with all applicable federal, state, local or foreign labor Laws. SECTION 5.16. Taxes. (a) Except as disclosed in Section 5.16(a) of ------ the Company's Disclosure Letter, (i) the Company and each Subsidiary of the Company, and any affiliated group, within the meaning of Section 1504 of the 27 Code, of which the Company or any Subsidiary of the Company is or has been a member, has filed or will file in a timely manner (within any applicable extension periods) all material Tax Returns required to be filed by the Code or by applicable state, local or foreign tax Laws, and all such Tax Returns are or will be true, complete and accurate in all material respects, (ii) all Taxes with respect to taxable periods covered by such Tax Returns, and all other Taxes for which the Company or any Subsidiary of the Company is or might otherwise be liable, have been timely paid in full or will be timely paid in full by the due date thereof and the most recent audited financial statements contained in the Filed Company SEC Documents for the Company reflect an adequate reserve for all Taxes accruing or payable by the Company and its Subsidiaries for all taxable periods and portions thereof through the date of such financial statements, and (iii) there are no material liens for Taxes with respect to any of the assets or properties of the Company or any Subsidiary of the Company. (b) Except as disclosed in Section 5.16(b) of the Company's Disclosure Letter, no Tax Return of the Company or of any Subsidiary of the Company is under examination by the Internal Revenue Service, and no written notice of such an audit or examination has been received by the Company or any Subsidiary of the Company. (c) Except as disclosed in Section 5.16(c) of the Company's Disclosure Letter, (i) each deficiency resulting from any audit or examination relating to Taxes by any Taxing Authority has been timely paid and (ii) no material issues relating to Taxes were raised by the relevant Taxing Authority in any completed audit or examination that can reasonably be expected to recur in a later taxable period. (d) Except as disclosed in Section 5.16(d) of the Company's Disclosure Letter, neither the Company nor any Subsidiary of the Company is party to or bound by any tax sharing agreement, tax indemnity obligation or similar agreement, arrangement or practice with respect to Taxes (including any advance pricing agreement, closing agreement or other agreement relating to Taxes with any Taxing Authority). (e) Except as disclosed in Section 5.16(e) of the Company's Disclosure Letter or as disclosed in the most recent audited financial statements included in the Filed Company SEC Documents, neither the Company nor any Subsidiary of the Company shall be required to include in a taxable period ending after the Effective Time taxable income attributable to income that accrued in a Pre- 28 Effective Time Tax period but that was not recognized in any Pre-Effective Time Tax period as a result of the installment method of accounting, the completed contract or percentage contract methods of accounting (including the look-back method under Section 460(b)(2) of the Code), the cash method of accounting or Section 481 of the Code or any comparable provision of state, local, or foreign Tax law, or for any other reason. (f) Except as disclosed in Section 5.16(f) of the Company's Disclosure Letter, (i) there are no outstanding agreements or waivers extending, or having the effect of extending, the statutory period of limitation applicable to any Tax Returns required to be filed with respect to the Company or any Subsidiary of the Company, (ii) neither the Company nor any Subsidiary of the Company, nor any affiliated group, within the meaning of Section 1504 of the Code, of which the Company or any Subsidiary of the Company is or has ever been a member, has requested any extension of time within which to file any Tax Return, which return has not yet been filed , and (iii) no power of attorney with respect to any Taxes has been executed or filed with any Taxing Authority by or on behalf of the Company or any Subsidiary of the Company. (g) Except as disclosed in Section 5.16(g) of the Company's Disclosure Letter, the Company and its Subsidiaries have complied in all material respects with all applicable Laws relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 3121 and 3402 of the Code or any comparable provision of any state, local or foreign Laws) and have, within the time and in the manner prescribed by applicable Law, withheld from and paid over to the proper Taxing Authorities all amounts required to be so withheld and paid over under applicable Laws. (h) To the Company's knowledge, no person who holds five percent or more of the stock of the Company is a "foreign person" as defined in Section 1445 of the Code. (i) Except as set forth in Section 5.16(i) of the Company's Disclosure Letter, none of the Company and its Subsidiaries, has been a member of an affiliated group filing a consolidated Federal income Tax Return other than the affiliated group of which the Company is the common parent corporation. SECTION 5.17. Environmental Matters. Except for matters disclosed in ---------------------- Section 5.17 of the Company's Disclosure Letter or as described in Reports, copies of 29 which have been provided to Parent, and except for matters that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on the Company, (a) the properties, operations and activities of the Company and its Subsidiaries are in compliance with all Environmental Laws; (b) the Company and its Subsidiaries and the properties, operations and activities of the Company and its Subsidiaries are not subject to, and have not received written notice of, any existing, pending or, to the Knowledge of the Company, threatened action, suit, investigation, inquiry or proceeding by or before any Court or Governmental Authority under any Environmental Law; (c) all Permits or applications therefor required to be obtained or filed by the Company or any of its Subsidiaries under any Environmental Law in connection with the properties, operations and activities of the Company and its Subsidiaries have been obtained or filed and are valid and currently in full force and effect, and, to the Company's Knowledge, there are no facts or circumstances that would cause such Permits to be revoked, modified or not renewed under current conditions or in connection with the transactions contemplated by this Agreement; (d) there has been no release of any hazardous substance, pollutant or contaminant into the environment by the Company or its Subsidiaries or in connection with their properties, operations or activities; (e) there has been no exposure (attributable to the action of the Company or its Subsidiaries) of any Person or property to any hazardous substance, pollutant or contaminant in connection with the properties, operations and activities of the Company and its Subsidiaries; and (f) neither the Company nor its Subsidiaries have assumed, whether by contract, operation of Law or otherwise, any liabilities or obligations arising under Environmental Laws in connection with their respective formerly owned properties, businesses, divisions, Subsidiaries, companies or other entities. SECTION 5.18. Intellectual Property. ---------------------- Section 5.18 of the Company's Disclosure Schedule contains a complete list of all Patents, registered Trademarks, and, to the Knowledge of the Company, all material unregistered Trademarks, which are owned by the Company or its Subsidiaries. Except as set forth in Sections 5.06 and 5.18 of the Company's Disclosure Schedule and except to the extent that the inaccuracy of any of the following, or the circumstances giving rise to such inaccuracy, would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect: (a) The rights of the Company in and to each item of Intellectual Property are owned or licensed by the 30 Company, free and clear of any Liens (except, in the case of licensed Intellectual Property, as set forth in the license therefor). All of the Company's rights in and to such Intellectual Property owned by the Company are freely assignable by it or its Subsidiaries, including the right to create derivative works. As of the date of this Agreement and to the Knowledge of the Company, it is under no obligation to pay any royalty, license fee or other similar consideration to any third party or to obtain any approval or consent for use of any of the Intellectual Property (except, in the case of licensed Intellectual Property, as set forth in the license therefor). None of the Intellectual Property owned by the Company or its Subsidiaries is subject to any outstanding judgment, order, decree, or injunction issued by a court of competent jurisdiction; no complaint, action, suit, proceeding, or hearing, is pending or, to the Knowledge of the Company, no charge, investigation, claim or demand, is threatened, which challenges the legality, validity, enforceability, or ownership of any of the Intellectual Property owned or currently used by the Company or its Subsidiaries. (b) To the Knowledge of the Company, no material breach or default (or event which with notice or lapse of time or both would result in an event of default) by the Company exists or has occurred, but not been cured, under any License-In or other agreement pursuant to which the Company uses any Intellectual Property, and the consummation of the transactions contemplated by this Agreement will not violate or conflict with or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) or result in a forfeiture under, or constitute a basis for termination of, any such License-In or other agreement. (c) To the Knowledge of the Company, it owns or, based on a due diligence review of its records, represents that it has the right to: (i) use all the Intellectual Property necessary to provide, produce, sell or license the services and products currently provided, produced, sold or licensed by the Company, (ii) to conduct the Company's business as presently conducted or planned to be conducted, and that (iii) the consummation of the transactions contemplated hereby will not impair any such rights, including any right of the Company to use or sublicense any Intellectual Property owned by others. To the Knowledge of the Company, the Intellectual Property covers all rights which are necessary to operate the business of the Company as it is presently conducted 31 and currently planned and to satisfy and perform the contracts, commitments, arrangements and understandings with customers of the Company. The Company has no Knowledge of any reason the Company will not be able to continue to own, use, license or sub-license all Intellectual Property without infringing any enforceable intellectual property rights of any third party. (d) To the Knowledge of the Company, except for Licensed-In Intellectual Property, no Intellectual Property owned or used by the Company, and no product or service licensed or sold by the Company, infringes any trademark, trade name, copyright or patent, or misappropriates any trade secret, right of publicity, right of privacy or other proprietary right of any Person or would give rise to an obligation to render an accounting to any Person as a result of co-authorship or co- invention. The Company has received no written notice of any adversely held patent, trademark, copyright, service mark, trade name or trade secret of any other Person alleging or threatening to assert that the Company's use of any of the Intellectual Property infringes upon or is in conflict with any intellectual property or proprietary rights of any third party. The Company has no Knowledge of any substantial basis for any charge, claim, suit or action asserting any such infringement or asserting that the Company does not have the legal right to use any such Intellectual Property. (e) All the Company's Patents and registered Trademarks listed in Section 5.18 of the Company's Disclosure Schedule as having been filed in, issued by or registered with the United States Patent and Trademark Office or the corresponding offices of other countries have been so duly filed, registered or issued, as the case may be, and have been properly maintained and renewed in accordance with all applicable provisions of law and administrative regulations in the United States and each such other country. The Company has used reasonable efforts to diligently protect its rights in such Intellectual Property, and, to the Knowledge of the Company, there have been no acts or omissions by the Company, the result of which would be to compromise the rights of the Company to apply for or enforce appropriate legal protection of such Intellectual Property in the United States or in such countries as the Company has done $500,000.00 (U.S.) or more of business within the past year. 32 (f) Each of the Company's employees and those independent contractors retained by the Company who, either alone or in concert with others, created or creates, developed or develops, invented or invents, discovered or discovers, derived or derives, programmed or programs or designed or designs any of the Intellectual Property, has entered into a written agreement with the Company providing, in substance, that all such Intellectual Property shall be owned by, or otherwise assigned to, the Company and that the Company's Proprietary Information shall not be used, or disclosed to any third party except as authorized by the Company. To the Knowledge of the Company, no former employees or independent contractors of the Company have any claim or right to any of the Intellectual Property necessary for the lawful conduct of the Company's business as now conducted. To the Knowledge of the Company, no employee of the Company is a party to or otherwise bound by any agreement with or obligated to any other Person (including, any former employer) which prevents such employee from performing any material obligation or commitment of such employee to the Company under any agreement to which he or she is currently a party. (g) The Company and each of its Subsidiaries has used its reasonable efforts to protect the proprietary and, as appropriate, confidential nature of all Proprietary Information that it presently owns or uses. For purposes of this Agreement, "Intellectual Property" means all of the --------------------- following which is owned by, licensed by, licensed to, used by the Company and its Subsidiaries (including all authorized copies and embodiments thereof that are fixed in a tangible media or form): (i) all registered and unregistered trademarks, service marks, logos, trade names, and other indications of origin, the goodwill associated with the foregoing and registrations in any jurisdiction, and applications in any jurisdiction to register (the "Trademarks"); (ii) all issued U.S. and foreign patents and pending patent ---------- applications (including, without limitation, divisionals, continuation, continuation in part, continuing and renewal applications)(the "Patents"); (iii) ------- all registered and unregistered copyrights and all applications to register the same (the "Copyrights"), (iv) all protectable items of trade dress used by the ---------- Company and its Subsidiaries, (v) all computer software and protectable databases owned by the Company or under development by, or specifically on behalf of, the Company (the "Software"); (vi) all licenses and agreements -------- pursuant to which the Company has acquired rights in or to 33 the Trademarks, Patents, Copyrights or Software (excluding software and databases licensed to the Company under standard (except for immaterial deviations), nonexclusive software licenses granted to end-user customers by third parties in the ordinary course of such third parties' business) ("Licenses-In"), (vii) all licenses and agreements pursuant to which the ----------- Company has licensed or transferred the rights in and to Company Intellectual Property (excluding software licensed by the Company under standard (except for immaterial deviations) non-exclusive software licenses granted to end-user customers by the Company as part of the sale of the Company's products) ("Licenses Out"'); and (viii) all confidential and proprietary trade secrets, ------------ know-how, processes, procedures, drawings, specifications, designs, plans, proposals, or technical data. ("Proprietary Information"). ----------------------- SECTION 5.19. Brokers. No broker, finder or investment banker (other -------- than the Financial Advisor) is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by or on behalf of the Company. The estimated fees and expenses incurred and to be incurred by the Company in connection with the Offer, the Merger and the other Transactions (including the fees of the Financial Adviser and the fees of the Company's legal counsel) are set forth in Section 5.19 of the Company's Disclosure Letter. The Company has furnished to Parent a true and complete copy of all agreements between the Company and the Financial Advisor relating to the Merger and the other Transactions. SECTION 5.20. Opinion of Financial Advisor. The Company has received ----------------------------- the opinion of the Financial Advisor in customary form, dated the date of this Agreement, to the effect that, as of such date, the consideration to be received in the Offer and the Merger by the Company's stockholders is fair to the Company's stockholders from a financial point of view. SECTION 5.21. Year 2000. The computer software and hardware operated ---------- by the Company and its Subsidiaries that is used in the conduct of their business is capable of providing or is in the process of being adapted to provide uninterrupted millennium functionality to record, store, process and present calendar dates falling on or after January 1, 2000 in substantially the same manner and with the same functionality as such software and hardware records, stores, processes and presents such calendar dates falling on or before December 31, 1999 other than such interruptions in millennium functionality that would not, 34 individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. SECTION 5.22. Insurance. The Company and its Subsidiaries maintain ---------- policies of fire and casualty, liability and other forms of insurance in such amounts, with such deductibles and against such risks and losses as are in the Company's judgment, reasonable for the assets and properties of the Company and its Subsidiaries and as are customary in the Company's industry. As of the date of this Agreement, except as set forth in Section 5.22 of the Company's Disclosure Letter, all such policies are in full force and effect, all premiums due and payable thereon have been paid, and no notice of cancellation or termination has been received with respect to any such policy. ARTICLE VI Representations and Warranties of the Parent Companies ------------------------------------------------------ The Parent Companies hereby represent and warrant to the Company that: SECTION 6.01. Organization and Qualification; Subsidiaries. Parent --------------------------------------------- and Purchaser are legal entities duly organized, validly existing and in good standing under the Laws of their respective jurisdictions of incorporation or organization, have all requisite power and authority to own, lease and operate their respective properties and assets and to carry on their business as it is