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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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THE PETERSEN COMPANIES, INC.
(NAME OF SUBJECT COMPANY)
THE PETERSEN COMPANIES, INC.
(NAME OF PERSON FILING STATEMENT)
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CLASS A COMMON STOCK, PAR VALUE $0.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
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716335 10 4
(CUSIP NUMBER OF CLASS OF SECURITIES)
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RICHARD S WILLIS
EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
THE PETERSEN COMPANIES, INC.
6420 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90048
(213) 782-2000
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE NOTICE
AND COMMUNICATIONS ON BEHALF OF PERSON FILING STATEMENT)
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WITH COPIES TO:
JOHN A. WEISSENBACH, ESQ.
DENNIS M. MYERS, ESQ.
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, ILLINOIS 60601
(312) 861-2000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is The Petersen Companies, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 6420 Wilshire Boulevard, Los Angeles, California 90048. The title
of the class of equity securities to which this Statement relates is the Class A
Common Stock, par value $0.01 per share, of the Company (the "Class A Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to a tender offer by EMAP Acquisition Corp., a
Delaware corporation ("Purchaser") and a wholly owned subsidiary of EMAP plc, an
English public limited company ("Parent"), disclosed in a Tender Offer Statement
on Schedule 14D-1, dated December 16, 1998 (the "Schedule 14D-1"), whereby
Purchaser has offered to purchase all of the outstanding shares of Class A
Shares and all of the outstanding shares of Class B Common Stock, par value
$0.01 per share, of the Company (the "Class B Shares" and, together with the
Class A Shares, the "Shares") at a price of $34.00 per Share (such price, or any
such higher price as may be paid in the Offer (as defined below), being referred
to herein as the "Offer Price"), net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated December 16, 1998 (the "Offer to Purchase"), and in the related
Letter of Transmittal (which together constitute the "Offer"), which are
incorporated by reference herein.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS: (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES THAT WOULD CONSTITUTE (X) A MAJORITY OF ALL OUTSTANDING SHARES OF CLASS A
SHARES AND (Y) A MAJORITY OF ALL OUTSTANDING SHARES, IN EACH CASE, ON A FULLY
DILUTED BASIS (WITHOUT GIVING EFFECT TO THE CONVERSION OF CLASS B SHARES INTO
CLASS A SHARES) ON THE DATE OF PURCHASE (THE "MINIMUM CONDITION"), (2) ANY
WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976,
AS AMENDED(THE "HSR ACT"), AND THE REGULATIONS THEREUNDER APPLICABLE TO THE
PURCHASE OF SHARES PURSUANT TO THE OFFER HAVING EXPIRED OR BEEN TERMINATED AND
(3) THE OFFER HAVING RECEIVED THE APPROVAL OF THE SHAREHOLDERS OF PARENT AT AN
EXTRAORDINARY GENERAL MEETING. The Company has represented and warranted to
Parent and Purchaser in the Merger Agreement that, as of the close of business
on December 14, 1998, (i) 26,871,538 Class A Shares and 7,886,290 Class B Shares
were issued and outstanding, (ii) 970,394 Class A Shares were issuable pursuant
to outstanding options ("Options"), (iii) 35,000 Class A Shares were issuable
pursuant to outstanding warrants ("Warrants"). Based on the foregoing and
assuming no additional Shares (or options, warrants or rights exercisable for,
or convertible securities convertible into Shares) have been issued since
December 14, 1998 (other than Shares issued pursuant to the exercise of the
Options and Warrants referred to above), if 13,938,467 Class A Shares and
17,881,612 Shares are validly tendered and not withdrawn prior to the Expiration
Date (as hereinafter defined) pursuant to the terms of the Offer, the Minimum
Condition will be satisfied.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of December 15, 1998 (the "Merger Agreement"), among Parent, Purchaser and
the Company, pursuant to which, as promptly as practicable following the
Expiration Date (as defined herein) and the satisfaction or waiver of certain
conditions, Purchaser will be merged with and into the Company (the "Merger"),
with the Company surviving as a wholly owned subsidiary of Parent (the
"Surviving Corporation"). The Merger Agreement is incorporated by reference
herein and is summarized in Item 3. The Offer is scheduled to expire at 12:00
midnight, New York City time, on Thursday, January 14, 1999 (the "Expiration
Date"), unless the Offer is extended.
In connection with the execution of the Merger Agreement, Parent and
Purchaser entered into a Stockholders' Agreement, dated as of December 15, 1998
(the "Stockholders Agreement"), with the Selling Stockholders (as defined in
Item 3(b)). Under the Stockholders Agreement, each of the Selling Stockholders
has, among other things, (i) agreed to tender pursuant to the Offer all Shares
owned by him, her
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or it, (ii) agreed to sell to Purchaser, subject to the terms and conditions of
the Stockholders Agreement, such Shares for a cash purchase price per Share
equal to the Offer Price, (iii) agreed to vote such Shares in favor of the
Merger and the Merger Agreement and (iv) granted to Parent and certain officers
of Parent an irrevocable proxy to vote such Shares in favor of the transactions
contemplated by the Merger Agreement. The Shares owned by the Selling
Stockholders and subject to the Stockholders Agreement, an aggregate of
18,406,656 Class A Shares and 7,886,290 Class B Shares, represented
approximately 66.0% of the Class A Shares and all of the Class B Shares
outstanding as of the close of business on December 14, 1998. As a result of the
Stockholders Agreement, Purchaser and Parent are deemed to be the beneficial
owners of such Shares.
All information contained in this Statement or incorporated herein by
reference concerning Purchaser, Parent or their affiliates, or actions or events
with respect to any of them, was provided to the Company by Purchaser or Parent,
and the Company takes no responsibility for the accuracy or completeness of such
information or for any failure by such entities to disclose events or
circumstances that may have occurred and may affect the significance,
completeness or accuracy of any such information.
According to the Schedule 14D-1, the address of the principal executive
offices of Parent and Purchaser is 1 Lincoln Court, Lincoln Road, Peterborough
PE1 2RF, England.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
Statement, is set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements and understandings between
the Company and certain of its directors and executive officers are described in
the Company's Information Statement pursuant to Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14f-1 thereunder (the "Information Statement")
dated the date hereof under "Information with Respect to the Company," "Security
Ownership of Certain Beneficial Owners and Management," "Information About
Executive Officers" and "Certain Relationships and Related Transactions." The
Information Statement is attached hereto as Annex A and incorporated herein by
reference. In addition, certain contracts, agreements, arrangements and
understandings relating to the Company and/or the Company's directors and
executive officers are contained in the Merger Agreement and are described below
under "Merger Agreement."
The following is a summary of certain provisions of the Merger Agreement
and the Stockholders Agreement, among Parent, Purchaser and Willis Stein &
Partners, L.P. ("Willis Stein"), Petersen Properties, Margie and Robert Petersen
Foundation, Chase Equity Associates, L.P., Allstate Insurance Company, Norwest
Equity Capital, L.L.C., Nassau Capital Partners II L.P., BankAmerica Investment
Corporation, CIVC Partners II, FUI, Inc., NAS Partners I L.L.C., James D.
Dunning, Jr., D. Claeys Bahrenburg, Laurence H. Bloch, Richard S Willis and
certain other stockholders of the Company (excluding Parent and Purchaser, the
"Selling Stockholders"). Each such summary is qualified in its entirety by
reference to the full text of the Merger Agreement and the Stockholders
Agreement, respectively, copies of which are filed as Exhibits (c)(1) and (c)(2)
to this Statement, respectively, and which are incorporated herein by reference.
Capitalized terms used and not otherwise defined herein shall have the meanings
assigned to them in the Merger Agreement. For the purposes of the Merger
Agreement and the Stockholders Agreement, "Company Material Adverse Effect"
means a material adverse effect on the business, results of operations or
financial condition of the Company and the Company Subsidiaries (as defined
below), taken as a whole, or prevents or materially delays the ability of the
Company to perform its obligations under the Merger Agreement or to consummate
the Offer, the Merger or the other transactions contemplated by the Merger
Agreement; provided, however, that in determining whether there has been a
"Company Material Adverse Effect," the following shall be disregarded: any
material adverse effect that results substantially from (i) the breach by Parent
or Purchaser of the Merger Agreement or (ii) any decline in the Company's stock
price (which shall not, in and of itself, constitute a "Material Adverse
Effect").
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MERGER AGREEMENT
The Offer. Provided that the Merger Agreement has not been terminated in
accordance with its terms and that none of the conditions set forth in Exhibit A
thereto have occurred and be continuing, Parent and Purchaser have agreed to,
promptly after the public announcement of the execution and delivery of the
Merger Agreement commence the Offer. The obligation of Purchaser to accept for
payment and to pay for any Shares tendered in the Offer is subject only to the
condition that there shall be validly tendered prior to the expiration date of
the Offer and not withdrawn a number of Shares which, together with the Shares
then owned by Parent or Purchaser, represents (x) a majority of the outstanding
shares of Class A Shares and (y) a majority of the outstanding Shares, in each
case on a fully diluted basis, after giving effect to the exercise or conversion
of all options, rights and securities exercisable or convertible into such
securities (other than conversion of the Class B Shares) ("Fully Diluted
Shares"), on the date of purchase (the "Minimum Condition"), and to the other
conditions set forth in Exhibit A thereto.
Parent and Purchaser have expressly reserved the right to modify the terms
of the Offer, except that, without the prior written consent of the Company,
neither Parent nor Purchaser can (i) decrease the price per Share or change the
form of consideration payable in the Offer, (ii) decrease the number of Shares
sought in the Offer, (iii) amend or waive satisfaction of the Minimum Condition,
(iv) impose additional conditions to the Offer or amend in any manner adverse to
the holders of Shares any condition to the Offer, (v) amend any other term of
the Offer in any manner adverse in any respect to the holders of Shares, or (vi)
except as provided in the next sentence, extend the expiration date of the
Offer. Notwithstanding the foregoing, subject to the Company's rights to
terminate the Merger Agreement and so long as neither Parent nor Purchaser has
breached any of its representations and warranties or obligations pursuant to
the Merger Agreement, Purchaser may, without the consent of the Company, (i)
extend the Offer, if at the then scheduled expiration date of the Offer any of
the conditions to Purchaser's obligation to purchase Shares is not satisfied,
until such time as such condition is satisfied or waived, (ii) extend the Offer
for a period of not more than five (5) business days beyond the then scheduled
expiration date of the Offer, if on the date of such extension less than (x) 90%
of the outstanding shares of Class A Shares or (y) 90% of the outstanding shares
of Class B Shares have been validly tendered and not properly withdrawn pursuant
to the Offer, and (iii) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange Commission
(the "SEC") or the staff thereof applicable to the Offer. Assuming the prior
satisfaction or waiver of the conditions to the Offer, upon the terms of the
Offer, the Purchaser will accept for payment and purchase, as soon as
practicable after the expiration of the Offer, all Shares validly tendered and
not withdrawn prior to the expiration of the Offer; provided, however, that
Purchaser shall only be entitled to purchase the Shares if it purchases all such
Shares pursuant to the Offer.
Conditions to the Offer. Notwithstanding any other provision of the Offer
or the Merger Agreement, Purchaser will 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 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, and may terminate
or amend the Offer if (i) as of immediately prior to the expiration of the
Offer, (A) the Minimum Condition shall not have been satisfied or (B) the
applicable waiting period under the HSR Act shall not have expired or been
terminated or (ii) prior to the acceptance for payment of or payment for Shares
and at any time on or after the date of the Merger Agreement, any of the
following conditions shall have occurred and be continuing:
(a) there shall be issued by any U.S. Federal or state court of competent
jurisdiction in connection with any legal proceeding, any final or
nonappealable order, ruling or injunction (that has not been vacated,
withdrawn or overturned), (i) restraining or prohibiting the acquisition
by Parent or Purchaser of any Shares under the Offer or the making or
consummation of the Offer or the Merger or the performance of any of the
other transactions contemplated by the Merger Agreement, or obtaining
from the Company, or Purchaser any damages in connection with the
aforesaid transactions that are material in relation to the Company and
its subsidiaries taken as a whole, (ii) prohibiting or materially
limiting the ownership or operation by the Company, Parent or any of
their respective subsidiaries of a material portion of the business or
assets of the Company
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and its subsidiaries, or Parent and its subsidiaries, in each case taken
as a whole, or compelling the Company or Parent to dispose of or hold
separate any material portion of the business or assets of the Company
and its subsidiaries, or Parent and its subsidiaries, in each case taken
as a whole, as a result of the Offer or any of the other transactions
contemplated by the Merger Agreement, (iii) seeking to impose material
limitations on the ability of Parent or Purchaser to acquire or hold, or
exercise full rights of ownership of, any Shares to be accepted for
payment pursuant to the Offer including, without limitation, the right
to vote such Shares on all matters properly presented to the
stockholders of the Company, or (iv) prohibiting Parent or any of its
subsidiaries from effectively controlling in any material respect any
significant portion of the business or operations of the Company and its
subsidiaries taken as a whole;
(b) The Company shall not have performed or complied in any material
respect with any obligation or to comply in any material respect with
any agreement or covenant required by the Merger Agreement to be
performed or complied with by the Company on or prior to the date of
consummation of the Offer, which failure to perform or comply is not
substantially cured within 15 days after Parent provides the Company
with notice of such failure;
(c) Any breach of the representations and warranties of the Company set
forth in the Merger Agreement, other than any breach that individually
or in the aggregate with each other such breach has not had and would
not reasonably be expected to have a Company Material Adverse Effect;
provided, that for purposes of this paragraph (c) each such
representation and warranty of the Company set forth in the Merger
Agreement shall be read without giving effect to any qualification as to
materiality or a Company Material Adverse Effect;
(d) The Merger Agreement shall have been terminated in accordance with its
terms;
(e) Parent and the Company shall have agreed that Parent shall terminate
the Offer;
(f) There shall be any statute, rule or regulation applicable to the Offer
or the Merger, or any other action shall be taken by any federal, state,
local or foreign government or any court of competent jurisdiction, or
other governmental, administrative or regulatory authority, commission
or agency, domestic or foreign (each a "Governmental Entity"), that
results, directly or indirectly, in any of the consequences referred to
in clauses (i) through (iv) of paragraph (a) above; or
(g) the Parent Shareholder Approval (as defined herein) shall not have
been obtained.
The foregoing conditions in paragraphs (a) through (g) 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 discretion. 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.
The Merger. The Merger Agreement provides that following the satisfaction
or waiver of the conditions described below under "Conditions to the Merger"
Purchaser will be merged with and into the Company in accordance with Delaware
General Corporation Law (the "DGCL"), whereupon the separate existence of
Purchaser shall cease, and the Company shall be the Surviving Corporation.
Notwithstanding the foregoing, Parent may elect at any time prior to the Merger,
instead of merging Purchaser into the Company to merge the Company with and into
Purchaser.
Conversion of Shares. At the effective time of the Merger (the "Effective
Time") by virtue of the Merger and without any action on the part of the holders
of any Shares or any shares of capital stock of Purchaser, each Share
outstanding immediately prior to the Effective Time shall, except as otherwise
provided in the Merger Agreement be converted into the right to receive $34.00,
or any higher price per Share paid in the Offer, in cash without any interest
thereon (the "Merger Consideration"). As of the Effective Time, all
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Shares shall no longer be outstanding and shall automatically be cancelled and
retired and shall cease to exist, and each holder of a certificate representing
any Shares shall cease to have any rights with respect thereto, except the right
to receive Merger Consideration upon surrender of such certificate in accordance
with the Merger Agreement, without interest.
Stockholders' Meetings. Unless Parent or Purchaser acquires at least (x)
90% of the outstanding shares of the Class A Shares, and (y) 90% of the
outstanding shares of Class B Shares, in which case Parent has agreed to cause
the Merger to become effective as soon as practicable after the expiration of
the Offer without a vote of the Company's stockholders as permitted under the
DGCL, if required by applicable law the Company has agreed to cause a special
meeting of its stockholders (the "Company Stockholders Meeting") to be duly
called and held as soon as reasonably practicable after the purchase of Shares
pursuant to the Offer for the purpose of acting upon proposals to adopt the
Merger Agreement and all actions contemplated hereby that require the approval
of the Company's stockholders. The Board has agreed to recommend approval and
adoption of the Merger Agreement by the Company's stockholders, unless the Board
after consultation with and based upon advice of legal counsel (who may be the
Company's regularly engaged legal counsel) determines in good faith that such
action is necessary for the Board to comply with its fiduciary duties to
stockholders under applicable law.
In addition, Parent has agreed to cause an extraordinary general meeting of
its shareholders (the "Parent Shareholders Meeting") to be duly called and held
as soon as reasonably practicable and in no event later than January 4, 1999 for
the purpose of acting upon proposals to approve the Merger Agreement and all
actions contemplated hereby that require the approval of Parent's shareholders.
Unless otherwise required pursuant to their fiduciary duties to Parent's
shareholders (as determined in good faith by the Directors of Parent based upon
the advice of independent legal counsel), the Directors of Parent have agreed
not to modify, withdraw or otherwise change their prior recommendation that the
Parent's shareholders approve the Merger Agreement and all actions contemplated
hereby that require the approval of Parent's shareholders.
Conditions to the Merger. The respective obligations of the Company,
Parent and Purchaser to consummate the Merger are subject to the satisfaction or
waiver on or prior to the closing date of the following conditions:
(a) if required by the DGCL, the Merger shall have been approved by the
affirmative vote of the holders of a majority of the combined voting
power of then outstanding Shares;
(b) any applicable waiting period (and any extension thereof) under the
HSR Act relating to the Merger shall have expired or been terminated;
(c) no Governmental Entity shall have enacted, issued or enforced any
statute, regulation ("Law") or, decree, injunction or other order (an
"Order") which has become final and nonappealable and which prohibits
the consummation of the Merger; provided, however, that each of the
Company, Purchaser and Parent shall have used its best efforts to
prevent the entry of any such Order and to appeal as promptly as
possible any such Order that may be entered prior to it having become
final and nonappealable; and
(d) Purchaser shall have purchased pursuant to the Offer all Shares
validly tendered prior to the expiration thereof and not withdrawn or
shall have purchased pursuant to the Stockholders Agreement all Shares
tendered thereunder.
