<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
(INCLUDING THE ASSOCIATED PREFERRED STOCK PURCHASE RIGHTS)
OF
NATIONAL COMPUTER SYSTEMS, INC.
AT
$73.00 NET PER SHARE
BY
PN ACQUISITION SUBSIDIARY INC.,
A WHOLLY OWNED INDIRECT SUBSIDIARY OF
PEARSON PLC
--------------------------------------------------------------------------------
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON THURSDAY, SEPTEMBER 7, 2000, UNLESS THE OFFER IS EXTENDED.
--------------------------------------------------------------------------------
THE OFFER IS BEING MADE PURSUANT TO THE AGREEMENT AND PLAN OF MERGER, DATED
AS OF JULY 30, 2000, AMONG PEARSON PLC ("PARENT"), PN ACQUISITION
SUBSIDIARY INC. (THE "PURCHASER") AND NATIONAL COMPUTER SYSTEMS, INC. (THE
"COMPANY"), AS AMENDED BY AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF MERGER, DATED
AS OF AUGUST 4, 2000, AMONG PARENT, THE PURCHASER AND THE COMPANY (AS SO
AMENDED, THE "MERGER AGREEMENT"). THE BOARD OF DIRECTORS OF THE COMPANY (AT A
MEETING DULY CALLED AND HELD) HAS DETERMINED THAT THE TERMS OF THE MERGER
AGREEMENT, THE OFFER AND THE MERGER (EACH AS DEFINED HEREIN) ARE FAIR TO AND IN
THE BEST INTERESTS OF THE COMPANY AND THE SHAREHOLDERS OF THE COMPANY; APPROVED
AND ADOPTED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT, INCLUDING THE OFFER AND THE MERGER; AND RESOLVED TO RECOMMEND THAT
THE SHAREHOLDERS OF THE COMPANY ACCEPT THE OFFER AND TENDER THEIR SHARES (AS
DEFINED HEREIN) PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES THAT WOULD REPRESENT AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES ON A
FULLY DILUTED BASIS.
------------------------------
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
Shares should either (1) complete and sign the Letter of Transmittal (or
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal, have such shareholder's signature thereon guaranteed if required by
Instruction 1 to the Letter of Transmittal, mail or deliver the Letter of
Transmittal (or such facsimile) and any other required documents to ChaseMellon
Shareholder Services, L.L.C. (the "DEPOSITARY") and deliver the certificates for
such Shares to the Depositary along with the Letter of Transmittal (or such
facsimile) or, in the case of a book-entry transfer effected pursuant to the
procedures described in Section 2, deliver an Agent's Message (as defined
herein) and any other required documents to the Depositary and deliver such
Shares pursuant to the procedures for book-entry transfer described in
Section 2, in each case prior to the expiration of the Offer, or (2) request
such shareholder's broker, dealer, bank, trust company or other nominee to
effect the transaction for such shareholder. A shareholder having Shares
registered in the name of a broker, dealer, bank, trust company or other nominee
must contact such broker, dealer, bank, trust company or other nominee if such
shareholder desires to tender such Shares.
A shareholder who desires to tender Shares and whose certificates for such
Shares are not immediately available or who cannot comply in a timely manner
with the procedure for book-entry transfer, or who cannot deliver all required
documents to the Depositary prior to the expiration of the Offer, may tender
such Shares by following the procedures for guaranteed delivery described in
Section 2. The Rights (as defined herein) are presently evidenced by
certificates for common stock and a tender by shareholders of their Shares will
also constitute a tender of the Rights.
Questions and requests for assistance may be directed to Georgeson
Shareholder Communications Inc. (the "INFORMATION AGENT") or to Goldman,
Sachs & Co. at their respective addresses and telephone numbers set forth on the
back cover of this Offer to Purchase. Additional copies of this Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery or any
other tender materials may be obtained from the Information Agent or from
brokers, dealers, banks, trust companies or other nominees.
------------------------------
THE DEALER MANAGER FOR THE OFFER IS:
GOLDMAN, SACHS & CO.
------------------------------
August 7, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
SUMMARY TERM SHEET.......................................... 1
INTRODUCTION................................................ 5
THE TENDER OFFER............................................ 8
</TABLE>
<TABLE>
<C> <S> <C>
1. Terms of the Offer.......................................... 8
2. Procedures for Tendering Shares............................. 10
3. Withdrawal Rights........................................... 13
4. Acceptance for Payment and Payment.......................... 14
5. Certain U.S. Federal Income Tax Consequences................ 15
6. Price Range of the Shares; Dividends on the Shares.......... 16
Effect of the Offer on the Market for the Shares; Nasdaq
Listing;
Exchange Act Registration; Margin Regulations............... 16
7.
8. Certain Information Concerning the Company.................. 17
9. Certain Information Concerning Parent and the Purchaser..... 19
10. Source and Amount of Funds.................................. 23
Contacts and Transactions with the Company; Background of
11. the Offer................................................... 24
Purpose of the Offer; the Merger Agreement; Plans for the
12. Company..................................................... 25
13. Dividends and Distributions................................. 40
14. Certain Conditions of the Offer............................. 40
15. Certain Legal Matters....................................... 42
16. Fees and Expenses........................................... 45
17. Miscellaneous............................................... 46
</TABLE>
<TABLE>
<S> <C>
SCHEDULE I--Directors and Executive Officers of Parent and
the Purchaser............................................. 47
</TABLE>
<PAGE>
SUMMARY TERM SHEET
PN Acquisition Subsidiary Inc. is offering to purchase all of the
outstanding common stock of National Computer Systems, Inc. (including the
associated preferred stock purchase rights) for $73.00 per share in cash. The
following are some of the questions you, as a shareholder of National Computer
Systems, Inc., may have and answers to those questions. We urge you to read
carefully the remainder of this offer to purchase and the letter of transmittal
because the information in this summary is not complete. Additional important
information is contained in the remainder of this offer to purchase and the
letter of transmittal.
WHO IS OFFERING TO BUY MY SHARES?
Our name is PN Acquisition Subsidiary Inc. We are a Minnesota corporation
formed for the purpose of making a tender offer for all of the common stock of
National Computer Systems, Inc. We are a wholly owned indirect subsidiary of
Pearson plc, a public limited company registered in England and Wales. See
"Introduction" and Section 9--"Certain Information Concerning Parent and the
Purchaser"--of this offer to purchase.
WHAT SHARES ARE BEING SOUGHT IN THE OFFER?
We are seeking to purchase all of the outstanding common stock of National
Computer Systems, Inc. (including the associated preferred stock purchase
rights). See "Introduction" and Section 1--"Terms of the Offer"--of this offer
to purchase.
HOW MUCH ARE YOU OFFERING TO PAY, WHAT IS THE FORM OF PAYMENT AND WILL I HAVE TO
PAY ANY FEES OR COMMISSIONS?
We are offering to pay $73.00 per share (including the associated preferred
stock purchase rights), net to you, in cash. If you are the record owner of your
shares and you tender your shares to us in the offer, you will not have to pay
brokerage fees or similar expenses. If you own your shares through a broker or
other nominee, and your broker tenders your shares on your behalf, your broker
or nominee may charge you a fee for doing so. You should consult your broker or
nominee to determine whether any charges will apply. See "Introduction" and
Section 1--"Terms of the Offer"--of this offer to purchase.
DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT?
The offer is not conditioned upon any financing arrangements. Pearson plc
will provide us with sufficient funds to acquire all tendered shares and any
shares to be acquired in the merger that is expected to follow the successful
completion of the offer. Pearson plc expects to obtain these funds from the
proceeds of an offering of its ordinary shares to its existing shareholders. The
offering is being substantially underwritten by Goldman Sachs International and
Cazenove & Co. You are not being offered to purchase securities in such
offering. See Section 10--"Source and Amount of Funds"--of this offer to
purchase.
IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER?
We do not think our financial condition is relevant to your decision whether
to tender shares and accept the offer because:
- the offer is being made for all outstanding shares solely for cash,
- the offer is not subject to any financing condition, and
- if we consummate the offer, we will acquire all remaining shares for the
same cash price per share as in the merger.
<PAGE>
HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER?
You will have at least until 12:00 midnight, New York City time, on
September 7, 2000, to tender your shares in the offer. Further, if you cannot
deliver everything that is required in order to make a valid tender by that
time, you may be able to use a guaranteed delivery procedure, which is described
later in this offer to purchase. See Section 1---"Terms of the Offer"--and
Section 2--"Procedures for Tendering Shares"--of this offer to purchase.
CAN THE OFFER BE EXTENDED AND UNDER WHAT CIRCUMSTANCES?
Subject to the terms of the merger agreement, we can extend the offer. We
have agreed in the merger agreement that:
--we may (i) extend the offer for one or more periods of time that we
reasonably believe to be necessary to cause the conditions to the offer to be
satisfied, if at the scheduled expiration date of the offer any of the
conditions to our obligation to accept shares for payment is not satisfied or
waived until such time as all conditions are satisfied or waived, (ii) extend
the offer for any period required by any rule, regulation, interpretation or
position of the Securities and Exchange Commission that is applicable to the
offer, (iii) extend the offer for an aggregate period of not more than 17
business days beyond the initial expiration date of the offer to the extent
required by Pearson plc to enable it and us to complete the financing of the
purchase of the shares tendered pursuant to the offer or (iv) extend the offer
for an aggregate period of not more than 10 business days beyond the latest
applicable date that would otherwise be permitted under clause (i), (ii) or
(iii) of this sentence, if, as of such date, all of the conditions to our
obligation to accept the shares for payment are satisfied or waived, but the
number of shares validly tendered and not withdrawn pursuant to the offer equals
less than 90% of the outstanding shares of National Computer Systems, Inc.;
--we shall extend the offer for a period of time which we reasonably believe
is necessary to cause the conditions to the offer to be satisfied or waived if
(i) all of the conditions to the offer are not satisfied on any scheduled
expiration date of the offer and (ii) National Computer Systems, Inc. is in
compliance with all of its covenants in the merger agreement; PROVIDED, HOWEVER,
that we are not required to extend the offer beyond December 31, 2000; and
--we may elect to provide a "subsequent offering period" for the offer. A
subsequent offering period, if one is included, will be an additional period of
time beginning after we have purchased shares tendered during the offer, during
which shareholders may tender, but not withdraw, their shares and receive the
offer consideration. We do not currently intend to include a subsequent offering
period, although we reserve the right to do so. See Section 1--"Terms of the
Offer"--of this offer to purchase.
HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED?
If we extend the offer, we will inform ChaseMellon Shareholder Services,
L.L.C., the depositary for the offer, of that fact and will make a public
announcement of the extension, no later than 9:00 a.m., New York City time, on
the next business day after the day on which the offer was scheduled to expire.
See Section 1--"Terms of the Offer"--of this offer to purchase.
WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER?
There is no financing condition to the offer, however:
--we are not obligated to purchase any tendered shares unless the number of
shares validly tendered and not withdrawn before the expiration date of the
offer represents at least a majority of the shares of National Computer
Systems, Inc. outstanding on a fully diluted basis. We have agreed not to waive
this minimum tender condition without the consent of National Computer
Systems, Inc.
2
<PAGE>
--we are not obligated to purchase any tendered shares if:
--there is a material adverse change in National Computer Systems, Inc. or
its business; or
--the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 or under any other applicable material
competition, merger, control, antitrust or similar law or regulation have
not expired or been terminated.
The offer is also subject to a number of other conditions. See
Section 14--"Certain Conditions of the Offer"--of this offer to purchase.
HOW DO I TENDER MY SHARES?
To tender shares, you must deliver the certificates representing your
shares, together with a completed letter of transmittal and any other documents
required, to ChaseMellon Shareholder Services, L.L.C., the depositary for the
offer, no later than the time the tender offer expires. If your shares are held
in street name, the shares can be tendered by your nominee through The
Depository Trust Company. If you cannot deliver something that is required to be
delivered to the depositary by the expiration of the tender offer, you may get a
little extra time to do so by having a broker, a bank or other fiduciary that is
a member of the Securities Transfer Agents Medallion Program or other eligible
institution guarantee that the missing items will be received by the depositary
within three National Association of Securities Dealers Automated Quotation
System trading days. For the tender to be valid, however, the depositary must
receive the missing items within that three trading day period. See
Section 2--"Procedures for Tendering Shares"--of this offer to purchase.
UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES?
You can withdraw shares at any time until the offer has expired and, if we
have not by October 5, 2000, agreed to accept your shares for payment, you can
withdraw them at any time after such time until we accept shares for payment.
This right to withdraw will not apply to any subsequent offering period, if one
is included. See Section 1--"Terms of the Offer"--and Section 3--"Withdrawal
Rights"--of this offer to purchase.
HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES?
To withdraw shares, you must deliver a written notice of withdrawal, or a
facsimile of one, with the required information to the depositary while you
still have the right to withdraw the shares. See Section 1--"Terms of the
Offer"--and Section 3--"Withdrawal Rights"--of this offer to purchase.
WHAT DOES THE NATIONAL COMPUTER SYSTEMS, INC. BOARD OF DIRECTORS THINK OF THE
OFFER?
We are making the offer pursuant to a merger agreement, as amended, among
us, Pearson plc and National Computer Systems, Inc. The National Computer
Systems, Inc. board of directors (at a meeting duly called and held) determined
that the merger agreement, the offer and the merger are fair to and in the best
interests of National Computer Systems, Inc. and the shareholders of National
Computer Systems, Inc. and approved and adopted the merger agreement and the
transactions contemplated thereby, including our tender offer and our proposed
merger with National Computer Systems, Inc. and resolved to recommend that
shareholders accept the offer and tender their shares. A committee of such
board, formed in accordance with Section 302A.673 of the Minnesota Business
Corporation Act (at a meeting duly called and held) has approved the merger
agreement and the transactions contemplated thereby, including our tender offer
and our proposed merger with National Computer Systems, Inc.
3
<PAGE>
HAVE ANY SHAREHOLDERS AGREED TO TENDER THEIR SHARES?
No. The executive officers and directors of National Computer
Systems, Inc., who own in the aggregate approximately 3.4% of the outstanding
common stock of National Computer Systems, Inc., on a fully diluted basis, have
advised National Computer Systems, Inc. that they currently intend to tender all
of the shares of common stock of National Computer Systems, Inc. owned by them.
WILL THE TENDER OFFER BE FOLLOWED BY A MERGER IF ALL THE SHARES ARE NOT TENDERED
IN THE OFFER?
If we accept for payment and pay for at least a majority of the outstanding
shares on a fully diluted basis of National Computer Systems, Inc., we will be
merged with National Computer Systems, Inc. If that merger takes place, Pearson
plc will indirectly own all of the shares of National Computer Systems, Inc.,
and all other shareholders of National Computer Systems, Inc. will receive
$73.00 per share in cash (or any higher price per share that is paid in the
offer).
There are no dissenters' rights available in connection with the offer.
However, if the merger takes place, shareholders who have not sold their shares
in the offer will have dissenters' rights under Minnesota law. See
Section 12--"Purpose of the Offer; the Merger Agreement; Plans for the Company--
Dissenters' Rights"--of this offer to purchase.
IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES?
If the merger takes place, shareholders who do not tender in the offer will
receive the same amount of cash per share that they would have received had they
tendered their shares in the offer, subject to their right to pursue dissenters'
rights under Minnesota law. Therefore, if the merger takes place and you do not
perfect your dissenters' rights, the only difference to you between tendering
your shares and not tendering your shares is that you will be paid earlier if
you tender your shares. However, if the merger does not take place, the number
of shareholders and the number of shares of National Computer Systems, Inc. that
are still in the hands of the public may be so small that there may no longer be
an active public trading market (or, possibly, any public trading market) for
the shares. Also, the shares may no longer be eligible to be traded on The
National Association of Securities Dealers Automated Quotation System--National
Market or any other securities exchange, and National Computer Systems, Inc. may
cease making filings with the SEC or otherwise cease being required to comply
with the SEC's rules relating to publicly held companies. See
Section 7--"Effect of the Offer on the Market for the Shares; Nasdaq Listing;
Exchange Act Registration; Margin Regulations"--and Section 12--"Purpose of the
Offer; the Merger Agreement; Plans for the Company"--of this offer to purchase.
WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE?
On July 28, 2000, the last trading day before National Computer
Systems, Inc. and Pearson plc announced that they had signed the merger
agreement, the last sale price of the shares reported on The National
Association of Securities Dealers Automated Quotation System--National Market
was $58.13 per share. On August 4, 2000, the last trading day before we
commenced our tender offer, the last sale price of the shares was $72.06 per
share. We advise you to obtain a recent quotation for shares of National
Computer Systems, Inc. in deciding whether to tender your shares. See
Section 6--"Price Range of the Shares; Dividends on the Shares"--of this offer
to purchase.
TO WHOM CAN I TALK IF I HAVE QUESTIONS ABOUT THE TENDER OFFER?
You can call Georgeson Shareholder Communications Inc. at (800) 223-2064
(toll free) or Goldman, Sachs & Co. at (800) 323-5678 (toll free). Georgeson
Shareholder Communications Inc. is acting as the information agent and Goldman,
Sachs & Co. is acting as the dealer manager for our tender offer. See the back
cover of this offer to purchase.
4
<PAGE>
To the Holders of Common Stock of
National Computer Systems, Inc.:
INTRODUCTION
PN ACQUISITION SUBSIDIARY INC., a Minnesota corporation (the "PURCHASER")
and wholly owned indirect subsidiary of PEARSON PLC, a public limited company
registered in England and Wales ("PARENT"), hereby offers to purchase all the
outstanding shares of common stock, par value $0.03 per share (the "COMMON
STOCK"), of NATIONAL COMPUTER SYSTEMS, INC., a Minnesota corporation (the
"COMPANY"), including the associated preferred stock purchase rights (the
"RIGHTS") issued pursuant to the Second Amended and Restated Rights Agreement,
dated as of December 8, 1998, between the Company and Norwest Bank Minnesota,
N.A. (as amended, the "RIGHTS AGREEMENT") (the Common Stock and the Rights
together are referred to herein as the "SHARES") at a price of $73.00 per Share,
net to the seller in cash, without interest thereon (the "OFFER PRICE"), upon
the terms and subject to the conditions set forth in this Offer to Purchase and
in the related Letter of Transmittal (which, together with any amendments or
supplements hereto or thereto, collectively constitute the "OFFER").
Tendering shareholders whose shares are registered in their own names and
who tender directly to the Depositary (as defined below) will not be obligated
to pay brokerage fees or commissions or, except as set forth in Instruction 6 of
the Letter of Transmittal, transfer taxes on the purchase of Shares pursuant to
the Offer. Shareholders who hold their Shares through banks or brokers should
check with such institutions as to whether they charge any service fees. The
Purchaser will pay all fees and expenses of Goldman, Sachs & Co., which is
acting as Dealer Manager (the "DEALER MANAGER"), ChaseMellon Shareholder
Services, L.L.C., which is acting as the Depositary (the "DEPOSITARY"), and
Georgeson Shareholder Communications Inc., which is acting as the Information
Agent (the "INFORMATION AGENT"), incurred in connection with the Offer. See
Section 16.