now being conducted and are duly qualified and in good standing to do business in each jurisdiction in which the nature of the business conducted by them or the ownership or leasing of their respective properties and assets makes such qualification necessary, other than such qualifications the lack of which, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on Parent. SECTION 6.02. Authorization of Agreement. Each of Parent and --------------------------- Purchaser has all requisite corporate power and authority to execute and deliver, each Transaction Agreement to which it is a party and each instrument required hereby to be executed and delivered by it prior to or at the Closing, to perform its obligations hereunder and thereunder and to consummate the Transactions. The execution and delivery by Parent and Purchaser of each Transaction Agreement to which it is a party and each instrument required hereby to be executed and delivered by Parent or Purchaser prior to or at the Closing and the 35 performance of their respective obligations hereunder and thereunder have been duly and validly authorized by all requisite corporate action (including stockholder action) on the part of Parent and Purchaser, respectively. Each Transaction Agreement to which it is a party has been duly executed and delivered by Parent and Purchaser and (assuming due authorization, execution and delivery hereof by the other party hereto) constitutes a legal, valid and binding obligation of Parent and Purchaser, enforceable against Parent and Purchaser in accordance with its terms, except as the same may be limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors' rights generally and (b) legal principles of general applicability governing the application and availability of equitable remedies. SECTION 6.03. Approvals. Except for the applicable requirements, if ---------- any, of (a) the Exchange Act, (b) state securities Laws or blue sky Laws, (c) the HSR Act, (d) the European Antitrust Laws, (e) Exon-Florio, (f) the filing and recordation of appropriate merger documents as required by the DGCL (and other state Laws where Purchaser or the Company are qualified to do business) and (g) those Laws and Orders noncompliance with which would not reasonably be expected to have a material adverse effect on the ability of Parent or Purchaser to perform its obligations under each Transaction Agreement to which it is a party, no filing or registration with, no waiting period imposed by and no Permit or Order of, any Governmental Authority is required under any Law or Order applicable to Parent or Purchaser to permit Parent or Purchaser to execute, deliver or perform each Transaction Agreement to which it is a party or any instrument required hereby or thereby to be executed and delivered by it prior to or at the Closing. SECTION 6.04. No Violation. Assuming effectuation of all filings and ------------- registrations with, termination or expiration of any applicable waiting periods imposed by and receipt of all Permits and Orders of, Governmental Authorities indicated as required in Section 6.03, neither the execution and delivery by Parent or Purchaser of any Transaction Agreement to which it is a party or any instrument required hereby or thereby to be executed and delivered by Parent or Purchaser prior to or at the Closing nor the performance by Parent or Purchaser of their respective obligations hereunder or thereunder will (a) conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancellation or acceleration of any obligation or to loss of a Material 36 benefit under, or to increased, additional, accelerated or guaranteed rights or entitlements of any Person under, or result in the creation of any Lien upon any of the properties or assets of Parent or any Subsidiary of Parent under, any provision of (i) any Law or Order applicable to Parent or Purchaser, (ii) the certificate of incorporation or bylaws of Parent or Purchaser or (iii) any contract or agreement to which Parent or any of its Subsidiaries is a party or by which it or any of its properties or assets is bound, or (b) with the passage of time, the giving of notice or the taking of any action by a third Person, have any of the effects set forth in clause (a) of this Section, except in any such case for any matters described in this Section that would not reasonably be expected to have a material adverse effect upon the ability of Parent or Purchaser to perform its obligations under this Agreement or any other Transaction Agreement. SECTION 6.05. Proxy Statement; Schedule 14D-9. None of the -------------------------------- information supplied or to be supplied by or on behalf of Parent or Purchaser for inclusion or incorporation by reference in the Offer Documents, the Schedule 14D-9 or the Proxy Statement, including any amendments or supplements thereto, at the time such document is filed with the SEC, at any time it is amended or supplemented or at the time it is first published or given to holders of shares of Company Common Stock, and, in the case of the Proxy Statement, at the time that it or any amendment or supplement thereto is mailed to the Company's stockholders, at the time of the Company Stockholders' Meeting or at the Effective Time, will contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading; provided that the foregoing shall not apply to -------- information supplied by or on behalf of the Company specifically for inclusion or incorporation by reference in any such document. The Offer Documents will comply as to form in all material respects with the provisions of the Exchange Act, except that no representations is made by Parent or Purchaser with respect to statements made or incorporated by reference therein based on information supplied by the Company for inclusion or incorporation by reference therein. SECTION 6.06. Sufficient Funds. Parent and Purchaser have access to ----------------- sufficient funds to consummate the Offer and the Merger on the terms contemplated by this Agreement. 37 SECTION 6.07. Brokers. Except for Warburg Dillon Read, no broker, -------- finder or investment banker is entitled to any brokerage, finder's or other fee or commission in connection with the Transactions based upon arrangements made by and on behalf of Parent or Purchaser. ARTICLE VII Covenants --------- SECTION 7.01. Conduct of Business of the Company. The Company hereby ----------------------------------- covenants and agrees that, prior to the Effective Time, unless otherwise expressly contemplated by this Agreement or consented to in writing by Parent, it will and will cause each of its Subsidiaries to: (a) operate its business in the usual and ordinary course consistent with past practices; (b) use reasonable efforts to preserve intact its business organization, maintain its material rights and franchises, retain the services of its respective key employees and maintain its relationships with its respective customers and suppliers and others having business dealings with it; (c) maintain and keep its properties and assets in as good repair and condition as at present, ordinary wear and tear excepted, and maintain supplies and inventories in quantities consistent with its customary business practice; and (d) use reasonable efforts to keep in full force and effect insurance and bonds comparable in amount and scope of coverage to that currently maintained. SECTION 7.02. Prohibited Actions by the Company. Without limiting the ---------------------------------- generality of Section 7.01, except as set forth in Section 7.02 of the Company's Disclosure Letter, the Company covenants and agrees that, except as expressly contemplated by this Agreement or otherwise consented to in writing by Parent, from the date of this Agreement until the Effective Time, it will not do, and will not permit any of its Subsidiaries to do, any of the following: (a) (i) increase the compensation payable to or to become payable to any director or employee, except for increases in salary or wages of employees in the ordinary course of business and consistent with past 38 practice; (ii) grant any severance or termination pay (other than pursuant to the normal severance policy or practice of the Company or its Subsidiaries as in effect on the date of this Agreement) to, or enter into or amend in any material respect any employment or severance agreement with, any employee; (iii) establish, adopt, enter into or amend in any material respect any collective bargaining agreement or Benefit Plan of the Company or its Subsidiaries except as required by applicable Law or (iv) take any action to accelerate any rights or benefits, or make any material determinations not in the ordinary course of business consistent with past practice, under any collective bargaining agreement or Benefit Plan of the Company or its Subsidiaries; (b) declare, set aside or pay any dividend on, or make any other distribution in respect of (whether in cash, stock or property), outstanding shares of capital stock, except for dividends by a wholly owned Subsidiary of the Company to the Company or another wholly owned Subsidiary of the Company; (c) redeem, purchase or otherwise acquire, or offer to redeem, purchase or otherwise acquire, any outstanding shares of capital stock of, or other equity interests in, or any securities that are convertible into or exchangeable for any shares of capital stock of, or other equity interests in, or any outstanding options, warrants or rights of any kind to acquire any shares of capital stock of, or other equity interests in, the Company or any of its Subsidiaries (other than (i) any such acquisition by the Company or any of its wholly owned Subsidiaries directly from any wholly owned Subsidiary of the Company in exchange for capital contributions or loans to such Subsidiary or (ii) any purchase, forfeiture or retirement of shares of Company Common Stock or the Company Stock Options occurring pursuant to the terms (as in effect on the date of this Agreement) of any existing Benefit Plan of the Company or any of its Subsidiaries; (d) effect any reorganization or recapitalization; or split, combine or reclassify any of the capital stock of, or other equity interests in, the Company or any of its Subsidiaries or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of such capital stock or such equity interests; 39 (e) offer, sell, issue or grant, or authorize the offering, sale, issuance or grant of, any shares of capital stock of, or other equity interests in, any securities convertible into or exchangeable for any shares of capital stock of, or other equity interests in, or any options, warrants or rights of any kind to acquire any shares of capital stock of, or other equity interests in, or any Voting Company Debt or other voting securities of, the Company or any of its Subsidiaries, or any "phantom" stock, "phantom" stock rights, stock appreciation rights or stock-based performance units, other than issuances of shares of Company Common Stock upon the exercise of the Company Stock Options outstanding at the date of this Agreement in accordance with the terms thereof (as in effect on the date of this Agreement); (f) acquire or agree to acquire, by merging or consolidating with, by purchasing an equity interest in or a portion of the assets of, or in any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire any assets of any other Person (other than the purchase of assets from suppliers or vendors in the ordinary course of business and consistent with past practice); (g) sell, lease, exchange or otherwise dispose of, or grant any Lien with respect to, any of the properties or assets (including technological assets) of the Company or any of its Subsidiaries, except for (i) dispositions of excess or obsolete assets, (ii) sales of inventories in the ordinary course of business and consistent with past practice and (iii) the licensing of software to customers consistent with past practice; (h) adopt any amendments to its certificate of incorporation or bylaws or other organizational documents; (i) effect any change in any accounting methods, principles or practices of the Company, except as may be required by a change in GAAP, or any change in Tax accounting; (j) (i) incur any indebtedness, issue or sell any debt securities or warrants or other rights to acquire any debt securities of the Company or any of its Subsidiaries, guarantee any debt securities of another Person, enter into any "keep well" or other agreement 40 to maintain any financial statement condition of another Person or enter into any arrangement having the economic effect of any of the foregoing, except for short-term borrowings pursuant to existing lines of credit incurred in the ordinary course of business consistent with past practice or (ii) make any loans, advances or capital contributions to, or investments in, any other Person, other than to or in the Company or any direct or indirect wholly owned Subsidiary of the Company; (k) enter into any contract which, if such contract is entered into, would be a Material Contract; (l) make or agree to make any new capital expenditure or expenditures other than the capital expenditures contemplated by the Company's annual operating plan for 1999, a copy of which has been furnished to Parent prior to the execution of this Agreement; (m) make any nonroutine Tax election or settle or compromise any Tax liability or refund; (n) (i) pay, discharge or satisfy any claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction, in the ordinary course of business consistent with past practice or in accordance with their terms, of liabilities reflected or reserved against in, or contemplated by, the most recent consolidated financial statements (or the notes thereto) of the Company included in the Filed SEC Documents or incurred in the ordinary course of business consistent with past practice or (ii) cancel any Material indebtedness (individually or in the aggregate) or waive any claims or rights of substantial value; (o) enter into any new agreements with, or commitments to, insurance brokers or advisers extending beyond one year or extend any insurance policy beyond one year (including, for the avoidance of doubt, the directors' and officers' liability insurance policies referred to in Section 7.11); or (p) agree in writing or otherwise to do any of the foregoing. SECTION 7.03. No Solicitation. (a) From the date of this Agreement ---------------- until the Effective Time or the 41 termination of this Agreement pursuant to Section 9.01, the Company agrees that it will not, and will not permit any of its Subsidiaries, or any of its or their officers, directors, employees, representatives, agents, or Affiliates, including any investment banker, attorney, or accountant retained by the Company or any of its Subsidiaries (collectively, "Representatives"), to, directly or --------------- indirectly (i) initiate, solicit or encourage or otherwise facilitate (including by way of furnishing information), or take any other action to facilitate, any inquiries or the making of any proposal or offer that constitutes, or may reasonably be expected to lead to, an Acquisition Proposal, (ii) enter into or maintain or continue discussions or negotiate with any Person regarding an Acquisition Proposal or in furtherance of such inquiries or to obtain an Acquisition Proposal, or (iii) agree to, approve, recommend or endorse any Acquisition Proposal, or authorize or permit any of the Representatives of the Company or any of its Subsidiaries to take any such action, and the Company shall promptly notify Parent of any such inquiries and proposals hereafter received by the Company or any of its Subsidiaries or by any such Representative, relating to any of such matters. Any violation of the restrictions set forth in this Section 7.03 by any Representative of the Company or any of its Subsidiaries, whether or not such Person is purporting to act on behalf of the Company or otherwise, shall be deemed to be a breach of this Section 7.03 by the Company. Notwithstanding the foregoing, the Board of Directors of the Company may, at any time prior to the earlier to occur of acceptance for payment of shares of Company Common Stock pursuant to the Offer and adoption of this Agreement by the stockholders of the Company, furnish information (pursuant to a customary confidentiality agreement no more favorable to the party receiving information than the Confidentiality Agreement and consistent with the Company's disclosure and other obligations under this Agreement, including Section 7.03(c)) to, or engage in discussions or negotiations with, any Person in response to an unsolicited bona fide written Acquisition Proposal of such Person that the Board of Directors of the Company determines is reasonably likely to constitute a Qualifying Proposal, if, and only to the extent that, (A) the Board of Directors of the Company, after consultation with outside legal counsel to the Company, determines in good faith that failure to do so would result in a breach of the fiduciary duty of the Board of Directors of the Company to the stockholders of the Company under applicable Law, and (B) prior to furnishing such information to, or entering 42 into discussions or negotiations with, such Person the Company provides written notice to Parent to the effect that it is furnishing information to, or entering into discussions or negotiations with, such Person and the Company complies with Section 7.03(c). The Company shall immediately cease and terminate any existing solicitation, initiation, encouragement, activity, discussion or negotiation with any Persons conducted heretofore by it or its Representatives with respect to any Acquisition Proposal. (b) Except as expressly permitted by this Section 7.03, (i) neither the Board of Directors of the Company nor any committee thereof shall (A) withdraw or modify, or propose publicly to withdraw or modify, in a manner adverse to Parent or Purchaser, the approval or recommendation by such Board of the Offer or the Merger as set forth in Section 2.02, (B) approve or recommend, or propose publicly to approve or recommend, any Acquisition Proposal, or (C) cause the Company to enter into any letter of intent, agreement in principle, acquisition agreement or other agreement (each, an "Acquisition Agreement") --------------------- related to any Acquisition Proposal and (ii) the Company shall not enter into any Acquisition Agreement with respect to any Acquisition Proposal. Notwithstanding the foregoing, prior to the earlier to occur of acceptance for payment of shares of Company Common Stock pursuant to the Offer and adoption of this Agreement by the stockholders of the Company, the Board of Directors of the Company may terminate this Agreement but only (A) to the extent that the Board of Directors of the Company, after consultation with outside legal counsel to the Company, determines in good faith that failure to do so would result in a breach of the fiduciary duty of the Board of Directors to the stockholders of the Company under applicable Law, (B) if the Company and the Board of Directors of the Company have complied with all the provisions of this Section 7.03, (C) after the second Business Day following Parent's receipt of written notice advising Parent that the Board of Directors of the Company is prepared to accept a Qualifying Proposal, specifying the principal terms and conditions of such Qualifying Proposal and identifying the Person making