Termination of the Merger Agreement. The Merger Agreement may be
terminated and the transactions contemplated thereby may be abandoned at any
time prior to the Effective Time (notwithstanding any approval and adoption of
the Merger Agreement by the stockholders of the Company and by the shareholders
of Parent):
(a) by mutual written consent of the Company and Parent;
(b) by either Parent or the Company, if any permanent injunction or action
by any Governmental Entity or by any federal or state court of competent
jurisdiction (other than a temporary restraining order) preventing the
consummation of the Merger shall have become final and nonappealable;
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(c) by either Parent or the Company, if the Merger shall not have been
consummated before June 30, 1999, unless the failure to consummate the
Merger is the result of a breach of the Merger Agreement by the party
seeking to terminate the Merger Agreement; provided, however, that the
Merger Agreement may be extended by written notice of either Parent or
the Company to a date not later than September 30, 1999, if the Merger
shall not have been consummated as a direct result of Parent or the
Company having failed by June 30, 1999, to receive all required
approvals or consents with respect to the Merger;
(d) by the Company, at any time three business days or more following
termination or expiration of the Offer without Purchaser purchasing
Shares thereunder, so long as no Shares have been purchased pursuant to
the Stockholders Agreement;
(e) by Parent, if the Offer shall have expired without the purchase of the
Shares thereunder and the Minimum Condition shall not have been
satisfied, or Parent or Purchaser shall have terminated the Offer
without purchasing Shares thereunder in accordance with the Merger
Agreement, in each case so long as no Shares have been purchased
pursuant to the Stockholders Agreement and neither Parent nor Purchaser
has breached any of its obligations under Section 1.01 of the Merger
Agreement or is in breach of any of their obligations under the Merger
Agreement and such breach has resulted in the failure of any condition
to the Offer to be satisfied;
(f) by the Company, if the Merger shall fail to receive the requisite vote
for approval and adoption by the stockholders of the Company at the
Company Stockholders Meeting;
(g) by the Company, if the Board fails to make or withdraws or modifies
its recommendation of approval and adoption of the Merger Agreement so
long as the Board, after consultation with and based upon the advice of
legal counsel (who may be the Company's regularly engaged legal
counsel), determines in good faith that such action is necessary for the
Board to comply with its fiduciary duties to stockholders under
applicable law and, after consultation with its independent legal
counsel and financial advisor, determines in good faith that the
Acquisition Proposal (as defined below) is a Superior Proposal (as
defined below); provided, that the Company may not terminate the Merger
Agreement pursuant to this paragraph (g) after such time as Purchaser
has purchased upon expiration of the Offer all Shares validly tendered
in the Offer and not withdrawn or Parent or Purchaser has purchased
Shares pursuant to the Stockholders Agreement;
(h) by either Parent or the Company, if the Merger shall fail to receive
the requisite vote for approval by the shareholders of Parent at the
Parent Shareholders Meeting;
(i) by Parent, in the event of any breach of the representations and
warranties of the Company set forth in the Merger Agreement other than
any breach that individually or in the aggregate with each other such
breach has not had and would not reasonably be expected to have a
Material Adverse Effect (provided, that for purposes of this paragraph
(i) each such representation and warranty of the Company set forth in
the Merger Agreement shall be read without giving effect to any
qualification as to materiality or a Company Material Adverse Effect),
or if the Company breaches or fails to perform in any material respect
any of its covenants contained in the Merger Agreement, which breach or
failure to perform (i) would give rise to the failure of a condition set
forth in Exhibit A thereto and (ii) has not been cured within 30 days
after the giving of written notice to Parent of such breach; provided,
that Parent may not terminate the Merger Agreement pursuant to this
paragraph (i) if (x) Parent or Purchaser is then in material breach of
any covenant contained in the Merger Agreement, (y) any Shares have been
purchased in the Offer or (z) any Shares have been purchased pursuant to
the Stockholders Agreement;
(j) by the Company, in the event of any breach of the representations and
warranties of Parent or Purchaser set forth in the Merger Agreement that
are qualified as to materiality or any breach of any representations and
warranties of Parent or Purchaser set forth in the Merger Agreement that
are not so qualified in any material respect and, individually or in the
aggregate, such breach has had a Parent Material Adverse Effect or if
Parent or Purchaser breaches or fails to perform in any
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material respect any of its covenants contained in the Merger Agreement,
which breach or failure to perform has not been cured within 30 days
after the giving of written notice to the Company of such breach;
provided, that the Company may not terminate the Merger Agreement
pursuant to this paragraph (j) if (x) the Company is then in material
breach of any covenant contained in the Merger Agreement, (y) any Shares
have been purchased in the Offer or (z) any Shares have been purchased
pursuant to the Stockholders Agreement; or
(k) by the Company, if the Parent Shareholders Meeting is not held on or
prior to January 4, 1999; provided, however, that the Company may not
terminate the Merger Agreement pursuant to this paragraph (k) if the
Parent has obtained the approval of its shareholders of the transactions
contemplated by the Merger Agreement prior to delivery by the Company of
its notice of termination.
The right of any party hereto to terminate the Merger Agreement will remain
operative and in full force and effect regardless of any investigation made by
or on behalf of any party hereto, any person controlling or controlled by any
such party or any of their respective officers or directors, whether prior to or
after the execution of the Merger Agreement.
Acquisition Proposals. The Merger Agreement provides that from and after
the date of the Merger Agreement, the Company shall not, and shall cause each of
its subsidiaries (the "Company Subsidiaries") and its and their respective
officers, directors, employees, representatives, agents or affiliates
(including, without limitation, any investment banker, attorney or accountant
retained by the Company or any of the Company Subsidiaries) not to, directly or
indirectly, invite, initiate, solicit or knowingly encourage (including by way
of furnishing non-public information or assistance), any inquiries or the making
of any proposal that constitutes any Acquisition Proposal (as defined below), or
enter into or maintain or continue discussions or negotiations with any person
or entity in furtherance of such inquiries or to obtain an Acquisition Proposal
or agree to or endorse any Acquisition Proposal, or authorize or permit any of
its respective officers, directors or employees or any of the Company
Subsidiaries or any investment banker, financial advisor, attorney, accountant
or other representative retained by it or any of the Company Subsidiaries to
take any such action; provided, however, that nothing contained in this section
prohibits the Board from (i) complying with Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal or (ii) (A) providing
information in response to a request therefor by a person who has made an
unsolicited bona fide written Acquisition Proposal if prior to providing such
information the Board informs such person in writing of the existence and the
material terms of the Stockholders Agreement and receives from such person an
executed confidentiality agreement on terms substantially equivalent to those
contained in the Confidentiality Agreement entered into between Parent and the
Company (as defined herein); (B) engaging in any negotiations or discussions
with any person who has made an unsolicited bona fide written Acquisition
Proposal; or (C) recommending such an Acquisition Proposal to the stockholders
of the Company, if and only to the extent that, (i) in each such case referred
to in clause (A), (B) or (C) above, the Board determines in good faith after
consultation with independent legal counsel (who may be the Company's regularly
engaged legal counsel) that such action is necessary in order for the Board to
comply with its fiduciary duties to stockholders under applicable law and (ii)
in each case referred to in clause (B) or (C) above, the Board determines in
good faith (after consultation with its independent legal counsel, who may be
the Company's regularly engaged legal counsel, and financial advisor) that such
Acquisition Proposal is reasonably capable of being consummated, taking into
account all legal, financial and regulatory aspects of the proposal, the terms
of the Stockholders Agreement and the person making the proposal and that such
Acquisition Proposal would, if consummated, be more favorable, from a financial
point of view (either short or long-term), to the stockholders of the Company,
than the Offer and the Merger Agreement (any such more favorable Acquisition
Proposal satisfying all the criteria of this clause (ii) being referred to in
the Merger Agreement as a "Superior Proposal"). For purposes of the Merger
Agreement, "Acquisition Proposal" means any of the following (other than the
transactions between the Company, Parent and Purchaser contemplated hereunder)
involving the Company or any of the Company Subsidiaries: (i) any merger,
consolidation, share exchange or other similar transaction involving the
Company; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of all or substantially all of the assets of the Company and the
Company Subsidiaries, taken
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<PAGE> 9
as a whole, in a single transaction or series of transactions; or (iii) any
tender offer or exchange offer for 50% or more of the outstanding shares of
capital stock of the Company or the filing of a registration statement under the
Securities Act, as amended, in connection therewith.
In addition to the obligations of the Company described in the preceding
paragraph, the Merger Agreement provides that the Company will promptly advise
Parent orally and in writing of any Acquisition Proposal or any inquiry with
respect to any Acquisition Proposal including any change to the material terms
of any such Acquisition Proposal or inquiry. In addition, the Company is further
required under the terms of the Merger Agreement to keep Parent fully informed
of the status including any change to the material terms of any such Acquisition
Proposal or inquiry.
Options and Warrants. The Merger Agreement provides that immediately prior
to the Effective Time and subject to obtaining all necessary consents, each then
outstanding Option to purchase any shares of capital stock of the Company,
whether or not then vested or exercisable, shall be cancelled by the Company and
in consideration of such cancellation and except to the extent that Parent or
Purchaser and the holder of any such Option otherwise agree, the Company (or, at
Parent's option, Purchaser) shall pay to such holders of Options an amount in
respect thereof equal to the product of (A) the excess, if any, of the Merger
Consideration over the exercise price per Share subject to each such Option
multiplied by (B) the number of Shares for which such Option shall not
theretofore have been exercised (net of withholding taxes and without interest).
In addition, the Merger Agreement provides that, immediately prior to the
Effective Time and subject to obtaining all necessary consent, each then
outstanding Warrant to purchase any shares of capital stock of the Company,
whether or not then exercisable, shall be cancelled by the Company and in
consideration of such cancellation and except to the extent that Parent or
Purchaser and the holder of any such Warrant otherwise agree, the Company (or,
at Parent's option, Purchaser) shall pay to such holders of the Warrants an
amount in respect thereof equal to the product of (A) the excess, if any, of the
Merger Consideration over the exercise price per Share subject to each such
Warrant multiplied by (B) the number of Shares for which such Warrant shall not
theretofore have been exercised (net of withholding taxes and without interest).
Dissenting Shares. Notwithstanding any other provision of the Merger
Agreement to the contrary, Shares ("Appraisal Shares") outstanding immediately
prior to the Effective Time and held by a holder who has not voted in favor of
the Merger or consented thereto in writing and who is entitled to demand and has
properly demanded appraisal for such Shares pursuant to and who complies in all
respects with, Section 262 of the DGCL shall not be converted into a right to
receive the Merger Consideration, but rather the holders of Appraisal Shares
shall be entitled to payment of the fair market value of such Appraisal Shares
in accordance with Section 262 of the DGCL, unless such holder fails to perfect
or withdraws or otherwise loses his right to appraisal. If, after the Effective
Time, such holder fails to perfect or withdraws or loses his right to appraisal,
such Shares shall be treated as if they had been converted as of the Effective
Time into a right to receive the Merger Consideration payable in respect of such
Shares.
Conduct of Business by the Company. Pursuant to the Merger Agreement, the
Company has agreed that, between the date of the Merger Agreement and continuing
until the earlier to occur of the Effective Time or the election of the Parent's
designees representing a majority of the members of the Board in accordance with
the Merger Agreement, unless Parent shall have consented in writing, the
businesses of the Company and the Company Subsidiaries shall be conducted in,
and the Company and the Company Subsidiaries shall not take any action except in
the ordinary course of business, consistent with past practice, and the Company
shall, and shall cause the Company Subsidiaries to, use their respective
reasonable best efforts to preserve substantially intact their respective
business organizations, to keep available the services of their respective
current officers, employees and consultants and to preserve their respective
relationships with customers, suppliers, licensors, licensees, distributors and
other persons with which it or any of the Company Subsidiaries has significant
business relations as well as with officials and employees of government
agencies and other entities which regulate the Company, the Company Subsidiaries
and their business to the end that
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<PAGE> 10
its goodwill and ongoing business shall be unimpaired at the Effective Time.
Pursuant to the terms of the Merger Agreement, neither the Company nor any of
the Company Subsidiaries shall:
(a) amend or otherwise change the certificate of incorporation, by-laws or
other comparable charter or organizational document of the Company or
any Company Subsidiary;
(b) (i) issue, deliver, grant or sell, or authorize the issuance or sale
of, any shares of capital stock of any class of, or any bonds,
debentures, notes or other indebtedness of the Company having the right
to vote on any matters which holders of shares may vote, or any other
ownership interest in, the Company or any of the Company Subsidiaries,
or any options, warrants or other securities or rights convertible into,
exchangeable for, evidencing the right to subscribe for or purchase, or
otherwise providing for the right to acquire capital stock, or any other
ownership interest (including, without limitation, any phantom interest)
of the Company or any of the Company Subsidiaries (other than the
issuance of shares of capital stock in connection with (A) the exercise
of the Options or the Warrants, (B) the then current offering period in
effect under the Company's Employee Stock Discount Purchase Plan (the
"Stock Purchase Plan") as in effect on the date of the Merger Agreement
or (C) the conversion of shares of Class B Shares to Class A Shares at
the request of the holder thereof), or (ii) authorize the sale of any
assets of it or any of the Company Subsidiaries, except for sales in the
ordinary course of business or which, individually, do not exceed $1.0
million or which, in the aggregate, do not exceed $3.0 million, or (iii)
amend, waive or otherwise modify any of the terms of any option, warrant
or stock option plan of the Company or any Company Subsidiary, including
without limitation the Options, the Warrants and the Stock Purchase
Plan;
(c) declare, set aside or pay any dividend on or other actual,
constructive or deemed distribution, payable in cash, stock, property or
otherwise, with respect to any of its capital stock (other than a
divided or distribution payable solely to the Company or a Company
Subsidiary) or otherwise make any payments to stockholders in their
capacity as stockholders;
(d) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any capital stock of the Company or any
Company Subsidiary or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities other
than Class B Shares upon conversion to Class A Shares at the request of
the holder thereof;
(e) (i) acquire or agree to acquire (for cash, shares of stock or other
consideration) (including, without limitation, by merger, consolidation,
or acquisition of stock or assets or by any other manner) any
corporation, partnership, joint venture, association or other business
organization or any division thereof (or a substantial portion of the
assets thereof) or any other assets, except for (A) such acquisitions
which, individually or in the aggregate, do not exceed $1.0 million or,
(B) any acquisition described in the Company's disclosure schedule to
the Merger Agreement; (ii) incur any indebtedness for borrowed money or
issue or sell any debt securities or warrants or other rights to acquire
any debt securities of the Company or any Company Subsidiary, or assume,
guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any 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, or 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, except (A) to finance any acquisition permitted under the
Merger Agreement or (B) borrowings under existing bank lines of credit
incurred in the ordinary course of business consistent with past
practices, or (iii) enter into or amend any contract, agreement,
commitment or arrangement to effectuate any prohibited matter set forth
in the Merger Agreement or;
(f) hire any employee with aggregate annual compensation and benefits in
excess of $100,000, or adopt, enter into, establish or amend any bonus,
profit sharing, compensation, severance, termination, stock option,
pension, retirement, deferred compensation, employment or other employee
benefit agreements, trusts, plans, funds or other arrangements for the
benefit or welfare of any director, officer or employee that increase in
any manner the compensation, retirement, welfare or
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<PAGE> 11
fringe benefits of any director, officer or employee, or pay any benefit
not required by any existing plan, agreement or arrangement (including
without limitation the granting of stock options or stock appreciation
rights) or take any action or grant any benefit not expressly required
under the terms of any existing agreements, trusts, plans, funds or
other such arrangements or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing, except pursuant to
collective bargaining agreements as presently in effect;
(g) take any action, other than as required by a change in generally
accepted accounting principles ("GAAP"), with respect to accounting
methods, practices, policies or procedures;
(h) authorize, recommend, propose or announce an intention to adopt a plan
of complete or partial liquidation or dissolution of the Company or any
of its material subsidiaries;
(i) make or change any tax election or settle or compromise any material
tax liability or refund;
(j) (i) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted, 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 the most recent
consolidated financial statements of the Company included in the
Company's documents filed with the SEC or incurred in the ordinary
course of business consistent with past practice, (ii) cancel any
material indebtedness (individually or in the aggregate) or waive any
claims or rights of substantial value or (iii) waive the benefits of, or
agree to modify in any manner, any confidentiality, standstill or
similar agreement to which the Company or any Company Subsidiary is a
party;
(k) other than in the ordinary course of business consistent with past
practice, neither the Company nor any of the Company Subsidiaries shall
waive any rights of substantial value or make any payment, direct or
indirect, of any material liability of the Company or any of the Company
Subsidiaries before the same comes due in accordance with its terms;
(l) fail to maintain its existing insurance coverage of all types in
effect or, in the event any such coverage shall be terminated or lapse,
to the extent available at reasonable cost, procure substantially
similar substitute insurance policies which in all material respects are
in at least such amounts and against such risks as are currently covered
by such policies;
(m) enter into any collective bargaining agreement;
(n) sell, lease, license or otherwise dispose of or subject to any Lien
(other than Permitted Lien as defined therein) any properties or assets,
except sales of inventory and excess or obsolete assets in the ordinary
course of business consistent with past practice;
(o) make or agree to make any new capital expenditure that is in excess of
$500,000 (except to consummate any acquisition not prohibited by the
Merger Agreement);
(p) initiate or threaten litigation against any third party;
(q) (i) make any changes in advertising or subscription rates, policies or
procedures that are not consistent with past practices or (ii) make any
material change in advertising or subscription rates, policies or
procedures (whether or not consistent with past practices);
(r) launch any new magazine or other product in excess of $1,000,000
(losses to profits for whole project); or
(s) authorize any of, or commit or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing.
Indemnification. In the Merger Agreement, the Purchaser and Parent have
agreed that the certificate of incorporation and by-laws of the Surviving
Corporation shall contain the provisions with respect to indemnification set
forth in the certificate of incorporation and by-laws of the Company as of the
date of the Merger Agreement, which provisions shall not be amended, repealed or
otherwise modified for a period of
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<PAGE> 12
six years after the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at any time prior to the Effective Time
were directors or officers of the Company in respect of actions or omissions
occurring at or prior to the Effective Time (including, without limitation, the
transactions contemplated by the Merger Agreement), unless such modification is
required by law.
Moreover, the Merger Agreement provides that from and after the Effective
Time, the Surviving Corporation shall indemnify, defend and hold harmless the
present and former officers and directors of the Company (collectively, the
"Indemnified Parties") against all losses, expenses, claims, damages,
liabilities or amounts that are paid in settlement of, with the approval of the
Surviving Corporation (which approval shall not unreasonably be withheld), or
otherwise incurred in connection with any claim, action, suit, proceeding or
investigation (a "Claim"), based in whole or in part by reason of the fact that
such person is or was a director or officer of the Company and arising out of
actions, events or omissions occurring at or prior to the Effective Time
(including, without limitation, the transactions contemplated by the Merger
Agreement), in each case to the full extent permitted under the DGCL (and shall
pay expenses in advance of the final disposition of any such action or
proceeding to each Indemnified Party to the fullest extent permitted under the
DGCL, upon receipt from the Indemnified Party to whom expenses are advanced of
the undertaking to repay such advances contemplated by Section 145(e) of the
DGCL); provided, that the Surviving Corporation shall indemnify, defend and hold
harmless the Indemnified Parties, and pay expenses in advance, only to the same
extent and on the same terms (including with respect to advancement of expenses)
provided for in the Company's certificate of incorporation and by-laws in effect
on the date of the Merger Agreement (to the extent consistent with applicable
law), which rights pursuant to such provisions shall survive the Merger and
continue in full force and effect for a period of six years after the Effective
Time.
For a period of three years after the Effective Time, the Surviving
Corporation has also agreed to cause to be maintained in effect the liability
insurance policies for directors and officers which are currently maintained by
the Company with respect to claims arising from facts or events which occurred
before the Effective Time (provided that Parent may substitute therefor policies
issued by insurance companies of comparable or higher rating of at least the
same coverage and amounts containing terms and conditions which are no less
advantageous in any material respect to the Indemnified Parties).
Notwithstanding the foregoing, Parent shall not be required to pay an annual
premium for such insurance in excess of $250,000, but in such case shall
purchase as much coverage as possible for such amount.