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of July 30, 2000, among Parent, the Purchaser and the Company, as amended by
Amendment No. 1 to Agreement and Plan of Merger, dated as of August 4, 2000,
among Parent, the Purchaser and the Company (as so amended, the "MERGER
AGREEMENT"), pursuant to which, following the consummation of the Offer and the
satisfaction or waiver of certain conditions, the Purchaser will be merged with
and into the Company, with the Company surviving the merger as a wholly owned
indirect subsidiary of Parent (the "MERGER"). In the Merger each outstanding
Share (other than Shares owned by Parent or the Purchaser or by shareholders, if
any, who are entitled to and properly exercise dissenters' rights under
Minnesota law) will be converted into the right to receive the price per Share
paid pursuant to the Offer in cash, without interest thereon.
The Merger Agreement is more fully described in Section 12.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") (AT A MEETING
DULY CALLED AND HELD) HAS (X) DETERMINED THAT THE MERGER AGREEMENT, THE OFFER
AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND THE
SHAREHOLDERS OF THE COMPANY; (Y) APPROVED AND ADOPTED THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE OFFER AND
THE MERGER; AND (Z) RESOLVED TO RECOMMEND THAT SHAREHOLDERS OF THE COMPANY
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER AND APPROVE AND
ADOPT THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT (THE DETERMINATIONS, APPROVALS AND RECOMMENDATIONS OF THE COMPANY
BOARD SET FORTH IN CLAUSES (X), (Y) AND (Z) ABOVE BEING COLLECTIVELY REFERRED TO
AS THE "RECOMMENDATION"). ADDITIONALLY, A COMMITTEE OF THE COMPANY BOARD, FORMED
PURSUANT TO SECTION 302A.673 OF THE MINNESOTA BUSINESS CORPORATION ACT (THE
5
<PAGE>
"COMMITTEE") (AT A MEETING DULY CALLED AND HELD) HAS APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING
THE OFFER AND THE MERGER (THE APPROVAL OF THE COMMITTEE SET FORTH IN THIS
SENTENCE IS REFERRED TO AS THE "COMMITTEE APPROVAL"). THE FACTORS CONSIDERED BY
THE COMPANY BOARD AND THE COMMITTEE IN ARRIVING AT THEIR DECISION TO APPROVE THE
MERGER AGREEMENT, THE OFFER, THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED
BY THE MERGER AGREEMENT AND TO RECOMMEND THAT SHAREHOLDERS OF THE COMPANY ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER ARE DESCRIBED IN THE
COMPANY'S SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE
14D-9"), WHICH HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION (THE
"COMMISSION") AND IS BEING MAILED TO SHAREHOLDERS OF THE COMPANY CONCURRENTLY
HEREWITH.
Salomon Smith Barney Inc., the Company's financial advisor, has delivered to
the Company Board a written opinion, dated July 30, 2000, to the effect that, as
of the date of the opinion and based upon and subject to certain matters stated
in such opinion, the $73.00 per Share cash consideration to be received in the
Offer and the Merger by the holders of Shares (other than Parent and its
affiliates) was fair, from a financial point of view, to such holders. A copy of
Salomon Smith Barney's opinion is included as an annex to the Schedule 14D-9.
Shareholders are urged to, and should, read the Schedule 14D-9 and such opinion
carefully in their entirety.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (A) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED IN SECTION 1
HEREOF) THAT NUMBER OF SHARES THAT WOULD REPRESENT AT LEAST A MAJORITY OF THE
FULLY DILUTED SHARES (AS DEFINED IN SECTION 14 HEREOF) ON THE DATE OF PURCHASE
(THE "MINIMUM TENDER CONDITION"), AND (B) ANY WAITING PERIOD UNDER THE
HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR
ACT"), APPLICABLE TO THE PURCHASE OF SHARES PURSUANT TO THE OFFER OR TO THE
MERGER AND ANY OTHER WAITING PERIODS UNDER ANY OTHER APPLICABLE MATERIAL
COMPETITION, MERGER, CONTROL, ANTITRUST OR SIMILAR LAW OR REGULATION SHALL HAVE
BEEN TERMINATED OR SHALL HAVE EXPIRED OR BEEN TERMINATED.
Consummation of the Merger is subject to a number of conditions, including
the purchase of Shares pursuant to the Offer, and approval by shareholders of
the Company, if such approval is required under applicable law. In the event the
Purchaser acquires 90% or more of the outstanding Shares pursuant to the Offer
or otherwise, the Purchaser will be able to effect the Merger pursuant to the
"short-form" merger provisions of the Minnesota Business Corporation Act (the
"MBCA"), without any action by any other shareholder of the Company. In such
event, the Purchaser intends to effect the Merger without any action by any
other shareholder of the Company as promptly as practicable following the
purchase of Shares pursuant to the Offer. See Section 12.
The Company has informed the Purchaser that, as of July 31, 2000, there
were: (a) 32,770,239 Shares issued and outstanding; (b) 2,794,978 Shares
reserved for issuance upon the exercise of outstanding options to purchase
Shares from the Company; and (c) approximately 35,565,217 Fully Diluted Shares.
Based upon the foregoing and assuming that no Shares are otherwise issued after
July 31, 2000, the Minimum Tender Condition will be satisfied if at least
17,782,609 Shares are validly tendered and not withdrawn prior to the Expiration
Date. The actual number of Shares required to be tendered to satisfy the Minimum
Tender Condition will depend upon the actual number of Fully Diluted Shares on
the date that the Purchaser accepts Shares for payment pursuant to the Offer. If
the Minimum Tender Condition is satisfied, and the Purchaser accepts for payment
Shares tendered pursuant to the Offer, the Purchaser will be able to promptly
designate a majority of the members of the Company Board and to effect the
Merger without the affirmative vote of any other shareholder of the Company. See
Section 12.
6
<PAGE>
No dissenters' rights are available in connection with the Offer.
Shareholders may exercise dissenters' rights under the MBCA in connection with
the Merger, however, regardless of whether the Merger is consummated with or
without a vote of the shareholders.
Certain U.S. federal income tax consequences of the sale of Shares pursuant
to the Offer and the conversion of Shares pursuant to the Merger are described
in Section 5.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION AND SHOULD BE READ CAREFULLY AND IN THEIR ENTIRETY BEFORE
ANY DECISION IS MADE WITH RESPECT TO THE OFFER.
7
<PAGE>
THE TENDER OFFER
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions of the Offer, the Purchaser
will accept for payment and pay for all Shares validly tendered prior to the
Expiration Date and not theretofore withdrawn in accordance with Section 3. The
term "EXPIRATION DATE" means 12:00 midnight, New York City time, on
September 7, 2000, unless and until the Purchaser shall have extended the period
of time during which the Offer is open in accordance with the terms of Merger
Agreement, in which event the term "EXPIRATION DATE" shall mean the latest time
and date on which the Offer, as so extended by the Purchaser, will expire.
The Purchaser may, at any time and from time to time, take one or more of
the following actions without the consent of the Company: (a) extend the Offer
for one or more periods of time that the Purchaser reasonably believes are
necessary to cause the conditions to the Offer to be satisfied, if at the
Expiration Date any of the conditions to the Purchaser's obligation to accept
Shares for payment is not satisfied or waived, until such time as all such
conditions are satisfied or waived, (b) extend the Offer for any period required
by any rule, regulation, interpretation or position of the Commission or the
staff thereof that is applicable to the Offer, (c) extend the Offer for an
aggregate period of not more than 17 business days beyond the initial Expiration
Date of the Offer to the extent required by Parent to enable Parent and the
Purchaser to complete the financing of the purchase of Shares tendered pursuant
to the Offer or (d) extend the Offer for an aggregate period of not more than
ten business days beyond the latest applicable date that would otherwise be
permitted under clause (a), (b) or (c) of this sentence, if, as of such date,
all of the conditions to the Purchaser's obligation to accept Shares for payment
(including the Minimum Tender Condition) are satisfied or waived but the number
of Shares validly tendered and not withdrawn pursuant to the Offer equals less
than 90% of the outstanding Shares on a fully diluted basis. If (x) all of the
conditions to the Offer are not satisfied on any scheduled Expiration Date of
the Offer and (y) the Company is in compliance with all of its covenants in the
Merger Agreement then the Purchaser will extend the Offer for one or more
periods of time that the Purchaser reasonably believes are necessary to cause
the conditions of the Offer to be satisfied, until all such conditions are
satisfied or waived; PROVIDED, HOWEVER, that the Purchaser will not be required
to extend the Offer pursuant to this sentence beyond December 31, 2000. UNDER NO
CIRCUMSTANCES WILL INTEREST BE PAID ON THE PURCHASE PRICE FOR TENDERED SHARES,
REGARDLESS OF ANY EXTENSION OF OR AMENDMENT TO THE OFFER OR ANY DELAY IN PAYING
FOR SUCH SHARES.
The Purchaser expressly reserves the right (but shall not be obligated), at
any time and from time to time, to waive any condition to the Offer or modify
the terms of the Offer, by giving oral or written notice of such waiver or
modification to the Depositary, in each case in its sole discretion; PROVIDED,
HOWEVER, that, without the consent of the Company, the Purchaser shall not
(i) reduce the number of Shares subject to the Offer, (ii) reduce the price per
Share to be paid pursuant to the Offer or change the form of consideration
payable in the Offer, (iii) amend or waive the Minimum Tender Condition or add
to the conditions of the Offer, (iv) except as provided above, extend the Offer,
or (v) otherwise amend the terms of Offer in any manner adverse to the holders
of Shares.
If by 12:00 midnight, New York City time, on September 7, 2000 (or any date
or time then set as the Expiration Date), any of or all the conditions to the
Offer have not been satisfied or waived, the Purchaser, subject to the terms of
the Merger Agreement and the applicable rules and regulations of the Commission,
reserves the right (but shall not be obligated) (a) to terminate the Offer and
not accept for payment or pay for any Shares and return all tendered Shares to
tendering shareholders, (b) except as set forth above with respect to the
Minimum Tender Condition, to waive all the unsatisfied conditions and accept for
payment and pay for all Shares validly tendered prior to the Expiration Date and
not theretofore validly withdrawn, (c) as set forth above, to extend the Offer
and, subject to the right of shareholders to withdraw
8
<PAGE>
Shares until the Expiration Date, retain the Shares that have been tendered
during the period or periods for which the Offer is extended or (d) except as
set forth above, to amend the Offer.
Any extension, waiver, amendment or termination will be followed as promptly
as practicable by public announcement thereof. An announcement in the case of an
extension will be made no later than 9:00 a.m., Eastern time, on the next
business day after the previously scheduled Expiration Date. Without limiting
the manner in which the Purchaser may choose to make any public announcement,
subject to applicable law (including Rules 14d-4(d) and 14d-6(c) under the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), which require
that material changes be promptly disseminated to holders of Shares), the
Purchaser will have no obligation to publish, advertise or otherwise communicate
any such public announcement other than by issuing a release to the Dow Jones
News Service. As used in this Offer to Purchase, "BUSINESS DAY" has the meaning
set forth in Rule 14d-1 under the Exchange Act.
If the Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer or waives a material condition of the Offer,
the Purchaser will disseminate additional tender offer materials and extend the
Offer to the extent required by Rules 14d-4(d), 14d-6(c) and 14e-1 under the
Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of such offer or information concerning
such offer, other than a change in price or a change in the percentage of
securities sought, will depend upon the facts and circumstances then existing,
including the relative materiality of the changed terms or information. With
respect to a change in price or a change in the percentage of securities sought,
a minimum period of 10 business days is generally required to allow for adequate
dissemination to shareholders.
Pursuant to Rule 14d-11 under the Exchange Act, although the Purchaser does
not currently intend to do so, the Purchaser may, subject to certain conditions,
elect to provide a subsequent offering period of from three business days to 20
business days in length following the expiration of the Offer on the Expiration
Date and acceptance of the Shares for payment pursuant to the Offer (a
"SUBSEQUENT OFFERING PERIOD"). A Subsequent Offering Period would be an
additional period of time, following the expiration of the Offer and the
purchase of Shares in the Offer, during which shareholders may tender Shares not
tendered in the Offer. A Subsequent Offering Period, if one is included, is not
an extension of the Offer, which already will have been completed.
During a Subsequent Offering Period, tendering shareholders will not have
withdrawal rights and the Purchaser will promptly purchase and pay for any
Shares tendered at the same price paid in the Offer. Rule 14d-11 provides that
the Purchaser may provide a Subsequent Offering Period so long as, among other
things, (i) the initial 23-business day period of the Offer has expired,
(ii) the Purchaser offers the same form and amount of consideration for Shares
in the Subsequent Offering Period as in the initial Offer, (iii) the Purchaser
immediately accepts and promptly pays for all securities tendered during the
Offer prior to its expiration, (iv) the Purchaser announces the results of the
Offer, including the approximate number and percentage of Shares deposited in
the Offer, no later than 9:00 a.m., Eastern time, on the next business day after
the Expiration Date and immediately begins the Subsequent Offering Period and
(v) the Purchaser immediately accepts and promptly pays for Shares as they are
tendered during the Subsequent Offering Period. The Purchaser will be able to
include a Subsequent Offering Period, if it satisfies the conditions above,
after September 7, 2000. In a public release, the Commission has expressed the
view that the inclusion of a Subsequent Offering Period would constitute a
material change to the terms of the Offer requiring the Purchaser to disseminate
new information to shareholders in a manner reasonably calculated to inform them
of such change sufficiently in advance of the Expiration Date (generally five
business days). In the event the Purchaser elects to include a Subsequent
Offering Period, it will notify shareholders of the Company consistent with the
requirements of the Commission.
9
<PAGE>
THE PURCHASER DOES NOT CURRENTLY INTEND TO INCLUDE A SUBSEQUENT OFFERING
PERIOD IN THE OFFER, ALTHOUGH IT RESERVES THE RIGHT TO DO SO IN ITS SOLE
DISCRETION. PURSUANT TO RULE 14D-7 UNDER THE EXCHANGE ACT, NO WITHDRAWAL RIGHTS
APPLY TO SHARES TENDERED DURING A SUBSEQUENT OFFERING PERIOD AND NO WITHDRAWAL
RIGHTS APPLY DURING THE SUBSEQUENT OFFERING PERIOD WITH RESPECT TO SHARES
TENDERED IN THE OFFER AND ACCEPTED FOR PAYMENT. THE SAME CONSIDERATION WILL BE
PAID TO SHAREHOLDERS TENDERING SHARES IN THE OFFER OR IN A SUBSEQUENT OFFERING
PERIOD, IF ONE IS INCLUDED.
The Company has provided the Purchaser with the Company's shareholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase, the related Letter of Transmittal and
other relevant materials will be mailed to record holders of Shares, and will be
furnished to brokers, dealers, banks, trust companies and similar persons whose
names, or the names of whose nominees, appear on the shareholder lists, or, if
applicable, who are listed as participants in a clearing agency's security
position listing, for subsequent transmittal to beneficial owners of Shares.
2. PROCEDURES FOR TENDERING SHARES
VALID TENDER. For a shareholder validly to tender Shares pursuant to the
Offer, (a) the certificates for tendered Shares, together with a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, any
required signature guarantees and any other required documents, must, prior to
the Expiration Date, be received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase; (b) in the case of a transfer
effected pursuant to the book-entry transfer procedures described under
"Book-Entry Transfer", either a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, and any required signature guarantees, or
an Agent's Message (as defined below), and any other required documents, must be
received by the Depositary at one of such addresses, such Shares must be
delivered pursuant to the book-entry transfer procedures described below and a
Book-Entry Confirmation (as defined below) must be received by the Depositary,
in each case prior to the Expiration Date; or (c) the tendering shareholder
must, prior to the Expiration Date, comply with the guaranteed delivery
procedures described below under "Guaranteed Delivery".
The valid tender of Shares pursuant to one of the procedures described above
will constitute a binding agreement between the tendering shareholder and the
Purchaser upon the terms and subject to the conditions of the Offer.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY
(AS DEFINED BELOW), IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER.
SHARES WILL BE DEEMED DELIVERED ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY
(INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION).
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
BOOK-ENTRY TRANSFER. The Depositary will establish an account with respect
to the Shares at The Depository Trust Company (the "BOOK-ENTRY TRANSFER
FACILITY") for purposes of the Offer within two business days after the date of
this Offer to Purchase. Any financial institution that is a participant of the
Book-Entry Transfer Facility's system may make book-entry delivery of Shares by
causing the Book-Entry Transfer Facility to transfer such Shares into the
Depositary's account in accordance with the Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of Shares may be
effected through book-entry transfer into the Depositary's account at the
Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, with any required
10
<PAGE>
signature guarantees, or an Agent's Message, and any other required documents,
must be, in any case, received by the Depositary at one of its addresses set
forth on the back cover of this Offer to Purchase prior to the Expiration Date
for a valid tender of Shares by book-entry. The confirmation of a book-entry
transfer of Shares into the Depositary's account at the Book-Entry Transfer
Facility as described above is referred to herein as a "BOOK-ENTRY
CONFIRMATION". DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY IN
ACCORDANCE WITH THE BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT
CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "AGENT'S MESSAGE" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against the participant.
SIGNATURE GUARANTEES. No signature guarantee is required on the Letter of
Transmittal if (a) the Letter of Transmittal is signed by the registered
holder(s) (which term, for purposes of this Section 2, includes any participant
in the Book-Entry Transfer Facility's system whose name appears on a security
position listing as the owner of the Shares) of Shares tendered therewith and
such registered holder has not completed either the box entitled "Special
Delivery Instructions" or the box entitled "Special Payment Instructions" on the
Letter of Transmittal or (b) such Shares are tendered for the account of a
financial institution (including most commercial banks, savings and loan
associations and brokerage houses) that is a participant in the Security
Transfer Agents Medallion Program, the New York Stock Exchange Medallion
Signature Guarantee Program or the Stock Exchange Medallion Program (such
participant, an "ELIGIBLE INSTITUTION"). In all other cases, all signatures on
the Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instructions 1 and 5 to the Letter of Transmittal. If the certificates for
Shares are registered in the name of a person other than the signer of the
Letter of Transmittal, or if payment is to be made or certificates for Shares
not tendered or not accepted for payment are to be returned to a person other
than the registered holder of the certificates surrendered, the tendered
certificates must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holders or
owners appear on the certificates, with the signatures on the certificates or
stock powers guaranteed as aforesaid. See Instructions 1 and 5 to the Letter of
Transmittal.
GUARANTEED DELIVERY. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's certificates for Shares are not immediately
available or the book-entry transfer procedures cannot be completed on a timely
basis or time will not permit all required documents to reach the Depositary
prior to the Expiration Date, such shareholder's tender may be effected if all
the following conditions are met:
(a) such tender is made by or through an Eligible Institution;
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary at one of its addresses set forth on the back cover of
this Offer to Purchase prior to the Expiration Date; and
(c) Either (i) the certificates for tendered Shares together with a
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, and any required signature guarantees, and any other required
documents are received by the Depositary at one of its addresses set forth
on the back cover of this Offer to Purchase within three Trading Days after
the date of execution of such Notice of Guaranteed Delivery or (ii) in the
case of a book-entry transfer effected pursuant to the book-entry transfer
procedures described above under "Book-Entry Transfer", either a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed,
and any required signature guarantees, or an Agent's Message, and any other
required documents, is received by the
11
<PAGE>
Depositary at one of such addresses, such Shares are delivered pursuant to
the book-entry transfer procedures above and a Book-Entry Confirmation is
received by the Depositary, in each case within three Trading Days after the
date of execution of such Notice of Guaranteed Delivery. A "TRADING DAY" is
any day on which the National Association of Securities Dealers Automated
Quotation System ("NASDAQ") is open for business.