such Qualifying Proposal (during which two day period the Company will negotiate in good faith with Parent or Purchaser concerning any amendments proposed by Parent or Purchaser) and (D) if concurrently with such termination, the Company enters into an Acquisition Agreement with respect to such Qualifying Proposal and pays to Parent the Termination Fee. (c) In addition to the obligations of the Company set forth in paragraphs (a) and (b) of this Section 7.03, the Company shall promptly advise Parent, orally and in writing, of any request for information or of any Acquisition Proposal, the principal terms and conditions of 43 such request or Acquisition Proposal and the identity of the Person making such request or Acquisition Proposal. The Company shall keep Parent reasonably informed of the status and details (including amendments or proposed amendments) of any such request or Acquisition Proposal. (d) "Acquisition Proposal" means an inquiry, offer or proposal that -------------------- is made after the date of this Agreement regarding any of the following (other than the Transactions) involving the Company: (i) any merger, consolidation, share exchange, recapitalization, liquidation, dissolution, business combination or other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of a substantial portion of the assets of the Company and its Subsidiaries, taken as a whole, or of any Material Business or of any Subsidiary or Subsidiaries responsible for a Material Business in a single transaction or series of related transactions; (iii) any acquisition of 15% or more of the outstanding shares of capital stock of the Company or the filing of a registration statement under the Securities Act in connection therewith or any other acquisition or disposition the consummation of which would prevent or materially diminish the benefits to Parent of the Merger; or (iv) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing. "Qualifying ---------- Proposal" means any written proposal made by a third party after the date of - -------- this Agreement to acquire, directly or indirectly, including pursuant to a tender offer, exchange offer, merger, consolidation, share exchange, business combination, recapitalization, liquidation, dissolution or other similar transaction all the shares of Company Common Stock then outstanding or the assets of the Company and its Subsidiaries as an entirety which the Board of Directors of the Company determines in good faith (x) (based on the advice of a financial advisor of nationally recognized reputation) that such proposal has a reasonable likelihood of being consummated and (y) (based on the written opinion of a financial advisor of nationally recognized reputation) that such proposal would, if consummated, be superior to the Company's stockholders from a financial point of view (taking into account any changes to the financial terms of this Agreement proposed by Parent or Purchaser in response to such proposal) when compared to the Offer, the Merger and the other Transactions, taken as a whole. "Material Business" means any business (or the assets needed to carry ----------------- out such business) that contributed or represented 15% or more of the net sales, the net income or the assets (including equity securities) of the Company and its Subsidiaries taken as a whole. 44 (e) Nothing contained in this Section 7.03 shall prohibit the Company from taking and disclosing to its stockholders a position contemplated by Rule 14e-2(a) promulgated under the Exchange Act or from making any disclosure to the Company's stockholders which the Board of Directors of the Company, after consultation with outside legal counsel to the Company, determines in good faith is required by applicable Law; provided that neither the Board of Directors of -------- the Company nor any committee thereof approves or recommends, or publicly proposes to approve or recommend, an Acquisition Proposal unless the Company and the Board of Directors of the Company have complied with all the provisions of this Section 7.03. Notwithstanding anything to the contrary, the Company will duly call, give notice and hold the Stockholders Meeting, if required by the DGCL, for the purpose of considering and taking action upon this Agreement and the Merger whether or not the Board of Directors of the Company has determined at any time after the date hereof it is no longer advisable for the stockholders of the Company to adopt this Agreement. SECTION 7.04. Access to Information. Between the date of this ---------------------- Agreement and the Effective Time, the Company shall, and shall cause its Subsidiaries to, (a) afford to Parent and its officers, directors, employees, accountants, consultants, legal counsel, agents and other representatives full reasonable access during normal business hours and at all other reasonable times to the officers, employees, agents, properties, offices and other facilities of the Company and its Subsidiaries and to their books and records and (b) furnish promptly to Parent and its representatives a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of federal or state securities Laws and such other information concerning the business, properties, contracts, records and personnel of the Company and its Subsidiaries (including financial, operating and other data and information) as may be reasonably requested, from time to time, by or on behalf of Parent. SECTION 7.05. Confidentiality Agreement. Subject to Section 7.07, -------------------------- the parties agree that the provisions of the Confidentiality Agreement shall remain binding and in full force and effect and that the terms of the Confidentiality Agreement are incorporated herein by reference; provided, -------- however, that any consents from the Company necessary under the Confidentiality - ------- Agreement for Parent and Purchaser to consummate the Transactions shall be deemed to have been made. The parties shall comply with, and shall cause their respective representatives to comply with, all of their respective obligations under the 45 Confidentiality Agreement until Purchaser purchases Shares pursuant to, and subject to the conditions of, the Offer. SECTION 7.06. Reasonable Efforts. Subject to the terms and ------------------- conditions of this Agreement, each of the parties hereto agrees to use all reasonable efforts to take, or cause to be taken, all action, and to do, or cause to be done, all things reasonably necessary, proper or advisable under applicable Laws to consummate and make effective as soon as reasonably practicable the Transactions including (a) cooperating in the preparation and filing of all applications, requests, consents and other filings required by applicable Governmental Authorities or Courts, including filings required by the HSR Act and Exon-Florio, the Offer Documents, the Schedule 14D-9, the Proxy Statement and any amendments and supplements to any thereof; (b) taking all action reasonably necessary, proper or advisable to secure any necessary consents, approvals or waivers from third parties, including under existing debt obligations of the Company and its Subsidiaries or to amend the notes, indentures or agreements relating to such existing debt obligations to the extent required by such notes, indentures or agreements, or to redeem or repurchase such debt obligations; (c) contesting any pending legal proceeding, whether judicial or administrative, relating to the Offer or the Merger, including seeking to have any stay or temporary restraining order entered by any Court or other Governmental Authority vacated or reversed; and (d) executing any additional instruments necessary to consummate the Transactions. In case at any time after the Effective Time any further action is necessary to carry out the purposes of this Agreement, the proper officers and directors of each party hereto shall use all reasonable efforts to take all such necessary action. SECTION 7.07. Public Announcements. Parent, Purchaser and the --------------------- Company will consult with each other before issuing any press release or otherwise making any public statements with respect to the Offer or the Merger or this Agreement and shall not issue any such press release or make any such public statement prior to such consultation (and affording the other party or parties an opportunity to comment thereon), except as may be required by applicable Law or Court process or by obligations pursuant to any listing agreement with the NASD or any securities exchange. SECTION 7.08. Employee Agreements. Parent acknowledges and agrees -------------------- that all employment agreements, severance agreements, deferred compensation agreements, and supplemental retirement agreements with the employees of the Company and its Subsidiaries that are listed in Section 7.08 46 of the Company's Disclosure Letter will be binding and enforceable obligations of the Surviving Corporation to the same extent as they were binding and enforceable obligations of the Company and its Subsidiaries as of the date of this Agreement, except as the parties thereto may otherwise agree. SECTION 7.09. State Takeover Statutes. The Company will take all ------------------------ steps necessary (a) to exempt the Transactions from Section 203 of the DGCL, (b) to ensure that no other state takeover statute or similar Law or Regulation is or becomes applicable to any Transaction Agreement and (c) if any state takeover statute or similar Law or Regulation becomes applicable to any Transaction Agreement, to ensure that the Offer, the Merger and the other Transactions may be consummated as promptly as practicable on the terms contemplated by the Transaction Agreements and otherwise to minimize the effect of such Law or Regulation on the Offer, the Merger and the other Transactions. SECTION 7.10. Employee Benefit Plans. Until 24 months from the ----------------------- Effective Date, Parent shall provide, or cause to be provided, to all employees of the Company and its Subsidiaries compensation, incentive pay and benefits that, taken as a whole, are substantially comparable in the aggregate to the compensation, incentive pay and benefits (without taking into account any equity-based compensation, incentive pay or benefits) provided to such employees by the Company and its Subsidiaries as of the Offer Closing Date. From and after the Effective Time, Parent shall grant all employees of the Surviving Corporation and its Subsidiaries on the Effective Time credit for vesting and eligibility purposes (but not for benefit accrual purposes) for all service with the Surviving Corporation and any Subsidiary of the Surviving Corporation prior to the Effective Time under all Benefit Plans of Parent or its Subsidiaries (other than the Surviving Corporation and its Subsidiaries) in which such employees shall become eligible to participate as if such service with the Surviving Corporation or any Subsidiary of the Surviving Corporation and their respective predecessors was service with Parent or any Subsidiary of Parent (other than the Surviving Corporation and its Subsidiaries). Except as set forth in Section 7.10 of the Company's Disclosure Letter, in the event any severance agreement, program or policy requires the payment of benefits solely as a result of the transactions contemplated under agreement, the Company will prior to the Closing amend such agreement, program or policy to prevent the payment of benefits solely as a result of the transactions contemplated under this agreement. 47 SECTION 7.11. Indemnification of Directors and Officers. (a) ------------------------------------------ Purchaser agrees that all rights to indemnification for acts or omissions occurring prior to the Effective Time in favor of the current or former directors, officers or employees of the Company and its Subsidiaries as provided in their respective certificates of incorporation or bylaws shall survive the Merger and shall continue in full force and effect in accordance with their terms for a period of six years from the Effective Time. Parent shall cause to be maintained for a period of six years from the Effective Time the Company's current directors', officers' and employees' insurance and indemnification policy (the "D&O Insurance") and the current fiduciary liability insurance ------------- policy (the "Fiduciary Insurance") (provided that Parent may substitute therefor ------------------- -------- policies or financial guarantees with reputable and financially sound carriers or other obligors of at least the same coverage and amounts containing terms and conditions which are no less advantageous) to the extent that such insurance policies provide coverage for events occurring prior to the Effective Time for all persons who are directors, officers or employees of the Company on or prior to the date of this Agreement, so long as the amount per annum to be paid by the Company after the date of this Agreement for such D&O Insurance and Fiduciary Insurance is not greater than 200% of the current annual premiums paid by the Company for such insurance. Parent may cause to be obtained D&O Insurance and Fiduciary Insurance that satisfies the foregoing pursuant to which premiums are paid for the entire six-year period or, if applicable, for the remainder of such period. If, during such six-year period, such insurance coverage cannot be obtained at all or can only be obtained for an amount (including amounts paid by the Company after the date of this Agreement) in excess of the per annum limit described above, Parent shall use all reasonable efforts to cause to be obtained as much D&O Insurance and Fiduciary Insurance as can be obtained for the remainder of such six-year period (including amounts paid by the Company after the date of this Agreement) not in excess of such limit on terms and conditions no less advantageous than the existing D&O Insurance and the existing Fiduciary Insurance, respectively. (b) If any claim or claims shall, subsequent to the Effective Time and within six years thereafter, be made in writing against any present or former director, officer or employee of the Company based on or arising out of the services of such Person prior to the Effective Time in the capacity of such Person as a director, officer or employee of the Company (and such director, officer or employee shall have given Parent written notice of such claim or claims 48 within such six year period), the provisions of subsection (a) of this Section respecting the rights to indemnity for current or former directors, officers or employees under the certificate of incorporation and bylaws of the Company and its Subsidiaries shall continue in effect until the final disposition of all such claims. (c) Notwithstanding anything to the contrary in this Section 7.11, neither Parent nor the Surviving Corporation shall be liable for any settlement effected without its written consent, which shall not be unreasonably withheld. SECTION 7.12. Event Notices and Other Actions. (a) From and after -------------------------------- the date of this Agreement until the Effective Time, each party hereto shall promptly notify the other parties hereto of (i) the occurrence or nonoccurrence of any event, the occurrence or nonoccurrence of which has resulted in, or could reasonably be expected to result in, any condition to the Offer set forth in Annex B, or any condition to the Merger set forth in Article VIII, not being satisfied, (ii) the failure of such party to comply with any covenant or agreement to be complied with by it pursuant to this Agreement which has resulted in, or could reasonably be expected to result in, any condition to the Offer set forth in Annex B, or any condition to the Merger set forth in Article VIII, not being satisfied and (iii) any representation or warranty made by it contained in this Agreement that is qualified as to materiality becoming untrue or inaccurate in any respect or any such representation or warranty that is not so qualified becoming untrue or inaccurate in any material respect. No delivery of any notice pursuant to this Section 7.12(a) shall cure any breach of any representation or warranty of such party contained in this Agreement or otherwise limit or affect the remedies available hereunder to the party or parties receiving such notice. (b) The Company and Parent shall not, and shall not permit any of their respective Subsidiaries to, take any action or nonaction that would, or that could reasonably be expected to, result in (i) any of the representations and warranties of such party set forth in this Agreement that is qualified as to materiality becoming untrue, (ii) any of such representations and warranties that is not so qualified becoming untrue in any material respect or (iii) except as otherwise permitted by Section 7.03, any condition to the Offer set forth in Annex B, or any condition to the Merger set forth in Article VIII, not being satisfied. 