Reasonable Best Efforts. The Merger Agreement provides, subject to the
terms and conditions contained therein, each party will use its commercially
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, and to assist and cooperate with the other parties in doing
all things necessary, proper or advisable under applicable laws and regulations
to consummate and make effective, the Offer, the Merger and the other
transactions contemplated by the Merger Agreement including (i) the obtaining of
all necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all necessary registrations and filings
(including filings with Governmental Entities, if any) and the taking of all
reasonable steps as may be necessary to obtain an approval or waiver from, or to
avoid an action or proceeding by, any Governmental Entity, (ii) the obtaining of
all necessary consents, approvals or waivers from third parties, (iii) the
defending of any lawsuits or other legal proceedings, whether judicial or
administrative, challenging the Merger Agreement or the consummation of the
transactions contemplated by the Merger Agreement, including seeking to have any
stay or temporary restraining order entered by any court or other Governmental
Entity vacated or reversed and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by the Merger
Agreement and to fully carry out the purposes of the Merger Agreement, except
that no party need waive any substantial rights or agree to any substantial
limitation on its operation or to dispose of any assets.
Benefit Plans. The Merger Agreement provides that after the Merger and
except as otherwise may be provided pursuant to a collective bargaining
agreement, Parent shall cause the Surviving Corporation to maintain or provide
the employees of the Surviving Corporation and its subsidiaries for a period of
one year after the Effective Time with employee benefits that are in the
aggregate substantially comparable to those provided by the Company and the
Company Subsidiaries on the date hereof. Moreover, after the Merger, Parent
shall cause the Surviving Corporation to honor the terms of all employment
agreements of the
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<PAGE> 13
Company and the Company Subsidiaries, the existence of which do not violate the
Merger Agreement. Parent shall cause the Surviving Corporation to honor all
collective bargaining agreements by which the Company or any of the Company
Subsidiaries is bound.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties.
Amendments; No Waiver. Any provision of the Merger Agreement may be
amended or waived prior to the Effective Time if, and only if, such amendment or
waiver is in writing and signed, in the case of an amendment, by the Company and
Parent or in the case of a waiver, by the party against whom the waiver is to be
effective; provided, however, that after receipt of the Company Stockholder
Approval of the Merger and Parent Shareholder Approval of the Offer and Merger,
there shall be made no amendment that by law requires further approval by the
stockholders of the Company or the shareholders of Parent without the further
approval of such stockholders or shareholders, as the case may be; provided,
further, that after the adoption of the Merger Agreement by the stockholders of
the Company, no such amendment or waiver shall, without the further approval of
such stockholders, alter or change in a manner adverse to the holders of any
shares of capital stock of the Company (i) the amount or kind of consideration
to be received in exchange for any shares of capital stock of the Company, (ii)
any term of the certificate of incorporation of the Surviving Corporation or
(iii) any of the terms or conditions of the Merger Agreement.
In addition to the foregoing, at any time prior to the Effective Time, the
parties may (a) extend the time for the performance of any of the obligations or
other acts of the other parties, (b) waive any inaccuracies in the
representations and warranties contained in the Merger Agreement or in any
document delivered pursuant to the Merger Agreement or (c) subject to the
preceding paragraph, waive compliance with any of the agreements or conditions
contained in the Merger Agreement. Any agreement on the part of a 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. The foregoing summary of the Merger
Agreement is qualified in its entirety by reference to the Merger Agreement, a
copy of which is filed as Exhibit(c)(i) to this Statement. The Merger Agreement
should be read in its entirety for a more complete description of the matters
summarized above.
STOCKHOLDERS AGREEMENT
Pursuant to the Stockholders Agreement, each of the Selling Stockholders
have agreed to sell to the Purchaser, and the Purchaser has agreed to purchase,
all Shares of such Selling Stockholders at a price equal to the Offer Price upon
termination of the Offer; provided that no Selling Stockholder shall be so
obligated to sell any such Shares if Stockholder Agreement is terminated in
accordance with the terms of the Stockholders Agreement; and provided, further,
that (x) Purchaser shall not be so obligated to purchase the Shares and no
Selling Stockholder shall be so obligated to sell any such Shares if as of
immediately prior to the expiration of the Offer, any applicable waiting period
(and any extension thereof) under the HSR Act relating to the purchase of the
Shares shall not have expired or been terminated, and (y) Purchaser shall not be
so obligated to purchase the Shares if at any time after the date of the
Stockholders Agreement until the purchase and sale of the Shares under the
Stockholders Agreement any of the following conditions have occurred and is
continuing and no Selling Stockholder shall be so obligated to sell any of such
Shares if during such period any of the conditions in subparagraphs (i), (iii)
and (iv) set forth below have occurred and is continuing:
(i) there shall be issued by any U.S. Federal or state court of
competent jurisdiction in connection with any legal proceeding, any final
or nonappealable order, ruling or injunction (that has not been vacated,
withdrawn or overturned), (A) restraining or prohibiting the acquisition by
Parent or Purchaser of any Shares under the Stockholder Agreement or the
making of the Stockholders Agreement or consummation of the transactions
contemplated thereby or the Merger, or obtaining from the Company, or
Purchaser any damages in connection with the aforesaid transactions that
are material in relation to the Company and the Company Subsidiaries, (B)
prohibiting or materially limiting the ownership or operation by the
Company, Parent or Purchaser or any of their respective subsidiaries of a
material portion of the business or assets of the Company and the Company
Subsidiaries, or Parent and the Parent Subsidiaries, or compelling the
Company or Parent to dispose of or hold separate any material portion of
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<PAGE> 14
the business or assets of the Company and the Company Subsidiaries, or
Parent and the Parent Subsidiaries, as a result of the Stockholders
Agreement or any of the other transactions contemplated by the Stockholders
Agreement, (C) seeking to impose material limitations on the ability of
Parent or Purchaser to acquire or hold, or exercise full rights of
ownership of, any Shares to be accepted for payment pursuant to the
Stockholders Agreement including, without limitation, the right to vote
such Shares on all matters properly presented to the stockholders of the
Company, or (D) prohibiting Parent or any Parent Subsidiary from
effectively controlling in any material respect any significant portion of
the business or operations of the Company and the Company Subsidiaries;
(ii) the Company shall not have performed or complied in any material
respect with any obligation or shall have failed to comply in any material
respect with any agreement or covenant required by the Merger Agreement to
be performed or complied with by the Company on or prior to the date of
consummation of the transactions contemplated by the Stockholders
Agreement, which failure to perform or comply is not substantially cured
within 15 days after Parent provides the Company with notice of such
failure;
(iii) any statute, rule or regulation enacted or promulgated by any
Governmental Entity that results, directly or indirectly, in any of the
consequences referred to in clauses (A) through (D) of paragraph (i) above;
(iv) if required in accordance with applicable law or stock exchange
regulations, Parent shall have held a vote at an extraordinary general
meeting of Parent of the holders of the outstanding ordinary shares of
Parent that are entitled to vote upon proposals to approve the Stockholders
Agreement and the Merger Agreement and any approval so required with
respect to the Stockholders Agreement or the Merger Agreement shall not
have been obtained; or
(v) any breach of the representations and warranties of the Company
set forth in the Merger Agreement other than any breach that individually
or in the aggregate with each other such breach has not had and would not
reasonably be expected to have a material adverse effect on the Company or
the Company Subsidiaries; provided, that for purposes of this paragraph
each such representation and warranty of the Company set forth in the
Merger Agreement shall be read without giving effect to any qualification
as to materiality or a material adverse effect on the Company or the
Company Subsidiaries.
Subject to the termination provisions described below, the obligation of
the Selling Stockholders to tender and not withdraw Shares is conditioned only
upon lawful commencement and consummation of the Offer, otherwise is
unconditional. The Stockholders Agreement shall terminate: (A) immediately upon
(i) the termination of the Offer or the Merger Agreement by Parent or the
Purchaser in accordance with the terms of the Merger Agreement prior to the
expiration of the Offer, (ii) termination of the Merger Agreement by Parent or
the Purchaser in accordance with the terms of the Merger Agreement following the
expiration of the Offer or (iii) the termination of the Merger Agreement by the
Company for the failure of Parent to hold the Parent Shareholders Meeting; (B)
upon delivery by the Selling Stockholders holding Shares representing a majority
of Shares subject to the Stockholders Agreement ("Majority Selling
Stockholders") of a notice of termination to Parent or the Purchaser at any time
(i) after Parent or Purchaser has terminated the Offer, prior to the expiration
of the Offer, in a manner which is not in accordance with the terms of the
Merger Agreement, or (ii) in the event that Parent or Purchaser fails to
purchase the Shares upon the expiration of the Offer in accordance with Section
1.01 of the Merger Agreement and either (x) each of the conditions to the Offer
has either been satisfied or waived, or (y) Parent or Purchaser is then in
breach of any of its obligations under the Stockholders Agreement or the Merger
Agreement and such breach has resulted in the failure of any condition to the
Offer to be satisfied; or (C) upon delivery by Majority Selling Stockholders of
a notice of termination to Parent or the Purchaser at any time more than 120
days after: (i) the expiration of the Offer without the purchase of any Shares
thereunder due to the failure of a condition to the Offer to be satisfied and
not waived (other than the Minimum Condition which shall have been satisfied);
or (ii) the expiration of the Offer without the purchase of any Shares
thereunder due to the failure of the Minimum Condition to be satisfied. Subject
to the termination provisions described above, any Shares not purchased in the
Offer will be purchased by immediately following the purchase of the Shares in
the Offer.
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<PAGE> 15
Notwithstanding the foregoing, no Selling Stockholder shall be required to
tender or otherwise sell its Shares in the event the Purchaser has (a) decreased
the price per Share or changed the form of consideration payable in the Offer,
(b) decreased the number of Shares sought in the Offer, (c) amended or waived
satisfaction of the Minimum Condition, (d) imposed additional conditions or
amended in any manner adverse to the holders of Shares any of the conditions set
forth under Item 3, (e) amended any other term of the Offer in any manner
adverse to the holders of Shares or (f) extended the Expiration Date in a manner
which requires the consent of the Company under the Merger Agreement.
Under the Stockholders Agreement, each Selling Stockholder has granted to
certain individuals designated by Parent an irrevocable proxy with respect to
the Shares subject to the Stockholders Agreement to Parent to vote such Shares
in favor of the Merger, the adoption of the Merger Agreement and the approval of
each of the other transactions contemplated by the Merger Agreement and against
(i) any merger agreement or merger (other than the Merger Agreement and the
Merger), consolidation, combination, sale of substantial assets, reorganization,
joint venture, recapitalization, dissolution, liquidation or winding up of or by
the Company and (ii) any amendment of the Company's certificate of incorporation
or its bylaws, as amended and restated, or other proposal or transaction
(including any consent solicitation to remove or elect any directors of the
Company) involving the Company, 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 or change in any manner the voting rights of any class of common stock
or other voting securities of the Company.
Each Selling Stockholder has also agreed in the Stockholders Agreement that
it shall not, and shall use its reasonable best efforts to cause any officer,
director or employee of, or any investment banker, financial advisor, attorney,
accountant or other representative of any such Selling Stockholder not to,
directly or indirectly, (i) solicit, initiate or encourage (including by way of
furnishing information), or to take any action to facilitate, any inquiries or
the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Acquisition Proposal, (ii) participate in any discussions or
negotiations regarding any Acquisition Proposal or (iii) enter into any
agreement with respect to any Acquisition Proposal. Each Selling Stockholder has
agreed to promptly advise Parent and Purchaser orally and in writing of any
Acquisition Proposal or inquiry made to the Selling Stockholders with respect to
or that could lead to any Acquisition Proposal, the identity of the person
making any such Acquisition Proposal or inquiry and the material terms of any
such Acquisition Proposal or inquiry.
The foregoing summary of the Stockholders Agreement is qualified in its
entirety by reference to the Stockholders Agreement, a copy of which is filed as
Exhibit (c)(2) to this Statement. The Stockholders Agreement should be read in
its entirety for a more complete description of the matters summarized above.
CONFIDENTIALITY AGREEMENT
Pursuant to a confidentiality agreement, dated November 18, 1998 (the
"Confidentiality Agreement"), the Company and Parent agreed to provide, among
other things, for the confidential treatment of the discussions regarding the
Offer and the Merger and Parent agreed to treat confidential certain information
provided to it by the Company. The Confidentiality Agreement has been filed as
Exhibit (c)(5) to this Statement and is incorporated herein by reference. The
Confidentiality Agreement should be read in its entirety for a more complete
description of the matters summarized above.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors.
On December 14, 1998, the Board of Directors of the Company (the "Board"),
after considering, among other factors, the opinions of Donaldson, Lufkin &
Jenrette Securities Corporation ("DLJ") and Morgan Stanley & Co. Incorporated
("Morgan Stanley") that, as of such date and based upon and subject to the
assumptions, limitations and qualifications set forth therein, the proposed
consideration to be received by the holders of Shares pursuant to the Merger
Agreement is fair from a financial point of view to such holders of Shares, (i)
unanimously approved the Merger Agreement, the Stockholders Agreement and the
transac-
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tions contemplated thereby, (ii) unanimously recommended that the holders of
Shares accept the Offer, tender their Shares pursuant to the Offer and approve
and adopt the Merger Agreement, (iii) unanimously determined that each of the
Merger Agreement, the Offer and the Merger is fair to the stockholders of the
Company, (iv) unanimously determined that the consideration to be paid for each
Share in the Offer and the Merger is fair to the stockholders of the Company,
(v) unanimously declared that the Merger Agreement is advisable, and (vi)
unanimously consented to the Offer.
A copy of a letter to all stockholders of the Company communicating the
recommendations of the Board is filed as Exhibit (a)(3) hereto and is
incorporated by reference.
(b) Background.
Since its initial investment in the Company in 1996, Willis Stein, a
stockholder of the Company that acts on behalf of a controlling group of
stockholders of the Company, and management have considered and had discussions
with other parties regarding various strategic and operational alliances and
other business combinations involving the Company.
In July 1998, a representative of DLJ approached Parent to discuss the
possibility of Parent pursuing an acquisition of the Company. DLJ indicated that
in certain circumstances and at a specified price, Willis Stein would consider
selling its Shares in connection with an acquisition of the Company.
Parent expressed to DLJ an interest in pursuing an acquisition of the
Company and DLJ arranged a meeting in August 1998 between Parent and
representatives of Willis Stein. During that meeting, representatives of Willis
Stein told the representatives of Parent that they believed that certain
stockholders of the Company would not consider selling their Shares at a price
below the highest traded share price to date, $33.625 per share.
Subsequently, Parent requested and the Company's advisors arranged a
meeting in September 1998, between the Company's management and Parent's
Chairman, Robin Miller, at which the Company's business strategy was discussed.
On October 7, 1998, the Board, at a regularly scheduled meeting, reviewed
the prior meetings between the Company and Parent and, in consultation with
Morgan Stanley, discussed a possible sale of the Company to Parent, as well as
other strategic alternatives.
An additional series of meetings between representatives of Parent and
James Dunning and other members of the Company's management were scheduled
during October 18, 1998 through October 21, 1998. At these meetings, the
Company's business and year-to-date financial performance were discussed in
detail.
The Company and Parent met on November 10, 1998 to discuss Parent's
preliminary views on valuation. At this meeting, Parent expressed an interest in
acquiring the Company at a price below $30.00 per share. The Company rejected
this offer proposal and suggested that Parent meet with one of its financial
advisors, Morgan Stanley. On the following day, representatives of Morgan
Stanley made a presentation to Parent and Schroder & Co. Inc., Parent's
financial advisor, regarding the Company. Immediately afterwards, Parent met
with Richard Willis, Chief Financial Officer of the Company, where financial
matters were discussed.
On November 12, 1998, the Company held a meeting of its Board during which
the Board discussed a potential transaction with Parent and, after such
discussions, established a special committee of the Board (the "Special
Committee") to consider and negotiate a possible sale of the Company to Parent.
Later that day, the Company received a letter from Parent wherein Parent
indicated that it would be willing to acquire the Company at a price of not less
than $33.00 per share. Subsequent discussions among representatives and advisors
of each of the Company and Parent between November 12 and November 17
established that the Company was not prepared to sell at a price less than
$34.00 per share. The parties agreed that due diligence should proceed and the
Confidentiality Agreement was executed on November 18, 1998.
Discussions and negotiations of the principal terms of the acquisition
among the Company and Parent and their respective financial and legal advisors
commenced on November 23, 1998. On December 4, 1998, James Dunning and Chip
Block from the Company attended a board meeting of Parent in London. Following
16
<PAGE> 17
a presentation of the proposal and a discussion thereof, Parent approved a
proposed acquisition of the Company at a price of $34.00 per share and the
financing necessary to consummate the acquisition, subject to satisfactory
negotiation and completion of the Merger Agreement, the Stockholders Agreement
and any other related documentation and receipt of all required approvals and
consents. The parties and their respective legal and financial advisors
continued their due diligence review and negotiations of the terms of the
acquisition and related documentation.
On December 8, 1998, the Special Committee met to discuss the proposed
terms of the sale of the Company to Parent. Representatives of both DLJ and
Morgan Stanley were present at such meeting and made presentations relating to
the financial terms of the proposed transaction. The Committee resolved to
recommend the proposed sale to the full Board, subject to satisfactory
negotiation and completion of the Merger Agreement, any other related
documentation and receipt of fairness opinions from DLJ and Morgan Stanley.
On December 14, 1998, each of the Company and Parent publicly announced
that it was engaged in discussions with the other regarding a potential
acquisition transaction.
On December 14, 1998, the Boards of Directors of the Company, Parent and
the Purchaser each approved the Merger Agreement and approved the transactions
set forth therein and the purchase price applicable to the Offer and the Merger.
Following such adoptions and approvals, the Merger Agreement and other related
agreements were executed and delivered, and the transaction was publicly
announced before financial markets in the United Kingdom opened on December 15,
1998.
(c) Reasons for the Board of Directors' Recommendation.
In approving the Offer, the Merger, the Merger Agreement, the Stockholders
Agreement and the other transactions contemplated thereby, and recommending that
stockholders of the Company accept the Offer and vote for adoption of the Merger
Agreement and approval of the transactions contemplated thereby, the Board
consulted with the Company's legal and financial advisors, as well as the
Company's management. The following are all the material factors considered by
the Board, certain of which contain both positive and negative elements:
- The fact that the $34.00 Offer Price represents a substantial premium of
approximately 48% over the closing sale price of $23.00 per share of
Class A Shares as reported on the New York Stock Exchange on December 11,
1998, the last trading day prior to the date that information relating to
a possible transaction involving the Company and Parent was first
publicly disclosed;
- The belief on the part of the members of the Board, based on their
familiarity with the Company's businesses, its current financial
condition and results of operations, its future prospects, and current
and anticipated developments in its businesses (including increasing
competition), that the consideration to be received by the Company's
stockholders in the Offer and the Merger represents, in their belief, the
best value reasonably obtainable by the stockholders in a sale of the
Company;
- The historical market prices and recent trading activity of the Class A
Shares and the Company's book value per Share;
- The recommendation of the Special Committee and the Company's management
with respect to the proposed transaction;
- The written opinions of DLJ and Morgan Stanley to the Board both dated
December 14, 1998 (the "Opinions") to the effect that, as of such date
and based upon and subject to the assumptions, limitations and
qualifications set forth therein, the consideration to be received by the
holders of the Shares pursuant to the Merger Agreement is fair from a
financial point of view to such holders; the full text of each of the
Opinions is attached as Annex B and Annex C hereto and should be read in
their entirety;
- A review of the strategic alternatives available to the Company
(including continuing the Company's business in its present configuration
without significant changes, conducting acquisitions, and merging
17
<PAGE> 18
or consolidating with a party or parties other than Parent), none of
which the Board believed to be as favorable to the Company's stockholders
as the Offer and the Merger;
- The fact that the Offer provides for a prompt cash tender offer for all
Shares, thereby enabling stockholders of the Company to receive cash in
exchange for their Shares at the earliest possible time;
- The likelihood that the Offer and the Merger would be consummated,
including the ability of Parent to finance the Offer and the Merger, the
terms of the Stockholders Agreement, and the effects on the Company's
business, operations and financial condition should it not be possible to
consummate the Merger following public announcement that the Merger
Agreement had been entered into;
- The financial and other terms and conditions of the Offer and the
Merger, the Merger Agreement, the Stockholders Agreement and the
transactions contemplated thereby, which were the product of arm's-length
negotiations, including the parties' representations, warranties and
covenants, the conditions to their respective obligations and the limited
ability of Parent and Purchaser to terminate the Offer or the Merger
Agreement; and
- The Board's recognition that certain members of the Board and management
have interests in the Offer and the Merger that are in addition to, and
not necessarily aligned with, the interests in the Offer and the Merger
of other holders of Shares.