The Notice of Guaranteed Delivery may be delivered by hand to the Depositary
or transmitted by telegram, facsimile transmission or mail to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
such Notice of Guaranteed Delivery.
OTHER REQUIREMENTS. Notwithstanding any provision hereof, payment for
Shares accepted for payment pursuant to the Offer will in all cases be made only
after timely receipt by the Depositary of (a) certificates for (or a timely
Book-Entry Confirmation with respect to) such Shares, (b) a Letter of
Transmittal (or facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message in lieu of the Letter of Transmittal) and (c) any other
documents required by the Letter of Transmittal. Accordingly, tendering
shareholders may be paid at different times depending upon when certificates for
Shares or Book-Entry Confirmations with respect to Shares are actually received
by the Depositary. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID BY THE PURCHASER
ON THE PURCHASE PRICE OF THE SHARES, REGARDLESS OF ANY EXTENSION OF THE OFFER OR
ANY DELAY IN MAKING SUCH PAYMENT.
APPOINTMENT. By executing a Letter of Transmittal (or facsimile thereof),
(or, in the case of a book-entry transfer, by delivery of an Agent's Message, in
lieu of a Letter of Transmittal), a tendering shareholder will irrevocably
appoint designees of the Purchaser as such shareholder's attorneys-in-fact and
proxies in the manner set forth in the Letter of Transmittal, each with full
power of substitution, to the full extent of such shareholder's rights with
respect to the Shares tendered by such shareholder and accepted for payment by
the Purchaser and with respect to any and all other Shares or other securities
or rights issued or issuable in respect of such Shares on or after August 7,
2000. All such proxies will be considered coupled with an interest in the
tendered Shares. Such appointment will be effective when, and only to the extent
that, the Purchaser accepts for payment Shares tendered by such shareholder as
provided herein. Upon the effectiveness of such appointment, all prior powers of
attorney, proxies and consents given by such shareholder with respect to such
Shares or other securities or rights will, without further action, be revoked
and no subsequent powers of attorney, proxies, consents or revocations may be
given (and, if given, will not be effective). The designees of the Purchaser
will thereby be empowered to exercise all voting and other rights with respect
to such Shares and other securities or rights in respect of any annual, special
or adjourned meeting of the Company's shareholders, actions by written consent
in lieu of any such meeting or otherwise, as they in their sole discretion deem
proper. The Purchaser reserves the right to require that, in order for Shares to
be deemed validly tendered, immediately upon the Purchaser's acceptance for
payment of such Shares, the Purchaser must be able to exercise full voting,
consent and other rights with respect to such Shares and other securities or
rights, including voting at any meeting of shareholders.
DETERMINATION OF VALIDITY. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance of any tender of Shares
will be determined by the Purchaser in its sole discretion, which determination
will be final and binding. The Purchaser reserves the absolute right to reject
any or all tenders determined by it not to be in proper form or the acceptance
for payment of or payment for which may, in the opinion of the Purchaser, be
unlawful. The Purchaser also reserves the absolute right to waive any defect or
irregularity in the tender of any Shares of any particular shareholder whether
or not similar defects or irregularities are waived in the case of other
shareholders. No tender of Shares will be deemed to have been validly made until
all defects or irregularities relating thereto have been cured or waived. None
of the Purchaser, Parent, the Company, the Depositary, the Information Agent,
the Dealer Manager or any other person will be under any duty to give
notification of any defects or irregularities in
12
<PAGE>
tenders or incur any liability for failure to give any such notification. The
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and the instructions thereto and any other related
documents thereto) will be final and binding.
BACKUP WITHHOLDING TAX. In order to avoid U.S. federal backup withholding
tax on payments of cash pursuant to the Offer, a shareholder surrendering Shares
in the Offer must, unless an exemption applies, provide the Depositary with such
shareholder's correct taxpayer identification number ("TIN") on a Substitute
Form W-9 and certify under penalties of perjury that such TIN is correct and
that such shareholder is not subject to backup withholding tax. If a shareholder
does not provide such shareholder's correct TIN or fails to provide the
certifications described above, the Internal Revenue Service (the "IRS") may
impose a penalty on such shareholder and any payment of cash to such shareholder
pursuant to the Offer may be subject to backup withholding tax at a rate of 31%.
All shareholders surrendering Shares pursuant to the Offer should complete and
sign the main signature form and the Substitute Form W-9 included as part of the
Letter of Transmittal to provide the information and certification necessary to
avoid backup withholding tax (unless an applicable exemption exists and is
proved in a manner satisfactory to the Purchaser and the Depositary). Certain
shareholders (including, among others, all corporations and certain foreign
individuals and entities) are not subject to backup withholding tax.
Noncorporate foreign shareholders should complete and sign the main signature
form and a Form W-8, Certificate of Foreign Status, a copy of which may be
obtained from the Depositary, in order to avoid backup withholding tax. See
Instruction 9 to the Letter of Transmittal.
3. WITHDRAWAL RIGHTS
Except as otherwise provided in this Section 3, tenders of Shares are
irrevocable. Shares tendered pursuant to the Offer may be withdrawn pursuant to
the procedures set forth below at any time prior to the Expiration Date and,
unless theretofore accepted for payment and paid for by the Purchaser pursuant
to the Offer, may also be withdrawn at any time after October 5, 2000 unless, as
described below, such Shares are tendered during any Subsequent Offering Period.
For a withdrawal to be effective, a written or facsimile transmission notice
of withdrawal must be timely received by the Depositary at one of its addresses
set forth on the back cover of this Offer to Purchase and must specify the name
of the person having tendered the Shares to be withdrawn, the number of Shares
to be withdrawn and the name of the registered holder of the Shares to be
withdrawn, if different from the name of the person who tendered the Shares. If
certificates for Shares have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the serial
numbers shown on such certificates must be submitted to the Depositary and,
unless such Shares have been tendered by an Eligible Institution, any and all
signatures on the notice of withdrawal must be guaranteed by an Eligible
Institution. If Shares have been tendered pursuant to the book-entry transfer
procedures described in Section 2, any notice of withdrawal must also specify
the name and number of the account at the Book-Entry Transfer Facility to be
credited with the withdrawn Shares and otherwise comply with the Book-Entry
Transfer Facility's procedures. Withdrawals of tenders of Shares may not be
rescinded, and any Shares properly withdrawn will thereafter be deemed not
validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered by again following one of the procedures described in Section 2 at
any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by the Purchaser in its sole discretion,
which determination will be final and binding. None of the Purchaser, Parent,
the Company, the Depositary, the Information Agent, the Dealer Manager or any
other person will be under any duty to give notification of any defects or
irregularities in any notice of withdrawal or incur any liability for failure to
give any such notification.
13
<PAGE>
In the event the Purchaser provides a Subsequent Offering Period following
the Offer, no withdrawal rights will apply to Shares tendered during such
Subsequent Offering Period or to Shares tendered in the Offer and accepted for
payment.
4. ACCEPTANCE FOR PAYMENT AND PAYMENT
Upon the terms and subject to the conditions of the Offer (including, if the
Offer is extended or amended, the terms and conditions of any such extension or
amendment), the Purchaser will accept for payment and will pay for all Shares
validly tendered prior to the Expiration Date and not properly withdrawn in
accordance with Section 3 promptly after the Expiration Date. The Purchaser,
subject to the Merger Agreement, expressly reserves the right, in its sole
discretion, to delay acceptance for payment of or payment for Shares in order to
comply in whole or in part with any applicable law, including, without
limitation, the HSR Act, and any other applicable material competition, merger,
control, antitrust or similar law or regulation. Any such delays will be
effected in compliance with Rule 14e-1(c) under the Exchange Act (relating to a
bidder's obligation to pay for or return tendered securities promptly after the
termination or withdrawal of such bidder's offer).
In all cases, payment for Shares accepted for payment pursuant to the Offer
will be made only after timely receipt by the Depositary of (a) the certificates
for such Shares, together with a Letter of Transmittal (or facsimile thereof),
properly completed and duly executed, and any required signature guarantees or
(b) in the case of a transfer effected pursuant to the book-entry transfer
procedures described in Section 2, a Book-Entry Confirmation and either a Letter
of Transmittal (or facsimile thereof), properly completed and duly executed, and
any required signature guarantees, or an Agent's Message, and any other required
documents. Accordingly, tendering shareholders may be paid at different times
depending upon when certificates for Shares or Book-Entry Confirmations with
respect to Shares are actually received by the Depositary.
The per Share consideration paid to any shareholder pursuant to the Offer
will be the highest per Share consideration paid to any other shareholder
pursuant to the Offer.
For purposes of the Offer, the Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered to the Purchaser and not
properly withdrawn as, if and when the Purchaser gives oral or written notice to
the Depositary of the Purchaser's acceptance for payment of such Shares. Upon
the terms and subject to the conditions of the Offer, payment for Shares
accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as an agent for
tendering shareholders for the purpose of receiving payment from the Purchaser
and transmitting payment to tendering shareholders whose Shares have been
accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST BE PAID ON THE
PURCHASE PRICE FOR TENDERED SHARES, REGARDLESS OF ANY EXTENSION OF OR AMENDMENT
TO THE OFFER OR ANY DELAY IN PAYING FOR SUCH SHARES.
If the Purchaser is delayed in its acceptance for payment of or payment for
Shares or is unable to accept for payment or pay for Shares pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer (but subject to compliance with Rule 14e-1(c) under the Exchange Act
(relating to a bidder's obligation to pay for or return tendered securities
promptly after the termination or withdrawal of such bidder's offer) and the
terms of the Merger Agreement (requiring that the Purchaser pay for Shares
accepted for payment as soon as practicable after the Expiration Date)), the
Depositary may, nevertheless, on behalf of the Purchaser, retain tendered
Shares, and such Shares may not be withdrawn except to the extent tendering
shareholders are entitled to do so as described in Section 3.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, the certificates for such Shares
will be returned (and, if certificates are submitted for more Shares than are
tendered, new certificates for the Shares not tendered will be sent) in each
case without expense to the tendering shareholder (or, in the case of Shares
delivered by book-entry transfer
14
<PAGE>
of such Shares into the Depositary's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described in Section 2, such
Shares will be credited to an account maintained at the Book-Entry Transfer
Facility), as promptly as practicable after the expiration or termination of the
Offer.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to Parent, or to one or more direct or indirect wholly
owned subsidiaries of Parent, the right to purchase Shares tendered pursuant to
the Offer, but any such transfer or assignment will not relieve the Purchaser of
its obligations under the Offer and will in no way prejudice the rights of
tendering shareholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
5. CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The receipt of cash pursuant to the Offer or the Merger will be a taxable
transaction for U.S. federal income tax purposes under the Internal Revenue Code
of 1986, as amended (the "CODE"), and may also be a taxable transaction under
applicable state, local or foreign income or other tax laws. Generally, for U.S.
federal income tax purposes, a tendering shareholder will recognize gain or loss
equal to the difference between the amount of cash received by the shareholder
as consideration for the Shares tendered by the shareholder and purchased
pursuant to the Offer or converted into cash in the Merger, as the case may be,
and the adjusted tax basis of such Shares. Gain or loss will be calculated
separately for each block of Shares that have the same holding period and
adjusted tax basis. If tendered Shares are held by a tendering shareholder as
capital assets, gain or loss recognized by such shareholder will be capital gain
or loss, which will be long-term capital gain or loss if such shareholder's
holding period for the Shares exceeds one year.
A shareholder (other than certain exempt shareholders including, among
others, all corporations and certain foreign individuals) that tenders Shares
may be subject to 31% backup withholding tax unless the shareholder provides its
TIN and certifies that such number is correct (or properly certifies that it is
awaiting a TIN) and certifies as to no loss of exemption from backup withholding
tax and otherwise complies with the applicable requirements of the backup
withholding tax rules. A shareholder that does not furnish a required TIN or
that does not otherwise establish a basis for an exemption from backup
withholding tax may be subject to a penalty imposed by the IRS. See "Backup
Withholding Tax" under Section 2. Each shareholder should complete and sign the
Substitute Form W-9 included as part of the Letter of Transmittal so as to
provide the information and certification necessary to avoid backup withholding
tax.
If backup withholding tax applies to a shareholder, the Depositary is
required to withhold 31% from payments to such shareholder. Backup withholding
tax is not an additional tax. Rather, the amount of the backup withholding tax
can be credited against the U.S. federal income tax liability of the person
subject to the backup withholding tax, provided that the required information is
given to the IRS. If backup withholding tax results in an overpayment of tax, a
refund can be obtained by the shareholder by filing a U.S. federal income tax
return.
The foregoing discussion may not be applicable with respect to Shares
received pursuant to the exercise of employee stock options or otherwise as
compensation or with respect to holders of Shares who are subject to special tax
treatment under the Code--such as non-U.S. persons, insurance companies,
tax-exempt organizations, partnerships, dealers or traders in securities and
financial institutions--and may not apply to a holder of Shares in light of
individual circumstances, such as holding Shares as a hedge or as part of a
hedging, straddle, conversion or other risk-reduction transaction. SHAREHOLDERS
ARE URGED TO CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE PARTICULAR TAX
CONSEQUENCES TO THEM (INCLUDING THE APPLICATION AND EFFECT OF ANY STATE, LOCAL
OR FOREIGN INCOME AND OTHER TAX LAWS) OF THE OFFER AND THE MERGER.
15
<PAGE>
6. PRICE RANGE OF THE SHARES; DIVIDENDS ON THE SHARES
The Shares have traded through the Nasdaq National Market under the symbol
"NLCS" at all times since June 3, 1971. The following table sets forth, for each
of the periods indicated, the high and low sales prices per Share as reported on
the Nasdaq National Market based on published financial sources and the amount
of cash dividends paid per Share.
<TABLE>
<CAPTION>
COMMON STOCK
-------------------------------
CASH
HIGH LOW DIVIDENDS
-------- -------- ---------
<S> <C> <C> <C>
Fiscal Year Ended January 31, 1999:
Third Quarter............................................. $31.38 $20.50 $0.05
Fourth Quarter............................................ $38.25 $28.13 $0.05
Fiscal Year Ended January 29, 2000:
First Quarter............................................. $39.13 $23.00 $0.05
Second Quarter............................................ $35.88 $27.13 $0.05
Third Quarter............................................. $40.38 $31.63 $0.05
Fourth Quarter............................................ $41.75 $32.50 $0.05
Fiscal Year Ending January 29, 2001
First Quarter............................................. $55.13 $32.88 $0.05
Second Quarter............................................ $71.94 $37.94 $0.05
Third Quarter (through August 4, 2000).................... $72.25 $71.69 N/A
</TABLE>
On July 28, 2000, the last full trading day before the public announcement
of the execution of the Merger Agreement, the last reported sales price of the
Shares on the Nasdaq National Market was $58.13 per Share. On August 4, 2000,
the last full trading day before commencement of the Offer, the last reported
sales price of the Shares on the Nasdaq National Market was $72.06 per Share.
SHAREHOLDERS ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ LISTING; EXCHANGE
ACT REGISTRATION; MARGIN REGULATIONS
MARKET FOR THE SHARES. The purchase of Shares pursuant to the Offer will
reduce the number of holders of Shares and the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public.
NASDAQ NATIONAL MARKET LISTING. Depending upon the number of Shares
purchased pursuant to the Offer, the Shares may no longer meet the requirements
for continued inclusion on the Nasdaq National Market, which requires that an
issuer either (i) have at least 750,000 publicly held shares held by at least
400 round-lot shareholders, with a market value of at least $5,000,000, net
tangible assets (total assets (excluding goodwill) less total liabilities) of at
least $4,000,000 and have a minimum bid price of $1 or (ii) have at least
1,100,000 publicly held shares, held by at least 400 round-lot shareholders,
with a market value of at least $15,000,000, have a minimum bid price of $5 and
have either (A) a market capitalization of at least $50,000,000 or (B) total
assets and revenues each of at least $50,000,000. If the Nasdaq National Market
and the NASDAQ Smallcap Market were to cease to publish quotations for the
Shares, it is possible that the Shares would continue to trade in the
over-the-counter market and that price or other quotations would be reported by
other sources. The extent of the public market for such Shares and the
availability of such quotations would depend, however, upon such factors as the
number of shareholders and/or the aggregate market value of such securities
remaining at such time, the interest in maintaining a market in the Shares on
the part of securities firms, the possible termination of registration under the
Exchange Act as described below, and other factors. The Purchaser cannot predict
whether the reduction in the number of Shares that might otherwise trade
publicly would have an
16
<PAGE>
adverse or beneficial effect on the market price for, or marketability of, the
Shares or whether it would cause future market prices to be greater or lesser
than the price per Share to be paid in the Offer. In the Merger Agreement, the
Company has represented that, as of July 21, 2000, 32,757,155 Shares were issued
and outstanding.
EXCHANGE ACT REGISTRATION. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by the
Company to the Commission if the Shares are neither listed on a national
securities exchange nor held by 300 or more holders of record. Termination of
registration of the Shares under the Exchange Act would reduce the information
required to be furnished by the Company to its shareholders and to the
Commission and would make certain provisions of the Exchange Act no longer
applicable to the Company, such as the short-swing profit-recovery provisions of
Section 16(b) of the Exchange Act and the requirement of furnishing a proxy
statement pursuant to Section 14(a) or 14(c) of the Exchange Act in connection
with shareholders' meetings and the related requirement of furnishing an annual
report to shareholders.
Furthermore, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant to
Rule 144 or 144A promulgated under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), may be impaired or eliminated. The Purchaser intends to seek
to cause the Company to apply for termination of registration of the Shares
under the Exchange Act as soon after the completion of the Offer as the
requirements for such termination are met.
MARGIN REGULATIONS. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"FEDERAL RESERVE BOARD"), which has the effect, among other things, of allowing
brokers to extend credit on the collateral of the Shares. Depending upon factors
similar to those described above regarding listing and market quotations, it is
possible that, following the Offer, the Shares would no longer constitute
"margin securities" for the purposes of the margin regulations of the Federal
Reserve Board and therefore could no longer be used as collateral for loans made
by brokers.
8. CERTAIN INFORMATION CONCERNING THE COMPANY
The Company is a Minnesota corporation with its principal offices at 11000
Prairie Lakes Drive, Eden Prairie, Minnesota 55344, telephone number
(952) 829-3000. According to the Company's Annual Report for the fiscal year
ended January 29, 2000, the Company is a global information services company,
which provides services, software, systems and internet-based technologies for
the collection, management and interpretation of data.
Set forth below is certain selected financial data with respect to the
Company and its subsidiaries excerpted from the data contained in the Company's
Annual Report on Form 10-K for the fiscal year ended January 29, 2000 and its
Quarterly Report on Form 10-Q for the fiscal quarter ended April 29, 2000. More
comprehensive financial data is included in such reports and other documents
filed by the Company with the Commission, and the following summary is qualified
in its entirety by reference to such reports, other documents and all the
financial data (including any related notes) contained therein. Such reports and
other documents should be available for inspection and copies thereof should be
obtainable in the manner set forth below under "Available Information."