49 SECTION 7.13. Third Party Standstill Agreements; Tortious ------------------------------------------- Interference. During the period from the date of this Agreement through the - ------------- Effective Time, the Company shall not terminate, amend, modify or waive any provision of any confidentiality or standstill or similar agreement to which the Company or any of its Subsidiaries is a party (other than any involving Parent). Subject to the foregoing, during such period, the Company agrees to enforce, to the fullest extent permitted under applicable Law, the provisions of any such agreements, including obtaining injunctions to prevent any breaches of such agreements and to enforce specifically the terms and provisions thereof in any Court of the United States or any state thereof having jurisdiction. Notwithstanding the foregoing, nothing in this Section 7.13 is intended to prevent the Company from exercising its rights under Section 7.03(a) in accordance with the provisions of Section 7.03. ARTICLE VIII Closing Conditions ------------------ SECTION 8.01. The obligations of the Parent Companies to effect the Merger shall be subject to the satisfaction at or prior to the Effective Time of the following conditions, any or all of which may be waived by the Parent Companies, in whole or in part, to the extent permitted by applicable Law: (a) This Agreement and the Merger shall have been approved and adopted by the requisite vote of the stockholders of the Company, if required by applicable Law. (b) No Court or Governmental Authority shall have enacted, issued, promulgated, enforced or entered any Law or Order (whether temporary, preliminary or permanent) which is in effect and which has the effect of making the Merger illegal or otherwise prohibiting consummation of the Merger. (c) The applicable waiting period under the HSR Act shall have expired or been terminated, the approvals under the European Antitrust Laws shall have been obtained from the applicable Governmental Authorities, and the period of time for any applicable review process by CFIUS under Exon- Florio shall have expired, and CFIUS shall not have taken any action or made any recommendation to the President of the United 50 States to block or prevent the consummation of the Offer or the Merger. (d) The Purchaser, Parent or their Affiliates shall have accepted for payment and purchased shares of Company Common Stock pursuant to and subject to the conditions of the Offer. ARTICLE IX Termination, Amendment and Waiver --------------------------------- SECTION 9.01. Termination. This Agreement may be terminated and the ------------ Offer and the Merger may be abandoned at any time (notwithstanding approval of the Merger by the stockholders of the Company) prior to the Effective Time: (a) by mutual written consent of Parent, Purchaser and the Company; (b) by Parent, Purchaser or the Company if any Court of competent jurisdiction or other Governmental Authority shall have issued a final Order or taken any other final action restraining, enjoining or otherwise prohibiting the consummation of the Offer or the Merger and such Order or other action is or shall have become nonappealable; (c) by Parent or Purchaser if due to an occurrence or circumstance which would result in a failure to satisfy any of the conditions set forth in Annex B hereto, Purchaser shall have (i) failed to commence the Offer within the time required by Regulation 14D under the Exchange Act, (ii) terminated the Offer without purchasing any shares of Company Common Stock pursuant to the Offer or (iii) failed to accept for payment shares of Company Common Stock pursuant to the Offer prior to July 16, 1999 (the "Termination Date"); ----------------- (d) by the Company if (i) there shall not have been (x) any breach or breaches of any representation or warranty that, individually or in the aggregate, have resulted in or would reasonably be expected to result in a Material Adverse Effect on the Company or (y) any breach or breaches of a covenant or agreement on the part of the Company under this Agreement or the Option Agreement that, individually or in the aggregate, materially adversely affect (or materially delay) the consummation of the Offer and Purchaser shall have (A) failed to commence the Offer within the 51 time required by Regulation 14D under the Exchange Act, (B) terminated the Offer without purchasing any shares of Company Common Stock pursuant to the Offer or (C) failed to accept for payment shares of Company Common Stock pursuant to the Offer prior to the Termination Date, or (ii) prior to the purchase of shares of Company Common Stock pursuant to the Offer, concurrently with the execution of an Acquisition Agreement under the circumstances permitted by Section 7.03; provided that such termination -------- under this clause (ii) shall not be effective unless the Company and the Board of Directors of the Company shall have complied with all their obligations under Section 7.03 and until payment of the Termination Fee pursuant to Section 9.05(b); (e) by Parent or Purchaser prior to the purchase of shares of Company Common Stock pursuant to the Offer, if (i) Purchaser shall be entitled to terminate the Offer pursuant to paragraph (b)(i) of Annex B, (ii) there shall have been any breach of any covenant or agreement on the part of the Company under this Agreement or the Option Agreement which materially adversely affects (or materially delays) the consummation of the Offer, which shall not have been cured prior to the earlier of (A) 10 days following notice of such breach and (B) two Business Days prior to the date on which the Offer expires, provided, however, that the Company shall have -------- ------- no right to cure a breach of Section 7.03, (iii) the Board of Directors of the Company or any committee thereof shall have withdrawn or modified (including by amendment of Schedule 14D-9) in a manner adverse to Purchaser its approval or recommendation of the Offer, the Merger or this Agreement or shall have recommended to the Company's stockholders a Third Party Acquisition, or (iv) there shall not have been validly tendered and not withdrawn prior to the expiration of the Offer at least a majority of the Fully Diluted Shares; or (f) by the Company prior to the purchase of any shares of Company Common Stock pursuant to the Offer if (i) there shall have been a breach of any representation or warranty in this Agreement on the part of Parent or Purchaser which materially adversely affects (or materially delays) the consummation of the Offer or (ii) there shall have been a breach of any covenant or agreement in this Agreement on the part of Parent or Purchaser which materially adversely affects (or materially delays) the consummation of the Offer which shall not have been cured prior to the earliest 52 of (A) 10 days following notice of such breach and (B) two Business Days prior to the date on which the Offer expires. SECTION 9.02. Effect of Termination. In the event of the termination ---------------------- and abandonment of this Agreement pursuant to Section 9.01, this Agreement shall forthwith become void and have no effect, without any liability on the part of any party hereto or its Affiliates, directors, officers or stockholders, other than the provisions of this Section 9.02 and Sections 5.19, 6.07, 7.05 and 9.05 and Article X. Nothing contained in this Section 9.02 shall relieve any party from liability for any antecedent breach of this Agreement. SECTION 9.03. Amendment. This Agreement may be amended by action ---------- taken by the Company, Parent and Purchaser at any time before or after any adoption of this Agreement by the stockholders of the Company (whether or not such adoption is required); provided that after the date of adoption of this -------- Agreement by the stockholders of the Company, no amendment shall be made that by Law requires further approval of such stockholders without the approval of such stockholders. This Agreement may not be amended except by an instrument in writing signed on behalf of all the parties. SECTION 9.04. Extension; Waiver. At any time prior to the Effective ------------------ Time, a party may (a) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (b) waive any inaccuracies in the representations and warranties of the other parties contained herein or in any document, certificate or writing delivered pursuant hereto or (c) waive compliance with any of the agreements or conditions of the other parties hereto contained herein; provided that after the date of adoption -------- of the Merger by the stockholders of the Company, no extensions or waivers shall be made that by Law requires further approval by such stockholders without the approval of such stockholders. Any agreement on the part of any party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. SECTION 9.05. Fees, Expenses and Other Payments. (a) Except as ---------------------------------- provided in Section 9.05(b) of this Agreement, all fees and expenses incurred by the parties hereto shall be borne solely and entirely by the party which has incurred such fees and expenses. 53 (b) If: (i) Parent or Purchaser terminates this Agreement pursuant to Section 9.01(e)(i) (other than a termination resulting from an event or circumstance that causes a Material Adverse Effect with respect to the Company after the date of this Agreement, which event or circumstance was not caused by the willful or intentional action or inaction by the Company) or (iv) or pursuant to Section 9.01(e)(ii) other than as a result of a breach of Section 7.03, and in any such case, any proposal for a Third Party Acquisition shall have been made on or prior to the date of such termination and in any such case, within 12 months thereafter the Company enters into an agreement with respect to the consummation of a Third Party Acquisition or a Third Party Acquisition is otherwise consummated; (ii) Parent or Purchaser terminates this Agreement pursuant to Section 9.01(e)(ii) as a result of a breach of Section 7.03 or pursuant to Section 9.01(e)(iii); or (iii) the Company terminates this Agreement pursuant to Section 9.01(d)(ii); then, in each case, the Company shall pay to Parent, within two Business Days following the execution and delivery of such agreement or such occurrence, as the case may be, or simultaneously with such termination pursuant to Section 9.01(d)(ii), a fee, in cash, of $135 million (a "Termination Fee") plus, in the --------------- event that the Option Agreement terminates in connection with the termination of this Agreement giving rise to the Termination Fee, an additional amount, not in excess of $22.5 million, as reimbursement for Expenses. (c) Any payment required to be made pursuant to Section 9.05(b) of this Agreement shall be made to Parent by wire transfer of immediately available funds to an account designated by Parent. (d) For purposes of this Section 9.05, this Agreement shall be deemed terminated by Parent or Purchaser pursuant to a provision giving rise to the payment of the Termination Fee if at the time of any termination hereunder Parent or Purchaser was so entitled to terminate this Agreement pursuant to such provision. 54 ARTICLE X General Provisions ------------------ SECTION 10.01. Nonsurvival of Representations, Warranties and ---------------------------------------------- Agreements. None of the representations and warranties in this Agreement or in - ----------- any instrument delivered pursuant to this Agreement shall survive the Effective Time. This Section 10.01 shall not limit any covenant or agreement of the parties which by its terms contemplates performance after the Effective Time. SECTION 10.02. Notices. All notices and other communications given -------- or made pursuant hereto shall be in writing and shall be deemed to have been duly given upon receipt, if delivered personally, mailed by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses or sent by electronic transmission to the telecopier number specified below: (a) If to either of the Parent Companies, to: GEC Incorporated and GEC Acquisition Corp. c/o Videojet Systems International, Inc. 1500 Mittel Boulevard Wood Dale, IL 60191-1073 Attention: Patricia A. Hoffman Telecopier No.: (630) 238-3998 with a copy to: Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, NY 10019-7475 Attention: Philip A. Gelston Telecopier No.: (212) 474-3700 55 (b) If to the Company, to: FORE Systems, Inc. 1000 Fore Drive Warrendale, PA 15086-7502 Attention: Christopher H. Gebhardt Telecopier No.: (724) 742-7654 with a copy to: Morgan, Lewis & Bockius LLP One Oxford Centre 301 Grant Street Pittsburgh, PA 15219-6401 Attention: Marlee S. Myers Telecopier No.: (412) 560-3399 or to such other address or telecopier number as any party may, from time to time, designate in a written notice given in a like manner. Notice given by telecopier shall be deemed received on the day the sender receives telecopier confirmation that such notice was received at the telecopier number of the addressee. Notice given by mail as set out above shall be deemed received three days after the date the same is postmarked. SECTION 10.03. Headings. The headings contained in this Agreement --------- are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 10.04. Severability. If any term or other provision of this ------------- Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the Transactions is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible. SECTION 10.05. Entire Agreement. This Agreement (together with the ----------------- Annexes, the Company's Disclosure Letter, the Confidentiality Agreement and the other Transaction 56 Agreements) constitutes the entire agreement of the parties, and supersedes all prior agreements and undertakings, both written and oral, among the parties, with respect to the subject matter hereof. SECTION 10.06. Assignment. Neither this Agreement nor any of the ----------- rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of Law or otherwise by any of the parties without the prior written consent of the other parties, except that Purchaser may assign, in its sole discretion, any of or all its rights (including the right to purchase Shares in the Offer), interests and obligations under this Agreement to Parent or to an Affiliate of Parent, but no such assignment shall relieve Purchaser of any of its obligations under this Agreement. Any attempted assignment in violation of this Section 10.06 shall be void. Subject to the preceding sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. SECTION 10.07. Parties in Interest. This Agreement shall be binding -------------------- upon and inure solely to the benefit of each party hereto and its successors and permitted assigns, and, except as provided in Article III and Section 7.11 nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any rights, benefits or remedies or any nature whatsoever under or by reason of this Agreement. SECTION 10.08. Failure or Indulgence Not Waiver; Remedies Cumulative. ----------------------------------------------------- No failure or delay on the part of any party hereto in the exercise of any right hereunder shall impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor shall any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. SECTION 10.09. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, -------------- AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAW. SECTION 10.10. Enforcement. The parties agree that irreparable ------------ damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent 57 breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Delaware state court or any Federal court located in the State of Delaware, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (a) consents to submit itself to the personal jurisdiction of any Delaware state court or any Federal court located in the State of Delaware in the event any dispute arises out of this Agreement or any transaction contemplated by this Agreement, (b) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (c) agrees that it will not bring any action relating to this Agreement or any transaction contemplated by this Agreement in any court other than any Delaware state court or any Federal court sitting in the State of Delaware and (d) waives any right to trial by jury with respect to any action related to or arising out of this Agreement or any transaction contemplated by this Agreement. The parties irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the courts of the State of Delaware or of the United States of America located in the State of Delaware, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. SECTION 10.11. Counterparts. This Agreement may be executed in ------------- multiple counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. 58 IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the date first written above by their respective officers or directors thereunto duly authorized. GEC INCORPORATED, by --------------------------------- Name: Title: GEC ACQUISITION CORP., by --------------------------------- Name: Title: FORE SYSTEMS, INC., by --------------------------------- Name: Title: ANNEX A SCHEDULE OF DEFINED TERMS The following terms when used in the Agreement shall have the meanings set forth below unless the context shall otherwise require: "Acquisition Agreement" shall have the meaning ascribed to such term --------------------- in Section 7.03(b). "Acquisition Proposal" shall have the meaning ascribed to such term in -------------------- Section 7.03(d). "Affiliate" shall mean, with respect to any Person, any other Person --------- that controls, is controlled by or is under common control with the former Person. "Agreement" shall mean the Agreement and Plan of Merger dated as of --------- April 26, 1999 among Parent, Purchaser and the Company, including any amendments thereto and each Annex (including this Annex A) and Schedule thereto (including the Company's Disclosure Letter). "Balance Sheet Date" shall mean March 31, 1998. ------------------ "Benefit Plans" shall mean any employee pension benefit plan (whether ------------- or not insured), as defined in Section 3(2) of ERISA, any employee welfare benefit plan (whether or not insured) as defined in Section 3(1) of ERISA, any plans that would be employee pension benefit plans or employee welfare benefit plans if they were subject to ERISA, such as foreign plans and plans for directors, any employment contracts, severance or termination pay arrangements, any stock bonus, stock ownership, stock option, stock purchase, stock appreciation rights, phantom stock or other stock plan (whether qualified or nonqualified), and any bonus or incentive compensation plan sponsored, maintained or contributed to by the Company or any of its Subsidiaries for the benefit of any of the present or former directors, officers, employees, agents, consultants or other similar representatives providing services to or for the Company or any of its Subsidiaries in connection with such services or any such plans which have been so sponsored, maintained, or contributed to within six years prior to the date of this Agreement; provided, however, that such term shall not include (a) routine employment policies and procedures developed and applied in the ordinary course of business and consistent with past practice, including wage, vacation, holiday and sick or other leave policies, (b) workers compensation insurance and (c) directors and officers liability insurance. 2 "Business Day" means any day other than a day on which banks in New ------------ York are authorized or obligated to be closed. "Certificate" shall mean an outstanding stock certificate which ----------- immediately prior to the Effective Time represented shares of Company Common Stock. "Certain Stockholders" shall have the meaning ascribed to such term in -------------------- the recitals to the Agreement. "Certificate of Merger" shall have the meaning ascribed to such term --------------------- in Section 3.02. "CFIUS" shall mean Committee on Foreign Investment in the United ----- States, an interagency committee chaired by a representative of the United States Secretary of the Treasury. "Closing" shall have the meaning ascribed to such term in Section ------- 4.04. "Closing Date" shall mean the date of the Closing as determined ------------ pursuant to Section 4.04. "Code" shall mean the Internal Revenue Code of 1986, as amended, and ---- the Regulations promulgated thereunder. "Company" shall mean FORE Systems, Inc., a Delaware corporation. ------- "Company Common Stock" shall have the meaning ascribed to such term in -------------------- the recitals to the Agreement. "Company Option Plans" shall mean the Incentive Stock Option and -------------------- Nonqualified Stock Option Plan; the 1994 Stock Option Plan; the 1994 Employee Stock Purchase Plan; the 1995 Stock Incentive Plan; the 1996 Stock Option Plan; 1998 Stock Option Plan; the Berkeley Networks, Inc. Substitute Stock Option Plan; the Alantec Corporation Second Amended and Restated 1991 Stock Option Plan; the Alantec Corporation 1994 Stock Option Plan; and the Change in Control Separation Plan and any other arrangement pursuant to which options to acquire Company Common Stock have been granted to current or former directors or employees. "Company SEC Documents" shall have the meaning ascribed to such term --------------------- in Section 5.07(a). 