The foregoing discussion of the factors considered by the Board is not
intended to be exhaustive. In view of the wide variety of factors considered in
connection with its evaluation of the Offer and the Merger, the Board did not
find it practicable to, and did not, quantify or otherwise attempt to assign
relative weights to the specific factors considered in reaching its
determinations. Rather, the Board made its determination based on the total mix
of information available to it, and the judgments of individual directors may
have been influenced to a greater or lesser degree by differing factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The DLJ Engagement
The Company has retained DLJ to act as financial advisor to the Company
with respect to the Offer, the Merger and matters arising in connection
therewith. Pursuant to a letter agreement dated November 18, 1998 between the
Company and DLJ, the Company has agreed to pay DLJ: (i) a fee equal to 0.5% of
the aggregate value of outstanding common stock of the Company, plus the amount
of any debt assumed, acquired, remaining outstanding, retired or defeased in
connection with a transaction and (ii) its reasonable out-of-pocket expenses,
including the fees and disbursements of DLJ's attorneys. The fee is payable upon
the consummation of a transaction, which is deemed to occur upon the acquisition
by another person of the majority of the outstanding equity securities of the
Company or upon the merger or consolidation of the Company with another person.
The Company has also agreed to indemnify DLJ and certain related persons
against certain liabilities in connection with its engagement, including certain
liabilities under federal securities laws.
In the past, DLJ and its affiliates have provided investment banking
services to the Company and received customary compensation for the rendering of
such services. In the ordinary course of business, DLJ and its affiliates may
trade securities of the Company for their own accounts and the accounts of their
customers and, accordingly, may at any time hold a long or short position in
such securities.
The Morgan Stanley Engagement
The Company has retained Morgan Stanley to act as financial advisor to the
Company with respect to the Offer, the Merger and matters arising in connection
therewith. Pursuant to a letter agreement dated November 19, 1998 between the
Company and Morgan Stanley, the Company has agreed to pay Morgan Stanley a
transaction fee of 0.5% of the aggregate value of the transaction, which will be
payable when control of 50% or more of the Company's common stock changes hands.
The aggregate value of the transaction includes the value of the consideration
paid for the Company's common equity plus the value of any debt,
18
<PAGE> 19
capital lease and preferred stock obligations of the Company assumed, retired or
defeased in connection with the transaction. The Company has agreed to reimburse
Morgan Stanley for its reasonable expenses, including the fees and disbursements
of legal counsel and other professional advisors.
The Company has also agreed to indemnify Morgan Stanley and certain related
persons against certain liabilities in connection with its engagement, including
certain liabilities under federal securities laws.
In the past, Morgan Stanley and its affiliates have provided investment
banking services to the Company and received customary compensation for the
rendering of such services. In the ordinary course of business, Morgan Stanley
and its affiliates may trade securities of the Company and Parent for their own
accounts and the accounts of their customers and, accordingly, may at any time
hold a long or short position in such securities.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to stockholders of the Company with respect to the Offer or the
Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Pursuant to the Stockholders Agreement, the Selling Stockholders,
certain of which are, or are affiliated with, a director or affiliate of the
Company and who own 18,406,656 Class A Shares and 7,886,290 Class B Shares in
the aggregate (representing approximately 66.0% of the Class A Shares and all of
the Class B Shares outstanding as of the close of business on December 14, 1998)
have (i) agreed to tender all Shares covered by the Stockholders Agreement into
the Offer, (ii) agreed to sell to Purchaser, subject to the terms and conditions
of the Stockholders Agreement, such Shares for a cash purchase price per Share
equal to Offer Price; (iii) agreed to vote their Shares in favor of the Merger,
and if necessary, to vote their Shares against any competing merger or business
combination proposal or any other proposal that could impede the Merger, (iv)
agreed to not sell or transfer their Shares to anyone and (v) granted to the
Purchaser an irrevocable proxy to vote their Shares in accordance with the
foregoing. See "Stockholders Agreement" under Item 3 above.
On December 4, 1998, Mr. Laurence H. Bloch, a director of the Company,
transferred an aggregate of 147,000 Class A Shares to the Bloch 1998 Charitable
Remainder Trust.
Except as described above, to the knowledge of the Company, no transactions
in the Shares or the Class A Shares have been effected during the past 60 days
by the Company or by any executive officer, director, affiliate or subsidiary of
such persons.
(b) To the knowledge of the Company, each of the Company's directors and
executive officers currently intend to tender all Shares over which they have
sole dispositive power into the Offer, except to the extent of any restrictions
created by Section 16(b) of the Exchange Act.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as described in this Statement, or as set forth in the Offer to
Purchase, no negotiation is being undertaken or is under way by the Company in
response to the Offer which relates to or would result in: (i) an extraordinary
transaction such as a merger or reorganization, involving the Company or any
subsidiary of the Company, (ii) a purchase, sale or transfer of a material
amount of assets by the Company or any subsidiary of the Company, (iii) a tender
offer for or other acquisition of securities by or of the Company or (iv) any
material change in the present capitalization or dividend policy of the Company.
(b) There are no transactions, board resolutions, agreements in principle,
or a signed contract in response to the Offer, other than as described in Items
3(b) and 4 above, which relates or would result in one or more of the matters
referred to in Item 7(a) above.
19
<PAGE> 20
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached as Annex A hereto is being furnished in
connection with the possible designation by Parent, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board other than at a
meeting of the Company's stockholders. The information contained in the Exhibits
referred to in Item 9 below is incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
(a)(1)* Offer to Purchase (incorporated by reference to Exhibit
(a)(1) to the Tender Offer Statement on Schedule 14D-1,
filed with the Securities and Exchange Commission (the
"Commission") by Parent and Purchaser on December 16, 1998).
(a)(2)* Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) to the Tender Offer Statement on Schedule 14D-1,
filed with the Commission by Parent and Purchaser on
December 16, 1998).
(a)(3)*+ Letter to Company stockholders, dated December 16, 1998.
(a)(4)* Notice of Guaranteed Delivery (incorporated by reference to
Exhibit (a)(3) to the Tender Offer Statement on Schedule
14D-1, filed with the Commission by Parent and Purchaser on
December 16, 1998).
(a)(5) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees (incorporated by reference to
Exhibit (a)(4) to the Tender Offer Statement on Schedule
14D-1, filed with the Commission by Parent and Purchaser on
December 16, 1998).
(a)(6)* Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees (incorporated by
reference to Exhibit (a)(5) to the Tender Offer Statement on
Schedule 14D-1, filed with the Commission by Parent and
Purchaser on December 16, 1998).
(a)(7)* Guidelines for Certification of Taxpayer Identification
Number on Substitute Form W-9 (incorporated by reference to
Exhibit (a)(6) to the Tender Offer Statement on Schedule
14D-1, filed with the Commission by Parent and Purchaser on
December 16, 1998).
(a)(8) Form of Summary Advertisement, dated December 16, 1998
(incorporated by reference to Exhibit (a)(7) to the Tender
Offer Statement on Schedule 14D-1, filed with the Commission
by Parent and Purchaser on December 16, 1998).
(a)(9) Text of Press Release, dated December 15, 1998, issued by
Parent (incorporated by reference to Exhibit (a)(8) to the
Tender Offer Statement on Schedule 14D-1, filed with the
Commission by Parent and Purchaser on December 16, 1998).
(a)(10)+ Text of Press Release, dated December 15, 1998, issued by
the Company.
(c)(1) Agreement and Plan of Merger, dated as of December 15, 1998,
among Parent, Purchaser and the Company (incorporated by
reference to Exhibit (c)(1) to the Tender Offer Statement on
Schedule 14D-1, filed with the Commission by Parent and
Purchaser on December 16, 1998).
(c)(2) Stockholders' Agreement, dated as of December 15, 1998,
among Parent, Purchaser and certain stockholders of the
Company (incorporated by reference to Exhibit (c)(2) to the
Tender Offer Statement on Schedule 14D-1, filed with the
Commission by Parent and Purchaser on December 16, 1998).
(c)(3)*+ Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation dated December 14, 1998.
(c)(4)*+ Opinion of Morgan Stanley & Co. Incorporated dated December
14, 1998.
(c)(5)+ Confidentiality Agreement, dated as of November 18, 1998,
among Parent and the Company.
</TABLE>
- ---------------
* Included in documents mailed to stockholders.
+ Filed herewith.
20
<PAGE> 21
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
THE PETERSEN COMPANIES, INC.,
Dated: December 16, 1998 By: /s/ JAMES D. DUNNING, JR.
------------------------------------
Name: James D. Dunning, Jr.
Title: Chairman of the Board and
Chief Executive Officer
21
<PAGE> 22
ANNEX A
[THE PETERSEN COMPANY LOGO]
6420 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90048
TELEPHONE: (213) 782-2000
INFORMATION STATEMENT PURSUANT TO SECTION 14(f) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement ("Information Statement") is being mailed on or
about December 16, 1998, as a part of the Solicitation/Recommendation Statement
on Schedule 14D-9 (the "Schedule 14D-9") of The Petersen Companies, Inc., a
Delaware corporation (the "Company") to the holders of record of shares of Class
A Common Stock, par value $0.01 per share, of the Company (the "Class A Shares"
and shares of Class B Common Stock, par value $0.01 per share, of the Company
(the "Class B Shares," and, together with the Class A Shares, the "Shares") at
the close of business on or about December 15, 1998. You are receiving this
Information Statement in connection with the possible election of persons
designated by Parent to a majority of the seats on the Company's Board of
Directors.
Pursuant to the Merger Agreement, Purchaser commenced the Offer on December
16, 1998. The Offer is scheduled to expire at 12:00 midnight, New York City
Time, on Thursday, January 14, 1999, unless the Offer is extended.
The Merger Agreement requires the Company to take all actions necessary to
cause Parent's designees to be elected to the Company's Board of Directors under
the circumstances described therein. See "Purchaser's Right to Designate
Directors; Purchaser's Designees." You are urged to read this Information
Statement carefully. You are not, however, required to take any action.
Capitalized terms used herein and not otherwise defined herein shall have the
meaning set forth in the Schedule 14D-9.
The following information is based on the Company's Proxy Statement, dated
as of March 24, 1998, and, except as indicated, such information is given as of
such date.
The information contained in this Information Statement or incorporated by
reference herein concerning Parent, Purchaser or their respective officers,
directors, representatives or affiliates or actions or events with respect to
any of them, was provided by Parent or Purchaser, and the Company takes no
responsibility for such information.
INFORMATION WITH RESPECT TO THE COMPANY
Unless the context otherwise requires: (i) the term "Predecessor" is used
herein to refer to the historical operations of the publishing division of
Petersen Publishing Company prior to September 30, 1996; and (ii) the term
"Petersen" is used herein to refer to, the operations of Petersen Holdings
L.L.C. and its consolidated subsidiaries, including Petersen Publishing Company
L.L.C. ("Publishing"). On September 30, 1996, Petersen acquired the Predecessor
in a leveraged acquisition (the "Acquisition"). In connection with the Company's
initial public offering (the "IPO"), the Company effected a reorganization
whereby, among other things, Petersen and Publishing became wholly owned
subsidiaries of the Company (the "Reorganization").
OUTSTANDING SHARES
As of December 15, 1998, there were: (i) 26,871,538 Class A Shares
outstanding, (ii) 7,886,290 Class B Shares outstanding, (iii) 2,041,269 Class A
Shares reserved for future issuance pursuant to the Company's 1997 Long-Term
Incentive Plan (the "Incentive Plan"), of which 970,394 Class A Shares were
reserved for issuance upon exercise of outstanding options, (iv) 35,000 Class A
Shares reserved for future issuance pursuant to outstanding warrants, and (v)
90,557 Class A Shares reserved for future issuance pursuant to the Company's
Employee Stock Discount Purchase Plan (the "Purchase Plan").
A-1
<PAGE> 23
PURCHASER'S RIGHT TO DESIGNATE DIRECTORS; PURCHASER'S DESIGNEES
The Merger Agreement provides that, promptly upon the earlier of the
purchase by Purchaser or any of its Shares pursuant to the Offer or the
Stockholders Agreement, and from time to time thereafter, Purchaser shall be
entitled to designate such number of directors, rounded up to the next whole
number (but in no event more than one less than the total number of directors on
the Board) as will give Purchaser, representation on the Board equal to the
product of (x) the total number of directors on the Board (giving effect to any
increase in the number of directors pursuant to the Merger Agreement) multiplied
by (y) the percentage that such number of Shares so purchased bears to the
aggregate number of Shares outstanding (such number being, the "Board
Percentage"), and the Company shall promptly use its reasonable best efforts to
satisfy the Board Percentage by, at the option of the Company (i) increasing the
size of the Board or (ii) securing the resignations of such number of directors
as is necessary to enable Parent's designees to be elected to the Board and
shall use its reasonable best efforts to cause Parent's designees promptly to be
so elected. The Company has agreed to take, at the Company's expense, all lawful
action necessary to effect any such election, including, without limitation,
mailing to its stockholders the information required by Section 14(f) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and Rule 14f-1
promulgated thereunder, unless such information has previously been provided to
the Company's stockholders this Schedule 14D-9.
In the Merger Agreement, the Company has represented that (i) to effect the
Offer and the Merger, the Board has approved, and has not withdrawn or amended,
resolutions (x) to increase the number of members of the Board from 11 to 15
directors, to be effective at such time as Purchaser purchases Shares pursuant
to the Offer or the Stockholders Agreement (the "Effective Time"), and (y) to
elect each of Kevin Lawrence Hand, David John Grigson, Thomas Charles Moloney
and Christopher Robert Innis to fill the vacancies created by such increase in
the number of Directors, effective upon such increase and (ii) each of the
Directors of the Company (other than the Chairman of the Board) has delivered to
the Company a letter stating that such Director has resigned from the Board, and
from each committee thereof, as of the Effective Time to the extent such
resignation is necessary to provide Parent with its Board Percentage.
In addition to the foregoing, following the election or appointment of the
Purchaser's designees prior to the consummation of Merger, any amendment or
termination of the Merger Agreement, extension for the performance or waiver of
the obligations or other acts of Parent or Purchaser or waiver of the Company's
rights thereunder, requires the concurrence of a majority of directors of the
Company then in office who are directors on the date hereof.
Set forth in the table below are the name, business address, age, present
principal occupation or employment for each of the persons who may be designated
by Parent as the Parent's designees. Each of the following individuals has
consented to serve as a director of the Company if appointed or elected. None of
the following individuals owns any Shares. In addition, none of the following
individuals is a director of, or holds any position with, the Company or any of
its subsidiaries. Each person is a citizen of the United Kingdom.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS
NAME AND BUSINESS ADDRESS AGE HELD DURING THE PAST FIVE YEARS
- ------------------------- --- --------------------------------------------------------------
<S> <C> <C>
KEVIN LAWRENCE HAND.................... 47 Chief Executive of EMAP plc from July 1998. Mr. Hand was
EMAP plc previously Chief Executive of EMAP Consumer Magazines from
1 Lincoln Road 1978 to 1994 and Chairman and Chief Executive of EMAP France
Lincoln Court from 1994 to 1998.
Peterborough, PE1 2RF
ENGLAND
DAVID JOHN GRIGSON..................... 44 Group Finance Director of EMAP plc since 1989.
EMAP plc
155 Farringdon Road
London
ENGLAND
</TABLE>
A-2
<PAGE> 24
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS
NAME AND BUSINESS ADDRESS AGE HELD DURING THE PAST FIVE YEARS
- ------------------------- --- --------------------------------------------------------------
<S> <C> <C>
THOMAS CHARLES MOLONEY................. 39 Executive Director of EMAP plc. Mr. Moloney has been Chief
EMAP Consumer Magazines Executive of East Consumer Magazines since 1995. As of
Priory Court December 1998, Mr. Moloney is also Chief Executive of East UK
30-32 Farringden Lane Consumer Affairs.
London ECIR 3AV
ENGLAND
CHRISTOPHER ROBERT INNIS............... 38 Director of Corporate Strategy of EMAP plc since 1994. From
Peakirk House 1987 to 1993, he was Assistant Director of Hambros Bank in
Peakirk PE6 7NF London. Mr. Innis was involved in a bid for the Company in
ENGLAND August 1996 in an auction.
</TABLE>
CURRENT MEMBERS OF THE BOARD OF DIRECTORS
The Board of Directors is currently comprised of eleven Directors divided
into three classes. The term of each Class expires in different years. All of
the current members of the Board of Directors were designated or approved by
Willis Stein & Partners, L.P. ("Willis Stein") pursuant to the terms of the
Securityholders Agreement. See "Security Ownership of Certain Beneficial Owners
and Management--Securityholders Agreement." Subject to rights of holders of any
series of preferred stock to fill such newly created directorships or vacancies,
any newly created directorships resulting from an increase in the authorized
number of Directors or any vacancies on the Board of Directors resulting from
death, resignation, disqualification or removal for cause may be filled by a
vote of 50% of the total number of the remaining Directors then in office.
Information regarding the current Directors of the Company is set forth
below:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ----------------------------------------------------------
<S> <C> <C>
James D. Dunning, Jr.(1)(2)... 51 Chairman of the Board and Chief Executive Officer
D. Claeys Bahrenburg(1)....... 51 Vice Chairman of the Board and Chairman of the Executive
Committee
Richard S Willis.............. 38 Executive Vice President, Chief Financial Officer and
Director
Stacey J. Lippman............. 49 President, Petersen Brands and Marketing and Director
Milton J. (Chip) Block, Jr.... 53 President, Consumer Marketing/General Manager and Director
Laurence H. Bloch(3).......... 45 Director
Avy H. Stein(1)(2)............ 43 Director
Daniel H. Blumenthal(2)....... 35 Director
John R. Willis................ 49 Director
David H. Moscow(3)............ 61 Director
Alfred W. Roberts, III(3)..... 60 Director
</TABLE>
- ------------------
(1) Member of the Executive Committee.
(2) Member of the Compensation Committee.
(3) Member of the Audit Committee.
There are no family relationships between or among any Directors or
executive officers of the Company.