17
<PAGE>
NATIONAL COMPUTER SYSTEMS, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED YEAR ENDED
--------------------- ---------------------------------------
MAY 1, APRIL 29, JANUARY 31, JANUARY 31, JANUARY 29,
1999 2000 1998 1999 2000
--------- --------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues.......................... $125,817 $174,365 $406,015 $505,372 $629,545
Income From Operations............ $ 11,631 $ 14,986 $ 43,044 $ 55,271 $ 69,588
Income Before Income Taxes........ $ 11,103 $ 14,469 $ 41,975 $ 54,111 $ 68,430
Net Income........................ $ 6,653 $ 8,769 $ 25,175 $ 32,511 $ 42,930
Basic Earnings Per Share.......... $ 0.21 $ 0.27 $ 0.83 $ 1.05 $ 1.35
Diluted Earnings Per Share........ $ 0.20 $ 0.26 $ 0.80 $ 1.00 $ 1.30
BALANCE SHEET DATA:
Total Assets...................... $464,690 $362,471 $449,880
Long-Term Debt-less Current
Maturities...................... $ 516 $ 516 $ 5,597
Stockholder Equity................ $293,683 $226,866 $276,388
</TABLE>
CERTAIN COMPANY PROJECTIONS. During the course of discussions between
representatives of Parent and the Company, the Company provided Parent or its
representatives with certain non-public business and financial information about
the Company. This information included the following projections of revenue and
operating income for the Company for the fiscal years 2000 through 2003:
<TABLE>
<CAPTION>
2000 2001 2002 2003
-------- -------- -------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
Revenue................................................ $752.0 $855.0 $1,000.0 $1,200.0
Operating Income....................................... $ 84.3 $102.5 $ 122.3 $ 145.0
</TABLE>
The Company has advised the Purchaser and Parent that it does not as a
matter of course make public any projections as to future performance or
earnings, and the projections set forth above are included in this Offer to
Purchase only because this information was provided to Parent. The projections
were not prepared with a view to public disclosure or compliance with the
published guidelines of the Commission or the guidelines established by the
American Institute of Certified Public Accountants regarding projections or
forecasts. The projections do not purport to present operations in accordance
with generally accepted accounting principles, and the Company's independent
auditors have not examined or compiled the projections and accordingly assume no
responsibility for them. The Company has advised Parent and the Purchaser that
its internal financial forecasts (upon which the projections provided to Parent
and the Purchaser were based in part) are, in general, prepared solely for
internal use and capital budgeting and other management decisions and are
subjective in many respects and thus susceptible to interpretations and periodic
revision based on actual experience and business developments. The projections
also reflect numerous assumptions made by management of the Company, with
respect to industry performance (including general business, economic, market
and financial conditions and other matters), all of which are difficult to
predict, many of which are beyond the Company's control, and none of which were
subject to approval by Parent or the Purchaser. Accordingly, there can be no
assurance that the assumptions made in preparing the projections will prove
accurate. It is expected that there will be differences between actual and
projected results, and actual results may be materially greater or less than
those contained in the projections. The inclusion of the projections herein
should not be regarded as an indication that any of Parent, the Purchaser, the
Company or their respective affiliates or representatives considered or consider
the projections to be a reliable prediction of future events, and the
projections should not be relied upon as such. None of Parent, the Purchaser,
18
<PAGE>
the Company or any of their respective affiliates or representatives has made or
makes any representation to any person regarding the ultimate performance of the
Company compared to the information contained in the projections, and none of
them intends to update or otherwise revise the projections to reflect
circumstances existing after the date when made or to reflect the occurrence of
future events even in the event that any or all of the assumptions underlying
the projections are shown to be in error.
AVAILABLE INFORMATION. The Company is subject to the informational
requirements of the Exchange Act and, in accordance therewith, is required to
file reports and other information with the Commission relating to its business,
financial condition and other matters. Certain information as of particular
dates concerning the Company's directors and officers, their remuneration, stock
options and other matters, the principal holders of the Company's securities and
any material interest of such persons in transactions with the Company is
required to be disclosed in the Company's proxy statements distributed to the
Company's shareholders and filed with the Commission. Such reports, proxy
statements and other information should be available for inspection at the
public reference facilities of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the Commission located at
Seven World Trade Center, 13th Floor, New York, NY 10048 and Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies of such
information should be obtainable, by mail, upon payment of the Commission's
customary charges, by writing to the Commission's principal office at 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also maintains a Web site
on the Internet at http://www.sec.gov/ that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Such information should also be available
for inspection at the offices of the National Association of Securities Dealers,
Reports Section, 1735 K Street, Washington, D.C. 20006.
Except as otherwise stated in this Offer to Purchase, the information
concerning the Company contained herein has been taken from or based upon
publicly available documents on file with the Commission and other publicly
available information. Although Parent and the Purchaser do not have any
knowledge that any such information is untrue, neither Parent nor the Purchaser
takes any responsibility for the accuracy or completeness of such information or
for any failure by the Company to disclose events that may have occurred and may
affect the significance or accuracy of any such information.
9. CERTAIN INFORMATION CONCERNING PARENT AND THE PURCHASER
The Purchaser, a Minnesota corporation that is a wholly owned indirect
subsidiary of Parent, was organized to acquire the Company and has not conducted
any unrelated activities since its organization. The principal executive office
of the Purchaser is located c/o Pearson Education, Inc. at One Lake Street,
Upper Saddle River, New Jersey 07458, telephone number (201) 236-7000.
Parent is a public limited company registered in England and Wales. The
principal executive office of Parent is located at 3 Burlington Gardens, London
W1X 1LE, telephone number 44-20-7411-2000. Parent is a global media company with
its principal operations in the education, business information, consumer
publishing and television markets. Shares of Parent are listed on the London
Stock Exchange.
The name, citizenship, business address, present principal occupation or
employment and five-year employment history of each of the directors and
executive officers of Parent and the Purchaser are set forth in Schedule I
hereto.
Except as described in this Offer to Purchase, neither Parent nor the
Purchaser, or, to the best knowledge of Parent and the Purchaser, any of the
persons listed in Schedule I or any associate or majority-owned subsidiary of
Parent or the Purchaser, or any of the persons so listed, beneficially owns any
equity security of the Company, and neither of Parent nor the Purchaser or, to
the best knowledge of Parent and the Purchaser, any of the other persons
referred to above has effected any transaction in any equity security of the
Company during the past 60 days.
19
<PAGE>
Except as described in this Offer to Purchase or the Schedule TO (as defined
below), (a) there have not been any contacts, transactions or negotiations
between Parent, the Purchaser, any of their respective subsidiaries or, to the
best knowledge of Parent and the Purchaser, any of the persons listed in
Schedule I, on the one hand, and the Company or any of its directors, officers
or affiliates, on the other hand, that are required to be disclosed pursuant to
the rules and regulations of the Commission and (b) none of Parent, or the
Purchaser or, to the best knowledge of Parent and the Purchaser, any of the
persons listed in Schedule I has any contract, arrangement, understanding or
relationship with any person with respect to any securities of the Company.
Because the only consideration in the Offer and Merger is cash and the Offer
covers all outstanding Shares, and in view of the absence of a financing
condition and in view of the financial capacity of Parent and its affiliates,
Parent and the Purchaser believe the financial condition of Parent and its
affiliates is not material to a decision by a holder of Shares whether to sell,
tender or hold Shares pursuant to the Offer.
Notwithstanding the foregoing, however, set forth in the table below is
certain selected consolidated financial data with respect to Parent for each of
the years in the three-year period ended December 31, 1999. The selected
consolidated profit and loss account data for the years ended December 31, 1999,
1998 and 1997, and the selected consolidated balance sheet data as at
December 31, 1999, 1998 and 1997, have been derived from Parent's audited
consolidated financial statements for such years and as of such dates. The
selected consolidated profit and loss account data for the six-month periods
ending June 30, 2000 and 1999 and the selected consolidated balance sheet data
as of June 30, 2000 and 1999, have been derived from Parent's unaudited
consolidated financial statements for such periods and as of such dates. These
unaudited financial statements have been prepared on the same basis as Parent's
audited financial statements and, in the opinion of Parent's management, include
all material adjustments, consisting only of normal recurring adjustments,
necessary to present the financial position and results of operations for the
periods and dates presented. Interim results are not necessarily indicative of
the results that may be expected for any other interim period or for the full
year.
Parent's consolidated financial statements have been prepared in accordance
with UK GAAP, which differs from US GAAP in significant respects. The
information provided below is not necessarily indicative of the results that may
be expected from future operations. For convenience, we have translated the
June 30, 2000 and December 31, 1999 amounts into US dollars at the rate of
L1.00=$1.51, the noon buying rate in The City of New York on June 30, 2000.
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
------------------------------ -----------------------------------------
2000 2000 1999 1999 1999 1998 1997
-------- -------- -------- -------- -------- -------- --------
$M LM LM $M LM LM LM
<S> <C> <C> <C> <C> <C> <C> <C>
UK GAAP INFORMATION:
CONSOLIDATED PROFIT AND LOSS ACCOUNT DATA
Total sales.................................. 2,333 1,545 1,306 5,031 3,332 2,395 2,293
Total sales from continuing operations....... 2,333 1,545 1,306 5,031 3,332 2,251 2,011
Operating profit from continuing
operations(1).............................. (29) (19) 25 408 270 187 252
Total operating profit....................... (17) (11) 46 480 318 250 328
Profit after taxation........................ 137 91 (38) 453 300 441 40
Operating profit before internet enterprises,
goodwill amortization and other items(2)... 236 156 133 888 588 389 328
Earnings per equity share(3)................. 21.4c 14.2p (6.6)p 72.8c 48.2p 74.1p 6.6p
Adjusted earnings per equity share after
internet enterprises(4).................... (0.9) (0.6) 6.3 73.2 48.5 42.0 34.9
Adjusted earnings per equity share before
internet enterprises(5).................... 15.1 10.0 7.1 80.5 53.3 42.0 34.9
Diluted earnings per equity share(6)......... 20.8 13.8 (6.5) 71.7 47.5 73.3 6.4
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
JUNE 30 DECEMBER 31
------------------------------ -----------------------------------------
2000 2000 1999 1999 1999 1998 1997
-------- -------- -------- -------- -------- -------- --------
$M LM LM $M LM LM LM
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
Total assets (Fixed Assets plus Current
Assets).................................... 9,817 6,501 5,447 8,079 5,350 5,317 2,253
Net assets................................... 2,935 1,944 1,107 2,004 1,327 1,084 156
Long-term obligations(7)..................... 3,059 2,026 2,312 3,452 2,286 2,562 609
Capital Stock................................ 236 156 153 231 153 152 144
Number of equity shares outstanding.......... 625 625 611 613 613 610 577
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31
------------------------------
1999 1999 1998
-------- -------- --------
$M LM LM
<S> <C> <C> <C>
US GAAP INFORMATION:
Profit for the financial year............................... 299 198 444
Profit from continuing operations for the financial year.... 254 168 122
Basic earnings per equity share............................. 48.9c 32.4p 75.3p
Diluted earnings per equity share........................... 48.5 32.1 74.6
Basic earnings from continuing operations per equity
share..................................................... 41.5 27.5 20.7
Diluted earnings from continuing operations per equity
share..................................................... 41.1 27.2 20.5
Shareholders' funds......................................... 3,949 2,615 2,468
</TABLE>
------------------------
(1) Continuing operations represent those operations carried on by Parent as at
June 30, 2000. Operating profit from continuing operations consists of
operating profit-Group, plus the Group's share of operating profit from
continuing operations for Group associates.
(2) Other items include a Year 2000 compliance costs of L5 million in 1999 and
L7 million in 1998, integration costs in connection with Parent's 1998
acquisition of Simon & Schuster's educational, business & professional and
reference publishing business of L95 million in 1999 and L120 million in
1998 and integration costs in connection with Parent's 2000 acquisition of
Dorling Kindersley of L3 million in 2000.
(3) Earnings per equity share is based on profit for the financial period and
the weighted average number of ordinary shares in issue during the period.
(4) Adjusted earnings per equity share is based on adjusted earnings for the
financial period and the weighted average number of ordinary shares in issue
during the period. Adjusted earnings excludes profits or losses on the sale
of fixed assets and investments, businesses and associates, Year 2000
compliance costs and integration costs in respect of the Simon & Schuster
acquisition and the Dorling Kindersley acquisition and, following the
prospective implementation of FRS10 "Goodwill and Intangible Assets" in
1998, goodwill amortization.
(5) Due to expenditure of L84 million in 2000 and L39 million in 1999 on new
internet enterprises, a second adjusted earnings per equity share in
accordance with UK GAAP is presented in which the results of these internet
enterprises are also excluded from earnings.
(6) Diluted earnings per equity share is based on diluted earnings for the
financial period and the diluted weighted average number of ordinary shares
in issue during the period. Diluted earnings comprise earnings adjusted for
the tax benefit on the conversion of share options by employees and the
weighted average number of ordinary shares adjusted for the dilutive effect
of share options.
(7) Long-term obligations are comprised of medium and long-term borrowings plus
amounts falling due after more than one year related to obligations under
finance leases.
------------------------
The following summarizes the principal differences between UK GAAP and US
GAAP in respect of Parent's financial statements.
21
<PAGE>
Prior to January 1, 1998, under UK GAAP, goodwill was written off to the
profit and loss reserve in the year of acquisition. Under US GAAP, as well as UK
GAAP from January 1, 1998, goodwill is recognized as an asset, and amortization
expense is recorded over useful lives ranging between 5 and 20 years. Intangible
assets under UK GAAP are recognized only when they may be disposed of without
also disposing of the business to which they relate, and for that reason it is
rare that intangible assets are separately identified and recorded apart from
goodwill. Under US GAAP, there is no similar requirement with respect to
intangible assets, and they should be recognized separately from goodwill when
they are separately identifiable and measurable. Under US GAAP, intangible
assets such as publishing rights, television production and distribution rights,
non-compete agreements, software, databases and advertising relationships have
been recognized and are being amortized over a range of useful lives between two
and 16 years. The difference in goodwill and intangible assets also creates a
difference in the gain or loss recognized on the disposal of a business due to
amortization expense taken with respect to the goodwill and intangible assets,
as UK GAAP requires that goodwill be removed from the profit and loss reserve
upon disposal and factored into the gain or loss on disposal calculation.
Under UK GAAP, the liability method is used in recording deferred taxation,
and consideration is given to whether or not the liability will be realized
within the foreseeable future. This can result in the full potential liability
not being recognized. Deferred tax assets are rarely recognized under UK GAAP.
Under US GAAP, the full provision method is used, meaning that all deferred tax
assets and liabilities are recorded. An assessment is then made with respect to
whether the deferred tax assets are realizable, and a determination is made as
to whether a valuation allowance is necessary with respect to the deferred tax
assets. The principal differences Parent recognize relate to deferred tax assets
in the United States.
Acquisition adjustments have arisen with respect to the Pearson
Education, Inc. acquisition of Simon & Schuster's educational, business and
professional and reference publishing business during 1998. Under US GAAP, the
criteria necessary for recognizing some restructuring costs in acquisition
accounting for the Simon & Schuster acquisition have been met, and a provision
for these costs has been included in the purchase price allocation. Under UK
GAAP, these types of restructuring costs are recorded as period costs when
incurred and may not be included in the allocation of the purchase price.
Under UK GAAP, there are no specific criteria which must be fulfilled in
order to record derivative contracts such as interest rate swaps, currency swaps
and forward currency contracts as a hedging instrument. Accordingly, based upon
Parent's intention and stated policy with respect to entering into derivative
transactions, they have been recorded as hedging instruments for UK GAAP. This
means that unrealized gains and losses on these instruments are typically
deferred and recognized when realized. Under US GAAP, Parent's derivative
contracts do not meet the prescriptive criteria for hedge accounting, and are
recorded at market value at each period end, with changes in their fair value
being recorded currently in the profit and loss account.
Under UK GAAP, the cost of providing pension benefits is expensed over the
average expected useful service lives of eligible employees, using long-term
actuarial assumptions. Under US GAAP, the annual pension costs comprise the
estimated cost of benefits accruing in the period, and actuarial assumptions are
adjusted annually to reflect current market and economic conditions.
Additionally, under US GAAP, part of the surplus, which is the excess of plan
assets over plan liabilities, is recognized on the balance sheet. The remainder
of the unrecognized surplus is spread over the employees' remaining service
lifetimes.
Under UK GAAP, no compensation costs associated with non-qualified stock
option plans are recognized if the value of the option at the date of grant is
equal to or greater than the market value on that date. Under US GAAP, Parent
has adopted the fair value method of accounting for options. Compensation
expense is determined based upon the fair value at the grant date, and has been
estimated using the Black Scholes model. Compensation cost is recognized over
the service life of the awards, which is
22
<PAGE>
normally equal to the vesting period. Compensation expense is also recognized
under US GAAP with respect to UK qualified non-compensatory plans, such as the
Save as You Earn option plan and the Worldwide Save for Shares plan, as these
plans offer employees a discount of greater than 15% from market value.
10. SOURCE AND AMOUNT OF FUNDS
The Offer is not conditioned on any financing arrangements.
The total amount of funds required by the Purchaser to purchase all
outstanding Shares pursuant to the Offer and to pay fees and expenses related to
the Offer and the Merger is estimated to be approximately $2.5 billion. The
Purchaser plans to obtain all funds needed for the Offer and the Merger through
capital contributions, loans and/or other financial arrangements that will be
made available by Parent, either directly or through one or more wholly owned
subsidiaries of Parent, to the Purchaser. Parent plans to make these
contributions, loans and/or other financial arrangements available using funds
it will receive pursuant to the issuance (the "RIGHTS ISSUE") of up to
170,528,278 new ordinary shares of Parent ("NEW SHARES"). Pursuant to the Rights
Issue, each holder of ordinary shares of Parent (other than certain shareholders
residing outside the United Kingdom) (each, a "QUALIFYING SHAREHOLDER") will be
offered the right to subscribe for three New Shares at a price of L10 per New
Share (the "ISSUE PRICE") for every eleven ordinary shares held by such
Qualifying Shareholder as of the close of business on July 28, 2000. The Rights
Issue, if fully subscribed, will result in aggregate proceeds to Parent of
approximately L1.7 billion (or $2.55 billion, calculated at the noon buying rate
in The City of New York on August 4, 2000 exchange rate of 1.5022 dollars for
each pound).
The Issue Price represents a discount of approximately 50% to the closing
middle market price of L20.10 per ordinary share on July 28, 2000. Pursuant to
the terms of an underwriting agreement dated July 31, 2000 (as supplemented, the
"UNDERWRITING AGREEMENT"), between Parent, Goldman Sachs International and
Cazenove & Co., Goldman Sachs International and Cazenove & Co. (the
"UNDERWRITERS") have severally agreed, subject to certain conditions (i) to
procure, as agents of Parent, subscribers for any New Shares not taken up by
Qualifying Shareholders and (ii) to underwrite up to 150,000,000 New Shares of
the Rights Issue to ensure that funds are available at completion of the Offer
and the Merger. In the event the full amount of the Rights Issue is not taken up
or subscribed, Parent will satisfy the remaining consideration for the Offer and
the Merger through the standby underwriting of New Shares and Parent's existing
bank facilities.