3 "Company Stock Options" shall mean stock options granted pursuant to --------------------- the Company Option Plans. "Company Stockholder Approval" shall have the meaning ascribed to such ---------------------------- term in Section 5.04(b). "Company Stockholders' Meeting" shall have the meaning ascribed to ----------------------------- such term in Section 3.07(b). "Company's Audited Consolidated Financial Statements" shall mean the --------------------------------------------------- consolidated balance sheets of the Company and its Subsidiaries as of March 31, 1998 and March 31, 1997 and the related consolidated statements of income and cash flows for the fiscal years ended March 31, 1998, 1997 and 1996, together with the notes thereto, all as audited by Price Waterhouse LLP, under their report with respect thereto dated April 22, 1998 and included in the Company's Annual Report on Form 10-K for the fiscal year ended March 31, 1998 filed with the SEC. "Company's Consolidated Financial Statements" shall mean the Company's ------------------------------------------- Audited Consolidated Financial Statements and the Company's Unaudited Consolidated Financial Statements. "Company's Disclosure Letter" shall mean a letter dated the date of --------------------------- the Agreement delivered by the Company to the Parent Companies concurrently with the execution of the Agreement, which, among other things, shall identify exceptions to the Company's representations and warranties contained in Article V and covenants contained in Article VII by specific section and subsection references. "Company's Unaudited Consolidated Financial Statements" shall mean the ----------------------------------------------------- unaudited consolidated balance sheet of the Company and its Subsidiaries as of December 31, 1998, and the related consolidated statements of income and cash flows for the nine-month periods ended December 31, 1998 and December 31, 1997. "Copyrights" shall have the meanings ascribed to such term in Section ---------- 5.18. "Confidentiality Agreement" shall mean that certain confidentiality ------------------------- agreement between Parent and the Company dated March 17, 1999. "Control Date" shall have the meaning ascribed to such term in Section ------------ 2.04. 4 "Court" shall mean any court of the United States, any foreign country ----- or any domestic or foreign state, and any political subdivision thereof, or any arbitration tribunal and shall include the European Court of Justice. "Current Benefit Plans" shall mean Benefit Plans that are sponsored, --------------------- maintained, or contributed to by the Company or any of its Subsidiaries as of the date of this Agreement. "D&O Insurance" shall have the meaning ascribed to such term in ------------- Section 7.11(a). "Derivative Financial Instrument" shall have the meaning ascribed to ------------------------------- such term in Section 5.08(b). "DGCL" shall mean the General Corporation Law of the State of ---- Delaware. "Dissenting Shares" shall have the meaning ascribed to such term in ----------------- Section 4.03. "Effective Time" shall mean the date and time of the completion of the -------------- filing of the Certificate of Merger with the Secretary of State of the State of Delaware in accordance with Section 3.02 or such later time as Parent and the Company may agree and specify in such certificate. "Environmental Law or Laws" shall mean any and all Laws, enforceable ------------------------- requirements or Orders of any Governmental Authority pertaining to health or the environment currently in effect and applicable to a specified Person and its Subsidiaries, including the Clean Air Act, as amended, the Comprehensive Environmental, Response, Compensation, and Liability Act of 1980 ("CERCLA"), as ------ amended, the Federal Water Pollution Control Act, as amended, the Occupational Safety and Health Act of 1970, as amended, the Resource Conservation and Recovery Act of 1976 ("RCRA"), as amended, the Hazardous & Solid Waste ---- Amendments Act of 1984, as amended, the Superfund Amendments and Reauthorization Act of 1986, as amended, the Hazardous Materials Transportation Act, as amended, the Oil Pollution Act of 1990, as amended ("OPA"), any state or local Laws --- implementing the foregoing federal Laws, and all other environmental conservation or protection Laws. For purposes of the Agreement, the terms "hazardous substance" and "release" have the meanings specified in CERCLA; provided, however, that, to the extent the Laws of the state or locality in - -------- ------- which the property is located establish a meaning for "hazardous substance" or "release" that is broader than that specified in CERCLA, such broader meaning shall apply within the jurisdiction of 5 such state or locality, and the term "hazardous substance" shall include all dehydration and treating wastes, waste (or spilled) oil, and waste (or spilled) petroleum products, by-products and derivatives thereof, polychlorinated biphenyls, asbestos, and radioactive material, even if such are specifically exempt from classification as hazardous substances or hazardous wastes pursuant to CERCLA or RCRA or the analogous statutes of any jurisdiction applicable to the specified Person or its Subsidiaries or any of their respective properties or assets. "ERISA" shall mean the Employee Retirement Income Security Act of ----- 1974, as amended, and the Regulations promulgated thereunder. "European Antitrust Laws" shall have the meaning ascribed to such term ----------------------- in Section 5.05. "Exchange Act" shall mean the Securities Exchange Act of 1934, and the ------------ Regulations promulgated thereunder. "Exchange Fund" shall mean the fund of cash deposited with the Paying ------------- Agent pursuant to Section 4.02. "Expenses" shall have the meaning ascribed to such term in the Option -------- Agreement. "Exon-Florio" shall mean Section 721 of the Defense Production Act, 50 ----------- App. U.S.C.A. (S) 2170 (West 1991 & Supp. 1998). "Fiduciary Insurance" shall have the meaning ascribed to such term in ------------------- Section 7.11(a). "Filed Company SEC Documents" shall have the meaning ascribed to such --------------------------- term by Section 5.09. "Financial Advisor" shall mean Goldman, Sachs & Co., the financial ----------------- advisor to the Company with respect to the Transactions. "Fully Diluted Shares" shall have the meaning ascribed to such term in -------------------- Annex B. "GAAP" shall mean accounting principles generally accepted in the ---- United States consistently applied by a specified Person. "Governmental Authority" shall mean any governmental agency or ---------------------- authority (other than a Court) of the United States, any foreign country, or any domestic or 6 foreign state, and any political subdivision or agency thereof, and shall include any multinational authority having governmental or quasi-governmental powers. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act ------- of 1976, as amended, and the Regulations promulgated thereunder. "Independent Directors" shall have the meaning ascribed to such term --------------------- in Section 2.04. "Intellectual Property" shall have the meaning ascribed to such term --------------------- in Section 5.18. "IRS" shall mean the Internal Revenue Service. --- "Knowledge" shall mean, with respect to either the Company or Parent, --------- the actual knowledge (after reasonable inquiry) of, in the case of the Company, any executive officer of the Company listed in such party's 1998 annual report to stockholders and, in the case of Parent, any executive officer of Parent. "Laws" shall mean all laws, statutes, ordinances and Regulations of ---- the United States, any foreign country, or any domestic or foreign state, and any political subdivision or agency thereof, including all decisions of Courts having the effect of Law in each such jurisdiction. "Leaseholds" shall mean, with respect to any Person, all the right, ---------- title and interest of such Person as lessee or licensee, in, to and under leases, licenses, improvements and/or fixtures. "Licenses-In" shall have the meaning ascribed to such term in Section ----------- 5.18. "Licenses-Out" shall have the meaning ascribed to such term in Section ------------ 5.18. "Lien" shall mean any mortgage, pledge, security interest, ---- encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing), any conditional sale or other title retention agreement, any lease in the nature thereof or the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction. "Material" shall mean is or will be material to the business, -------- properties, assets, condition (financial and 7 other) or results of operations of a specified Person and its Subsidiaries, if any, taken as a whole. "Material Adverse Effect" shall mean any change or effect that is ----------------------- material and adverse to the business, properties, assets, condition (financial and other) or results of operations of a specified Person and its Subsidiaries, if any, taken as a whole, including a material adverse effect on the ability of a specified Person to perform its obligations under each Transaction Agreement to which it is a party, other than any such effect arising out of or resulting from, in the case of a determination with respect to the Company and its Subsidiaries (i) changes in general economic conditions, (ii) general changes or developments in the industries in which the Company and its Subsidiaries operate and (iii) facts or events that are primarily and directly attributable to the announcement of this Agreement and the Transactions. "Material Business" shall have the meaning ascribed to such term in ----------------- Section 7.03(d). "Material Contract" shall mean each contract, lease, indenture, ----------------- agreement, arrangement or understanding to which the Company or any of its Subsidiaries is a party or to which any of the properties, assets or operations of the Company or any of its Subsidiaries is subject that is material to the business, properties, assets, condition (financial and other) or results of operations of the Company and its Subsidiaries, taken as a whole, including any SEC Contract. "Merger" shall have the meaning ascribed to such term in Section 3.01. ------ "Merger Consideration" shall mean, as to any Certificate, the amount -------------------- to be paid to the holder thereof pursuant to the Merger, which amount shall be equal to the product of the number of shares of Company Common Stock evidenced by such Certificate, multiplied by the Per Share Merger Consideration. "Minimum Tender Condition" shall have the meaning ascribed to such ------------------------ term in Annex B. "NASD" shall mean the National Association of Securities Dealers, Inc. ---- "Offer" shall have the meaning ascribed to such term in the recitals ----- to the Agreement. 8 "Offer Closing Date" shall mean the date on which the acceptance for ------------------ payment and payment by Purchaser for shares of Company Common Stock tendered pursuant to the Offer occurs. "Offer Documents" shall have the meaning ascribed to such term in --------------- Section 2.01(c). "Option Agreement" shall have the meaning ascribed to such term in the ---------------- recitals to the Agreement. "Order" shall mean any judgment, order or decree of any Court or ----- Governmental Authority, federal, foreign, state or local. "Parent" shall mean GEC Incorporated, a Delaware corporation. ------ "Parent Companies" shall have the meaning ascribed to such term in the ---------------- first paragraph of the Agreement. "Patents" shall have the meaning ascribed to such term in Section ------- 5.18. "Paying Agent" shall mean a bank or trust company designated and ------------ appointed by Parent to act in the capacities required thereof under Section 4.02. "PBGC" shall mean the Pension Benefit Guaranty Corporation. ---- "Per Share Merger Consideration" shall have the meaning ascribed to ------------------------------ such term in Section 4.01(a). "Permits" shall mean any and all permits, licenses, authorizations, ------- orders, certificates, registrations or other approvals granted by any Governmental Authority. "Person" shall mean an individual, partnership, limited liability ------ company, corporation, joint stock company, trust, estate, joint venture, association or unincorporated organization, or any other form of business or professional entity, but shall not include a Governmental Authority. "Proprietary Information" shall have the meaning ascribed to such term ----------------------- in Section 5.18. "Proxy Statement" shall mean a proxy statement conforming to the --------------- requirements of the Exchange Act and 9 relating to the adoption of this Agreement by the Company's stockholders, if such adoption is required by Law. "Purchaser" shall mean GEC Acquisition Corp., a Delaware corporation --------- and a wholly owned Subsidiary of Parent. "Qualifying Proposal" shall have the meaning ascribed to such term in ------------------- Section 7.03(d). "Regulation" shall mean any rule or regulation of any Governmental ---------- Authority having the effect of Law. "Reports" shall mean, with respect to a specified Person, all reports, ------- registrations, filings and other documents and instruments required to be filed by the specified Person or any of its Subsidiaries with any Governmental Authority (other than the SEC). "Representatives" shall have the meaning ascribed to such term in --------------- Section 7.03(a). "Restricted Stock" shall have the meaning ascribed to such term in ---------------- Section 3.06(a). "Schedule 14D-1" shall have the meaning ascribed to such term in -------------- Section 2.01(c). "Schedule 14D-9" shall have the meaning ascribed to such term in -------------- Section 2.02. "SEC" shall mean the Securities and Exchange Commission. --- "SEC Contract" shall mean any "material contract" within the meaning ------------ of Item 10 of Regulation S-K promulgated by the SEC. "SEC Reports" shall mean (a) all Annual Reports on Form 10-K, (b) all ----------- Quarterly Reports on Form 10-Q, (c) all proxy statements relating to meetings of stockholders (whether annual or special), (d) all Current Reports on Form 8-K and (e) all other reports, schedules, registration statements or other documents required to be filed during a specified period by a Person with the SEC pursuant to the Securities Act or the Exchange Act. "Section 262" shall have the meaning ascribed to such term in Section ----------- 4.03. 10 "Securities Act" shall mean the Securities Act of 1933 and the -------------- Regulations promulgated thereunder. "Software" shall have the meaning ascribed to such term in Section -------- 5.18. "Stockholders Agreement" shall have the meaning ascribed to such term ---------------------- in the recitals to this Agreement. A "Subsidiary" of a specified Person shall mean any corporation, ---------- partnership, limited liability company, joint venture or other legal entity of which the specified Person (either alone or through or together with any other Subsidiary) owns, directly or indirectly, 50% or more of the stock or other equity or partnership interests the holders of which are generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. "Surviving Corporation" shall mean the Company as the corporation --------------------- surviving the Merger. "Tax" or "Taxes" shall mean all Federal, state, county, local, --- ----- municipal, foreign and other taxes, assessments, duties or similar charges of any kind whatsoever, including all corporate franchise, income, sales, use, ad valorem, receipts, value added, profits, license, withholding, payroll, employment, excise, premium, property, customs, net worth, capital gains, transfer, stamp, documentary, social security, environmental, alternative minimum, occupation, recapture and other taxes, and including all interest, penalties and additions imposed with respect to such amounts, and all amounts payable pursuant to any agreement or arrangement with respect to Taxes. "Taxing Authority" shall mean any domestic, foreign, federal, ---------------- national, state, county or municipal or other local government, any subdivision, agency, commission or authority thereof, or any quasi-governmental body exercising tax regulatory authority. "Tax Return" or "Tax Returns" shall mean all returns, declarations of ---------- ----------- estimated tax payments, reports, estimates, information returns and statements, including any related or supporting information with respect to any of the foregoing, filed or to be filed with any Taxing Authority in connection with the determination, assessment, collection or administration of any Taxes. 11 "Terminated Benefit Plans" shall mean Benefit Plans that were ------------------------ sponsored, maintained, or contributed to by the Company or any of its Subsidiaries within six years prior to the date of the Agreement but which have been terminated prior to the date of the Agreement. "Termination Date" shall have the meaning ascribed to such term in ---------------- Section 9.01(c). "Termination Fee" shall have the meaning ascribed to such term in --------------- Section 9.05(b). "Third Party Acquisition" shall mean (a) the acquisition of the ----------------------- Company by merger, consolidation, share exchange, recapitalization, liquidation, dissolution, business combination or other similar transaction by any Person (which includes for these purposes a "person" as defined in Section 13(d)(3) of the Exchange Act) other than Parent, Purchaser or any Affiliate thereof (a "Third Party"); (b) the acquisition by a Third Party of more than 50% of the - ------------ assets of the Company and its Subsidiaries, taken as a whole; (c) the acquisition by a Third Party of 50% or more of the outstanding Company Common Stock or 50% or more of the aggregate ordinary voting power represented by the issued and outstanding capital stock of the Company; (d) the adoption by the Company of a plan of liquidation or the declaration or payment of an extraordinary dividend; or (e) the purchase by the Company or any of its Subsidiaries of more than 30% of the outstanding shares of Company Common Stock. "Trademarks" shall have the meaning ascribed to such term in Section ---------- 5.18. "Transaction Agreements" shall mean, collectively, the Agreement, the ---------------------- Stockholders Agreement and the Option Agreement. "Transactions" shall mean, collectively, the transactions contemplated ------------ by the Transaction Agreements. "Voting Company Debt" shall have the meaning ascribed to such term in ------------------- Section 5.03(e). ANNEX B CONDITIONS OF THE OFFER (a) Notwithstanding any other term of the Offer or the Agreement, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-l(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered shares of Company Common Stock promptly after the termination or withdrawal of the Offer), to pay for any shares of Company Common Stock tendered pursuant to the Offer unless (i) there shall have been validly tendered and not withdrawn prior to the expiration of the Offer that number of shares of Company Common Stock which would represent at least a majority of the Fully Diluted Shares (the "Minimum Tender Condition"), (ii) any waiting period under the HSR Act ------------------------ applicable to the purchase of shares of Company Common Stock pursuant to the Offer shall have expired or been terminated, (iii) the approvals under the European Antitrust Laws shall have been obtained from the applicable Governmental Authority and (iv) the period of time for any applicable review process by CFIUS under Exon-Florio shall have expired, and CFIUS shall not have taken any action or made any recommendation to the President of the United States to block or prevent the consummation of the Offer or the Merger. The term "Fully Diluted Shares" means all outstanding securities entitled generally -------------------- to vote in the election of directors of the Company on a fully diluted basis, after giving effect to the exercise or conversion of all options, warrants, rights and securities exercisable or convertible into such voting securities. (b) Furthermore, notwithstanding any other term of the Offer or the Agreement, Purchaser shall not be required to commence the Offer, accept for payment or, subject as aforesaid, pay for any shares of Company Common Stock not theretofore accepted for payment or paid for, and may terminate or amend the Offer, with the consent of the Company or if, at any time on or after the date of the Agreement and before the acceptance of such shares for payment or the payment therefor, any of the following conditions exists: (i) any representation and warranty of the Company in this Agreement that is qualified as 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 material respect, as of the date of the Agreement and as of such time, except to the extent such 2 representation and warranty expressly relates to an earlier date (in which case on and as of such earlier date) (provided that, in each -------- case, the condition set forth in this clause (i) shall be deemed satisfied so long as any failures of such representations and warranties to be true and correct, individually or in the aggregate, have not had and would not reasonably be expected to have a Material Adverse Effect on the Company); (ii) the Company shall have breached any of its covenants or agreements contained in the Agreement or the Option Agreement which materially adversely affects (or materially delays) the consummation of the Offer (it being understood that a breach of Section 7.12 of the Agreement shall not result in a failure of this condition to be satisfied unless such breach results in the failure of the condition specified in paragraph (i) above); or (iii) there shall be threatened or pending any suit, action or proceeding by any Governmental Authority, or any suit, action or proceeding brought by any other Person that has a reasonable likelihood of success, (A) challenging the acquisition by Parent or Purchaser of any Company Common Stock, seeking to restrain or prohibit the making or consummation of the Offer or the Merger, or seeking to obtain from the Company, Parent or any of their respective Subsidiaries or Affiliates any damages in an amount that would result in a Material Adverse Effect in respect of the Company, taken as a whole, and in the case of Parent or any of its Subsidiaries or Affiliates relating to the Transaction, (B) seeking to prohibit or limit the ownership or operation by the Company, Parent or any of their respective Subsidiaries or Affiliates of any Material portion of the business or assets of the Company, Parent or any of their respective Subsidiaries or Affiliates, or to compel the Company, Parent or any of their respective Subsidiaries or Affiliates to dispose of or hold separate any Material portion of the business or assets of the Company, Parent or any of their respective Subsidiaries or Affiliates, as a result of the Offer, the Merger or any of the other Transactions or (C) which otherwise is reasonably likely to have a Material Adverse Effect on the Company; 3 (iv) there shall be any statute, rule, regulation, legislation, interpretation, judgment, order or injunction threatened, proposed, sought, enacted, entered, enforced, promulgated, amended or issued with respect to, or deemed applicable to, or any consent or approval withheld with respect to, (A) Parent, the Company or any of their respective Subsidiaries or Affiliates or (B) the Offer or the Merger by any Governmental Authority that has or is reasonably likely to result, directly or indirectly, in any of the consequences referred to in paragraph (iii) above; (v) except as disclosed in the Company Disclosure Letter, since the date of the Agreement there shall have occurred any event, change, effect or development that, individually or in the aggregate, has had or is reasonably likely to have, a Material Adverse Effect on the Company; (vi) there shall have occurred and be continuing (A) any general suspension of trading in, or limitation on prices for, securities on any national securities exchange or in the over-the-counter market in the United States or in the United Kingdom,(B) a declaration of a banking moratorium by any Governmental Authority or any suspension of payments by any Governmental Authority in respect of banks in the United States or in the United Kingdom, (C) any general limitation (whether or not mandatory) by any Governmental Authority in the United States or in the United Kingdom on the extension of credit by banks or other lending institutions or (D) in the case of any of the foregoing existing on the date of the Agreement, a material acceleration or worsening thereof; (vii) any Person (which includes a "person" as such term is defined in Section 13(d)(3) of the Exchange Act) other than Purchaser, any of its Affiliates, or any group of which any of them is a member shall have acquired beneficial ownership of more than 15% of the outstanding shares of Company Common Stock or shall have entered into a definitive agreement or an agreement in principle with the Company with respect to a tender offer or exchange offer for any shares of Company Common Stock or a merger, consolidation or other business combination with or involving the Company or any of its Subsidiaries; or 4 (viii) the Agreement shall have been terminated in accordance with its terms; which, in the sole and reasonable judgment of Purchaser or Parent, in any such case, and regardless of the circumstances giving rise to any such condition (including any action or inaction by Parent or any of its Affiliates), makes it inadvisable to proceed with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Purchaser and Parent and may be asserted by Purchaser or Parent regardless of the circumstances giving rise to such condition or may be waived by Purchaser and Parent in whole or in part at any time and from time to time in their sole and reasonable judgment; provided that the Minimum Tender Condition may be waived or -------- modified only by the mutual consent of Purchaser and the Company. The failure by Parent, Purchaser or any other Affiliate of Parent at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and circumstances shall not be deemed a waiver with respect to any other facts and circumstances and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. EX-99.(2)(C) 5 STOCK OPTION AGREEMENT Exhibit (2)(c) EXECUTION COPY STOCK OPTION AGREEMENT dated as of April 26, 1999, between FORE SYSTEMS, INC., a Delaware corporation ("Issuer"), and GEC ------ ACQUISITION CORP., a Delaware corporation ("Grantee"). ------- WHEREAS, concurrently with the execution and delivery of this Agreement, Issuer, Grantee and GEC Incorporated ("Parent") have entered into an ------ Agreement and Plan of Merger (as the same may be amended or supplemented, the "Merger Agreement"; terms used but not defined herein have the meanings set - ----------------- forth in the Merger Agreement), providing for, among other things, the merger of Grantee with and into Issuer whereby Issuer will be the surviving corporation and will be a wholly owned subsidiary of Parent; and WHEREAS, as a condition and inducement to Grantee's and Parent's willingness to enter into the Merger Agreement, Grantee and Parent have requested that Issuer agree, and Issuer has agreed, to grant Grantee the Option (as defined below). NOW, THEREFORE, the parties hereto agree as follows: SECTION 1. Grant of Option. Subject to the terms and conditions set ---------------- forth herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase up to 23,187,340 (as adjusted as set forth herein) shares ------ (the "Option Shares") of Common Stock, par value $.01 per share ("Issuer Common ------------- ------------- Stock"), of Issuer at a purchase price of $35.00 (as adjusted as set forth - ----- herein) per Option Share (the "Purchase Price"); provided, however, that in no -------------- -------- ------- event shall the number of shares for which this Option is exercisable exceed 19.9% of the issued and outstanding shares of Issuer Common Stock. SECTION 2. Exercise of Option. (a) Grantee may exercise the Option, ------------------- with respect to any of or all the Option Shares at any time or from time to time, subject to the provisions of Section 2(c), (i) after the occurrence of any event as a result of which the Grantee is entitled (without any further contingencies) to receive a Termination Fee pursuant to the terms of the Merger Agreement (a "Purchase Event") and (ii) following Grantee's acceptance of shares -------------- of Issuer Common Stock for payment pursuant to the Offer, to the extent the effect of such exercise would result in Parent owning, directly or indirectly, immediately 2 after such exercise 90% of the then outstanding shares of Issuer Common Stock (a "Top Up Event"); provided, however, that (i) except as provided ------------ -------- ------- in the last sentence of this Section 2(a), the Option shall terminate and be of no further force and effect upon the earliest to occur of (A) the Effective Time, (B) 15 months after the occurrence of a Purchase Event (including any Purchase Event occurring after termination of the Merger Agreement), and (C) termination of the Merger Agreement in accordance with its terms prior to the occurrence of any Purchase Event, unless, in the case of this clause (C), Grantee is or may be entitled to receive a Termination Fee under the Merger Agreement following such termination pursuant to Section 9.05(b)(i) (but only to the extent the Merger Agreement was terminated pursuant to Section 9.01(e)(iv) thereof), 9.05(b)(ii) or 9.05(b)(iii) of the Merger Agreement, in which case the Option shall not terminate pursuant to this clause (C) until Grantee could no longer under any circumstances become entitled to receive a Termination Fee. Any purchase of Option Shares upon exercise of the Option shall be subject to compliance with the HSR Act and the obtaining or making of any consents, approvals, orders, notifications or authorizations (the "Regulatory Approvals"), -------------------- the failure of which to have obtained or made would have the effect of making the issuance of Option Shares unlawful. Notwithstanding the termination of the Option, Grantee shall be entitled to purchase the Option Shares if it has exercised the Option in accordance with the terms hereof prior to the termination of the Option and the termination of the Option shall not affect any rights hereunder that by their terms do not terminate or expire prior to or as of such termination. (b) The exercise of the Option shall be effected by Grantee sending to Issuer a written notice (an "Exercise Notice"; the date of which being herein --------------- referred to as the "Notice Date") to that effect. An Exercise Notice shall ----------- specify the number of Option Shares Grantee wishes to purchase pursuant to this Section 2(b), whether such exercise is the result of a Purchase Event or a Top Up Event, the denominations of the certificate or certificates evidencing the Option Shares that Grantee wishes to purchase pursuant to this Section 2(b) and a date (subject to obtaining applicable Regulatory Approvals) not earlier than three business days from the Notice Date for the closing of such purchase (the "Option Closing Date"). Any Option Closing will be at the offices of Cravath, - -------------------- Swaine & Moore, Worldwide Plaza, 825 Eighth Avenue, New York, New York 10019 at 10:00 a.m. (New York City time) on the applicable Option Closing Date or at such later date as may be necessary so as to comply with clause (ii) of Section 2(a). 3 (c) Notwithstanding anything to the contrary contained herein, any exercise of the Option and purchase of Option Shares shall be subject to compliance with applicable Laws and Regulations, which may prohibit the purchase of all the Option Shares specified in the Exercise Notice without first obtaining or making certain Regulatory Approvals. In such event, if the Option is otherwise exercisable and Grantee wishes to exercise the Option, the Option may be exercised in accordance with Section 2(b) and Grantee shall acquire the maximum number of Option Shares specified in the Exercise Notice that Grantee is then permitted to acquire under the applicable Laws and Regulations, and if Grantee thereafter obtains the Regulatory Approvals to acquire the remaining balance of the Option Shares specified in the Exercise Notice, then Grantee shall be entitled to acquire such remaining balance. Issuer agrees to use its reasonable best efforts to assist Grantee in seeking the Regulatory Approvals. SECTION 3. Payment and Delivery of Certificates. (a) At any Option ------------------------------------- Closing Date, Grantee shall pay to Issuer in immediately available funds by wire transfer to a bank account designated in writing by Issuer an amount equal to the Purchase Price multiplied by the number of Option Shares to be purchased at such Option Closing Date. (b) At any Option Closing Date, simultaneously with the delivery of immediately available funds as provided in Section 3(a), Issuer shall deliver to Grantee a certificate or certificates representing the Option Shares to be purchased at such Option Closing Date, which Option Shares shall be free and clear of all Liens. (c) Certificates for the Option Shares delivered at an Option Closing Date shall have typed or printed thereon a restrictive legend, which will read substantially as follows: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE." It is understood and agreed that the reference to restrictions arising under the Securities Act in the above legend will be removed by delivery of substitute certificate(s) without such reference if such Option Shares have been registered pursuant to the Securities Act, such Option Shares have been sold in reliance on and in accordance with Rule 144 under the Securities Act upon 4 receipt of an opinion of counsel to such effect in form and substance reasonably satisfactory to Issuer and its counsel or Grantee has delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel in form and substance reasonably satisfactory to Issuer and its counsel, to the effect that such legend is not required for purposes of the Securities Act. SECTION 4. Cash-Out Right. (a) To the extent the exercise of this --------------- Option is the result of a Purchase Event, during the period commencing on such Purchase Event and ending on the termination of the Option in accordance with Section 2, Grantee shall have the right (the "Cash-Out Right"), in lieu of -------------- exercising the Option, to surrender to Issuer for cancellation of the Option with respect to such number of Option Shares as Grantee specifies in the Cash- Out Notice (as hereinafter defined) in exchange for the payment by Issuer of an amount in cash (the "Cash-Out Amount") equal to the greater of (i) $0.05 per --------------- Option Share the subject of such Exercise Notice and (ii) such number of Option Shares multiplied by the amount by which (A) the average closing price, for the ten trading days commencing on the 12th trading day immediately preceding the Cash-Out Notice Date (as hereinafter defined), per share of Issuer Common Stock as quoted on the Nasdaq National Market (the "NASDAQ"), as reported in The Wall ------ -------- Street Journal (Northeast edition), or, if not reported thereby, any other - -------------- authoritative source (the "Closing Price") exceeds (B) the Purchase Price. ------------- (b) The Cash-Out Right may be exercised by Grantee sending to Issuer a written notice (a "Cash-Out Notice"; the date of which being herein referred --------------- to as the "Cash-Out Notice Date") indicating Grantee's election to exercise the -------------------- Cash-Out Right. A Cash-Out Notice shall specify the number of Option Shares covered by the portion of the Option to be surrendered to Issuer for cancellation and a date not earlier than three business days from the Cash-Out Notice Date for the closing of such cancellation and payment of the Cash-Out Amount in respect thereof. Such closing will be at an agreed location and time in New York, New York, on the date so specified. At such closing, Issuer shall pay to Grantee the Cash-Out Amount in immediately available funds by wire transfer to a bank account designated in writing by Grantee. (c) Notwithstanding the termination of the Option, Grantee shall be entitled to exercise its rights under this Section 4 if it has exercised such rights in accordance with the terms hereof prior to the termination of the Option. 5 SECTION 5. Profit Limitations. (a) Notwith-standing any other ------------------- provision of this Agreement, to the extent the exercise of this Option is the result of a Purchase Event, in no event shall the Total Option Profit (as hereinafter defined) exceed, when aggregated with the Termination Fee, in the aggregate $135 million and, if any payment to be made to Grantee otherwise would cause such aggregate amount to be exceeded, the Grantee, at its sole election, shall either (i) reduce the number of shares of Issuer Common Stock subject to this Option, (ii) deliver to the Issuer for cancellation Option Shares previously purchased by Grantee, (iii) pay cash to the Issuer, or (iv) any combination thereof, so that the Total Option Profit, when aggregated with such Termination Fee so paid to Grantee, shall not exceed $135 million after taking into account the foregoing actions, plus an additional amount, not in excess of $22.5 million, as reimbursement for out-of-pocket fees and expenses incurred by Parent, Purchaser or their respective Affiliates in connection with the Transactions, including all fees and expenses of their counsel, accountants, investment bankers, experts and consultants (collectively "Expenses"). -------- (b) Notwithstanding any other provision of this Agreement, to the extent the exercise of this Option is the result of a Purchase Event, this Option may not be exercised for a number of shares of Issuer Common Stock as would, as of the date of exercise, result in a Notional Total Option Profit (as hereinafter defined) which would exceed, when aggregated with the Termination Fee, in the aggregate $135 million, plus an additional amount, not in excess of $22.5 million, as reimbursement for Expenses, and, if it otherwise would exceed such amount, the Grantee, at its sole election, shall either (i) reduce the number of shares of Issuer Common Stock subject to such exercise, (ii) deliver to the Issuer for cancellation Option Shares previously purchased by Grantee, (iii) pay cash to the Issuer, or (iv) any combination thereof, so that the Notional Total Option Profit, when aggregated with such Termination Fee so paid to Grantee shall not exceed $135 million after taking into account the foregoing actions, plus an additional amount, not in excess of $22.5 million, as reimbursement for Expenses; provided, however, that this paragraph (b) shall not -------- ------- be construed as to restrict any exercise of the Option that is not prohibited hereby on any subsequent date. (c) As used herein, the term "Total Option Profit" shall mean the ------------------- aggregate amount (before taxes) of the following: (i) any Cash-Out Amount received or then entitled to be received by Grantee pursuant to Section 4, (ii) (x) the net consideration, if any, received by Grantee 6 pursuant to the sale of Option Shares (or any other securities into which such Option Shares are converted or exchanged) purchased by Grantee pursuant to an exercise of this Option following a Purchase Event to any unaffiliated party, valuing any non-cash consideration at its fair market value (as defined below), less (y) the Purchase Price and any cash paid by Grantee to Issuer pursuant to - ---- Section 5(a)(iii) or Section 5(b)(iii), as the case may be, and (iii) the net consideration, if any, received by Grantee from, the transfer of the Option (or any portion thereof) to any unaffiliated party, valuing any non-cash consideration at its fair market value (as defined below). (d) As used herein, the term "Notional Total Option Profit" with ---------------------------- respect to any number of shares of Issuer Common Stock as to which Grantee has delivered an Exercise Notice shall be the Total Option Profit determined as of the date of such proposal assuming that the Option were exercised on such date for such number of shares of Issuer Common Stock and assuming that such shares, together with all other Option Shares held by Grantee and its Affiliates as of such date, were sold for cash at the closing market price for the Issuer Common Stock as of the close of business on the preceding trading day (less customary brokerage commissions or underwriting discounts). (e) As used herein the "fair market value" of any non-cash ----------------- consideration consisting of: (i) securities listed on a national securities exchange or traded on the NASDAQ shall be equal to the average closing price per share of such security as reported on such exchange or NASDAQ for the five trading days after the date of determination; and (ii) consideration which is other than cash or securities of the form specified in clause (i) above shall be determined by a nationally recognized independent investment banking firm mutually agreed upon by the parties within five business days of the event requiring selection of such banking firm; provided, however, that if the parties are unable to agree -------- ------- within two business days after the date of such event as to the investment banking firm, then the parties shall each select one firm, and those firms shall select a third nationally recognized independent investment banking firm, which third firm shall make such determination. 