CLASS I DIRECTORS
Richard S Willis has served as Executive Vice President and Chief Financial
Officer of the Company since the Acquisition and has served as a Director of the
Company since December 1996. Prior to the Acquisition, Mr. Willis served as the
Vice President, Finance of the Predecessor since October 1995. From 1993 to
1995, Mr. Willis served as the Executive Vice President and Chief Financial
Officer of two divisions of World Color Press, Inc. and from 1990 to 1993 as the
Chief Financial Officer and Secretary of
A-3
<PAGE> 25
Aster Publishing Company. From 1987 to 1990, Mr. Willis served as the Chief
Financial Officer and Vice president of Finance and Administration of the
consumer magazine group of Cowles Media Company. Prior thereto, Mr. Willis held
various financial and managerial positions with Capital Cities/ABC, including
the Chief Financial Officer of its consumer magazine division. Mr. Willis is not
affiliated with Willis Stein.
Milton J. (Chip) Block, Jr. has served as President, Consumer
Marketing/General Manager since July 1998 and as a Director of the Company since
March 1998. Prior to joining the Company, Mr. Block served as Chairman and
President of Applied Interactive Media, Inc. (now known as AIM, LLC), which
develops circulation programs for magazine publishers, since 1990. Mr. Block has
been involved in consumer magazine publishing for over twenty years in various
capacities. Mr. Block is also a director of Worldwide Media, Inc.
John R. Willis has served as a Director of the Company since December 1996.
Mr. Willis is a founder and Managing Director of Willis Stein. Prior to founding
Willis Stein, Mr. Willis served as President of Continental Illinois Venture
Corporation ("CIVC"), a venture capital investment firm, from 1989 through 1994.
Prior to his tenure at CIVC, Mr. Willis founded and served as a Managing
Director of Continental Mezzanine Investment Group, following his serving in
various senior lending positions at Continental Bank, which he joined in 1974.
Mr. Willis also serves as a director of a number of privately-held companies.
Alfred W. Roberts, III has served as a Director of the Company since
September 1998. From 1991 to 1998, Mr. Roberts served as the Executive Director
to the law firm of Winthrop, Stimson, Putman & Roberts and, from 1989 to 1990,
Mr. Roberts was a Partner in RFE Investment Partners, a venture capital
investment fund. From 1961 to 1989, Mr. Roberts was employed by Arthur Young &
Company in various managerial capacities, most recently as Vice Chairman --
Strategic Services. Mr. Roberts is a Certified Public Accountant.
CLASS II DIRECTORS
D. Claeys Bahrenburg has served as Vice Chairman of the Board and as a
Director of the Company since the Acquisition and as Chairman of the Executive
Committee since October 1997. From 1989 to 1995, Mr. Bahrenburg served as
President of the Magazine Publishing Division of The Hearst Corporation
("Hearst"), the largest publisher of monthly magazines in the world. From 1986
to 1989, Mr. Bahrenburg served as Executive Vice President and Group Publishing
Director at Hearst, where his responsibilities included overseeing 12
publications, new magazine development and brand development. From 1981 to 1986,
Mr. Bahrenburg held the position of Publisher of both House Beautiful and
Cosmopolitan.
Laurence H. Bloch currently serves as a Director of the Company and served
as the Vice Chairman of the Company since the Acquisition to December 1997. Mr.
Bloch also serves as Chairman of TransWestern Holdings L.P. and TransWestern
Publishing Company LLC (collectively, "TransWestern"), one of the largest
independent publisher of yellow pages in the United States. Mr. Bloch joined
TransWestern in May 1993. From September 1990 to March 1992, Mr. Bloch was
Senior Vice President and Chief Financial Officer of Lanxide Corporation, a
materials technology company. Between 1980 and 1990, Mr. Bloch was an investment
banker, initially with Thomson McKinnon Securities, Inc. ("Thomas McKinnon"),
and later as a Managing Director of Smith Barney. Mr. Bloch is also a director
of TransWestern.
Daniel H. Blumenthal has served as a Director of the Company since the
Acquisition. Mr. Blumenthal is a founder and Managing Director of Willis Stein.
Prior to founding Willis Stein, Mr. Blumenthal served as Vice President of CIVC
from 1993 through 1994. Prior to his tenure at CIVC, Mr. Blumenthal was a
corporate tax attorney with Latham & Watkins, a national law firm, from 1988 to
1993. Mr. Blumenthal also serves as a director of a number of privately-held
companies.
Stacey J. Lippman has served as President, Petersen Brands and Marketing
since July 1998 and as a Director of the Company since March 1998. Prior to
joining the Company, Mr. Lippman has served as the Corporate Media Director and
a Managing Partner of TBWA/Chiat Day Advertising Agency since 1988. Mr. Lippman
has over 25 years experience in the advertising industry.
A-4
<PAGE> 26
CLASS III DIRECTORS
James D. Dunning, Jr. has served as the Chairman of the Board and Chief
Executive Officer of the Company since the Acquisition. Mr. Dunning served as
Chairman and Chief Executive Officer of TransWestern Publishing Company, L.P.
from 1993 through September 1997, and is currently Chairman and Chief Executive
Officer of The Dunning Group, Inc., a private investment firm. Mr. Dunning was
formerly Chairman of SRDS Media Information, L.P., a media information and
database publisher. From 1987 to 1992, Mr. Dunning was Chairman, Chief Executive
Officer and President of Multi-Local Media Information Group, Inc., a yellow
pages and database company. From 1985 to 1986, he served as Executive Vice
President of Ziff Communications, a consumer and trade publisher. From 1982 to
1984, Mr. Dunning was Senior Vice President and Director of Corporate Finance at
Thomson McKinnon. Mr. Dunning served as President of Rolling Stone Magazine from
1977 to 1982.
Avy H. Stein has served as a Director of the Company since the Acquisition.
Mr. Stein is a founder and Managing Director of Willis Stein. Prior to founding
Willis Stein, Mr. Stein served as a Managing Director of CIVC from 1989 through
1994. Prior to his tenure at CIVC, Mr. Stein served as a special consultant for
mergers and acquisitions to the Chief Executive Officer of NL Industries, Inc.;
as the Chief Executive Officer and principal shareholder of Regent Corporation;
as President of Cook Energy Corporation and as an attorney with Kirkland &
Ellis, a national law firm. Mr. Stein also serves as a director of Tremont
Corporation, Racing Champions Corporation, UC Television Network Corp. and a
number of privately-held companies.
David H. Moscow has served as a Director of the Company since June 1998.
Mr. Moscow has served as the Vice Chairman of The Hudson Group, Inc., a national
magazine distribution company, since 1993 and as Chairman Emeritus of East Texas
Distributing Company ("East Texas"), a regional distributor of magazines and
videotapes, since 1997. From 1977 to 1997, Mr. Moscow served as Chairman of East
Texas.
COMPENSATION OF DIRECTORS
Each of the Directors of the Company (other than Messrs. Bahrenburg,
Lippman, Block and R. Willis) is paid annual compensation of $35,000. Directors
are also reimbursed by the Company for reasonable travel expenses incurred in
attending Board of Directors' meetings. The Directors do not receive any
additional compensation for committee participation. Upon their appointment to
the Board, Messrs. Block, Lippman, Moscow and Roberts were each granted options
under the Company's Incentive Plan to purchase 5,000 shares of Class A Shares at
an exercise price equal to its fair market value on the date of grant. These
options vest in equal installments over a three-year period beginning on the
first anniversary of their appointment to the Board.
COMMITTEES AND DIRECTORS' MEETINGS
The Board of Directors held six meetings and took action by written consent
an additional three times during 1997. All of the Directors attended 75% or more
of the total number of meetings of the Board of Directors.
The Board of Directors has three standing committees: the Executive
Committee, the Audit Committee and the Compensation Committee.
The Audit Committee is currently comprised of Messrs. Laurence Bloch,
Alfred Roberts and David Moscow. The Board of Directors has resolved that, in
its opinion and after a full discussion on the matter, each of the members of
the Audit Committee is free from any relationship with the Company or its
management that would interfere with his exercise of independent judgment as a
committee member. The Audit Committee reviews and recommends to the Board, as it
deems necessary, the internal accounting and financial controls for the Company
and the accounting principles and auditing practices and procedures to be
employed in preparation and review of financial statements of the Company. The
Audit Committee makes recommendations to the Board concerning the engagement of
independent public accountants and the scope of the audit to be undertaken by
such accountants. Ernst & Young LLP presently serves as the independent auditors
of the Company.
The Compensation Committee is currently comprised of Messrs. Stein, Dunning
and Blumenthal. The Compensation Committee reviews and, as it deems appropriate,
recommends to the Board policies, practices
A-5
<PAGE> 27
and procedures relating to the compensation of the officers and other managerial
employees and the establishment and administration of employee benefit plans.
The Compensation Committee exercises all authority under any employee stock
option plans of the Company as the committee therein is specified (unless the
Board resolution appoints any other committee to exercise such authority), and
advises and consults with the officers of the Company as may be requested
regarding managerial personnel policies. The Compensation Committee will have
such additional powers and be granted additional authority as may be conferred
upon it from time to time by the Board.
The Executive Committee is comprised of Messrs. Bahrenburg, Dunning and
Stein. The Executive Committee is authorized, subject to certain limitations, to
exercise all of the powers of the Board of Directors during periods between
Board meetings. The Board may also establish other committees to assist in the
discharge of its responsibilities.
The Company does not have a nominating committee. The entire Board of
Directors currently is responsible for filling vacancies on the Board as they
occur and recommending candidates for election as Directors at the annual
meetings of stockholders. The Board will consider individuals recommended for
nominations by stockholders of the Company. Such recommendations should be
submitted in writing to the Chairman of the Board, who will submit them to the
entire Board for its consideration. The recommendation must be accompanied by
the consent of the individual nominated to be elected and to serve.
In addition, the Amended and Restated By-Laws of the Company (the
"By-Laws") require that advance notice of nominations for the election of
Directors to be made by a stockholder (as distinguished from a stockholder's
recommendation to the Board) be given to the Secretary of the Company (i) in the
case of an annual meeting, no later than 60 days and no more than 90 days before
an annual meeting of stockholders, provided, that in the event that the date of
the annual meeting is changed by more than 30 days from the first anniversary
date of the preceding year's annual meeting, notice by stockholders must be
received no later than the close of business on the tenth (10th) day following
the earlier of the date on which this notice was mailed or public announcement
of the meeting was made, and (ii) in the case of a special meeting at which
Directors are to be elected, not later than the close of business on the 10th
day following the earlier of the day on which notice of the date of the meeting
was mailed or public announcement of the meeting was made. Such notice must
include: (i) as to each person whom the stockholder proposes to nominate for
election as a Director at such meeting all information relating to such person
that is required to be disclosed in solicitations of proxies for election of
directors, or is otherwise required, in each case pursuant to Regulation 14A
under the Exchange Act (including such person's written consent to being named
in the proxy statement as a nominee and to serving as a director if elected);
(ii) as to the stockholder giving the notice (A) the name and address, as they
appear on the Company's books, of such stockholder and (B) the class and number
of shares of the Company which are beneficially owned by such stockholder and
also which are owned of record by such stockholder; and (iii) as to the
beneficial owner, if any, on whose behalf the nomination is made, (A) the name
and address of such person and (B) the class and number of shares of the Company
which are beneficially owned by such person.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Compensation Committee was established in December 1996 and
is comprised of Messrs. Blumenthal, Dunning and Stein. Messrs. Blumenthal and
Stein are each Managing Directors of Willis Stein, which is a principal
stockholder of Company. See "Security Ownership of Certain Beneficial Owners and
Management."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Except as otherwise noted, the following table sets forth certain
information as of November 30, 1998 as to the security ownership of equity
securities of the Company by (i) each of the executive officers named in the
Summary Compensation Table, (ii) each of the Directors of the Company, (iii) all
Directors and executive officers as a group and (iv) those persons owning of
record or known to the Company to be the beneficial owner of more than five
percent of the voting securities of the Company. All information with respect to
beneficial ownership has been furnished by the respective Director, executive
officer or five percent
A-6
<PAGE> 28
beneficial owner, as the case may be. Unless otherwise indicated, the persons
named below have sole voting and investment power with respect to the number of
shares set forth opposite their names. Beneficial ownership of the Class A
Shares has been determined for this purpose in accordance with the applicable
rules and regulations promulgated under the Exchange Act.
<TABLE>
<CAPTION>
CLASS A CLASS B
COMMON STOCK(1) COMMON STOCK(1)
-------------------------- --------------------
NO. OF PERCENT OF NO. OF PERCENT
SHARES CLASS SHARES OF CLASS
------------- ---------- --------- --------
<S> <C> <C> <C> <C>
EXECUTIVE OFFICERS AND DIRECTORS:
James D. Dunning, Jr.(2)............................. 1,094,074 4.1% -- --%
D. Claeys Bahrenburg................................. 575,159 2.1 -- --
Neal Vitale(3)....................................... 284,015 1.1 -- --
Richard S Willis..................................... 175,486 * -- --
Laurence H. Bloch(4)................................. 607,128 2.3 -- --
Avy H. Stein(5)...................................... 7,209,409 26.8 -- --
Daniel H. Blumenthal(5).............................. 7,209,409 26.8 -- --
Milton J. (Chip) Block, Jr. ......................... 300 * -- --
Stacey J. Lippman.................................... -- -- -- --
John R. Willis(5).................................... 7,209,409 26.8 -- --
David H. Moscow...................................... -- -- -- --
Alfred W. Roberts, III............................... 1,500 -- -- --
All Directors and executive officers as a group (11
persons)........................................... 9,663,056 36.0 -- --
5% OWNERS:
Willis Stein & Partners, L.P.(6)..................... 7,209,409 26.8 -- --
Robert E. Petersen(7)................................ 3,604,705 13.4 -- --
BankAmerica Investment Corporation(1)(8)............. 2,883,763 10.7 2,883,763 36.6
Chase Equity Associates, L.P.(1)(9).................. 2,684,223 10.0 1,397,823 17.7
The Allstate Corporation(10)......................... 2,162,823 8.0 -- --
First Union Corporation(1)(11)....................... 1,802,352 6.7 1,802,352 22.9
CIBC WG Argosy Merchant Fund 2, L.L.C.(1)(12)........ 1,802,352 6.7 1,802,352 22.9
</TABLE>
- ------------------
*Less than one percent.
(1) The Company has two classes of outstanding Common Stock, the Class A Shares
and the Class B Shares, which are identical in all respects except that the
Class B Shares is non-voting and is convertible to Class A Shares under
certain circumstances. In general, holders of Class B Shares are only
entitled to convert their Class B Shares into Class A Shares in the event
they intend to dispose such shares to a third party. Beneficial ownership
of the Class A Shares has been determined in accordance with the rules of
the Commission. Pursuant to such rules, a person is deemed to be the
beneficial owner of any security in which that person has the right to
acquire beneficial ownership of such security within 60 days. As a result,
holders of Class B Shares are deemed to be the beneficial owners of the
Class A Shares issuable upon the conversion thereof. Such shares of Class A
Shares, however, are not deemed outstanding for purposes of computing the
percentage ownership of any other person.
(2) Includes 14,418 shares of Class A Shares held in trusts for which Mr.
Dunning serves as trustee.
(3) Mr. Vitale's employment with the Company terminated in July 1998.
(4) Such shares of Class A Shares are held in a trust for which Mr. Bloch
serves as trustee.
(5) Includes 7,209,409 shares of the Class A Shares beneficially owned by
Willis Stein. Such persons disclaim beneficial ownership of all such shares
beneficially owned by Willis Stein in which he does not have a pecuniary
interest. Such person's address is c/o Willis Stein, 227 West Monroe
Street, Suite 4300, Chicago, Illinois 60606.
(6) The address of Willis Stein is 227 West Monroe Street, Suite 4300, Chicago,
Illinois 60606. Willis Stein & Partners, L.L.C. is the sole general partner
of Willis Stein. As a result, Willis Stein & Partners,
A-7
<PAGE> 29
L.L.C. may be deemed to have shared voting and dispositive powers with
respect to such shares. The members of Willis Stein & Partners, L.L.C. are
John R. Willis, Avy H. Stein, Beth F. Johnston, Daniel H. Blumenthal,
Daniel M. Gill and Robert C. Froetscher.
(7) Mr. Petersen's interests in the Company are owned through Petersen
Properties. The address for Mr. Petersen and Petersen Properties is 6420
Wilshire Boulevard, Los Angeles, California 90048.
(8) Such person's address is c/o BankAmerica Investment Corporation ("BAIC"),
231 South LaSalle Street, Chicago, Illinois 60697. Also includes shares of
Class B Shares held by CIVC Partners II, a partnership all of the partners
of which are employees of BAIC or an affiliate thereof.
(9) Such person's address is 380 Madison Avenue, 12th Floor, New York, New York
10017-2951.
(10) Such person's address is 2775 Sanders Road, Northbrook, Illinois
60062-6127.
(11) Such person's address is One First Union Center, 301 South College Street,
Charlotte, North Carolina 28288-0137.
(12) Such person's address is 425 Lexington Avenue, 3rd Floor, New York, New
York 10017.
SECURITYHOLDERS AGREEMENT
At the time of the Acquisition, the Company, Petersen, Willis Stein and the
other investors named therein, including Messrs. Dunning, Bahrenburg and Richard
S Willis (collectively, the "Investors"), entered into a securityholders
agreement (the "Securityholders Agreement"), providing for: (i) the composition
of the Board of Directors; (ii) restrictions on the transfer of equity
securities of Petersen, the Company and Petersen Investment Corp. (the "Equity
Securities"); (iii) registration rights relating to the Equity Securities; (iv)
obligations of the Investors upon a sale of the Company; and (v) preemptive
rights in favor of the non-Willis Stein Investors in connection with issuances
of equity to Willis Stein. Under the terms of the Securityholders Agreement, the
Investors agreed to vote their shares in favor of those individuals designated
by Willis Stein to serve on the Board of Directors. Willis Stein also has the
right to control the vote on any significant corporate changes, such as a
merger, consolidation or sale of the Company until such time as the Company
consummates an initial public offering of its equity securities resulting in the
receipt by the Company of at least $75.0 million of gross proceeds and which
indicates a market capitalization of the Company without giving effect to any
issuances of equity securities following its initial capitalization of at least
$330.0 million (a "Qualified IPO"). All of the Investors have agreed that Willis
Stein (through the Company) may control the circumstances under which a sale of
Petersen may take place, and that each Investor will consent to such transaction
on the terms negotiated by Willis Stein. The Securityholders Agreement provides
for up to four long-form and unlimited short-form demand registrations in favor
of Willis Stein, two short-form demand registrations in favor of a majority of
the non-Willis Stein Investors at such time as the Company is eligible to use a
short-form registration statement and unlimited "piggyback" registrations in
favor of the Investors.
Certain of the provisions of the Securityholders Agreement terminated in
accordance with their terms upon the completion of the IPO. Certain of the
parties to the Securityholders Agreement agreed to extend the voting provisions
of the Securityholders Agreement for a period of at least 21 months following
the IPO. Such voting provisions would have otherwise terminated by their terms
as a result of the IPO being a Qualified IPO. As a result of such amendment,
Willis Stein has the power to vote shares of Class A Shares representing
approximately 65% of the Company's voting securities.