The Rights Issue is conditional on Admission becoming effective by
8:30 a.m. (London time) on the London Stock Exchange dealing day after the
Rights Issue prospectus is posted to Parent's shareholders. It is expected that
the prospectus will be posted on or about August 9, 2000. "ADMISSION" means
(i) the admission of the New Shares to the official list (the "OFFICIAL LIST")
of the Financial Services Authority in its capacity as competent authority under
the Financial Services Act of 1986 (the "UK LISTING AUTHORITY") becoming
effective and (ii) the admission of the New Shares to trading having been
granted by the London Stock Exchange. Application has been made to the UK
Listing Authority for the New Shares to be admitted to the Official List and to
the London Stock Exchange for the New Shares to be admitted to trading on the
London Stock Exchange. It is expected that admission of the New Shares to the
Official List and to trading on the London Stock Exchange will become effective
and that dealings on the London Stock Exchange in New Shares, nil paid, will
commence on August 10, 2000. The Rights Issue is not conditional upon either the
acquisition of the Company or the Underwriting Agreement becoming unconditional.
The Offer does not constitute an offer to sell, nor a solicitation to sell,
nor a solicitation of an offer to purchase, any New Shares, any rights to
subscribe for Parent's ordinary shares or any other securities of Parent.
23
<PAGE>
The foregoing description is qualified in its entirety by reference to the
Underwriting Agreement, a copy of which is filed as Exhibit (b)(1) and (b)(2) to
the Schedule TO. The Underwriting Agreement should be read in its entirety for a
more complete description of the matters summarized above.
11. CONTACTS AND TRANSACTIONS WITH THE COMPANY; BACKGROUND OF THE OFFER
On May 4, 2000, Peter Jovanovich, Chairman and Chief Executive Officer of
Pearson Education, Inc., a wholly owned indirect subsidiary of Parent, met with
Russell A. Gullotti, Chairman of the Company Board, President and Chief
Executive Officer of the Company at the Company's offices in Eden Prairie,
Minnesota to discuss a full range of possible strategic alliances between
Pearson Education, Inc. and the Company including a possible business
combination.
On May 23, 2000, the Company and Pearson Education, Inc. entered into a
confidentiality agreement.
On May 26, 2000, Mr. Jovanovich and other representatives of Pearson
Education, Inc. met with Mr. Gullotti and other representatives of the Company
at the Company's offices in Eden Prairie, Minnesota to further discuss strategic
alliances between the two companies, including the possibility of Pearson
Education, Inc. and the Company jointly selling assessment and curriculum
solutions to school districts.
From May 27, 2000 to June 14, 2000, Mr. Jovanovich and Mr. Gullotti had
various telephone conferences regarding possible alliances between the Company
and Pearson Education, Inc.
On June 14, 2000, Pearson Education, Inc. and the Company executed a second
confidentiality agreement (the "CONFIDENTIALITY AGREEMENT").
On June 15, 2000, representatives of Pearson Education, Inc. and the Company
met in the Company's offices in Mesa, Arizona to discuss again possible
strategic alliances between the Company and Pearson Education, Inc.
On June 19, 2000, Mr. Gullotti and Jeffrey W. Taylor, the Vice President and
Chief Financial Officer of the Company met with Mr. Jovanovich, John Makinson,
the Finance Director of Parent, and Douglas Kubach, the Chief Technology Officer
of Pearson Education, Inc. in Bloomington, Minnesota. At the meeting, the
parties discussed the Company's business operations. The parties also explored
strategic alternatives involving the companies, including a possible merger of
the Company and Pearson Education, Inc.
From July 7, 2000 through July 11, 2000, Marjorie Scardino, the Chief
Executive of Parent, and Mr. Gullotti had various telephone conferences
discussing a possible business combination between the Company and Parent and
the preliminary terms of such a transaction.
From July 12, 2000 through July 17, 2000, Ms. Scardino and Mr. Gullotti
continued to have telephone discussions regarding a possible business
combination and the terms thereof.
On July 14, 2000, Ms. Scardino and Mr. Gullotti reached a preliminary
understanding on a possible purchase price of $73.00 per Share and certain other
material terms of the transaction, and on July 15, 2000, they met in Bluffton,
South Carolina to discuss these matters further.
From July 17, 2000 through July 21, 2000, Ms. Scardino, Mr. Makinson,
Mr. Jovanovich, David Bell (one of Parent's directors) and other representatives
of Parent and their advisors met with members of the Company's management,
including various business unit heads of the Company and representatives of the
Company's financial advisor, in Minneapolis, Minnesota and engaged in various
telephone conversations to review the Company's business plans and its business
and operations and to discuss outstanding issues in the transaction (including
employee and severance issues). Also during this period, and continuing through
July 30, 2000, Parent and its advisors conducted legal, business and financial
due diligence with respect to the Company.
24
<PAGE>
On July 17, 2000, Parent's legal advisors provided a draft of an acquisition
agreement. Between July 17, 2000 and July 21, 2000, Parent's and the Company's
respective legal advisors began negotiating the proposed draft acquisition
agreement.
On July 20, 2000, Parent and the Company executed an exclusivity agreement
pursuant to which, subject to certain exceptions, the Company agreed to refrain
from negotiating a business combination with any party other than Parent until
August 2, 2000.
Parent, the Company, and their respective advisors continued negotiation of
the acquisition agreement between July 22, 2000 and July 30, 2000.
On July 27, 2000, Parent's Board of Directors approved the Offer, the
Merger, the Merger Agreement and the other transactions contemplated thereby,
subject to the satisfactory finalization of the Merger Agreement. On July 28,
2000, the Company Board approved the Offer, the Merger, the Merger Agreement and
the other transactions contemplated thereby, subject to finalization of the
Merger Agreement.
On July 30, 2000, Parent, the Purchaser and the Company executed the Merger
Agreement.
On July 31, 2000, each of Parent and the Company issued a press release in
the United States announcing the execution of the Merger Agreement.
On August 4, 2000, Parent, the Purchaser and the Company executed Amendment
No. 1 to the Merger Agreement.
On August 7, 2000, in accordance with the Merger Agreement, the Purchaser
commenced the Offer.
During the Offer, Parent and the Purchaser intend to have ongoing contacts
with the Company and its directors, officers and shareholders.
12. PURPOSE OF THE OFFER; THE MERGER AGREEMENT; PLANS FOR THE COMPANY
PURPOSE
The purpose of the Offer is to enable Parent to acquire control of the
Company and to acquire all of the outstanding Shares. The Offer, as the first
step in the acquisition of the Company, is intended to facilitate the
acquisition of all the outstanding Shares. The purpose of the Merger is to
acquire all of the outstanding Shares not tendered and purchased pursuant to the
Offer or otherwise.
THE MERGER AGREEMENT
The Merger Agreement provides that, following the satisfaction or waiver of
the conditions described below under "Conditions to the Merger", the Purchaser
will be merged with and into the Company, with the Company being the surviving
corporation, and each issued Share (other than Shares owned by Parent, the
Purchaser or the Company or a subsidiary of Parent or the Purchaser or by
shareholders, if any, who are entitled to and who properly exercise dissenters'
rights under Minnesota law) will be converted into the right to receive the
price per Share paid pursuant to the Offer in cash, without interest thereon.
COMPANY ACTION. The Merger Agreement states that the Company Board (at a
meeting duly called and held) (i) determined that the Merger Agreement, the
Offer and the Merger are fair to and in the best interests of the Company and
the shareholders of the Company, (ii) approved and adopted the Merger Agreement
and the transactions contemplated thereby, including the Offer and the Merger,
and (iii) resolved to recommend that the shareholders of the Company accept the
Offer and tender their Shares pursuant to the Offer. Additionally, the Committee
(at a meeting duly called and held) approved the Merger Agreement and the
transactions contemplated by the Merger Agreement, including the Offer and the
Merger.
25
<PAGE>
VOTE REQUIRED TO APPROVE MERGER. The MBCA requires, among other things,
that the adoption of any plan of merger or consolidation of the Company must be
approved and found advisable by the Company Board and, if the "short-form"
merger procedure described below is not available, approved by the holders of a
majority of the Company's outstanding voting securities. The Company Board and
the Committee have approved the Offer, the Merger and the Merger Agreement;
consequently, the only additional action of the Company that may be necessary to
effect the Merger is approval of the Merger Agreement by the Company's
shareholders if such "short-form" merger procedure is not available. If required
by the MBCA, the Company will call and hold a meeting of its shareholders
promptly following the consummation of the Offer for the purposes of voting upon
the approval of the Merger Agreement. At any such meeting all Shares then owned
by Parent or the Purchaser will be voted in favor of the approval of the Merger.
If the Purchaser acquires--through the Offer, the Merger Agreement or
otherwise--voting power with respect to at least a majority of the outstanding
Shares (which would be the case if the Minimum Tender Condition were satisfied
and the Purchaser were to accept for payment Shares tendered pursuant to the
Offer), it would have sufficient voting power to effect the Merger without the
affirmative vote of any other shareholder of the Company.
The MBCA also provides that, if a parent company owns at least 90% of the
outstanding shares of each class of stock of a subsidiary, the parent company
may effect a "short form" merger with that subsidiary without a shareholder
vote. In order to consummate the Merger pursuant to these provisions of the
MBCA, the Purchaser would have to own at least 90% of the outstanding Shares.
Accordingly, if, as a result of the Offer or otherwise, the Purchaser acquires
or controls the voting power of at least 90% of the outstanding Shares, the
Purchaser intends to effect the Merger without a vote of the shareholders of the
Company.
CONDITIONS TO THE MERGER. The Merger Agreement provides that the respective
obligations of each party to effect the Merger are subject to the satisfaction
or waiver of certain conditions, including the following: (a) Shareholder
Approval (as defined below under "Termination of the Merger Agreement"), if
required by applicable law, shall have been obtained; (b) any requisite waiting
period (and any extension thereof) applicable to the Merger under the HSR Act
and any other applicable foreign antitrust and competition laws shall have been
terminated or shall have expired and any necessary consents or approvals with
respect to such transactions under any applicable foreign antitrust and
competition laws shall have been obtained; (c) no temporary restraining order,
preliminary or permanent injunction or other order or decree issued by any court
of competent jurisdiction or other legal restraint or prohibition (collectively,
"LEGAL RESTRAINTS") that has the effect of preventing the consummation of the
Merger shall be in effect; and (d) the Purchaser shall have previously accepted
for payment and paid for the Shares pursuant to the Offer.
TERMINATION OF THE MERGER AGREEMENT. The Merger Agreement may be terminated
at any time prior to the effective time of the Merger (the "EFFECTIVE TIME"),
whether before or after the Shareholder Approval:
(a) by mutual written consent of Parent and the Company;
(b) by either Parent or the Company:
(i) if the Purchaser shall not have accepted for payment any Shares
pursuant to the Offer prior to December 31, 2000; PROVIDED that this
right to terminate the Merger Agreement is not available to any party
whose breach of the Merger Agreement has been a principal reason the
Offer has not been consummated by such date;
(ii) if any domestic or foreign government or any court,
administrative agency or commission or other governmental or regulatory
authority or agency (a "GOVERNMENTAL ENTITY") shall have issued an order,
injunction or other decree or ruling or taken any other action (a
"RESTRAINT") permanently enjoining, restraining or otherwise prohibiting
the acceptance for
26
<PAGE>
payment of, or payment for the Shares pursuant to the Offer or the Merger
and such order, injunction, decree or ruling or other action shall have
become final and nonappealable;
(c) by Parent, if the Company Board shall have failed to confirm the
Recommendation to the shareholders of the Company that they accept the Offer
and give Shareholder Approval within four business days after a written
request by Parent that it do so if such request is made following the making
of a Takeover Proposal (as defined below under "Takeover Proposals").
"SHAREHOLDER APPROVAL" means approval of the Merger by an affirmative vote
of the holders of a majority of the outstanding Shares;
(d) by Parent (i) if the Company shall have breached or failed to
perform in any material respect any of its representations, warranties,
covenants or other agreements contained in the Merger Agreement, which
breach, individually or in the aggregate with other breaches, would give
rise to the failure of a condition set forth in paragraph (d) or (e) of
Section 14 hereof, and has not been or is incapable of being cured by the
Company within 20 business days after its receipt of written notice thereof
from Parent, or (ii) if any suit, action or proceeding described in
paragraph (a) of Section 14 hereof shall have prevailed and become final and
nonappealable;
(e) by the Company, if any of Parent or the Purchaser shall have
breached or failed to perform in any material respect any of its
representations, warranties, covenants or other agreements contained in the
Merger Agreement, except for such failures to be true and correct that,
individually or in the aggregate, would not reasonably be expected to have a
material adverse effect on Parent's or the Purchaser's ability to consummate
the transactions contemplated by the Merger Agreement, which breach or
failure to perform has not been or is incapable of being cured by Parent
within 20 business days after its receipt of written notice thereof from the
Company;
(f) by the Company in the circumstances described below under "Takeover
Proposals" in which such termination is permitted, subject to compliance by
the Company with the notice provisions described below and the termination
fee provisions described below; or
(g) by Parent, if there is a material breach of the obligations
described below under "Takeover Proposals" or (i) if the Company Board
(A) withdraws or modifies in any manner materially adverse to Parent or the
Purchaser the Recommendation, (B) accepts, approves or recommends any
Takeover Proposal or (C) resolves or publicly discloses any intention to do
any of the foregoing or (ii) if the Committee (A) withdraws or modifies in
any manner adverse to Parent or the Purchaser the Committee Approval,
(B) approves a Takeover Proposal or (C) resolves or publicly discloses any
intention to do any of the foregoing.
TAKEOVER PROPOSALS. The Merger Agreement provides that the Company will
not, nor will it permit any of its affiliates to, nor will it authorize or
permit any affiliate, director, officer or employee of, or any investment
banker, financial advisor, attorney, accountant or other advisor or
representative of, the Company or any of its affiliates to, directly or
indirectly, (i) solicit, seek, initiate or encourage (including by way of
furnishing information), or take any other action to facilitate the submission
of any inquiries or the making of any proposal or offer that constitutes, or
would be reasonably likely to constitute or lead to a Takeover Proposal,
(ii) enter into, continue or otherwise participate in any discussions or
negotiations (including by way of furnishing information) or otherwise cooperate
in any way with, or assist, participate in, facilitate or encourage any effort
or attempt by any person to submit or otherwise act in furtherance of, a
Takeover Proposal, (iii) agree to, approve or recommend any Takeover Proposal,
or (iv) take any other action inconsistent with the obligations and commitments
of the Company contained in this provision, PROVIDED that the foregoing shall
not prohibit the presentation of a Takeover Proposal to the Company Board which
was not obtained or received in violation of Section 4.02 of the Merger
Agreement. Notwithstanding the foregoing, in the event the Company Board
determines in good faith after consultation with outside counsel that failure to
do so would constitute a breach of the Company Board's fiduciary duties to the
shareholders of the Company under applicable law, the Company Board may, in
27
<PAGE>
response to (A) a Superior Proposal (as defined below) or (B) a bona fide
Takeover Proposal that the Company Board determines in good faith is reasonably
likely to lead to a Superior Proposal (a "LIKELY SUPERIOR PROPOSAL") at any time
prior to the acceptance for payment of Shares pursuant to the Offer (the
"SPECIFIED DATE"), that in each case was unsolicited and did not otherwise
result from a breach of this provision, and subject to compliance with the
notification obligations described below: (x) furnish information with respect
to the Company and its subsidiaries to the person making such Superior Proposal
or Likely Superior Proposal (and its representatives) pursuant to an appropriate
and customary confidentiality and standstill agreement that is no less favorable
than the Confidentiality Agreement; and (y) participate in discussions or
negotiations with the person making such Superior Proposal or Likely Superior
Proposal (and its representatives) regarding such Superior Proposal or Likely
Superior Proposal.
"SUPERIOR PROPOSAL" means any bona fide written offer made by a third party
to consummate a tender offer, exchange offer, merger, consolidation or similar
transaction that would result in such third party (or its shareholders) owning,
directly or indirectly, more than 50% of the Shares then outstanding (or of the
surviving entity in a merger) or all or substantially all of the assets of the
Company and its subsidiaries, taken as a whole, and that is otherwise on terms
and conditions which the Company Board determines in good faith (after
consultation with a financial advisor of nationally recognized reputation) to
provide consideration to the holders of Shares with a greater value than the
consideration payable in the Merger after taking into account (i) the amount and
type of consideration offered, (ii) any changes to the terms of the Merger
Agreement proposed in writing by Parent in response to such Superior Proposal or
otherwise, (iii) the likelihood of the consummation of such transaction and
(iv) the identity of the person making the proposal, PROVIDED, HOWEVER, that no
such offer shall constitute a Superior Proposal unless (A) such offer is first
received by the Company after the date of the Merger Agreement and (B) such
offer is unsolicited and does not otherwise result from a breach of
Section 4.02 of the Merger Agreement.
"TAKEOVER PROPOSAL" means any inquiry, proposal or offer from any person
relating to (i) any direct or indirect purchase, lease, pledge or other
acquisition of 10% or more of the assets of the Company and its subsidiaries,
taken as a whole, or 10% or more (on either an issued and outstanding or a
fully-diluted basis) of any class or series of capital stock of the Company or
any subsidiary of the Company, (ii) any tender offer or exchange offer that if
consummated would result in any person (or group of related persons)
beneficially owning 10% or more (on either an issued and outstanding or a
fully-diluted basis) of any class or series of capital stock of the Company or
any subsidiary of the Company, or (iii) any merger, consolidation, business
combination, recapitalization, liquidation, dissolution or other similar
transaction involving the Company or any subsidiary of the Company, in each
case, other than the transactions to be effected pursuant to the Merger
Agreement.
The Merger Agreement further provides that, except as described below,
neither the Company Board nor any committee thereof (including the Committee)
shall (i) withdraw (or modify in a manner adverse to Parent or the Purchaser) or
propose to withdraw (or modify in a manner adverse to Parent or the Purchaser)
the Recommendation and the Committee Approval, (ii) adopt, approve or recommend,
or propose to adopt, approve or recommend, any Takeover Proposal, (iii) cause or
permit the Company to enter into any letter of intent, memorandum of
understanding, agreement in principle, acquisition agreement, merger agreement
or other similar contract (other than a confidentiality agreement as required by
Section 4.02(a) of the Merger Agreement) (each, an "ACQUISITION AGREEMENT")
constituting or related to, or which is intended to or is reasonably likely to
lead to, any Takeover Proposal, or (iv) agree or resolve to take any of the
actions contemplated by clause (i), (ii) or (iii) of this sentence PROVIDED,
HOWEVER, that the Company Board or any committee thereof may take any of such
actions if (and only if) each of the following conditions has been satisfied:
(w) the Company Board or such committee thereof determines in good faith, after
consultation with outside counsel, that failure to do so would constitute a
breach of its fiduciary duties to the shareholders of the Company under
applicable law; (x) no breach of
28
<PAGE>
any of the Company's obligations under this provision or its obligations
described in the immediately following paragraph shall have occurred; (y) the
Company shall have given Parent three business days' prior written notice of its
intention to take such action and if such action is being taken in connection
with a Superior Proposal or a Takeover Proposal which may lead to a Superior
Proposal, Parent shall not have proposed changes to the terms of the Merger
Agreement which would have the effect of causing the Takeover Proposal in
question no longer to constitute a Superior Proposal or otherwise cause the
condition set forth in clause (w) above no longer to be satisfied; and (z) the
Company shall have terminated the Merger Agreement and prior to such
termination, the Company has paid the Termination Fee (as defined below under
"Fees and Expenses; Termination Fee") to Parent.