7 SECTION 6. Representations and Warranties of Issuer. Issuer hereby ----------------------------------------- represents and warrants to Grantee as follows: (a) Issuer has taken all necessary corporate and other action to authorize and reserve and, subject to the expiration or termination of any required waiting period under the HSR Act, to permit it to issue, and, at all times from the date hereof until the obligation to deliver Option Shares upon the exercise of the Option terminates, shall have reserved for issuance, upon exercise of the Option, shares of Issuer Common Stock sufficient for Grantee to exercise the Option in full, and Issuer shall take all necessary corporate action to authorize and reserve for issuance all additional shares of Issuer Common Stock or other securities which may be issued pursuant to Section 8 upon exercise of the Option. (b) The shares of Issuer Common Stock to be issued upon due exercise of the Option, including all additional shares of Issuer Common Stock or other securities which may be issuable upon exercise of the Option or any other securities which may be issued pursuant to Section 8, upon issuance pursuant hereto, when paid for in accordance herewith, will be duly and validly issued, fully paid and nonassessable, and will be delivered free and clear of all liens, including any preemptive rights of any stockholder of Issuer. SECTION 7. Representations and Warranties of Grantee. Grantee hereby ------------------------------------------ represents and warrants to Issuer that any Option Shares purchased by Grantee will be acquired for investment only and not with a view to public distribution thereof, and Grantee will not offer to sell or otherwise dispose of any Option Shares so acquired by it in violation of the registration requirements of the Securities Act. SECTION 8. Adjustment upon Changes in Capitalization, Etc. (a) In ----------------------------------------------- the event of any change in Issuer Common Stock by reason of a stock dividend, split-up, merger, recapitalization, combination, exchange of shares, or similar transaction, the type and number of shares or securities subject to the Option, and the Purchase Price thereof, shall be adjusted appropriately, and proper provision will be made in the agreements governing such transaction, so that Grantee shall receive upon exercise of the Option the number and class of shares or other securities or property that Grantee would have received in respect of Issuer Common Stock if the Option had been exercised immediately prior to such event or the record date 8 therefor, as applicable. Subject to Section 1, and without limiting the parties' relative rights and obligations under the Merger Agreement, if any additional shares of Issuer Common Stock are issued after the date of this Agreement (other than pursuant to an event described in the first sentence of this Section 8(a)), the number of shares of Issuer Common Stock subject to the Option shall be adjusted so that, after such issuance, it equals 19.9% of the number of shares of Issuer Common Stock then issued and outstanding, without giving effect to any shares subject to or issued pursuant to the Option. (b) Without limiting the parties' relative rights and obligations under the Merger Agreement, in the event that Issuer enters into an agreement (i) to consolidate with or merge into any person, other than Grantee or one of its subsidiaries, and Issuer will not be the continuing or surviving corporation in such consolidation or merger, (ii) to permit any person, other than Grantee or one of its subsidiaries, to merge into Issuer and Issuer will be the continuing or surviving corporation, but in connection with such merger, the shares of Issuer Common Stock outstanding immediately prior to the consummation of such merger will be changed into or exchanged for stock or other securities of Issuer or any other person or cash or any other property, or the shares of Issuer Common Stock outstanding immediately prior to the consummation of such merger will, after such merger, represent less than 50% of the outstanding voting securities of the merged company, or (iii) to sell or otherwise transfer all or substantially all its assets to any person, other than Grantee or one of its subsidiaries, then, and in each such case, the agreement governing such transaction will make proper provision so that the Option will, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option with identical terms appropriately adjusted to acquire the number and class of stock or other securities or cash or other property that Grantee would have received in respect of Issuer Common Stock if the Option had been exercised immediately prior to such consolidation, merger, sale, or transfer, or the record date therefor, as applicable, and make any other necessary adjustments. SECTION 9. Registration Rights. Issuer shall, if requested by -------------------- Grantee at any time and from time to time within one year of the exercise of the Option, as expeditiously as possible prepare and file one, and only one, registration statement under the Securities Act if such registration is necessary in order to permit the sale or other disposition of any or all shares of securities that 9 have been acquired by or are issuable to Grantee upon exercise of the Option in accordance with the intended method of sale or other disposition stated by Grantee, including a "shelf" registration statement under Rule 415 under the Securities Act or any successor provision, and Issuer shall use reasonable best efforts to qualify such shares or other securities under any applicable state securities laws. Issuer shall use reasonable best efforts to cause such registration statement to become effective, to obtain all consents or waivers of other parties that are required therefor, and to keep such registration statement effective for such period not in excess of 180 calendar days from the day such registration statement first becomes effective (which period shall be extended for any period during which use of such registration statement is suspended after it becomes effective pursuant to the next sentence) as may be reasonably necessary to effect such sale or other disposition. The obligations of Issuer hereunder to file such registration statement and to maintain its effectiveness may be suspended for up to 45 calendar days in the aggregate if the Board of Directors of Issuer shall have determined that the filing of such registration statement or the maintenance of its effectiveness would require premature disclosure of material nonpublic information. Such registration statement prepared and filed under this Section 9, and any sale covered thereby, shall be at Issuer's expense except for underwriting discounts or commissions, brokers' fees and the fees and disbursements of Grantee's counsel related thereto. Grantee will provide all information reasonably requested by Issuer for inclusion in such registration statement to be filed hereunder. If, during the time periods referred to in the first sentence of this Section 9, Issuer effects a registration under the Securities Act of Issuer Common Stock for its own account or for any other stockholders of Issuer (other than on Form S-4 or Form S-8, or any successor form), it shall allow Grantee the right to participate in such registration, and such participation shall not affect the obligation of Issuer to effect the demand registration statement for Grantee under this Section 9; provided, however, that, if the managing underwriters of such offering advise Issuer in writing that in their opinion the number of shares of Issuer Common Stock requested to be included in such registration exceeds the number which can be sold in such offering, Issuer shall include the shares requested to be included therein by Grantee pro rata with the shares intended to be included therein by Issuer. In connection with such registration pursuant to this Section 9, Issuer and Grantee shall provide each other and any underwriter of the offering with customary representations, warranties, covenants, 10 indemnification, and contribution in connection with such registration. SECTION 10. Listing. If Issuer Common Stock or any other securities -------- to be acquired upon exercise of the Option are then traded on the NASDAQ (or any national securities exchange or other national securities quotation system), Issuer, upon the request of Grantee, will promptly file an application to list the shares of Issuer Common Stock or other securities to be acquired upon exercise of the Option on the NASDAQ (and any such national securities exchange or other national securities quotation system) and will use reasonable best efforts to obtain approval of such listing as promptly as practicable. SECTION 11. Loss or Mutilation. Upon receipt by Issuer of evidence ------------------- reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like tenor and date. Any such new Agreement executed and delivered will constitute an additional contractual obligation on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed, or mutilated shall at any time be enforceable by anyone. SECTION 12. Miscellaneous. (a) Expenses. Except as otherwise -------------- --------- provided in this Agreement or the Merger Agreement, each of the parties hereto will bear and pay all costs and expenses incurred by it or on its behalf in connection with the transactions contemplated hereunder, including fees and expenses of its own financial consultants, investment bankers, accountants, and counsel. (b) Amendment. This Agreement may not be amended, except by an ---------- instrument in writing signed on behalf of each of the parties. (c) Extension; Waiver. Any agreement on the part of a party to waive ------------------ any provision of this Agreement, or to extend the time for performance, will be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise will not constitute a waiver of such rights. (d) Entire Agreement; No Third-Party Beneficiaries. This Agreement ----------------------------------------------- and the Merger Agreement (including the documents and instruments attached thereto as 11 exhibits or schedules or delivered in connection therewith) (i) constitute the entire agreement, and supersede all prior agreements and understandings, both written and oral, between the parties with respect to the subject matter of this Agreement, and (ii) except as provided in Section 10.7 of the Merger Agreement, are not intended to confer upon any person other than the parties any rights or remedies. (e) GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY, AND CONSTRUED -------------- IN ACCORDANCE WITH, THE LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICT OF LAWS THEREOF. (f) Notices. All notices, requests, claims, demands, and other -------- communications under this Agreement shall be given in accordance with Section 10.2 of the Merger Agreement. (g) Assignment. Neither this Agreement, the Option nor any of the ----------- rights, interests, or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise, by Issuer or Grantee without the prior written consent of the other, except that Grantee may assign all its rights under Section 9 to any person who acquires from Grantee any Option Shares; provided, however, that Grantee may assign any of its rights, interests -------- ------- or obligations under this Agreement to Parent or any Affiliate of Parent without the consent of the Issuer, but no such assignment shall relieve Grantee of its obligations hereunder. Any purported assignment in violation of the preceding sentence will be void. Subject to the first and second sentences of this Section 12(g), this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and permitted assigns. (h) Further Assurances. In the event of any exercise of the Option ------------------- by Grantee, Issuer and Grantee will execute and deliver all other documents and instruments and take all other actions that may be reasonably necessary in order to consummate the transactions provided for by such exercise. 12 (i) Enforcement. The parties agree that irreparable damage would ------------ occur and that the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Delaware state court or any Federal court located in the State of Delaware, the foregoing being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of any Delaware state court or any Federal court located in the State of Delaware in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than any Delaware state court or any Federal court sitting in the State of Delaware and (iv) waives any right to trial by jury with respect to any action related to or arising out of this Agreement. IN WITNESS WHEREOF, Issuer and Grantee have duly executed this Agreement, all as of the day and year first written above. FORE SYSTEMS, INC., by ----------------------------- Name: Title: GEC ACQUISITION CORP., by ----------------------------- Name: Title: EX-99.(2)(D) 6 STOCKHOLDERS AGREEMENT Exhibit (2)(d) EXECUTION COPY STOCKHOLDER AGREEMENT, as of April 26, 1999, among GEC INCORPORATED, a Delaware corporation ("Parent"), GEC ACQUISITION ------ CORP., a Delaware corporation and a wholly owned subsidiary of Parent ("Purchaser"), and the persons listed on Schedule A hereto --------- (each a "Stockholder" and, collectively, the "Stockholders"). ----------- ------------ WHEREAS, concurrently with the execution of this Agreement, Parent, Purchaser and FORE Systems, Inc., a Delaware corporation (the "Company"), are ------- entering into an Agreement and Plan of Merger dated as of the date hereof (as the same may be amended or supplemented, the "Merger Agreement"; terms used but ---------------- not defined herein have the meanings set forth in the Merger Agreement) providing for the making of a cash tender offer (as such offer may be amended from time to time as permitted under the Merger Agreement, the "Offer") by ----- Purchaser for shares of Common Stock, par value $.01 per share, of the Company (the "Common Stock") and the merger of the Company and Purchaser (the "Merger"); ------------ ------ WHEREAS, each Stockholder is the beneficial owner of the shares of Common Stock set forth opposite such Stockholder's name on Schedule A hereto; such shares of Common Stock, as such shares may be adjusted by stock dividend, stock split, recapitalization, combination or exchange of shares, merger, consolidation, reorganization or other change or transaction of or by the Company, together with shares of Common Stock that may be acquired after the date hereof by such Stockholder, including shares of Common Stock issuable upon the exercise of options to purchase Common Stock (as the same may be adjusted as aforesaid), being collectively referred to herein as the "Shares" of such ------ Stockholder; and WHEREAS, as a condition to their willingness to enter into the Merger Agreement, Parent and Purchaser have requested that the Stockholders enter into this Agreement; NOW, THEREFORE, to induce Parent and Purchaser to enter into, and in consideration of their entering into, the Merger Agreement, and in consideration of the premises and the representations, warranties and agreements contained herein, the parties agree as follows: 2 SECTION 1. Agreement to Sell; Tender. -------------------------- (a) Subject to Section 8, as promptly as practicable following the expiration of the Offer (but in no event later than 10:00 a.m., New York City time, immediately after such expiration), each Stockholder hereby severally and not jointly agrees to sell to Purchaser, and Purchaser agrees to purchase, all the Shares owned by such Stockholder not tendered pursuant to Section 1(b) at a price per Share equal to the price per Share paid by Purchaser in the Offer (the "Offer Price"). The obligations of each Stockholder to sell its Shares pursuant ----------- to this Section 1(a) is conditioned upon Purchaser purchasing shares of Common Stock pursuant to the Offer. (b) In addition, each Stockholder hereby severally and not jointly agrees that if such Stockholder is directed to tender the Shares it owns as of the date hereof and any Shares it may acquire prior to the expiration of the Offer by Purchaser pursuant to the following sentence, it shall promptly tender all such Shares in the Offer, and it shall not withdraw any Shares so tendered (it being understood that the obligation contained in this sentence is unconditional, subject to Section 8). In the event that Purchaser wishes to direct a Stockholder to tender its Shares, Purchaser shall give written notice to such Stockholder to such effect and specifying the number (if less than all) of such Stockholder's Shares. Section 1(a) above shall be deemed satisfied upon completion of the purchase of such Shares in the Offer. (c) In addition, each Stockholder hereby severally and not jointly grants to Purchaser an irrevocable option (as to each Stockholder, the "Option") ------ to purchase any of or all the Shares owned by such Stockholder and any