A-8
<PAGE> 30
INFORMATION ABOUT EXECUTIVE OFFICERS
EXECUTIVE OFFICERS
Set forth below is certain information regarding the current executive
officers of the Company. Executive officers of the Company are elected by and
serve at the discretion of the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
James D. Dunning, Jr. .................. 51 Chairman of the Board and Chief Executive Officer
D. Claeys Bahrenburg.................... 51 Vice Chairman of the Board and Chairman of the
Executive Committee
Richard S Willis........................ 38 Executive Vice President and Chief Financial Officer
Stacey J. Lippman....................... 49 President, Petersen Brands and Marketing
Milton J. (Chip) Block, Jr. ............ 53 President, Consumer Marketing/General Manager
</TABLE>
For information relating to each executive officer's background, see
"Information with Respect to the Company--Current Members of the Board of
Directors."
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table includes individual compensation
information for the Chief Executive Officer and each of the other executive
officers of the Company for the year ended December 31, 1997 (collectively, the
"Named Executive Officers") for services rendered in all capacities to the
Company during the years ended December 31, 1996 and 1997. In certain
circumstances, the amounts shown in the table combine the compensation received
for services that were provided to the Predecessor from January 1, 1996 through
September 30, 1996, and to the Company from October 1, 1996 through December 31,
1996. There were no stock options exercised during the Company's last fiscal
year nor were any options granted to or held by the Named Executive Officers
during or at the end of the Company's last fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
NAME AND PRINCIPAL POSITION ANNUAL COMPENSATION AWARDS
--------------------------- --------------------------- --------------- ALL OTHER
YEAR SALARY($) BONUS($) STOCK AWARDS($) COMPENSATION($)
---- --------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
James D. Dunning, Jr.(5)............. 1997 $200,000 $200,000 $ 3,360,000(1) $ 44,941(3)(4)
Chairman and Chief Executive
Officer 1996 25,000 -- 37,085(2) 8,750(4)
D. Claeys Bahrenburg(5).............. 1997 $500,000 $310,000 $ 2,100,000(1) $ 7,656(3)
Vice Chairman and Chairman of 1996 133,333 -- 23,180(2) --
Executive Committee
Neal Vitale(5)(6).................... 1997 $333,400 $235,000 $ 2,100,000(1) $ 9,774(3)
President and Chief Operating
Officer 1996 111,133 25,000 23,180(2) --
Richard S Willis..................... 1997 $200,000 $160,000 $ 420,000(1) $ 9,355(3)
Executive Vice President and Chief 1996 181,791 50,000 4,635(2) 115,875(7)
Financial Officer
</TABLE>
- ------------------
(1) On July 31, 1997, the Named Executive Officers exchanged their Class B
Common Units and Class C Common Units of Petersen (see footnote 2 below)
for Class D Common Units, which resulted in the Company recording a
non-recurring non-cash charge of $12.2 million. The value deemed received
by each Named Executive Officer as a result of this exchange is set forth
in the foregoing table. These amounts were determined based upon the
difference in value of the Class D Common Units and the Class B Common
Units and Class C Common Units. As a result of the Reorganization, all of
the Class D Common Units held by the Named Executive Officers were
exchanged for the following number of Class A Shares: James D. Dunning,
Jr.--477,449; D. Claeys Bahrenburg--171,744; Neal Vitale--254,182; and
Richard S Willis--94,803. See "Certain Relationships and Related
Transactions." Set forth below is the aggregate number of shares of Class A
Shares subject to vesting and their
A-9
<PAGE> 31
aggregate value (based upon the closing price of the Company's Class A
Shares on December 31, 1997) for each of the Named Executive Officers as of
the end of the Company's last fiscal year:
<TABLE>
<CAPTION>
CLASS A AGGREGATE
NAME SHARES VALUE
---- ------- ----------
<S> <C> <C>
D. Claeys Bahrenburg........................ 171,744 $3,950,112
Neal Vitale................................. 254,182 5,846,186
Richard S Willis............................ 94,803 2,180,469
</TABLE>
(2) Represents the estimated fair market value at the time of issuance
(September 30, 1996) of the Class A, B and C Common Units of Petersen. Each
of the Class A, B and C Common Units issued to such executive officers were
subject to vesting over a five-year period and the Class B and C Common
Units were not eligible to participate in any distributions by Petersen
until the original purchasers of the Preferred Units and the remaining
Class A Common Units achieved a specified rate of return on their total
investment in Petersen. The Class A Common Units so issued were valued at
$4.50 per unit, the price paid therefor by the investors in connection with
the Acquisition. Because of the terms applicable to the Class B and C
Common units, the fair market value of such Class B and C Common Units was
determined by the Board of Directors to be zero at the time of issuance.
(3) Includes payments made by the Company on behalf of such Named Executive
Officers in 1997 as follows:
<TABLE>
<CAPTION>
MEDICAL-INSURANCE LIFE INSURANCE 401(k)
PREMIUM PREMIUMS MATCHING CONTRIBUTION
----------------- -------------- ---------------------
<S> <C> <C> <C>
James D. Dunning, Jr........... $6,801 $474 $2,666
D. Claeys Bahrenburg........... 6,801 855 --
Neal Vitale.................... 6,119 855 2,800
Richard S Willis............... 6,119 570 2,666
</TABLE>
(4) Includes director fees of $35,000 in 1997 and $9,750 in 1996.
(5) Executive's employment with the Company commenced on September 30, 1996.
See--Employment Agreements.
(6) Mr. Vitale's employment with the Company terminated in July 1998.
(7) Represents payment made to Mr. Willis pursuant to the terms of his
Employment Agreement to reimburse him for losses incurred in connection
with the sale of his principal residence.
EMPLOYMENT AGREEMENTS
In connection with the Acquisition, Messrs. Bahrenburg, Vitale and R.
Willis each entered into an Executive Securities Purchase and Employment
Agreement (the "Employment Agreements") with the Company. The Employment
Agreements provide for the continued employment of Mr. Bahrenburg as the Chief
Executive Officer of Publishing, Mr. Vitale as the President of Publishing and
Mr. Willis as the Chief Financial Officer of Publishing until December 31, 2001,
unless terminated earlier as provided in the respective Employment Agreement.
The Employment Agreements of Messrs. Bahrenburg, Vitale and Willis provide for:
(i) an annual base salary of $500,000, $325,000, and $200,000, respectively
(subject to annual increases based on the consumer price index); (ii) annual
bonuses of up to approximately half of the base salary of such person based on
the achievement certain EBITDA targets; and (iii) a deferred bonus payable upon
the first to occur of: (a) a sale of the Company or (b) the fifth anniversary of
the date of such agreements. Each executive's employment may be terminated by
the Company at any time with or without cause. If such executive is terminated
by the Company with "cause" or resigns other than for "good reason" (each as
defined in such agreements), the executive will be entitled to his base salary
and fringe benefits until the date of termination, but will not be entitled to
any unpaid bonus. Each of Messrs. Bahrenburg, Vitale and Willis is entitled to
his base salary and fringe benefits and any accrued bonus for a period of twelve
months following his termination in the event such executive is terminated
without cause or resigns with good reason. Pursuant to the Employment
Agreements, Messrs. Bahrenburg, Vitale and Willis each has agreed not to compete
with the Company during the employment period and for one year thereafter. The
Employment Agreements also provide each executive with customary fringe benefits
and vacation periods. "Cause"
A-10
<PAGE> 32
is generally defined in the Employment Agreements to mean: (i) the commission of
a felon or a crime involving moral turpitude; (ii) the commission of any other
act or omission involving dishonest disloyalty or fraud; (iii) the substantial
and repeated failure to perform duties as reasonably directed by the Board or
Chairman of the Board of the Company; (iv) gross negligence or willful
misconduct with respect to the Company or any subsidiary; (v) an other material
breach of the Employment Agreement or Company policy established by the Board,
which breach if curable, is not cured within 15 days after written notice
thereof to the executive; or (vi) the failure by the Company to generate a
specified level of EBITDA in any fiscal year. "Good reason" is defined to mean
the occurrence, without such executive's consent, of any of the following: (i)
the assignment to the executive of significant duties materially inconsistent
with the executive's status as a senior executive officer of the Company or a
substantial diminution in the nature or status of the executive's
responsibilities; (ii) a reduction by the Company in the executive's annual base
salary as in effect on the date of such Employment Agreements, except for
across-the-board salary reductions similarly affecting all senior executives of
the Company; or (iii) the Board requires the executive to relocate from the New
York area in the case of Mr. Bahrenburg or the Los Angeles area in the case of
Mr. Vitale and Mr. Willis. The Employment Agreements also provided for the
purchase by Messrs. Bahrenburg, Vitale and Willis of Preferred Units, Common
Units and Common Stock of Petersen for a combination of cash and notes. In
addition, the Company has agreed to nominate Messrs. Bahrenburg and Vitale to
the Board of Directors in accordance with their employment agreements. Mr.
Vitale's employment agreement with the Company was terminated in July 1998.
1997 LONG-TERM EQUITY INCENTIVE PLAN
In September 1997, the Board and stockholders of the Company approved and
adopted the Incentive Plan. The Incentive Plan is administered by the
Compensation Committee of the Board of Directors (the "Committee") composed of
at least two non-employee directors (as that term is defined in Rule 16b-3 under
the Exchange Act), who will be appointed by the Board. Certain employees,
Directors, advisors and consultants of the Company are eligible to participate
in the Incentive Plan (a "Participant"). The Committee is authorized under the
Incentive Plan to select the Participants and determine the terms and conditions
of the awards under the Incentive Plan. The Incentive Plan provides for the
issuance of the following types of incentive awards: stock options, stock
appreciation rights, restricted stock, performance grants and other types of
awards that the Compensation Committee deems consistent with the purposes of the
Incentive Plan. An aggregate of 2,041,269 shares of Class A Shares have been
reserved for issuance under the Incentive Plan, of which options to purchase an
aggregate of 970,394 shares of Class A Shares were outstanding as of December
14, 1998. The Incentive Plan provides that Participants will be limited to
receiving awards relating to no more than 100,000 shares of Class A Shares per
year. All outstanding options granted under the Incentive Plan will become fully
vested and exercisable as a result of the transactions contemplated by the
Merger Agreement.
Options granted under the Incentive Plan may be either incentive stock
options ("ISOs") or such other forms of non-qualified stock options ("NQOs") as
the Committee may determine. ISOs are intended to qualify as "incentive stock
options" within the meaning of Section 422 of the Code. The exercise price of
(i) an ISO granted to an individual who owns shares possessing more than 10% of
the total combined voting power of all classes of stock of the Company (a "10%
Owner") will be at least 110% of the fair market value of a share of common
stock on the date of grant and (ii) an ISO granted to an individual other than a
10% Owner will be at least 100% of the fair market value of a share of Class A
Shares on the date of grant.
Options granted under the Incentive Plan may be subject to time vesting and
certain other restrictions at the sole discretion of the Committee. Subject to
certain exceptions, the right to exercise an option generally will terminate at
the earlier of (i) the first date on which the initial grantee of such option is
not employed by the Company for any reason other than termination without cause,
death, retirement or permanent disability or (ii) the expiration date of the
option. If the holder of an option dies or suffers a permanent disability while
still employed by the Company, the right to exercise all unexpired installments
of such option shall be accelerated and shall vest as of the latest of the date
of such death, the date of such permanent disability and the date of the
discovery of such permanent disability, and such option shall be exercisable,
subject to certain exceptions, for 180 days after such date. If the holder of an
option retires, to the extent the option has vested,
A-11
<PAGE> 33
such option will be exercisable for one year after the date of retirement. If
the holder of an option is terminated without cause, to the extent the option
has vested, such option will be exercisable for 30 days after such date.
All outstanding awards under the Incentive Plan will terminate immediately
prior to consummation of a liquidation or dissolution of the Company, unless
otherwise provided by the Board. In the event of the sale of all or
substantially all of the assets of the Company or the merger of the Company with
another corporation, all restrictions on any outstanding awards will terminate
and Participants will be entitled to the full benefit of their awards
immediately prior to the closing date of such sale or merger, unless otherwise
provided by the Board.
The Board generally will have the power and authority to amend the
Incentive Plan at any time without approval of the Company's stockholders,
subject to applicable federal securities and tax laws limitations (including
regulations of the NYSE).
EMPLOYEE STOCK DISCOUNT PURCHASE PLAN
The Purchase Plan was approved by the Board and the existing stockholders
prior to the consummation of the IPO. The Purchase Plan was established to give
employees desiring to do so a convenient means of purchasing shares of Class A
Shares through payroll deductions. The Purchase Plan provides an incentive to
participate by permitting certain purchases at a discounted price equal to 85%
of fair market value of the Class A Shares on the date of purchase. The Company
believes that ownership of stock by employees will foster greater employee
interest in the success, growth and development of the Company. An aggregate of
90,557 Class A Shares have been reserved for sale under the Purchase Plan. As of
the close of business on December 14, 1998, no shares have been sold under the
Purchase Plan.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In connection with the Company's IPO, all of the existing securityholders
of the Company (including the Named Executive Officers (as defined herein)) and
Petersen entered into a Contribution and Recapitalization Agreement (the
"Recapitalization Agreement"), pursuant to which, among other things, each
existing securityholder of the Company and Petersen contributed all, of its
existing shares of common stock of the Company and Preferred Units and Common
Units of Petersen to the Company in exchange for newly-issued shares of Common
Stock. Pursuant to the Recapitalization Agreement: (i) all of the Preferred
Units of Petersen were exchanged for an aggregate of 10,727,176 shares of Common
Stock and (ii) all of the Class A and Class D Common Units of Petersen and all
of the then-outstanding common stock of the Company was exchanged for an
aggregate of 16,132,088 shares of Common Stock. The number of shares of Common
Stock that were issued under the Recapitalization Agreement to the existing
securityholders of the Company and Petersen was determined according to the
relative preference rankings of such securities and was based upon the initial
public offering price of the Class A Shares.
On July 31, 1997, Petersen and all of the holders of Class A, B and C
Common Units (including the Named Executive Officers) entered into an agreement
whereby all of the outstanding Class B and C Common Units of Petersen were
converted into five series of Class D Common Units. The Class D Common Units
issued to Messrs. Bahrenburg, Vitale and Willis are subject to vesting and
scheduled to vest on the fifth anniversary of their issue date provided that the
holder thereof has been continuously employed by the Company through such date.
Vesting accelerates upon death or disability of such holder or the sale of
Petersen. Upon the IPO, vesting of such Class D Common Units accelerated as
follows so long as the holder is continuously employed through the date of such
IPO: (i) if the holder continues to be employed on the first, second or third
anniversary of the IPO date such that 33 1/3% will vest upon each of the first,
second and third anniversaries of the IPO date and (ii) if the holder ceases to
be employed on a date other than such an anniversary, such that a pro rata
portion will vest since the later of the IPO date and the last anniversary of
the IPO date. As a result of the Reorganization, these Class D Common Units were
exchanged for shares of Class A Shares, which continue to be subject to the same
vesting schedule set forth above for Messrs. Bahrenburg, Vitale and Willis. All
of the Class A Shares held by Messrs. Bahrenburg and Willis that have not
already vested will accelerate in connection with the transactions contemplated
by the Merger
A-12
<PAGE> 34
Agreement. The following table sets forth the Class A Shares that were issued to
each executive officer and/or Director of the Company for their Class D Common
Units:
<TABLE>
<CAPTION>
NUMBER
OF
SHARES
-------
<S> <C>
James D. Dunning, Jr........................................ 477,449
D. Claeys Bahrenburg........................................ 171,744
Laurence H. Bloch........................................... 238,381
Neal Vitale................................................. 254,182
Richard S Willis............................................ 94,803
</TABLE>
Mr. Bloch, a Director of the Company, receives an annual consulting fee of
$200,000 for providing strategic advice to the Company on an as-needed basis
regarding potential acquisitions and other ventures.
Willis Stein, a significant stockholder of the Company, owns approximately
18.0% of the equity securities of Racing Champions Corporation ("Racing
Champions") and has two representatives on Racing Champions' board of directors,
including Avy H. Stein. The Company has entered into licensing and marketing
arrangements with Racing Champions in connection with the Racing Champions Mint
and Racing Champions Hot Rod Collection. The Company received payments of
approximately $180,000 in 1997 from Racing Champions in connection with these
licenses.
Each of Messrs. Bahrenburg, Vitale and Willis purchased equity securities
of Petersen and the Company at the time of the Acquisition through the issuance
of promissory notes to the Company. Such promissory notes bear interest at a
rate equal to the Company's weighted average cost of borrowing (8.5% at December
31, 1997) and will become due and payable on the earlier to occur of: (i)
December 31, 2001; (ii) the termination of such executive's employment with the
Company; or (iii) a sale of the Company. As of December 31, 1997, the following
principal amounts were outstanding under such promissory notes:
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OUTSTANDING
-----------
<S> <C>
D. Claeys Bahrenburg........................................ $800,000
Neal Vitale................................................. 750,000
Richard S Willis............................................ 200,000
</TABLE>
As of December 15, 1998, Messrs. Vitale and Willis had repaid all of their
respective borrowings under such promissory notes.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's officers,
Directors and persons who beneficially own more than ten percent of the
Company's Class A Shares to file reports of securities ownership and changes in
such ownership with the Securities and Exchange Commission ("SEC"). Officers,
Directors and greater than ten percent beneficial owners also are required by
rules promulgated by the SEC to furnish the Company with copies of all Section
16(a) forms they file.
Based solely upon a review of the copies of such forms furnished to the
Company, or written representations that no Form 5 filings were required, the
Company believes that during the period from October 2, 1997 (the date the
Company's Class A Shares became registered under the Exchange Act) through
December 31, 1997, all Section 16(a) filing requirements applicable to its
officers, Directors and greater than ten percent beneficial owners were complied
with other than by the general partner of Willis Stein and its members, all of
which filed a Form 5 to disclose that each may be deemed to be the beneficial
owner of the shares of Class A Shares held of record by Willis Stein.
A-13
<PAGE> 35
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
This Compensation Committee report shall not be deemed incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act or under the Exchange Act,
except to the extent that the Company specifically incorporates this information
by reference, and shall not otherwise be deemed filed under such Acts.
The following report has been submitted by the Compensation Committee of
the Board of Directors:
The Compensation Committee reviews and, as it deems appropriate, recommends
to the Board policies, practices and procedures relating to the compensation of
the officers and other managerial employees and the establishment and
administration of employee benefit plans. The Compensation Committee exercises
all authority under any employee stock option plans of the Company as the
Committee therein specified (unless the Board resolution appoints any other
committee to exercise such authority), and advises and consults with the
officers of the Company as may be requested regarding managerial personnel
policies. In making its recommendations to the full Board of Directors
concerning adjustments to compensation levels, the Compensation Committee
intends to consider the financial condition and operational performance of the
Company during the prior year.
Objectives. The Company's basic objective for executive compensation is to
recruit and help retain top quality executive leadership focused on attaining
long-term corporate goals and increasing stockholder value.
Elements of Compensation. Total compensation for each of the Company's
executive officers is comprised of (i) base salary; (ii) annual bonus; and (iii)
equity incentives.
Base Salary. The base salaries for Messrs. Bahrenburg, Vitale and R.