In addition to the obligations of the Company described in the preceding
three paragraphs, the Merger Agreement provides that the Company will promptly
(and in any event within 24 hours or, in the case of any action described in
clause (x) or (y) of the fourth preceding paragraph not less than 48 hours prior
to taking any such action) (i) advise Parent orally and in writing of any
request for information that the Company reasonably believes could lead to or
contemplates a Takeover Proposal or of any Takeover Proposal or of any inquiry
the Company reasonably believes could lead to any Takeover Proposal, the terms
and conditions of any such request, Takeover Proposal or inquiry (including any
subsequent amendment or other modification to such terms and conditions) and the
identity of the person making any such request, Takeover Proposal or inquiry and
(ii) keep Parent informed in all material respects of the status and details
(including amendments or proposed amendments) of any such request, Takeover
Proposal or inquiry and of any discussions or negotiations with respect thereto.
The Merger Agreement provides that the provisions described above will not
prohibit the Company from taking and disclosing to its shareholders a position
contemplated by Rule 14d-9 or Rule 14e-2(a) promulgated under the Exchange Act
or making any disclosure to the Company's shareholders if, in the good faith
judgment of the Company Board, after consultation with outside counsel, failure
so to disclose would be inconsistent with applicable law; PROVIDED, HOWEVER, in
no event shall the Company Board or any committee thereof withdraw or modify, or
propose to withdraw or modify, its position with respect to the Merger
Agreement, the Offer or the Merger (unless it is permitted to do so as described
above) or adopt, approve or recommend, or propose to adopt, approve or
recommend, any Takeover Proposal.
FEES AND EXPENSES; TERMINATION FEE. The Merger Agreement provides that
except as set forth below, all fees and expenses incurred in connection with the
Merger Agreement, the Offer, the Merger and the other transactions contemplated
by the Merger Agreement shall be paid by the party incurring such fees or
expenses, whether or not the Merger is consummated.
In the event that (i) (A) a Takeover Proposal shall have been made (whether
to the Company, any subsidiary of the Company, or the shareholders of the
Company or otherwise) or become publicly known or any person shall have publicly
proposed or publicly announced an intention (whether or not conditional and
whether or not withdrawn) to make a Takeover Proposal, (B) thereafter the Merger
Agreement is terminated by either Parent or the Company as described above in
paragraph (b)(i) under "Termination of the Merger Agreement" and (C) within
12 months after such termination, the Company or any of its subsidiaries enters
into any Acquisition Agreement with respect to, or otherwise consummates the
transaction contemplated by, any Takeover Proposal; or (ii) the Merger Agreement
is terminated by Parent as described above in paragraph (c), (d)(i) or
(g) under "Termination of the Merger Agreement" or by the Company as described
in paragraph (f) under "Termination of the Merger Agreement"; then, in each
case, the Company shall pay Parent a fee equal to $98,000,000 (the "TERMINATION
FEE") by wire transfer of same day funds, to an account designated by Parent. In
the event that such payment is being made as a result of any event referred to
in subsection (i)(C) or subsection (ii)(B) above, such payment shall be made not
later than the date of such event and in the event that such payment is being
made as a result of any event referred to in subsection (ii) above, such payment
shall be made not later than the date of such termination (and in the case of a
termination by the Company as
29
<PAGE>
a condition to such termination); PROVIDED, HOWEVER, that for purposes of
subsection (i) of this paragraph, the references to "10%" in the definition of
"Takeover Proposal" shall in each case be deemed to be references to "50%". The
parties have agreed that if the Company fails promptly to pay any amount due as
described in this paragraph and, in order to obtain such payment, Parent
commences a suit that results in a judgment against the Company for such amount,
the Company shall pay to Parent interest on such amount at the prime rate of
Citibank, N.A. in effect on the date such payment was required to be made.
CONDUCT OF BUSINESS. The Merger Agreement provides that during the period
from the date of the Merger Agreement to the Effective Time, except (i) as
consented to in writing by Parent, (ii) as specifically contemplated by the
Merger Agreement or (iii) as disclosed on Section 4.01(a) of the Company's
disclosure schedule to the Merger Agreement, the Company shall, and shall cause
its subsidiaries to, carry on their respective businesses in the ordinary course
consistent with past practice and use their commercially reasonable efforts to
comply with all applicable laws, rules and regulations and, to the extent
consistent therewith, use their commercially reasonable efforts to preserve
their assets and technology and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them in all material respects. Without limiting the generality of
the foregoing, but subject to clauses (i), (ii) and (iii) above, the Company
shall not, and shall not permit any of its subsidiaries to:
(i) (w) declare, set aside or pay any dividends on, or make any other
distributions (whether in cash, stock or property) in respect of, any of its
capital stock except for cash dividends payable to the Company or a
subsidiary of the Company by a subsidiary of the Company, (x) purchase,
redeem or otherwise acquire any shares of capital stock or any other
securities of the Company or its subsidiaries (except in connection with and
consistent with the terms of the Stock Plans (as defined in the Merger
Agreement) or the Benefit Plans (as defined in the Merger Agreement), as in
effect on the date of the Merger Agreement) or any options, warrants, calls
or rights to acquire any such shares or other securities, (y) split, combine
or reclassify any of its capital stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in substitution for shares
of its capital stock or any of its other securities or (z) liquidate, merge
or consolidate with any other person;
(ii) issue, deliver, sell, pledge, dispose of, grant, encumber, or
otherwise transfer or authorize the issuance, delivery, sale, pledge,
disposition, grant or encumbrance of any shares of the Company's or any of
its subsidiaries' capital stock, any other equity or voting interests or any
securities convertible into, or exchangeable for, or any options, warrants,
calls or rights to acquire, any such shares, voting securities or
convertible securities or any stock appreciation rights or other rights
(other than the issuance of Shares upon the exercise of Stock Options (as
defined in the Merger Agreement) and other rights and agreements set forth
in Section 3.01(c) of the Company's disclosure schedule to the Merger
Agreement that were in existence on the date of the Merger Agreement);
(iii) amend or propose to amend its or any of its subsidiaries' articles
of incorporation or by-laws (or similar organizational documents);
(iv) directly or indirectly acquire or agree to acquire (A) by merging
or consolidating with, or by purchasing all or a substantial portion of the
assets of, or in any other manner, any assets or stock constituting a
business or any corporation, partnership, joint venture or association or
other entity or division thereof, or any direct or indirect interest in any
of the foregoing, or (B) any assets other than purchases of assets
(including, subject to clause (vii) below, capital assets) in the ordinary
course of business consistent with past practice;
(v) directly or indirectly sell, lease, license, sell and lease back,
mortgage or otherwise encumber or subject to any lien or otherwise dispose
of any of its properties or assets or any interest
30
<PAGE>
therein, except (i) sales of assets or any interest therein in the ordinary
course of business consistent with past practice, (ii) pledges or
encumbrances pursuant to existing borrowing arrangements, or (iii) any such
transaction not otherwise permitted with an aggregate value not to exceed
$5,000,000;
(vi) (x) repurchase, accelerate, prepay or incur any indebtedness or
guarantee any indebtedness of another person or issue or sell any debt
securities or options, warrants, calls or other rights to acquire any debt
securities of the Company or any of its subsidiaries, guarantee any debt
securities of another person, enter into any "keep well" or other agreement
to maintain any financial statement condition of another person or enter
into any arrangement having the economic effect of any of the foregoing
(PROVIDED that the Company may incur indebtedness for borrowed money under
its existing credit facilities up to an aggregate amount of $30,000,000),
(y) make any loans, advances or capital contributions to, or investments in,
any other person, other than the Company or any direct or indirect wholly
owned subsidiary of the Company, or (z) enter into any hedging agreement or
other financial agreement or arrangement designed to protect the Company
against fluctuations in interest rates, commodity prices, currency exchange
rates or otherwise, except, in the cases of clauses (x), (y) and (z) above,
agreements or arrangements entered into in the ordinary course of business
consistent with past practice;
(vii) incur or commit to incur any capital expenditures in an aggregate
amount in excess of $10,000,000;
(viii) pay, discharge, settle or satisfy any litigation, claims
(including claims of shareholders), liabilities or obligations (whether
absolute, accrued, asserted or unasserted, contingent or otherwise) in an
aggregate amount exceeding $5,000,000, other than the payment, discharge or
satisfaction in the ordinary course of business consistent with past
practice or as required by their terms as in effect on the date of the
Merger Agreement of claims, liabilities or obligations reflected, reserved
against or otherwise disclosed in the most recent audited financial
statements (or the notes thereto) of the Company included in documents the
Company has filed with the Commission (for amounts not in excess of such
reserves or as otherwise disclosed) or incurred since the date of such
financial statements in the ordinary course of business consistent with past
practice, or waive, release, grant or transfer any right of material value,
other than in the ordinary course of business consistent with past practice,
or waive any material benefits of, or agree to modify in any material
adverse respect, or fail to enforce, or consent to any matter with respect
to which its consent is required under, any confidentiality, standstill or
similar agreement to which the Company or any of its subsidiaries is a
party;
(ix) (A) grant to any employee, officer, director, consultant or
independent contractor of the Company or any of its subsidiaries any
increase in cash compensation or pay any bonus, other than in the ordinary
course of business consistent with past practice, (B) grant to any employee,
officer, director, consultant or independent contractor of the Company or
any of its subsidiaries any increase in severance or termination pay,
(C) establish, adopt, enter into or amend in any material respect any
collective bargaining agreement or Benefit Plan (as defined in the Merger
Agreement), (D) take any action to accelerate any rights or benefits, take
any action to fund or in any other way secure the payment of compensation or
benefits under any Benefit Plan, or make any material determinations not in
the ordinary course of business consistent with past practice, under any
collective bargaining agreement or Benefit Plan other than as provided below
under "Stock Options", including any payment of cash pursuant thereto or
(E) amend or modify or grant any Stock Option, in each case above other than
(i) changes that are required by applicable law or (ii) to satisfy
obligations existing as of the date of the Merger Agreement;
(x) fail to maintain insurance existing at levels substantially
comparable to levels as of the date of the Merger Agreement;
31
<PAGE>
(xi) transfer or license to any person or entity or otherwise extend,
amend or modify any rights to the Intellectual Property (as defined in the
Merger Agreement) rights of the Company and its subsidiaries other than in
the ordinary course of business consistent with past practice; PROVIDED that
in no event shall the Company license on an exclusive basis or sell any
Intellectual Property rights of the Company or its subsidiaries;
(xii) enter into or amend any agreements pursuant to which any person is
granted exclusive marketing, manufacturing or other rights with respect to
any material Company product, process or technology, other than in the
ordinary course of business consistent with past practice;
(xiii) except insofar as may be required by a change in generally
accepted accounting principles in the United States or generally accepted
accounting principles of the applicable jurisdiction or changes in
applicable law, make any changes in accounting methods, principles or
practices;
(xiv) take any action that could reasonably be expected to result in
(A) any representation and warranty of the Company set forth in the Merger
Agreement that is qualified as to materiality becoming untrue, (B) any such
representation and warranty that is not so qualified becoming untrue in any
material respect or (C) any condition to the Offer or the Merger not being
satisfied except as provided in Section 4.02(b) of the Merger Agreement;
(xv) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect
to accounting policies or procedures;
(xvi) amend, modify or consent to the termination of any Material
Contract (as defined in the Merger Agreement), or amend, waive, modify or
consent to the termination of the Company's or any of its subsidiaries'
material rights thereunder;
(xvii) commence any material litigation; or
(xviii) authorize any of, or commit, resolve or agree to take any of,
the foregoing actions.
BOARD OF DIRECTORS. The Merger Agreement provides that promptly upon the
acceptance for payment of, and payment by the Purchaser for, any Shares pursuant
to the Offer, the Purchaser shall, subject to compliance with Section 14(f) of
the Exchange Act and Rule 14f-1 promulgated thereunder, be entitled to designate
such number of directors on the Company Board as will give the Purchaser
representation on the Company Board equal to that number of directors, rounded
up to the next whole number, which is the product of (a) the total number of
directors on the Company Board (giving effect to the directors elected pursuant
to this sentence) multiplied by (b) a fraction, the numerator of which is the
number of Shares so accepted for payment and paid for by the Purchaser and the
denominator of which is the number of such Shares outstanding, and the Company
shall, at such time, cause the Purchaser's designees to be so elected or
appointed to the Company Board; PROVIDED, HOWEVER, that during the period
commencing with the election or appointment of the Purchaser's designees to the
Company Board until the Effective Time, the Company Board shall have at least
three directors who are directors on the date of the Merger Agreement and who
are not officers of the Company or representatives of any affiliates of the
Company (the "INDEPENDENT DIRECTORS"); and PROVIDED FURTHER, HOWEVER, that if
during such period the number of Independent Directors shall be reduced below
three for any reason whatsoever, the remaining Independent Directors (or
Independent Director, if there shall be only one remaining) shall be entitled to
designate persons to fill any such vacancies who shall be deemed to be
Independent Directors for purposes of the Merger Agreement or, if no Independent
Directors then remain, the other directors shall designate three persons to fill
such vacancies who are not shareholders, officers or affiliates of the Company,
Parent or the Purchaser, and such persons shall be deemed to be Independent
Directors for purposes of the Merger Agreement. Subject to applicable law, the
Company shall take all action requested by Parent for the purpose of effecting
any such election or appointment of the Purchaser's designees. In connection
with the foregoing, the Company shall promptly, at the option of the Purchaser,
either increase the size of the Company Board or obtain the resignation of such
number
32
<PAGE>
of its current directors as is necessary to enable the Purchaser's designees to
be elected or appointed to the Company Board as provided above. Prior to the
Effective Time, the Company shall cause each member of the Company Board, other
than the Purchaser's designees, to execute and deliver a letter effectuating his
or her resignation as a director of the Company Board effective immediately
prior to the Effective Time.
STOCK OPTIONS. The Merger Agreement provides that prior to or as soon as
practicable following the Effective Time, the Company (acting, where
appropriate, through the Company Board or a committee thereof) shall take all
action as may be necessary, and shall use commercially reasonable effects to
obtain any necessary consents, so that each Stock Option outstanding immediately
prior to the Effective Time is fully vested and canceled at the Effective Time
in exchange for a right to receive a cash payment from the Company, payable as
soon as practicable after such cancellation, equal to the product of (x) the
excess, if any, of (A) the consideration payable in the Merger over (B) the
exercise price per Share subject to such Stock Option, multiplied by (y) the
number of Shares issuable pursuant to the unexercised portion of such Stock
Option, less any tax withholding required by applicable law. Notwithstanding the
foregoing, at the request of Parent, the Company (acting, where appropriate,
through the Company Board or a committee thereof) shall take all action as may
be necessary, and shall use commercially reasonable efforts to obtain any
necessary consents, so that each Stock Option outstanding immediately prior to
the first purchase of Shares pursuant to the Offer is fully vested and canceled
at such time in exchange for the right to receive such payment (such vesting and
cancellation in exchange for the right to receive such payment is referred to as
the "OPTION CASH-OUT"). Parent intends to make such request. In connection with
this request, the Company will solicit, during the term of the Offer, consents
from all holders of Stock Options to the Option Cash-Out. Holders of Stock
Options will be required to agree in writing prior to the expiration of the
Offer to the Option Cash-Out for the Option Cash-Out to be effected, with their
consent taking effect immediately prior to the first purchase of Shares in the
Offer. In addition to a letter from the Company soliciting each holder's
agreement to cancel the holder's Stock Options, each holder will be provided
with a copy of this Offer to Purchase and the other relevant tender offer
materials.
Payment of the cash price pursuant to the Option Cash-Out will occur on the
same schedule as the payment for tendered Shares in the Offer.
Prior to the Effective Time, the Company Board (or, if appropriate, any
committee administering the Stock Plans) shall take or cause to be taken such
actions as are required (x) to cause the Stock Plans to terminate as of the
Effective Time, (y) to cause the provisions in any other Benefit Plan providing
for the issuance, transfer or grant of any capital stock of the Company or any
interest on or following the Effective Time in respect of any capital stock of
the Company to be deleted as of the Effective Time, and (z) modify or cancel any
award outstanding thereunder so that no Shares are outstanding or are issuable
under such award after the Effective Time.
RESTRICTED STOCK. Prior to or as soon as practicable following the date of
the Merger Agreement, the Company (acting, where appropriate, through the
Company Board or a committee thereof) shall take all action as may be necessary,
and shall use commercially reasonable efforts to obtain any necessary consents,
so that the consideration payable in the Merger received in respect of each
Share subject to restrictions based on satisfaction of performance criteria (the
"RESTRICTED STOCK") pursuant to Section 2.01(c) of the Merger Agreement shall be
held in custody by the Company and distributed to the holder of such Restricted
Stock only upon satisfaction of the performance criteria contained in the
Restricted Stock Award Agreement related thereto.
EARNOUT SHARES. Prior to or as soon as practicable following the date of
the Merger Agreement, the Company shall take any action (including the giving of
notice to the Accredited Sellers (as defined in the Merger Agreement)) as is
required by the Macro Agreement (as defined in the Merger Agreement) and the
Macro Side Letters (as defined in the Merger Agreement), so that, in accordance
with the terms of the Macro Agreement and the Macro Side Letters, the right to
receive a Share under the Macro
33
<PAGE>
Agreement and the Macro Side Letters shall be converted into a right to receive
the consideration payable in the Merger, when and if such Shares become issuable
to the Accredited Sellers, pursuant to the terms of the Macro Agreement and the
Macro Side Letters.
PHANTOM STOCK AWARDS. Prior to or as soon as practicable following the date
of the Merger Agreement, the Company (acting, where appropriate, through the
Company Board or a committee thereof) shall take all action as may be necessary,
and shall use commercially reasonable efforts to obtain any necessary consents,
so that all phantom stock awards (including, for this purpose, any award payable
in cash in an amount based in whole or in part on the value of a Share)
outstanding under any Stock Plan are cancelled as of the Effective Time. As soon
as practicable after such cancellation, Parent shall cause a payment to be made
with respect to each such award granted on March 2, 1998 under the 1997
Long-Term Incentive Plan (as defined in the Merger Agreement) and listed on
Section 5.04(d) of the Company's disclosure schedule to the Merger Agreement (by
name of holder and number of phantom shares) equal to the product of (i) the
number of phantom shares so awarded, and (ii) $38.125, less any tax withholding
required by applicable law. No cash payments shall be made directly or
indirectly in respect of any award of phantom shares granted on March 2, 1999 or
March 7, 2000. Immediately following the Effective Time, Parent shall cause
payment to be made of the remaining, unpaid, portion of the award granted on
March 3, 1997 under the Long-Term Incentive Plan and which would have been due
and payable, absent the Merger Agreement, in 2001.
EMPLOYEE STOCK PURCHASE PLAN. Prior to or as soon as practicable following
the date of the Merger Agreement and contingent on the closing of the
transactions contemplated by the Merger Agreement, the Company (acting, where
appropriate, through the Company Board or a committee thereof) shall take all
action as may be necessary, and shall use commercially reasonable efforts to
obtain any necessary consents, to suspend or to terminate the Company's Employee
Stock Purchase Plan (as defined in the Merger Agreement) so that, with regard to
employee contributions withheld from pay after the date of the Merger Agreement,
no additional Shares may be purchased thereunder if those shares would be
subject to direct or indirect purchase under the Merger Agreement.