of or all the Shares for which any stock options owned by such Stockholder are then exercisable on the date the Option is exercised by the Purchaser (on any date, the "Vested Options") in each case at a price per Share equal to the Offer -------------- Price. Subject to Section 8, the Option may be exercised at any time and from time to time after any breach by such Stockholder of Section 4(b) or after Parent is entitled to a Termination Fee pursuant to the Merger Agreement as a result of a breach of Section 7.03 thereof. In the event that Purchaser wishes to exercise the Option as to a Stockholder, Purchaser shall give written notice (the date of such notice being called the "Notice Date") to such Stockholder and ----------- to the Company specifying the number (if less than all) of such Stockholder's Shares, including shares of Common Stock underlying Vested Options, and a 3 place, time and date not later than 10 Business Days from the Notice Date for the closing of such purchase. SECTION 2. Representations and Warranties of the Stockholders. Each --------------------------------------------------- Stockholder hereby represents and warrants to Parent and Purchaser as follows: (a) Authority. Such Stockholder has all requisite power and ---------- authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. If such Stockholder is not an individual, the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by such Stockholder. This Agreement has been duly executed and delivered by such Stockholder and constitutes a valid and binding obligation of the Stockholder enforceable against such Stockholder in accordance with its terms, except as the same may be limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws (as defined in the Merger Agreement) relating to creditors' rights generally and (b) legal principles of general applicability governing the application and availability of equitable remedies. Except for the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR --- Act"), neither the execution, delivery or performance of this Agreement by such - --- Stockholder nor the consummation by such Stockholder of the transactions contemplated hereby will (i) require any filing with, or permit, authorization, consent or approval of, any Governmental Authority (as defined in the Merger Agreement), (ii) result in a violation or breach of, or constitute (with or without due notice or lapse of time or both) a default under, or give rise to any right of termination, amendment, cancellation or acceleration under, or result in the creation of any Lien (as defined in the Merger Agreement) upon any of the properties or assets of such Stockholder under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, lease, license, permit, concession, franchise, contract, agreement or other instrument or obligation (a "Contract") to which such Stockholder is a party or by which such -------- Stockholder or any of such Stockholder's properties or assets, including such Stockholder's Shares, may be bound or (iii) violate any Order (as defined in the Merger Agreement) or any Law applicable to such Stockholder or any of such Stockholder's properties or assets, including such Stockholder's Shares, other than, in the case of clause (ii) above, such items that, individually or in the 4 aggregate, have not and could not reasonably be expected to have a material adverse effect on the ability of such Stockholder to perform its obligations under this Agreement. (b) The Shares. Such Stockholder's Shares and the certificates ----------- representing such Shares are now, and at all times during the term hereof will be, held by such Stockholder, or by a nominee or custodian for the benefit of such Stockholder, and such Stockholder is the legal and beneficial owner of and has good and marketable title to such Shares, free and clear of any Liens, proxies, voting trusts or agreements, understandings or arrangements, except for any such Liens or proxies arising hereunder. (c) Brokers. No broker, investment banker, financial advisor or -------- other person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of such Stockholder. (d) Merger Agreement. Such Stockholder understands and acknowledges ----------------- that Parent is entering into, and causing Purchaser to enter into, the Merger Agreement in reliance upon such Stockholder's execution and delivery of this Agreement. SECTION 3. Representations and Warranties of Parent and the ------------------------------------------------ Purchaser. Parent and the Purchaser hereby represent and warrant to the - ---------- Stockholders as follows: (a) Authority. Each of Parent and such Purchaser has the requisite ---------- corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by Parent and such Purchaser and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate action on the part of Parent and such Purchaser. This Agreement has been duly executed and delivered by Parent and such Purchaser and constitutes a valid and binding obligation of Parent and Purchaser enforceable in accordance with its terms, except as the same may be limited by (a) bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or other similar Laws relating to creditors' rights generally and (b) legal principles of general applicability governing the application and availability of equitable remedies. 5 (b) Securities Act. The Shares will be acquired in compliance with, --------------- and such Purchaser will not offer to sell or otherwise dispose of any Shares so acquired by it in violation of the registration requirements of, the Securities Act of 1933, as amended. SECTION 4. Covenants of the Stockholders. Each Stockholder agrees ------------------------------ as follows: (a) Such Stockholder shall not, except as contemplated by the terms of this Agreement, (i) sell, transfer, pledge, assign or otherwise dispose of, or enter into any Contract, option or other arrangement (including any profit sharing arrangement) or understanding with respect to the sale, transfer, pledge, assignment or other disposition of, the Shares to any person other than Purchaser or Purchaser's designee, (ii) enter into any voting arrangement, whether by proxy, voting agreement, voting trust, power-of-attorney or otherwise, with respect to the Shares or (iii) take any other action that would in any way restrict, limit or interfere with the performance of its obligations hereunder or the transactions contemplated hereby. (b) Subject to Section 11 hereof, until the Merger is consummated or the Merger Agreement is terminated, such Stockholder shall not, nor shall such Stockholder permit any investment banker, financial adviser, attorney, accountant or other representative or agent of such Stockholder to, directly or indirectly (i) solicit, initiate or encourage (including by way of furnishing information), or take any other action designed or reasonably likely to facilitate, any inquiries or the making of any proposal which constitutes, or may reasonably be expected to lead to, any Acquisition Proposal (as defined in the Merger Agreement) or (ii) participate in any discussions or negotiations regarding any Acquisition Proposal. Without limiting the foregoing, it is understood that any violation of the restrictions set forth in the preceding sentence by an investment banker, financial advisor, attorney, accountant or other representative or agent of such Stockholder shall be deemed to be a violation of this Section 4(b) by such Stockholder. (c) At any meeting of stockholders of the Company called to vote upon the Merger and the Merger Agreement or at any adjournment thereof or in any other circumstances upon which a vote, consent or other approval (including by written consent) with respect to the Merger and the Merger Agreement is sought, such Stockholder shall vote (or cause 6 to be voted) such Stockholder's Shares in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the other Transactions (as defined in the Merger Agreement). At any meeting of stockholders of the Company or at any adjournment thereof or in any other circumstances upon which the Stockholder's vote, consent or other approval is sought, the Stockholder shall vote (or cause to be voted) the Stockholder's Shares against (i) any merger agreement or merger (other than the Merger Agreement and the Merger), consolidation, combination, sale of substantial assets, reorganization, recapitalization, dissolution, liquidation or winding up of or by the Company or any other Acquisition Proposal (collectively, "Alternative Transactions") or ------------------------- (ii) any amendment of the Company's certificate of incorporation or bylaws or other proposal or transaction involving the Company or any of its subsidiaries, which amendment or other proposal or transaction would in any manner impede, frustrate, prevent or nullify the Offer, the Merger, the Merger Agreement or any of the other Transactions (collectively, "Frustrating Transactions"). ------------------------ SECTION 5. Grant of Irrevocable Proxy; Appointment of Proxy. (a) ------------------------------------------------- Each Stockholder hereby irrevocably grants to, and appoints, Patricia Hoffman and Thomas Edeus and any other individual who shall hereafter be designated by Parent, and each of them, such Stockholder's proxy and attorney-in-fact (with full power of substitution), for and in the name, place and stead of such Stockholder, to vote such Stockholder's Shares, or grant a consent or approval in respect of such Shares, at any meeting of stockholders of the Company or at any adjournment thereof or in any other circumstances upon which their vote, consent or other approval is sought, in favor of the Merger, the adoption by the Company of the Merger Agreement and the approval of the terms thereof and each of the other transactions contemplated by the Merger Agreement and against any Alternative Transaction or Frustrating Transaction. (b) Each Stockholder represents that any proxies heretofore given in respect of such Stockholder's Shares are not irrevocable, and that any such proxies are hereby revoked. (c) Each Stockholder hereby affirms that the irrevocable proxy set forth in this Section 5 is given in connection with the execution of the Merger Agreement, and that such irrevocable proxy is given to secure the performance of the duties of such Stockholder under this 7 Agreement. Such Stockholder hereby further affirms that the irrevocable proxy is coupled with an interest and may under no circumstances be revoked, subject to Section 8. Such Stockholder hereby ratifies and confirms all that such irrevocable proxy may lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is executed and intended to be irrevocable in accordance with the provisions of the General Corporation Law of the State of Delaware. Such irrevocable proxy shall be valid until the termination of this Agreement pursuant to Section 8. SECTION 6. Further Assurances. Each Stockholder will, from time to ------------------- time, execute and deliver, or cause to be executed and delivered, such additional or further transfers, assignments, endorsements, consents and other instruments as Parent or Purchaser may reasonably request for the purpose of effectively carrying out the transactions contemplated by this Agreement and to vest the power to vote such Stockholder's Shares as contemplated by Section 5. Parent and Purchaser jointly and severally agree to use reasonable efforts to take, or cause to be taken, all actions necessary to comply promptly with all legal requirements that may be imposed with respect to the transactions contemplated by this Agreement (including any applicable legal requirements of the HSR Act). SECTION 7. Assignment. Neither this Agreement nor any of the rights, ----------- interests or obligations hereunder shall be assigned by any of the parties without the prior written consent of the other parties, except that Purchaser may assign, in its sole discretion, any or all of its rights, interests and obligations hereunder to Parent or to an Affiliate (as defined in the Merger Agreement) of Parent, but no such assignment shall relieve Purchaser of any of its obligations under this Agreement. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by, the parties and their respective successors and assigns. Each Stockholder agrees that this Agreement and the obligations of such Stockholder hereunder shall attach to such Stockholder's Shares and shall be binding upon any person or entity to which legal or beneficial ownership of such Shares shall pass, whether by operation of law or otherwise, including such Stockholder's heirs, guardians, administrators or successors. SECTION 8. Termination. This Agreement shall terminate upon the ------------ earlier of (i) the Effective Time and (ii) the termination of the Merger Agreement in accordance with its terms, except that, with respect to each Stockholder, Section 1(c) shall (x) survive (A) any 8 termination pursuant to clause (ii) above in the event that such termination was the result of a breach by the Company of Section 7.03 of the Merger Agreement or (B) if at the time of such termination, such Stockholder is in breach Section 4(b) and (y) shall remain in effect so long as Purchaser has the right to exercise the option granted by the Company under the Option Agreement. SECTION 9. Stop Transfer. The Company agrees with, and covenants to, -------------- Parent and Purchaser that the Company shall not register the transfer of any certificate representing any Stockholder's Shares unless such transfer is made in accordance with the terms of this Agreement. SECTION 10. General Provisions. (a) Payments. All payments required ------------------- -------- to be made to any party to this Agreement shall be made by wire transfer of immediately available funds to an account designated by such party at least one trading day prior to such payment. (b) Expenses. All costs and expenses incurred in connection with --------- this Agreement and the transactions contemplated hereby shall be paid by the party incurring such expense. (c) Amendments. This Agreement may not be amended except by an ----------- instrument in writing signed by each of the parties hereto. (d) Notice. All notices and other communications hereunder shall be ------- in writing and shall be deemed given if delivered personally, telecopied (which is confirmed), sent by overnight courier (providing proof of delivery) or mailed by registered or certified mail (return receipt requested) 9 to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (i) if to Parent or Purchaser, to: GEC Incorporated and GEC Acquisition Corp. c/o Videojet Systems International, Inc. 1500 Mittel Boulevard Wood Dale, IL 60191-1073 Attention: Patricia A. Hoffman Telecopier No.: (630) 238-3998 with a copy to: Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, NY 10019-7475 Attention: Philip A. Gelston, Esq. Telecopy No: (212) 474-3700 and (ii) if to a Stockholder, to the address set forth under the name of such Stockholder on Schedule A hereto with a copy to: Morgan, Lewis & Bockius LLP One Oxford Centre 301 Grant Street Pittsburgh, PA 15219-6401 Attention: Marlee S. Myers Telecopier No.: (412) 569-3399 (e) Interpretation. When a reference is made in this Agreement to a --------------- Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Wherever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words 10 "without limitation". Words in the singular include the plural, and words in the plural include the singular. (f) Counterparts. This Agreement may be executed in multiple ------------- counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. (g) Entire Agreement; No Third-Party Beneficiaries. This Agreement ----------------------------------------------- (including the documents and instruments referred to herein) (i) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and (ii) is not intended to confer upon any person other than the parties hereto any rights or remedies hereunder. (h) Governing Law. This Agreement shall be governed by, and -------------- construed in accordance with, the Laws of the State of Delaware, regardless of the Laws that might otherwise govern under applicable principles of conflict of Law. (i) Publicity. Except as otherwise required by Law, court process or ---------- the rules of a national securities exchange or the Nasdaq National Market or as contemplated or provided in the Merger Agreement, for so long as this Agreement is in effect, no Stockholder shall issue or cause the publication of any press release or other public announcement with respect to the transactions contemplated by this Agreement or the Merger Agreement without the consent of Parent, which consent shall not be unreasonably withheld. SECTION 11. Stockholder Capacity. No person executing this Agreement --------------------- makes any agreement or understanding herein in his or her capacity as a director or officer of the Company or any subsidiary of the Company. Each Stockholder signs solely in his or her capacity as the beneficial owner of such Stockholder's Shares and nothing herein shall limit or affect any actions taken by a Stockholder in its capacity as an officer or director of the Company or any subsidiary of the Company to the extent specifically permitted by the Merger Agreement. SECTION 12. Performance by Purchaser. Parent covenants and agrees ------------------------- for the benefit of the Stockholders that it shall cause Purchaser to perform in full each obligation of Purchaser set forth in this Agreement. 11 SECTION 13. Enforcement. The parties agree that irreparable damage ------------ would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any federal court located in the State of Delaware or in any Delaware state court, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each of the parties hereto (i) consents to submit such party to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated hereby, (ii) agrees that such party will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that such party will not bring any action relating to this Agreement or any of the transactions contemplated hereby in any court other than a Federal court located in the state of Delaware or a Delaware state court and (iv) waives any right to trial by jury with respect to any claim or proceeding related to or arising out of this Agreement or any of the transactions contemplated hereby. The parties irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this Agreement or the transactions contemplated hereby in the courts of the State of Delaware or of the United States of America located in the State of Delaware, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 12 IN WITNESS WHEREOF, each of Parent and Purchaser has caused this Agreement to be signed by its officer or director thereunto duly authorized and each Stockholder has signed this Agreement, all as of the date first written above. GEC INCORPORATED, By________________________ Name: Title: GEC ACQUISITION CORP., By________________________ Name: Title: 13 STOCKHOLDERS -------------------------- Eric C. Cooper -------------------------- Robert D. Sansom 14 ACKNOWLEDGED AND AGREED TO AS TO SECTION 9: FORE SYSTEMS, INC., By________________________ Name: Title: 15 Schedule A ---------- Total number Total number of shares of shares underlying stock options ------------ ------------- Eric C. Cooper 2,154,978 960,000 Robert D. Sansom 2,776,558 606,000 -----END PRIVACY-ENHANCED MESSAGE-----