Willis for 1997 were each established pursuant to the terms of their respective
employment agreements with the Company. See "Compensation of Executive Officers
- -- Employment Agreements." The terms of each of such executive officer's
employment agreement was determined through arms-length negotiations between
such executive officer and representatives of Willis Stein at the time of the
Acquisition. The base salaries of Messrs. Bahrenburg, Vitale and R. Willis were
determined based, in part, on the prior compensation arrangements of such
executive officers and a review of compensation paid to similar officers at
comparably-sized companies within the publishing industry. The Committee intends
to review the base salary levels for each of the executive officers on an annual
basis and to make recommendations to the Board as circumstances warrant.
Annual Bonus. Under the terms of their respective employment agreements,
Messrs. Bahrenburg, Vitale and R. Willis are each entitled to receive an annual
bonus of up to approximately half of their base salaries if the Company achieves
certain EBITDA targets, which are established by the Compensation Committee at
the beginning of each fiscal year. In 1997, the Company achieved the EBITDA
target required for each executive officer to receive the maximum bonus award.
In addition, due to the Company's exceptional performance in 1997, the Committee
also granted each executive officer a special bonus of $60,000. Under the terms
of their respective employment agreement, each executive officer was required to
use a portion of his 1997 bonus to repay indebtedness to the Company in
connection with his purchase of equity securities at the time of the
Acquisition.
Equity Incentives. Each of the Company's executive officers (including Mr.
Dunning) participated in the Acquisition. Specifically, each executive officer
purchased equity securities of Petersen and the Company on the same terms and
conditions as the other Investors in the Acquisition. In addition, such
executive officers were also granted additional incentives in the form of equity
securities of Petersen, certain of which were subject to vesting over a
five-year period and certain of which (i.e., the Class B and Class C Common
Units) were not eligible to participate in any distributions by Petersen until
certain of the Investors received a specified rate of return on their total
investment in Petersen. On July 31, 1997, Petersen exchanged the Class B and
Class C Common Units held by such executive officers for Class D Common Units.
The terms of the Class D Common Units permitted participation in the earnings of
Petersen if such Investors' investment achieved a certain value (regardless of
whether such Investors actually received such amount). This exchange resulted in
the executive officers being deemed to receive the difference in value of the
Class D Common Units and the Class B and Class C Common Units. All of such
equity securities of Petersen held by the
A-14
<PAGE> 36
executive officers were exchanged in the Reorganization for Class A Shares. See
"Compensation of Executive Officers -- Summary Compensation Table."
As a result of their participation in the Acquisition and the additional
equity incentives granted to the executive officers at the time of the
Acquisition, the executive officers held a significant equity interest in the
Company. Therefore, to a large extent, the interests of the Company's senior
management are already aligned with those of its stockholders.
Prior to the completion of the IPO, the Company adopted the Incentive Plan
and the Purchase Plan. Under the Incentive Plan, the Committee was granted broad
authority to award equity-based compensation arrangements to any eligible
employee or director of the Company. An aggregate of 2,041,269 shares of Class A
Shares were reserved for issuance upon the exercise of awards granted to
eligible participants under the Incentive Plan. Since the ultimate value of
stock options bear a direct relationship to market price of the Class A Shares,
the Committee believes that awards under the Incentive Plan are an effective
incentive for the Company's management to create value for the Company's
stockholders. Under the Purchase Plan, eligible employees of the Company are
entitled to purchase shares of Class A Shares at a purchase price equal to 85%
of their fair market value. The Purchase Plan is designed to encourage employees
of the Company to acquire an ownership interest in the Company and thereby
permitting such employees to share in the growth in value of the Company.
Compensation of Chief Executive Officer.
Mr. Dunning's base salary for 1997 was established pursuant to an
arrangement between Mr. Dunning and Willis Stein, as the principal investor in
the Acquisition. At the time of the Acquisition, Mr. Dunning was also serving as
Chairman and Chief Executive Officer of TransWestern Publishing Company, L.P. As
a result, Mr. Dunning's salary level was established in light of Mr. Dunning's
other responsibilities. Mr. Dunning ceased to be employed by TransWestern in
September 1997 and since that time has devoted his full-time to the Company
(although not obligated to do so). As a result, the Committee expects that Mr.
Dunning's base salary for 1998 will be upwardly adjusted.
Mr. Dunning was awarded a bonus of $200,000 as a result of the Company's
achieving certain EBITDA levels in 1997. The level of such bonus, as well as the
EBITDA target, was established at the time of the Acquisition through
arms-length negotiations between Mr. Dunning and representatives of Willis
Stein.
Policy with respect to qualifying compensation for deductibility and other
matters. Section 162(m) of the Internal Revenue Code generally limits to
$1,000,000 the annual tax deductible compensation paid to a covered officer.
However, the limitation does not apply to performance-based compensation,
provided certain conditions are satisfied.
The Company's policy is generally to preserve the federal income tax
deductibility of compensation paid. Accordingly, the Company has taken, to the
extent it believes feasible, appropriate actions to preserve the deductibility
of annual incentive, long-term performance, and stock option awards. However,
notwithstanding the Company's general policy, the Committee retains the
authority to authorize payments that may not be deductible if it believes that
is in the best interests of the Company and its stockholders.
The foregoing report has been approved by all members of the Compensation
Committee.
Daniel H. Blumenthal
James D. Dunning, Jr.
Avy H. Stein
A-15
<PAGE> 37
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stockholder
return since the Class A Shares became publicly traded on October 2, 1997 with
the Standard & Poor's 500 Stock Index and an index of certain companies selected
by the Company as comparative to the Company in that each is a consumer
publishing company. The graph assumes that the value of the investment in the
Company's Class A Shares at its initial public offering price of $17.50 per
share and each index was $100.00 on October 1, 1997.
COMPARISON OF THE COMPANY'S CLASS A SHARES,
STANDARD & POOR'S 500 STOCK INDEX AND A PEER GROUP INDEX(1)
[GRAPHIC]
<TABLE>
<CAPTION>
OCTOBER 1, 1997 DECEMBER 31, 1997
--------------- -----------------
<S> <C> <C>
The Petersen Companies, Inc. (2)............................ $100 $131
Standard & Poor's 500 Stock Index........................... $100 $102
Peer Group Index............................................ $100 $ 97
</TABLE>
- ------------------
(1) The companies selected to form the Company's peer group index are America
Media, Inc., CMP Media, Inc., PRIMEDIA Inc., The Reader's Digest
Association, Inc., Scholastic Corporation and The Times Mirror Company.
Total returns are based on market capitalization.
(2) The closing sale price of the Class A Shares on December 31, 1997 was
$23.00 per share, as reported by the NYSE.
A-16
<PAGE> 1
[THE PETERSEN COMPANY LOGO]
6420 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90048
(213) 782-2000
DECEMBER 16, 1998
Dear Stockholder:
On behalf of the Board of Directors of The Petersen Companies, Inc. (the
"Company"), I am pleased to inform you that the Company entered into an
Agreement and Plan of Merger, dated as of December 15, 1998 (the "Merger
Agreement"), with EMAP plc ("Parent") and EMAP Acquisition Corp., its wholly
owned subsidiary ("Purchaser"), pursuant to which Purchaser has today commenced
a cash tender offer (the "Offer") to purchase all outstanding shares of Class A
Common Stock of the Company (the "Class A Shares") and all outstanding shares of
Class B Common Stock of the Company (the "Class B Shares" and, together with the
Class A Shares, the "Shares") at a price of $34.00 per share, net to the seller
in cash, without interest. The Offer is conditioned upon, among other things,
the tender of at least a majority of both the outstanding Class A Shares and the
Shares.
Following the successful completion of the Offer, upon the terms and
subject to the conditions contained in the Merger Agreement, Purchaser will be
merged with and into the Company (the "Merger"). At the effective time of the
Merger, each remaining issued and outstanding Share will be converted into the
right to receive $34.00 in cash, subject to dissenter's rights.
YOUR BOARD OF DIRECTORS HAS: (1) UNANIMOUSLY APPROVED THE MERGER AGREEMENT,
THE STOCKHOLDERS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY; (2)
UNANIMOUSLY RECOMMENDED THAT THE HOLDERS OF SHARES ACCEPT THE OFFER, TENDER
THEIR SHARES PURSUANT TO THE OFFER AND APPROVE AND ADOPT THE MERGER AGREEMENT;
(3) UNANIMOUSLY DETERMINED THAT EACH OF THE MERGER AGREEMENT, THE OFFER AND THE
MERGER IS FAIR TO THE STOCKHOLDERS OF THE COMPANY; (4) UNANIMOUSLY DETERMINED
THAT THE CONSIDERATION TO BE PAID FOR EACH SHARE IN THE OFFER AND THE MERGER IS
FAIR TO THE STOCKHOLDERS OF THE COMPANY AND THE OFFER AND THE MERGER ARE
OTHERWISE IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS; (5)
UNANIMOUSLY DECLARED THAT THE MERGER AGREEMENT IS ADVISABLE; AND (6) UNANIMOUSLY
CONSENTED TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to the factors described in the enclosed
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"),
which is being filed today with the Securities and Exchange Commission,
including among other things, the written opinions of Donaldson, Lufkin &
Jenrette Securities Corporation and Morgan Stanley & Co. Incorporated, the
Company's financial advisors, that, as of such date and based upon and subject
to the assumptions, limitations and qualifications set forth therein, the
consideration to be received by such holders of the Shares pursuant to the Offer
and the Merger is fair to such stockholders from a financial point of view and
that certain stockholders of the Company (the "Selling Stockholders") entered
into a Stockholders' Agreement (the "Stockholders Agreement") with Parent and
Purchaser on December 15, 1998 pursuant to which each Selling Stockholder has
agreed to tender into the Offer, and not to withdraw therefrom, all the
<PAGE> 2
Class A Shares and Class B Shares that such Selling Stockholder owned on
December 15, 1998 (comprising 18,406,656 Class A Shares and 7,886,290 Class B
Shares for all the Selling Stockholders) as well as any Shares thereafter
acquired by him, her or it.
Additional information with respect to the Board's decision is contained in
the enclosed Schedule 14D-9, and I urge you to consider this information
carefully.
In addition to the attached Schedule 14D-9, also enclosed is the Parent's
Offer to Purchase dated December 16, 1998, together with related materials,
including a Letter of Transmittal to be used for tendering your Shares in the
Offer. These documents set forth the terms and conditions of the Offer and
provide instructions on how to tender your Shares. I urge you to read and
consider the enclosed materials carefully before making your decision with
respect to tendering your Shares pursuant to the Offer.
Very truly yours,
/s/ James D. Dunning, Jr.
James D. Dunning, Jr.
Chairman of the Board and
Chief Executive Officer
<PAGE> 1
FOR IMMEDIATE RELEASE
THE PETERSEN COMPANIES, INC. BOARD ACCEPTS $1.2 BILLION CASH TENDER OFFER FROM
EMAP PLC
THE COMBINED COMPANY TO BECOME ONE OF THE LARGEST MAGAZINE PUBLISHERS IN THE
WORLD
NEW YORK, December 15, 1998 - The Petersen Companies, Inc. (NYSE -
PTN), the largest publisher of special interest magazines in the U.S., announced
today that its Board of Directors has agreed to the terms of a cash tender offer
from EMAP plc (EMA.L), one of the largest consumer magazine publishers in
Europe.
Under the terms of the agreement, each Petersen shareholder will
receive $34 per share in cash. Willis Stein & Partners, L.P., a Chicago-based
private equity investment firm and the largest single shareholder of Petersen,
along with its coinvestors and certain of Petersen's management, combined
representing over 66% of Petersen's Class A shares and 100% of its Class B
shares, have irrevocably agreed to accept the tender offer.
Following the acquisition, which has been approved by both boards, EMAP
Petersen, under the leadership of James D. Dunning, Jr., will become a new
division of EMAP plc. EMAP plc, which is led by Kevin Hand, with the addition of
Petersen, will be one of the world's leading international magazine publishers
with over 600 magazine titles and multimedia products including television,
radio, trade shows, consumer events and custom publishing, more than 6,000
employees worldwide and combined revenues exceeding US$1.5 billion.
James D. Dunning, Jr., the Chairman, President and Chief Executive
Officer of The Petersen Companies, Inc., will remain Chairman and President of
the newly created EMAP Petersen division. Upon completion of the deal it is
anticipated that Mr. Dunning will be invited to join the Board of Directors of
EMAP plc.
"This acquisition brings together two outstanding organizations that
share a common vision, values, and strategies and have demonstrated track
records of achievement," said Mr. Dunning and Mr. Hand in a joint statement.
They added "This is an opportunity for all of the employees, at both Petersen
and EMAP, to participate in the growth of an international publishing and
multimedia company."
"With Petersen as a strong platform for growth in the U.S., we plan to
create a dynamic, broadly-based international publishing business with strong
brands and competitive positions that are expected to generate strong cash flows
to finance future growth," they said. "The acquisition fits the strategy of
seeking market leadership, pursued by both companies," they added.
<PAGE> 2
THE PETERSEN COMPANIES, INC. PAGE 2
"Petersen represents an outstanding opportunity for us. With such an
established footing in the U.S. magazine market, there are very good
opportunities for further growth by Petersen, including acting as a launch pad
for EMAP's international titles" Mr. Hand said. Mr. Dunning added, "The heritage
and culture of the two companies together with the strength and complementary
nature of Petersen's magazine franchises and their complementary geographic
coverage, make these two companies an excellent fit. We plan to accelerate our
proven strategy of growth driven by acquisitions, launches and brand
extensions."
EMAP will finance the acquisition with cash, bank financing and through
a rights issue, which has been underwritten by Schroders and BT Alex. Brown
International in the U.K. The acquisition is subject to EMAP shareholder and
regulatory approval, as well as other customary conditions. The Tender Offer
will be effected pursuant to an agreement and plan of merger between EMAP and
Petersen and is subject to, among other conditions, a tender of a majority of
Petersen's Class A common stock and a majority of Petersen's total outstanding
common stock. A subsidiary of EMAP will make a cash tender offer of $34 per
share for all of the outstanding Petersen shares. The tender offer is expected
to be consummated in mid-January. Any Petersen shares not purchased in the offer
will be converted in a subsequent merger into a right to receive $34 in cash.
Petersen was founded in 1948 by Robert E. Petersen with the launch of
HOT ROD magazine followed by MOTOR TREND. In September 1996 an investment group
led by Willis Stein & Partners, L.P., James D. Dunning, Jr. and management,
purchased the company from Mr. Petersen. In October 1997 Petersen completed an
initial public offering at $17.50 per share, raising $141 million in equity, and
was listed on the New York Stock Exchange under the symbol PTN. The Petersen
Companies, Inc. has become the largest publisher of special interest magazines
in the U.S. It has a diverse portfolio of 132 special-interest magazines,
including internationally recognized titles such as MOTOR TREND, HOT ROD, TEEN,
SPORT, SLAM, SURFER, INLINE, SNOWBOARDER, POWDER, SKATEBOARDER, HUNTING, SKIN
DIVER, PHOTOGRAPHIC, MOTORCYCLIST and 4 WHEEL & OFF-ROAD. In addition to these
titles, Petersen has scheduled for 1999 more than 100 trade and consumer events
including the GRAVITY GAMES. A joint venture with NBC, the GRAVITY GAMES is an
alternative sports and lifestyle & music festival, which is the first in a
series to be aired on NBC Network in October 1999. Since purchasing Petersen,
management has launched and acquired more than 60 magazines, including
STEREOPHILE, SLAM, INSIDE SPORTS, POWDER, BIKE, DISCOVER DIVING, HOME THEATER,
MOBILE COMPUTING and PORTABLE COMPUTING. In addition more than 60 licensing
agreements have been signed.
In October 1998 Petersen announced record year-to-date revenues and
earnings per share. Year-to-date revenues, as of the end of the third quarter,
were at $228.7 million, up 24.4% above prior year results of $183.8 million.
Year-to-date earnings per share (excluding one-time extraordinary expenses)
increased to $0.47, an improvement of $1.08 per share versus the prior year loss
of ($0.61).
EMAP, based in London, traces its roots back to 1887 when Sir Richard
Winfrey founded the company by acquiring his first publication, SPALDING
GUARDIAN. EMAP was incorporated in 1947 as a result of the merger of four local
newspaper companies, the same year it attained a listing on the London Stock
Exchange. It developed into a UK newspaper business in the early 50's and began
its shift to magazines in the mid 50's with the launch of ANGLING TIMES which
was soon followed by MOTOR CYCLE NEWS and GARDEN NEWS. Today EMAP is an
international media business and one of the largest consumer magazine publishers
in Europe. Its business is comprised of four major
<PAGE> 3
THE PETERSEN COMPANIES, INC. PAGE 3
divisions; Consumer Magazines UK, EMAP France (Consumer and Business magazines);
Business Communications; Radio. EMAP, and its subsidiaries, publish over 157
consumer magazines in Europe. The leading magazines by circulation include MORE,
FHM, BLISS, SMASH HITS, YOURS, NEW WOMAN, CAR, MOTORCYCLE NEWS, PERFORMANCE BIKE
and Q in the U.K. France EMAP's portfolio includes titles such as TELE STAR,
MODES TRAVAUX, TOP SANTE/, AUTO JOURNAL and AUTO PLUS. In addition, EMAP has a
market-leading portfolio of events and trade publications in the U.K. and
Germany with titles such as NURSING TIMES, FLEET NEWS, BROADCAST, SCREEN
INTERNATIONAL and CONSTRUCTION NEWS and exhibitions including the International
Autumn & Spring Fair and 40(Degree). In the U.K. commercial radio market,
through its ownership of 18 broadcast radio stations in London, Manchester,
Newcastle, Leeds and Liverpool, it has a market leading position in one of the
fastest growing mediums in that country.
With operations in Europe, Australia and Asia, EMAP had annual
revenues, for the year ended March 31, 1998, of more than 772 Million Pounds
(US$1.3 billion), mostly derived from the U.K. and France, where it is the 2nd
and 3rd largest publisher of consumer magazines respectively. During the last
five full financial years EMAP has grown its reported adjusted earnings per
share (excluding exceptional items) at a compound annual growth rate of
approximately 23.2%, while its share price, since 1993, has risen by almost
212%, representing significant out-performance of the FTSE -All Share index.
Except for historical information contained herein, the statements in this
release are forward-looking and made pursuant to the safe harbor provisions of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements are based on management's expectations and certain assumptions as of
the date hereof, which are subject to certain risks and uncertainties. The
Company does not undertake any responsibility to update any of these statements
in the future. Actual future performance and results could differ from that
contained in or suggested by these forward-looking statements as a result of the
factors and the business risks described in the Company's Report on Form 10-K
for the year ended December 31, 1997 and elsewhere in the Company's filings with
the Securities and Exchange Commission.
* * *
The Petersen Companies, Inc. EMAP PLC
New York Stock Exchange - symbol PTN London Stock Exchange - symbol EMA.L
www.petersenco.com www.emap.com
Contact for PETERSEN: Contact for EMAP:
New York - New York -
SUSAN MAGRINO AGENCY FLEISHMAN HILLARD
Susan Magrino, ext. 208 Peter McCue
Daniel Courtney, ext. 206 Michele Vana
Telephone: 212-957-3005 Jeff Kruger
Email: [email protected] Telephone: 212-453-2000
Email: [email protected]
London -
Tim Spratt
Financial Dynamics Ltd.
44 171 831 3113
<PAGE> 1
ANNEX B
[DONALDSON, LUFKIN & JENRETTE LETTERHEAD]
December 14, 1998
Board of Directors
The Petersen Companies, Inc.