EMPLOYEE STOCK OWNERSHIP PLAN. Prior to the Effective Time and contingent
on the closing of the transactions contemplated by the Merger Agreement, the
Company (acting, where appropriate, through the Company Board or a committee
thereof) shall take all action as may be necessary so that the accounts of all
employees under the Company's Employee Stock Ownership Plan (as defined in the
Merger Agreement) are fully vested as of the Effective Time.
POST-CLOSING EMPLOYEE BENEFITS. The Merger Agreement provides that,
following the date of closing of the Merger, and allowing for such period of
time thereafter as may be administratively advisable in order to effect the
transition from the Benefit Plans, Parent shall provide, or cause to be
provided, the employees of the surviving corporation in the Merger and its
subsidiaries with employee benefits (other than bonuses and severance benefits
to the extent covered below in "Severance" and "Annual Bonus Awards") that are
no less favorable in the aggregate than those made available by Parent to its
similarly situated employees, PROVIDED that after the date of closing of the
Merger, Parent shall retain the right to amend or terminate any of such benefits
to the extent permitted by applicable law and consistent with the Merger
Agreement. To the extent that service is relevant for eligibility and vesting
under any retirement plan or employee benefit plan, program or arrangement
established or maintained for the benefit of the employees of the surviving
corporation in the Merger and its subsidiaries, such plan, program or
arrangement shall credit such employees for service on or prior to the date of
closing of the Merger with the Company or any of its subsidiaries, except where
such credit would result in a duplication of benefits or unintended windfall or
with respect to any benefit where, as to similarly situated employees of Parent,
only future service is taken into account.
SEVERANCE. With respect each employee of the Company who is listed in
Section 5.07(b)(1) of the Company's disclosure schedule to the Merger Agreement
(the "LEVEL 1 EMPLOYEES"), Parent shall cause
34
<PAGE>
the Change in Control Agreement or Severance Agreement to which such employee is
a party and is in effect at the Effective Date to be honored in accordance with
its terms, PROVIDED, HOWEVER, that the reference, if any, to "two times"
contained in the definition of "Applicable Incentive Amount" in any Change in
Control Agreement shall be disregarded. With respect to each employee of the
Company who is listed in Section 5.07(b)(2) of the Company's disclosure schedule
to the Merger Agreement (the "LEVEL 2 EMPLOYEES"), Parent shall cause each such
employee whose employment is terminated by Parent or its affiliates (or by the
employee if (and only if) on account of a reduction in the employee's base pay
or annual target bonus percentage under the Company's Management Incentive Plan
or a relocation of the employee's primary work site of more than 40 miles)
within the one year period following the date of closing of the Merger to
receive over a 12 month period such percentage of such employee's annual base
pay as is equal to 100% plus such employee's annual target bonus percentage.
With respect to each employee of the Company who is not a Level 1 Employee or a
Level 2 Employee (the "LEVEL 3 EMPLOYEES"), Parent shall cause each such
employee whose employment is terminated by Parent or its affiliates within the
one year period following the date of closing of the Merger to receive severance
payments equal to those payable pursuant to the Company's Severance Pay Plan as
in effect on the date of the Merger Agreement (the "SEVERANCE PLAN") and shall
not exercise any retained right to amend or to terminate the Severance Pay Plan
and shall not exercise any right to issue a "severance pay award" under the
Severance Pay Plan for the purpose of diminishing the entitlement to these
payments. For up to 12 months following a termination of employment entitling a
Level 2 or Level 3 Employee to severance payments, Parent shall subsidize such
employee's COBRA continuation coverage in an amount that allows such employee to
continue to participate in the Company's medical program on the same basis as
similarly situated active employees. Notwithstanding the foregoing, no Level 2
or Level 3 Employee shall be entitled to severance benefits if (i) such
employee's employment is terminated by Parent or its affiliates for any reason
set forth in Section 3.3 of the Severance Plan or by reason of death or
disability or (ii) such employee fails to execute a release of claims in favor
of Parent and its affiliates in a form that is reasonably acceptable to Parent.
ANNUAL BONUS AWARDS. Parent shall cause the annual bonus opportunities with
respect to the Company's fiscal year ending February 3, 2001 under the Company's
Management Incentive Plan and 2000 Long-Term Incentive Program to remain in
place, subject to such reasonable adjustments in the performance targets as
Parent determines are necessary to reflect consummation of the transactions
contemplated by the Merger Agreement.
INDEMNIFICATION, EXCULPATION AND INSURANCE. The Merger Agreement provides
that all rights to indemnification and exculpation from liabilities for acts or
omissions occurring at or prior to the Effective Time existing at the date of
the Merger Agreement, in favor of the then current or former directors or
officers of the Company and its subsidiaries as provided in their respective
articles of incorporation or by-laws (or similar organizational documents) shall
be assumed by the surviving corporation in the Merger, without further action,
at the Effective Time and shall survive the Merger and shall continue in full
force and effect in accordance with their terms.
In the event that the surviving corporation in the Merger or any of its
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers or conveys all or substantially all its properties
and assets to any person, then, and in each such case, Parent shall cause proper
provision to be made so that the successors and assigns of the surviving
corporation assume the obligations described in this section "Indemnification,
Exculpation and Insurance".
In the Merger Agreement, Parent has agreed that for not less than six years
after the Effective Time, Parent shall maintain in effect the Company's current
directors' and officers' liability insurance covering each person currently
covered by the Company's directors' and officers' liability insurance policy for
acts or omissions occurring prior to the Effective Time on terms with respect to
coverage and amounts that are no less favorable in any material respect to such
directors and officers than those of such policy
35
<PAGE>
as in effect on the date of the Merger Agreement; PROVIDED, HOWEVER, that
(i) Parent may substitute therefor policies of a reputable insurance company the
material terms of which, including coverage and amount, are no less favorable in
any material respect to such directors and officers than the insurance coverage
otherwise required by this provision of the Merger Agreement, and (ii) in no
event shall Parent be required to pay aggregate premiums for insurance described
in this paragraph in excess of 200% of the amount of the aggregate premiums paid
by the Company in respect of such coverage for the calendar year 1999; PROVIDED
FURTHER, HOWEVER, that Parent shall nevertheless be obligated to provide such
coverage as may be obtained for such 200% amount. The provisions described in
this paragraph are intended to be for the benefit of, and will be enforceable
by, each indemnified party, his or her heirs and his or her representatives.
COMMERCIALLY REASONABLE EFFORTS; NOTIFICATION. The Merger Agreement
provides that each of the parties agrees to use all commercially reasonable
efforts to take, or cause to be taken, all actions that are necessary, proper or
advisable to consummate and make effective the Offer, the Merger and the other
transactions contemplated by the Merger Agreement, including using all
commercially reasonable efforts to accomplish the following: (i) the taking of
all commercially reasonable acts necessary to cause the conditions to the Offer
and the Merger to be satisfied, (ii) the obtaining of all necessary actions or
nonactions, waivers, consents, approvals, orders and authorizations from
Governmental Entities and the making of all necessary registrations,
declarations and filings, including the making of all filings under the HSR Act
and the relevant foreign antitrust laws as promptly as reasonably practicable,
and in any event, within five business days after the date of the Merger
Agreement, and (iii) the obtaining of all necessary consents, approvals or
waivers from third parties. In connection with and without limiting the
foregoing, the Company and the Company Board shall, if any state takeover
statute or similar statute or regulation is or becomes applicable to the Merger
Agreement, the Offer, the Merger or any of the other transactions contemplated
thereby, use its commercially reasonable efforts to ensure that the Offer, the
Merger and the other transactions contemplated by the Merger Agreement may be
consummated as promptly as practicable on the terms contemplated by the Merger
Agreement and otherwise to minimize the effect of such statute or regulation on
the Merger Agreement, the Offer, the Merger and the other transactions
contemplated thereby. The Company and Parent shall keep the other apprised of
the status of matters relating to the completion of the transactions
contemplated thereby and work cooperatively in connection with obtaining any
such waivers, consents, approvals, orders and authorizations, including, without
limitation: (i) promptly notifying the other of, and if in writing, furnishing
the other with copies of (or, in the case of material oral communications,
advise the other orally of) any communications from or with any Governmental
Entity with respect to the Offer, the Merger or any of the other transactions
contemplated by the Merger Agreement, (ii) permitting the other party to review
and discuss in advance, and considering in good faith the views of one another
in connection with, any proposed written (or material proposed oral)
communication with any Governmental Entity, (iii) not participating in any
meeting with any Governmental Entity unless it consults with the other party in
advance and to the extent permitted by such Governmental Entity gives the other
party the opportunity to attend and participate there at, (iv) furnishing the
other party with copies of all correspondence, filings and communications (and
memoranda setting forth the substance thereof) between it and any Governmental
Entity with respect to the Merger Agreement, the Offer and the Merger, and
(v) furnishing the other party with such necessary information and reasonable
assistance as such other party may reasonably request in connection with its
preparation of necessary filings or submissions of information to any
Governmental Entity. The Company and Parent may, as each deems advisable and
necessary, reasonably designate any competitively sensitive material provided to
the other under this paragraph as "outside counsel only". Such materials and the
information contained therein shall be given only to the outside legal counsel
of the recipient and will not be disclosed by such outside counsel to employees,
officers, or directors of the recipient unless express permission is obtained in
advance from the source of the materials (the Company or Parent, as the case may
be) or its legal counsel. The Company shall give prompt notice to Parent, and
Parent shall give prompt notice to the Company, of (i) any representation or
36
<PAGE>
warranty made by it contained in the Merger Agreement that is qualified as to
materiality becoming untrue or inaccurate in any respect or any such
representation or warranty that is not so qualified becoming untrue or
inaccurate in any material respect, (ii) the failure by it to comply with or
satisfy in any material respect any covenant, condition or agreement to be
complied with or satisfied by it under the Merger Agreement, or (iii) any change
or event having, or that is reasonably likely to have, a material adverse effect
on the notifying party or on the truth of their respective representations and
warranties or the ability of the conditions contained in the Merger Agreement to
be satisfied; PROVIDED that no such notification shall affect the
representations, warranties, covenants or agreements of the parties or the
conditions to the obligations of the parties under the Merger Agreement.
REPRESENTATIONS AND WARRANTIES. The Merger Agreement contains various
customary representations and warranties, including representations relating to
corporate existence and power; capitalization; corporate authorizations;
subsidiaries; Commission filings; absence of certain changes; litigation;
contracts; compliance with laws; labor matters; environmental matters; employee
benefits matters; taxes; intellectual property; real and personal property;
state takeover statutes; brokers; the inapplicability of the Rights Agreement to
the Offer and the Merger; and the opinion of the Company's financial advisor.
Certain representations and warranties in the Merger Agreement made by the
Company and Parent are qualified as to "materiality" or "material adverse
effect". For purposes of the Merger Agreement and the Offer, the term "MATERIAL
ADVERSE EFFECT" means any state of facts, change, development, effect, event,
condition or occurrence that is materially adverse to the business, assets,
financial condition, results of operations of the Company and its subsidiaries,
taken as a whole; PROVIDED, HOWEVER, that none of the following shall be deemed
to constitute, and none of the following shall be taken into account in
determining whether there has been or will be, a Material Adverse Effect: any
state of facts, change, development, effect, event, condition or occurrence
(i) to the extent attributable to the announcement of the Offer and the other
transactions contemplated pursuant to the Merger Agreement, or
(ii) attributable to conditions generally affecting the information services
industry, the United States economy as a whole or foreign economies in any
locations where the Company or any of its subsidiaries has material operations
or sales.
PROCEDURE FOR AMENDMENT, EXTENSION OR WAIVER. The Merger Agreement may be
amended by the parties at any time, whether before or after the Shareholder
Approval; PROVIDED that, after the purchase of Shares pursuant to the Offer, no
amendment shall be made which decreases the Offer Price and, after the
Shareholder Approval has been obtained, there shall be made no amendment that by
law requires further approval by the Company's shareholders or Parent's or the
Purchaser's shareholders without the further approval of the Company's
shareholders or Parent's or the Purchaser's shareholders. The Merger Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties thereto. Following the election or appointment of the Purchaser's
designees to the Company Board as described above and prior to the Effective
Time, the affirmative vote of a majority of the Independent Directors then in
office shall be required by the Company to (i) amend or terminate the Merger
Agreement by the Company, (ii) exercise or waive any of the Company's rights or
remedies under the Merger Agreement or (iii) extend the time for performance of
Parent's and the Purchaser's respective obligations under the Merger Agreement.
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 thereto
or (c) waive compliance with any of the agreements or conditions contained
therein; PROVIDED that after the Shareholder Approval has been obtained, there
shall be made no waiver that by law requires further approval by the Company's
shareholders or Parent's shareholders without the further approval of the
Company's shareholders or Parent's or the Purchaser's shareholders. 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
37
<PAGE>
behalf of such party. The failure or delay by any party to the Merger Agreement
to assert any of its rights under the Merger Agreement or otherwise shall not
constitute a waiver of such rights nor shall any single or partial exercise by
any party to the Merger Agreement of any of its rights under the Merger
Agreement preclude any other or further exercise of such rights or any other
rights under the Merger Agreement.
The foregoing summary of the Merger Agreement is qualified in its entirety
by reference to the Merger Agreement, which is filed as Exhibit (d)(1) and
Exhibit (d)(2) to the Schedule TO. The Merger Agreement should be read in its
entirety for a more complete description of the matters summarized above.
THE CONFIDENTIALITY AGREEMENT
Pursuant to a Confidentiality Agreement dated June 14, 2000 between Pearson
Education, Inc., a wholly owned indirect subsidiary of Parent, and the Company,
Pearson Education, Inc., on behalf of itself and its parent corporations agreed
to keep confidential certain information provided by the Company or its
representatives. The Confidentiality Agreement also contains customary
standstill provisions.
PLANS FOR THE COMPANY
If a majority of the outstanding Shares are purchased by the Purchaser
pursuant to the Offer, Parent may designate its representatives as a majority of
the Company Board. Parent's principal reason for acquiring the Company is the
strategic fit of the Company's operations with Parent's operations. Parent
intends to continue to review the Company and its assets, corporate structure,
dividend policy, capitalization, operations, properties, policies, management
and personnel and to consider, subject to the terms of the Merger Agreement,
what, if any, actions or changes would be desirable in light of the
circumstances then existing (including steps to integrate the operations of the
Company with those of Parent under the direction of Parent's management as well
as the implementation of technical and industrial savings and synergies created
by the transaction), and reserves the right to take such actions or effect such
changes as it deems desirable. Such changes could include changes in the
Company's corporate structure, operational headquarters, capitalization,
management or dividend policy.
Except as described above or elsewhere in this Offer to Purchase, Parent and
the Purchaser have no present plans or proposals that would relate to or result
in (i) any extraordinary corporate transaction involving the Company or any of
its subsidiaries (such as a merger, reorganization, liquidation, relocation of
any operations or sale or other transfer of a material amount of assets),
(ii) any sale or transfer of a material amount of assets of the Company or any
of its subsidiaries, (iii) any change in the Company Board or management of the
Company, (iv) any material change in the Company's capitalization or dividend
policy, (v) any other material change in the Company's corporate structure or
business, (vi) a class of securities of the Company being delisted from a
national securities exchange or ceasing to be authorized to be quoted in an
inter-dealer quotation system of a registered national securities association or
(vii) a class of equity securities of the Company being eligible for termination
of registration pursuant to Section 12(g) of the Exchange Act.
Parent is considering a transfer of the shares which it indirectly owns in
the Purchaser (which following the Merger will represent shares in the Company)
to another subsidiary (direct or indirect) of Parent.
DISSENTERS' RIGHTS
No rights to seek to obtain the "fair value" of their Shares are available
to shareholders of the Company in connection with the Offer. However, if the
Merger is consummated, a shareholder of the Company will have certain rights
under Sections 302A.471 and 302A.473 of the MBCA to dissent from the Merger and
obtain payment in cash for the fair value of that shareholder's Shares. Those
rights, if the
38
<PAGE>
statutory procedures are complied with, could lead to a judicial determination
of the fair value (immediately prior to the effective date of the Merger)
required to be paid in cash to dissenting shareholders of the Company for their
Shares. Any judicial determination of the fair value of the Shares could be
based upon considerations other than or in addition to the consideration payable
in the Merger and the market value of the Shares, including asset values and the
investment value of the Shares. The value so determined could be more or less
than the consideration payable in the Merger.
The Merger Agreement provides that, notwithstanding any provision of the
Merger Agreement to the contrary, any Shares which are issued and outstanding
immediately prior to the Effective Time and which are held by a holder who has
not voted such Shares in favor of the Merger and who has properly exercised
dissenters' rights with respect to such Shares in accordance with the MBCA
(including Sections 302A.471 and 302A.473 thereof) and, as of the Effective
Time, has neither effectively withdrawn nor otherwise lost for any reason its
right to exercise such dissenters' rights ("DISSENTING SHARES"), will not be
converted into or represent a right to receive the consideration payable in the
Merger. The holders of Dissenting Shares will be entitled to only such rights as
are granted by Section 302A.471 of the MBCA.
The Merger Agreement further provides that if any shareholder of the Company
who asserts dissenters' rights with respect to its Shares under the MBCA
effectively withdraws or otherwise loses for any reason (including failure to
perfect) dissenters' rights, then as of the Effective Time or the occurrence of
such event, whichever later occurs, such holder's Shares will automatically be
cancelled and converted into and represent only the right to receive the
consideration payable in the Merger, without interest thereon, upon surrender of
the certificate or certificates formerly representing such Dissenting Shares.
The Merger Agreement further provides that the Company shall give Parent
(x) prompt notice of any written intent to demand payment of the fair value of
any Shares, withdrawals of such demands and any other instruments delivered
pursuant to the MBCA in respect of Shares or the Merger received by the Company
and (y) the opportunity to control and resolve all negotiations and proceedings
with respect to dissenters' rights under the MBCA. The Company may not
voluntarily make any payment with respect to any exercise of dissenters' rights
and may not, except with the prior written consent of Parent, settle or offer to
settle any such dissenters' rights.
FAILURE TO PRECISELY FOLLOW THE STEPS REQUIRED BY SECTIONS 302A.471 AND
302A.473 OF THE MBCA FOR THE PERFECTION OF DISSENTERS' RIGHTS MAY RESULT IN THE
LOSS OF THOSE RIGHTS.
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING SHAREHOLDERS UNDER THE
MBCA IS NOT A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
SHAREHOLDERS DESIRING TO EXERCISE ANY DISSENTERS' RIGHTS AVAILABLE UNDER THE
MBCA.
THE PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE
TO THE APPLICABLE PROVISIONS OF THE MBCA.
GOING-PRIVATE TRANSACTIONS
The Commission has adopted Rule 13e-3 under the Exchange Act, which is
applicable to certain "going private" transactions. The Purchaser does not
believe that Rule 13e-3 will be applicable to the Merger unless the Merger is
consummated more than one year after the termination of the Offer. If
applicable, Rule 13e-3 requires, among other things, that certain financial
information concerning the fairness of the Merger and the consideration offered
to minority shareholders in the Merger be filed with the Commission and
disclosed to shareholders prior to the consummation of the Merger.