6420 Wilshire Boulevard
Los Angeles, CA 90048
Dear Sirs:
You have requested our opinion as to the fairness from a financial point of
view to the holders of Class A Common Stock (as defined below), other than the
stockholders who are affiliates (the "Public Stockholders"), of The Petersen
Companies, Inc. (the "Company") of the consideration to be received by such
holders of Class A Common Stock pursuant to the terms of the Agreement and Plan
of Merger, dated as of December 15, 1998 (the "Agreement"), among the Company,
EMAP, plc ("EMAP") and EMAP Acquisition Corp. ("Merger Sub"), a wholly owned
subsidiary of EMAP, pursuant to which Merger Sub will be merged (the "Merger")
with and into the Company.
Pursuant to the Agreement, EMAP and Merger Sub will commence a tender offer
(the "Tender Offer") for all issued and outstanding shares of the Class A Common
Stock, par value $0.01 per share ("Class A Common Stock") of the Company and
Class B Common Stock, par value $0.01 per share ("Class B Common Stock") of the
Company, in each case at a price of $34.00 per share. The Tender Offer is to be
followed by the Merger in which the shares of all shareholders who did not
tender in the Tender Offer would be converted into the right to receive the same
consideration as offered in the Tender Offer.
In arriving at our opinion, we have reviewed the draft dated December 11,
1998 of the Agreement and the exhibits thereto. We also have reviewed financial
and other information that was publicly available or furnished to us by the
Company including information provided during discussions with the Company's
management. Included in the information provided during discussions with
management were certain financial projections of the Company for the period
beginning January 1, 1998 and ending December 31, 2003 prepared by the
management of the Company. In addition, we have compared certain financial and
securities data of the Company with various other companies whose securities are
traded in public markets, reviewed the historical stock prices and trading
volumes of the Class A Common Stock, reviewed prices and premiums paid in
certain other business combinations and conducted such other financial studies,
analyses and investigations as we deemed appropriate for purposes of this
opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
us from public sources, that was provided to us by the Company or its
representatives, or that was otherwise reviewed by us. With respect to the
financial projections supplied to us, we have assumed that they have been
reasonably prepared on the basis reflecting the best currently available
estimates and judgments of the management of the Company as to the future
operating and financial performance of the Company. We have not assumed any
responsibility for making an independent evaluation of any assets or liabilities
or for making any independent verification of any of the information reviewed by
us. We have relied as to certain legal matters on advice of counsel to the
Company.
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. Our opinion does not address the relative
merits of the Merger and the other business strategies being considered by the
Company's Board of Directors, nor does it address the Board's decision to
proceed
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<PAGE> 2
with the Merger. Our opinion does not constitute a recommendation to any
stockholder as to whether to tender in the Tender Offer or how to vote on the
proposed Merger.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for the Company in the past and has been compensated
for such services. DLJ co-lead managed the Company's $140 million initial public
offering in October 1997.
Based upon the foregoing and such other factors as we deem relevant, we are
of the opinion that the consideration to be received by the Public Stockholders
of the Company pursuant to the Agreement is fair to such holders of Class A
Common Stock from a financial point of view.
Very truly yours,
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ PETER B. POND
------------------------------------
Peter B. Pond
Managing Director
B-2
<PAGE> 1
ANNEX C
MORGAN STANLEY DEAN WITTER
1585 BROADWAY
NEW YORK, NEW YORK 10036
(212) 761-4000
December 14, 1998
Board of Directors
The Petersen Companies, Inc.
110 Fifth Avenue
New York, NY 10011
Members of the Board:
We understand that Petersen, Inc. ("Petersen" or the "Company"), EMAP plc
("EMAP") and EMAP Acquisition Corp., a wholly owned subsidiary of EMAP ("Merger
Subsidiary"), have entered into an Agreement and Plan of Merger, dated as of
December 14, 1998 (the "Merger Agreement"), which provides, among other things,
for (i) the commencement by Merger Subsidiary of a tender offer (the "Tender
Offer") for all the issued and outstanding shares of Class A Common Stock, par
value $0.01 per share, of the Company (the "Class A Common") and all the issued
and outstanding shares of Class B Common Stock, par value $0.01 per share, of
the Company (the "Class B Common" and, together with Class A Common, the "Common
Stock") for $34.00 per share net to the seller in cash, and (ii) the subsequent
merger (the "Merger") of the Company with and into the Merger Subsidiary.
Pursuant to the Merger, the Company will become a wholly owned subsidiary of
EMAP and each issued and outstanding share of Common Stock, other than shares
held in treasury or held by Buyer or any affiliate of Buyer or as to which
dissenters' rights have been perfected, will be converted into the right to
receive $34.00 per share in cash. We further understand that certain of the
holders of Common Stock and EMAP have entered into a Stockholders' Agreement,
dated as of December 14, 1998 (the "Stockholders' Agreement"). The terms and
conditions of the Tender Offer and the Merger are more fully set forth in the
Merger Agreement.
You have asked for our opinion as to whether the consideration to be
received by the holders of shares of Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) reviewed certain publicly available financial statements and
other information of the Company;
(ii) reviewed certain internal financial statements and other
financial and operating data concerning the Company prepared by the
management of the Company;
(iii) analyzed certain financial projections prepared by the
management of the Company;
(iv) discussed the past and current operations and financial
condition and the prospects of the Company with senior executives of the
Company;
(v) reviewed the reported prices and trading activity for the Class A
Common;
(vi) compared the financial performance of the Company and the prices
and trading activity of the Class A Common with that of certain other
comparable publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available,
of certain comparable acquisition transactions;
(viii) participated in discussions and negotiations among
representatives of the Company, EMAP and certain other parties and their
financial and legal advisors;
(ix) reviewed the Merger Agreement, the Stockholders' Agreement and
certain related documents; and
C-1
<PAGE> 2
MORGAN STANLEY DEAN WITTER
(x) performed such other analyses and considered such other factors
as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the purposes of
this opinion. With respect to the financial projections, we have assumed that
they have been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the future financial performance of the
Company. We have not made any independent valuation or appraisal of the assets
or liabilities of the Company, nor have we been furnished with any such
appraisals. Our opinion is necessarily based on economic, market and other
conditions as in effect on, and the information made available to us as of, the
date hereof.
We have acted as financial advisor to the Board of Directors of the Company
in connection with this transaction and will receive a fee for our services. In
the past, Morgan Stanley & Co. Incorporated and its affiliates have provided
financial advisory and financing services for the Company and have received fees
for the rendering of these services. In particular, we acted as lead manager in
connection with the initial public offering of the Company Common Stock in
October 1997.
It is understood that this letter is for the information of the Board of
Directors of the Company and may not be used for any other purpose without our
prior written consent, except that this opinion may be included in its entirety
in any filing made by the Company in respect of the Tender Offer and the Merger
with the Securities and Exchange Commission. In addition, Morgan Stanley
expresses no opinion or recommendation as to whether or not the shareholders of
the Company should tender their shares in connection with the Tender Offer.
Based on and subject to the foregoing, we are of the opinion on the date
hereof that the consideration to be received by the holders of shares of Common
Stock pursuant to the Merger Agreement is fair from a financial point of view to
such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ STUART J. EPSTEIN
-----------------------------------
Stuart J. Epstein
Managing Director
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<PAGE> 1
THE PETERSEN COMPANIES, INC.
6420 Wilshire Boulevard
Los Angeles, California 90048
November 18, 1998
EMAP PLC
1 Lincoln Court
Lincoln Road
Peterborough, England
PE1 2RF
Attention: Chief Executive Officer
Gentlemen:
To assist you in your evaluation (the "Evaluation") of the business and
prospects of The Petersen Companies, Inc., a Delaware corporation (the
"Company"), in connection with a possible business combination or similar
transaction with the Company involving the Company's stock (a "Transaction"),
the Company has furnished to you or will furnish to you certain information
which is confidential, proprietary or otherwise not generally available to the
public (it being understood that, subject to Section 4, all of the Information
(as defined in Section 9) provided to you or any of your Representatives should
be assumed to be confidential, proprietary or otherwise not generally available
to the public unless informed in writing to the contrary by the Company). As a
condition to, and in consideration of, the Company furnishing the Information,
you agree as follows:
1. Nondisclosure of Information. The Information will (a) be kept
confidential by you, (b) not be used by you in any manner detrimental to the
Company, and (c) not be used other than in connection with the Evaluation and
the Transaction. You may, however, disclose the Information to your
Representatives, but only if you determine in your sole discretion that your
Representatives need to know the Information in connection with the Evaluation
and the Transaction. You will (i) inform each of your Representatives receiving
Information of the confidential nature of the Information and of this letter
agreement, (ii) direct your Representatives to treat the Information
confidentially and not to use it other than in connection with the Evaluation
and the Transaction, and (iii) be responsible for any improper use of the
Information by you or any of your Representatives (including, without
limitation, any Representatives who, subsequent to the first date of disclosure
of Information hereunder, become your former Representatives). You will upon the
Company's request deliver to the Company a list of those to whom Information has
been disclosed. Without the prior consent of the Company or your prior written
consent, as appropriate, or except as otherwise provided herein, you and the
Company will not, and will direct each of our respective Representatives not to,
disclose to any person (1) that the Information has been made available to you,
(2) that discussions regarding the Transaction are taking place or your
identity, or (3) any other facts (including any of the terms and conditions of
the Transaction) with respect to the discussions between you and the Company.
The restrictions set forth in the immediately preceding sentence shall terminate
upon the execution of a Definitive Agreement.
<PAGE> 2
November 18, 1998
Page 2
2. Notice Preceding Compelled Disclosure. If you or any of your
Representatives are requested, pursuant to a subpoena, civil investigative
demand or similar process or other oral or written request issued by a court of
competent jurisdiction or a federal, state, local or foreign governmental or
regulatory body or agency, to disclose any Information, you will promptly notify
the Company of such request so that the Company may seek a protective order or
take other appropriate action and/or waive compliance with the terms of this
letter agreement. Upon the Company's request, you will also use reasonable
endeavors to cooperate in the Company's efforts to obtain a protective order or
other reasonable assurance that confidential treatment will be accorded the
Information. If, in the absence of a protective order, you or any of your
Representatives are compelled as a matter of law to disclose the Information,
you will disclose, without liability hereunder, to the party compelling
disclosure only that part of the Information as is required by law to be
disclosed (in which case, prior to such disclosure, you will advise the Company
and its counsel as to such disclosure and the nature and wording of such
disclosure), and you will use your reasonable best efforts to obtain
confidential treatment for any Information so disclosed.
3. Treatment of Information. As soon as reasonably practicable upon the
Company's written request or upon your determination to terminate the Evaluation
(if no Transaction results) you and your Representatives will return to the
Company all tangible Information which has been provided to you and will destroy
(or, at your option, return to the Company) all Information prepared by you or
your Representatives. Such destruction (or return) will be confirmed in writing
to the Company. The redelivery or destruction of such material shall not relieve
you or any of your Representatives of the confidentiality obligations of this
letter agreement. You hereby acknowledge that (i) you are aware and that your
Representatives have been advised by you that the United States securities laws
prohibit any person who has material non-public information about a company
which is obtained from the company or its representatives from purchasing or
selling securities of such company or from communicating the information to any
other person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities and (ii) are familiar with
the United States Securities Exchange Act of 1934 (the "Exchange Act") and the
rules and regulations promulgated thereunder, and agree that you will not use,
or communicate to any person under circumstances where it is reasonably likely
that such person is likely to use or cause any person to use, any Information in
contravention of the Exchange Act or any of its rules and regulations, including
Rules 10b-5 and 14e-3.
4. Public Information. The term "Information" does not include, and
this letter agreement will not apply to, information that (a) is or becomes
generally available to the public through no action by you or your
Representatives in violation of the provisions of this letter agreement, or (b)
is or becomes available to you on a nonconfidential basis from a source, other
than the Company or its Representatives, which you believe, after reasonable
inquiry, is not prohibited from disclosing such portions to you by a
contractual, legal or fiduciary obligation.
5. No Warranty of Accuracy. You understand that the Company will
endeavor to include in the Information materials it believes to be relevant for
the Evaluation, but you acknowledge that neither the Company nor any
Representative of the Company makes any representation or warranty as to the
accuracy or completeness of any Information except as otherwise
<PAGE> 3
November 18, 1998
Page 3
provided in the Definitive Agreement. You agree that neither the Company nor any
of its Representatives will have any liability to you or your Representatives
resulting from the use of the Information by you or any of your Representatives,
except, in the case of the Company, as otherwise provided in the Definitive
Agreement. You also agree that if you determine to enter into the Transaction,
such determination will be based solely on the terms of the Definitive Agreement
and on your own investigation, analysis and assessment of the business to be
acquired.
6. Certain Actions.
(a) During the course of the Evaluation, you will ensure that neither
you nor any of your Representatives will contact or otherwise communicate with
the Company or any of its officers, directors or employees except with the prior
approval of, and that you and any of your Representatives will direct all
inquiries as to the Company or any of its officers, directors or employees to,
Avy H. Stein, as Chairman of the Special Committee (the "Committee") appointed
by the Company's Board of Directors to evaluate a Transaction.
(b) As of the date of this letter agreement, except as previously
disclosed by you to the Company in writing, you confirm that you do not
beneficially own any securities of the Company, whether equity or debt
securities, or any direct or indirect options or other rights to acquire any
such securities ("Securities"). If discussions relating to a possible
Transaction have been terminated by either party, you agree that, for a period
of one (1) year from the date of this letter agreement, unless such shall have
been specifically invited in writing by the Board of Directors of the Company,
you will not, and you will not direct any of your Representatives, in any
manner, directly or indirectly, (A) effect or seek, offer or propose (whether
publicly or otherwise) to effect, or cause or participate in or in any way
assist any other person to effect or seek, offer or propose (whether publicly or
otherwise) to effect or participate in, (i) any acquisition of any securities
(or beneficial ownership thereof) or assets of the Company or any of its
subsidiaries; (ii) any tender or exchange offer or merger or other business
combination involving the Company or any of its subsidiaries; (iii) any
recapitalization, restructuring, liquidation, dissolution or other extraordinary
transaction with respect to the Company or any of its subsidiaries; or (iv) any
"solicitation" of "proxies" (as such terms are used in the proxy rules of the
Securities and Exchange Commission) or consents to vote any voting securities of
the Company, (B) form, join or in any way participate in a "group" (as defined
under Section 13d-5 of the Exchange Act, which may engage in any of the
foregoing matters set forth in (A) above, (C) otherwise act, alone or in concert
with others, to seek to control or influence the management, Board of Directors
or policies of the Company, (D) take any action which might in the reasonable
opinion of counsel force the Company to make a public announcement regarding any
of the types of matters set forth in (A) above, or (E) enter into any
discussions or arrangements with any third party with respect to any of the
foregoing; provided, however, that the provisions in clauses (A) through (E)
above shall cease to be effective in the event that the Company enters into an
agreement with a third party relating to a possible Transaction. You also agree
during any such period not to request the Company (or its directors, officers,
employees or agents), directly or indirectly, to amend or waive any provision of
this paragraph (including this sentence).
<PAGE> 4
November 18, 1998
Page 4
(c) You further agree that, for a period of two (2) years from the date
of this letter agreement, you will not directly or indirectly solicit for
employment any of the current officers or employees of the Company with whom you
have had contact or who was specifically identified to you during the period of
the Evaluation.
(d) The provisions of this Paragraph 6 will survive for the periods
stated above (unless otherwise provided for above) notwithstanding that some or
all of the Information has become publicly disclosed or outdated or that any
portion of this letter agreement has become inoperative as to any portion of the
Information.
7. Certain Obligations Only on Definitive Agreement. No agreement
providing for any Transaction will be deemed to exist unless and until a
Definitive Agreement has been executed and delivered by the Company and each of
the other parties thereto, and you hereby irrevocably waive any claims
(including, without limitation, claims related to an alleged breach of contract)
in connection with any Transaction unless and until a Definitive Agreement has
been so executed and delivered and then only in accordance with the terms
thereof. Unless and until a Definitive Agreement has been so executed and
delivered, none of the Company or any of its Representatives has any legal
obligation to you of any kind with respect to any Transaction because of this
letter agreement or any other written or oral expression with respect to any
Transaction, except, in the case of this letter agreement, for the matters
specifically agreed to herein. You agree that you will not have any claims
against the Company or any of its Representatives arising out of or relating to
any Transaction other than those claims, if any, arising out of or relating to a
Definitive Agreement with the Company and then only in accordance with the terms
of such Definitive Agreement.
8. General Provisions. No failure or delay in exercising any right
hereunder will operate as a waiver thereof, nor will any single or partial
exercise thereof preclude any other or further exercise thereof or the exercise
of any other right This letter agreement will be binding on and inure to the
benefit of the parties hereto and their respective successors and assigns. In
addition, because money damages would not be a sufficient remedy for any
violation of the terms of this letter agreement, the parties hereto will be
entitled to specific performance and injunctive relief as remedies for any
violation, in addition to all other remedies available at law or equity. You
hereby consent to personal jurisdiction in any action brought in any federal or
state court within the State of New York having subject matter jurisdiction in
the matter for purposes of any action arising out of this letter agreement,
provided that the foregoing shall not in any way be construed as a general
consent to service of process in the State of New York for any other purpose
except as set forth herein. This letter agreement will be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the principles of conflict of laws thereof.
9. Certain Definitions. As used in this letter agreement, (a) the terms
or phrases "affiliate," "beneficial owner," "election contest," "equity
security," "group," "participant," "person," "proxy," "security," and
"solicitation" (and the plurals thereof) will be ascribed a meaning no less
broad than the broadest definition or meaning of such terms under the Exchange
Act and the rules and regulations promulgated thereunder, (b) the term "Company"
and any word referring to the Company includes the Company and its affiliates,
(c) the term "you" and "your" includes the entity
<PAGE> 5
November 18, 1998
Page 5
named as the addressee of this letter agreement and its affiliates, (d) with the
exceptions that are set forth in Section 4 hereof, the information concerning
the Company, whether provided to you prior to the date hereof or as contemplated
by this letter agreement, whether furnished by the Company or any of its
Representatives, together with all written or electronically stored
documentation prepared by you or your Representatives based upon, reflecting or
incorporating, in whole or in part, such information or the Evaluation is herein
referred to as the "Information," (e) any director, officer, employee, agent,
lender, partner or representative, including, without limitation, any
accountant, attorney, and financial advisor, is herein referred to as a
"Representative," and (f) a definitive, written agreement providing for a
Transaction that is executed by us and you and that states it is intended to be
binding is herein referred to as a "Definitive Agreement;" provided, however,
that a Definitive Agreement does not include a letter of intent or any other
preliminary agreement, whether or not executed, nor does it include any actual
or purported written or verbal acceptance of any offer or bid.
Please sign and return one copy of this letter agreement to evidence
your acceptance of and agreement to the foregoing, whereupon this letter
agreement will become the binding obligation of each of the undersigned.
THE PETERSEN COMPANIES, INC.
By: /s/ Richard S Willis
------------------------
Name: Richard S Willis
Title: Executive Vice President and Chief
Executive Officer
Accepted and agreed to as of
the date first above written:
EMAP PLC
By: /s/ Chris Innis
--------------------------------
Name: Chris Innis
Title: Director of Corporate Strategy