39
<PAGE>
13. DIVIDENDS AND DISTRIBUTIONS
As discussed in Section 12, the Merger Agreement provides that from the date
of the Merger Agreement to the Effective Time, without the prior approval of
Parent, the Company may not declare, set aside or pay any dividends on, or make
any other distributions (whether in cash, stock or property) in respect of, any
of its capital stock except for cash dividends payable to the Company or a
subsidiary of Company by a subsidiary of the Company.
14. CERTAIN CONDITIONS OF THE OFFER
The Merger Agreement provides that the Purchaser will not be required to
accept for payment or, subject to any applicable rules and regulations of the
Commission, including Rule 14e-1(c) under the Exchange Act (relating to the
Purchaser's obligation to pay for or return tendered Shares promptly after the
termination or withdrawal of the Offer), to pay for any Shares tendered pursuant
to the Offer and may postpone the acceptance for payment or payment for any
Shares tendered and when permitted by the Merger Agreement, amend or terminate
the Offer if (i) there shall not have been validly tendered and not withdrawn
prior to the expiration of the Offer that number of Shares which would represent
at least a majority of the outstanding Shares (determined on a fully diluted
basis for all outstanding stock options, convertible debentures and any other
rights to acquire Shares on the date of purchase) (the "FULLY DILUTED SHARES")
and (ii) any requisite waiting period under the HSR Act (and any extension
thereof) applicable to the purchase of Shares pursuant to the Offer or to the
Merger and any other requisite waiting periods under any other applicable
material competition, merger, control, antitrust or similar law or regulation
shall not have been terminated or shall not have expired. Furthermore,
notwithstanding any other term of the Offer or the Merger Agreement, the
Purchaser will not be required to accept for payment or, subject to any
applicable rules and regulations of the Commission, to pay for any Shares not
yet accepted for payment or paid for, and, subject to the Merger Agreement, may
terminate or amend the Offer, immediately prior to the applicable Expiration
Date, if any of the following conditions exists:
(a) there shall be pending or formally threatened in writing any suit,
action or proceeding by any Governmental Entity having a reasonable
likelihood of success on the merits (i) challenging the acquisition by
Parent or the Purchaser of any shares of common stock of the Company,
seeking to restrain or prohibit consummation of the Offer or the Merger, or
seeking to place limitations on the ownership of Shares (or shares of common
stock of the Company following the Merger) by Parent or the Purchaser,
(ii) seeking to prohibit or limit the ownership or operation by the Company
or Parent and their respective subsidiaries of any material portion of the
business or assets of the Company or Parent and their respective
subsidiaries taken as a whole, or to compel the Company or Parent and their
respective subsidiaries to dispose of or hold separate any material portion
of the business or assets of the Company or Parent and their respective
subsidiaries taken as a whole, as a result of the Offer, the Merger or any
of the other transactions contemplated by the Merger Agreement,
(iii) seeking to prohibit Parent or any of its subsidiaries from effectively
controlling in any material respect the business or operations of the
Company or Parent and subsidiaries taken as a whole, or (iv) which otherwise
is reasonably expected to have a Material Adverse Effect;
(b) any Legal Restraint that has the effect of preventing the purchase
of Shares pursuant to the Offer or the Merger shall be in effect;
(c) except as set forth in the Company's disclosure schedule to the
Merger Agreement or in the SEC Documents (as defined in the Merger
Agreement), since April 29, 2000, there shall have been any state of facts,
change, development, effect, event, condition or occurrence that,
individually or in the aggregate, constitutes or would reasonably be
expected to have, a Material Adverse Effect;
(d) as of the date of the consummation of the Offer, the representation
and warranty of the Company with respect to its capital structure and
outstanding equity interests shall not be true and
40
<PAGE>
correct in all material respects, or the other representations and
warranties of the Company contained in the Merger Agreement shall not be
true and correct (without giving effect to any limitation as to
"materiality" or material adverse effect set forth therein), as if such
representations and warranties were made on the date thereof, except for
such failures to be true and correct that, individually and in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect;
(e) the Company shall have failed to perform in any material respect any
material obligation required to be performed by it under the Merger
Agreement at or prior to the Specified Date;
(f) Parent shall not have obtained all consents, approvals,
authorizations, qualifications and orders of all Governmental Entities
legally required in connection with the Merger Agreement and the
transactions contemplated by the Merger Agreement other than any such
consents, approvals, authorizations, qualifications and orders, the failure
of which to obtain, individually and in the aggregate, would not reasonably
be expected to have a Material Adverse Effect;
(g) the Merger Agreement shall have been terminated in accordance with
its terms;
(h) (i) the Company Board shall have (A) withdrawn or modified or
changed, in any manner adverse to Parent or the Purchaser, the
Recommendation, (B) accepted, approved or recommended any Takeover Proposal,
or (C) resolved or publicly disclosed any intention to do any of the
foregoing or (ii) the Committee shall have (A) withdrawn or modified in any
manner adverse to Parent or the Purchaser, the Committee Approval,
(B) approved a Takeover Proposal or (C) resolved or publicly disclosed any
intention to do any of the foregoing; or
(i) there shall have occurred (i) any general suspension of trading in
or on the Nasdaq National Market or the London Stock Exchange in excess of
24 hours (other than a shortening of trading hours or any coordinated
trading halt triggered solely as a result of a specified increase or
decrease in a market index or a trading halt resulting from physical damage
or interference with such market or exchange not related to market
conditions), (ii) a decline of at least 25% in all of the Dow Jones Average
of Industrial Stocks, the Standard & Poor's 500 Index and the Financial
Times-Stock Exchange All Shares Index measured from the date hereof to the
date on which the Offer has expired, (iii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States or the United Kingdom, (iv) the imposition of any limitation (whether
or not mandatory) by any government or Governmental Entity, that materially
adversely affects the extension of credit by banks or other lending
institutions or (v) a commencement of a war or armed hostilities or any
other national or international calamity directly or indirectly involving
the United States or the United Kingdom;
which, in the sole discretion of the Purchaser or Parent in any such case, and
regardless of the circumstances giving rise to any such condition (including any
action or inaction by Parent or any of its affiliates), makes it inadvisable to
proceed with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of the Purchaser and
Parent and may be asserted by the Purchaser or Parent regardless of the
circumstances giving rise to such condition or may be waived by the Purchaser or
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.
41
<PAGE>
15. CERTAIN LEGAL MATTERS
Except as described in this Section 15, based on a review of publicly
available filings made by the Company with the Commission and other publicly
available information concerning the Company and discussions of representatives
of Parent with representatives of the Company, none of Parent, the Purchaser or
the Company is aware of any license or regulatory permit that appears to be
material to the business of the Company and its subsidiaries, taken as a whole,
that might be adversely affected by the Purchaser's acquisition of Shares (and
the indirect acquisition of the stock of the Company's subsidiaries) as
contemplated herein or of any approval or other action by any Governmental
Entity that would be required or desirable for the acquisition or ownership of
Shares by the Purchaser as contemplated herein. Should any such approval or
other action be required or desirable, Parent and the Purchaser currently
contemplate that such approval or other action will be sought, except as
described below under "State Takeover Laws". While (except as otherwise
expressly described in this Section 15) the Purchaser does not presently intend
to delay the acceptance for payment of or payment for Shares tendered pursuant
to the Offer pending the outcome of any such matter, there can be no assurance
that any such approval or other action, if needed, would be obtained or would be
obtained without substantial conditions or that failure to obtain any such
approval or other action might not result in consequences adverse to the
Company's business or that certain parts of the Company's business might not
have to be disposed of if such approvals were not obtained or such other actions
were not taken or in order to obtain any such approval or other action. If
certain types of adverse action are taken with respect to the matters discussed
below, the Purchaser could, subject to the terms and conditions of the Merger
Agreement, decline to accept for payment or pay for any Shares tendered. See
Section 14 for a description of certain conditions to the Offer.
STATE TAKEOVER LAWS. A number of states throughout the United States have
enacted takeover statutes that purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations that are incorporated or have
assets, shareholders, executive offices or places of business in such states. In
EDGAR V. MITE CORP., the Supreme Court of the United States held that the
Illinois Business Takeover Act, which involved state securities laws that made
the takeover of certain corporations more difficult, imposed a substantial
burden on interstate commerce and therefore was unconstitutional. In CTS CORP.
V. DYNAMICS CORP. OF AMERICA, however, the Supreme Court of the United States
held that a state may, as a matter of corporate law and, in particular, those
laws concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation without prior
approval of the remaining shareholders, provided that such laws were applicable
only under certain conditions. Subsequently, a number of U.S. federal courts
ruled that various state takeover statutes were unconstitutional insofar as they
apply to corporations incorporated outside the state of enactment.
In Minnesota, Section 302A.673 of the MBCA limits the ability of a publicly
held Minnesota corporation to engage in business combinations with an
"interested shareholder" (defined in Section 302A.011 of the MBCA as any
beneficial owner, directly or indirectly, of 10% or more of the voting power of
the outstanding shares of such corporation entitled to vote) unless, among other
things, a committee of that corporation's board comprised of all disinterested
directors (defined in Section 302A.673 as a director or person who is neither an
officer nor an employee of that corporation or a related organization, nor has
been an officer or an employee within five years preceding the formation of the
committee) has given its prior approval of either the business combination or
the transaction which resulted in the shareholder becoming an "interested
shareholder".
Section 302A.671 of the MBCA (the "CONTROL SHARE ACT") provides that, unless
the acquisition of certain additional percentages of voting control of an
issuing public corporation (equal to or in excess of 20%, 33 1/3% or 50%) by an
acquiring person is approved by the holders of a majority of the outstanding
voting power of all shares entitled to vote (other than shares held by the
acquirer and certain other persons), the shares acquired at or above any such
new percentage level of voting control will not be
42
<PAGE>
entitled to voting rights. In addition, if the statutory requirements are not
satisfied, the issuing public corporation may redeem the shares so acquired by
the acquirer at their market value. Section 302A.671 does not apply to a cash
offer to purchase all shares of voting stock of the issuing public corporation
if such offer has been approved by a majority vote of the same committee of the
disinterested directors of the issuing public corporation formed in accordance
with Section 302A.673 and if, following the completion of the cash offer, the
offeror will own over 50% of the voting power of the shares of the corporation.
Section 302A.671 does not apply to a control share acquisition of shares of an
issuing public corporation whose articles of incorporation or by-laws approved
by its shareholders provide that the Control Share Act does not apply to control
share acquisitions of its shares. The Company's Articles of Incorporation and
By-Laws currently do not exclude the Company from the restrictions imposed by
the Control Share Act.
Section 302A.675 of the MBCA imposes a fair price requirement limiting a
purchaser's ability to acquire shares of a publicly held corporation within two
years following the last purchase of shares pursuant to a takeover offer with
respect to that class, including new acquisitions made by purchase. This fair
price requirement does not apply if the second acquisition is approved by a
committee of that corporation's board of directors comprised of the
disinterested directors formed in accordance with Section 302A.675 of the MBCA
before the purchase of any shares pursuant to the first takeover offer.
As described in Section 12 of this Offer to Purchase, the Company Board and
the Committee, which was formed in accordance with Section 302A.673 of the MBCA,
have approved the Offer and the Merger. The Company has represented in the
Merger Agreement that, assuming the accuracy of the representation made by
Parent and the Purchaser in the Merger Agreement that neither Parent nor any of
its affiliates or associates, individually or in the aggregate, has Beneficial
Ownership (as defined in Section 302A.011 of the MBCA) of more than 5% of the
outstanding capital stock of the Company, as a result of the approvals by the
Company Board and the Committee, the Offer, the Merger, the Merger Agreement and
the transactions contemplated by the Merger Agreement will not be impeded by
Sections 302A.671, 302A.673 and 302A.675 of the MBCA. The Company further
represented in the Merger Agreement that no other "fair price," "merger
moratorium," "control share acquisition" or other anti-takeover statute or
similar statute or regulation (other than Section 302A.553 of the MBCA and
Chapter 80 of the Minnesota Statutes) applies or purports to apply to the Merger
Agreement, the Offer or any of the transactions contemplated by the Merger, the
Merger Agreement or the Offer. Accordingly, Parent and the Purchaser believe
that the foregoing restrictions do not apply to them with respect to such
transactions.
The Minnesota Takeover Disclosure Law, Minnesota Statutes, Sections
80B.01-80B.13 (the "TAKEOVER STATUTE"), by its terms requires certain
disclosures and the filing of certain disclosure material with the Minnesota
Commissioner of Commerce (the "MINNESOTA COMMISSIONER") with respect to any
offer for a corporation, such as the Company, that has its principal place of
business in Minnesota and a certain number of shareholders resident in
Minnesota. Parent and the Purchaser will promptly file a registration statement
with the Commissioner on August 7, 2000. Parent and the Purchaser will also
deliver to all offerees the information contained in such registration statement
as required by the Takeover Statute. Although the Minnesota Commissioner does
not approve or disapprove the Offer, he does review the disclosure material for
the adequacy of such disclosure and is empowered to suspend summarily the Offer
in Minnesota within three days of such filing if he determines that the
registration statement does not (or the materials provided to beneficial owners
of the Shares residing in Minnesota do not) provide full disclosure. If such
summary suspension occurs, a hearing must be held (within 10 days of the summary
suspension) as to whether to permanently suspend the Offer in Minnesota, subject
to corrective disclosure. If the Minnesota Commissioner takes action under the
Takeover Statute, then the Purchaser may not be obligated to accept for payment
or pay for Shares tendered pursuant to the Offer because such action may have
the effect of significantly delaying the Offer. See Section 14 of
43
<PAGE>
this Offer to Purchase for certain conditions of the Offer, including conditions
with respect to governmental actions. In such event, the Purchaser may, among
other things, terminate the Offer or amend the terms and conditions of the
Offer.
Based on information supplied by the Company and the Company's
representations in the Merger Agreement, neither Parent nor the Purchaser
believes that any other state takeover statutes or regulations apply to the
Offer or the Merger. The Purchaser reserves the right to challenge the
applicability or validity of any state law purportedly applicable to the Offer
or the Merger and nothing in this Offer to Purchase or any action taken in
connection with the Offer or the Merger is intended as a waiver of that right.
If it is asserted that any state takeover statute is applicable to the Offer or
the Merger and an appropriate court does not determine that it is inapplicable
or invalid as applied to the Offer or the Merger, the Purchaser might be
required to file certain information with, or to receive approvals from, the
relevant state authorities, and the Purchaser might be unable to accept for
payment or pay for Shares tendered pursuant to the Offer, or be delayed in
consummating the Offer or the Merger. In such case, the Purchaser may not be
obligated to accept for payment or pay for any Shares tendered pursuant to the
Offer.
ANTITRUST
UNITED STATES ANTITRUST LAW. Under the provisions of the HSR Act applicable
to the Offer, the acquisition of Shares under the Offer may be consummated after
the expiration of a 15-calendar day waiting period commenced by the filing by
Parent of a Notification and Report Form with respect to the Offer, unless
Parent receives a request for additional information or documentary material
from the Antitrust Division of the Department of Justice or the Federal Trade
Commission (the "FTC") or unless early termination of the waiting period is
granted. Parent has filed such Notification Report Form on August 2, 2000. If,
within the initial 15-day waiting period, either the Antitrust Division or the
FTC requests additional information from Parent concerning the Offer, the
waiting period will be extended and would expire at 11:59 p.m., New York City
time, on the tenth calendar day after the date of substantial compliance by
Parent with such request. Only one extension of the waiting period pursuant to a
request for additional information is authorized by the HSR Act. Thereafter,
such waiting period may be extended only by court order or with the consent of
Parent. In practice, complying with a request for additional information or
material can take a significant amount of time. In addition, if the Antitrust
Division or the FTC raises substantive issues in connection with a proposed
transaction, the parties frequently engage in negotiations with the relevant
governmental agency concerning possible means of addressing those issues and may
agree to delay consummation of the transaction while such negotiations continue.
Expiration or termination of the applicable waiting period under the HSR Act is
a condition to the Purchaser's obligation to accept for payment and pay for
Shares tendered pursuant to the Offer.
The Merger will not require an additional filing under the HSR Act if the
Purchaser owns 50% or more of the outstanding Shares at the time of the Merger
or if the Merger occurs within one year after the HSR Act waiting period
applicable to the Offer expires or is terminated.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's proposed acquisition
of the Company. At any time before or after the Purchaser's acquisition of
Shares pursuant to the Offer, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the public
interest, including seeking to enjoin the purchase of Shares pursuant to the
Offer or the consummation of the Merger or seeking the divestiture of Shares
acquired by the Purchaser or the divestiture of substantial assets of the
Company or its subsidiaries or Parent or its subsidiaries. Private parties may
also bring legal action under the antitrust laws under certain circumstances.
There can be no assurance that a challenge to the Offer on antitrust grounds
will not be made or, if such a challenge is made, of the result thereof.
44
<PAGE>
GERMAN ANTITRUST LAW. Pursuant to the Gesetz gegen
Wettbewerbsbeschrankungen (the Act Against Restraints of Competition), Parent
and the Company are required to submit a premerger notification to the German
Federal Cartel Office (the "FCO"). The initial waiting period applicable to the
purchase of Shares pursuant to the Offer is one month unless the FCO extends the
waiting period if it determines that additional review is required. If such a
determination is made, the waiting period may be extended for a period of up to
four months (such period to commence from the day following the filing date of
the premerger notification). If the FCO concludes that the acquisition will lead
to the creation or strengthening of a market dominating position, the
acquisition will be prohibited unless the parties agree to remedy the adverse
competitive impact identified by the FCO. The FCO may approve the Purchaser's
acquisition of the Shares pursuant to the Offer prior to the expiration of the
initial one-month waiting period. There can be no assurance, however, that the
initial one-month waiting period will be terminated early. Shares will not be
accepted for payment or paid for pursuant to the Offer until the conditions to
the Offer, including the expiration of this waiting period, are satisfied or
waived by the Purchaser by the Expiration Date.
OTHER FOREIGN LAWS. The Company and Parent and certain of their respective
subsidiaries conduct business in several foreign countries where regulatory
filings or approvals may be required or desirable in connection with the
consummation of the Offer. Certain of such filings or approvals, if required or
desirable, may not be made or obtained prior to the expiration of the Offer.
Parent, the Purchaser and the Company are analyzing the applicability of any
such laws and currently intend to take such action as may be required or
desirable. If any foreign Governmental Entity takes any action prior to the
completion of the Offer that might have certain adverse effects, the Purchaser
will not be obligated to accept for payment or pay for any Shares tendered. See
Section 14.
16. FEES AND EXPENSES
Goldman, Sachs & Co. is acting as Dealer Manager for the Offer and is
providing certain financial advisory services to Parent and the Purchaser in
connection with the Offer, for which services Goldman, Sachs & Co. will receive
customary compensation. Parent also has agreed to reimburse Goldman, Sachs & Co.
for reasonable out-of-pocket expenses, including fees and expenses of its legal
counsel, and to indemnify Goldman, Sachs & Co. and certain related parties
against certain liabilities, including liabilities under the federal securities
laws, arising out of its engagement. In the ordinary course of business,
Goldman, Sachs & Co. and its affiliates may actively trade or hold the
securities of Parent and the Company for their own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities.
Parent and the Purchaser have retained Georgeson Shareholder
Communications Inc. to act as the Information Agent and ChaseMellon Shareholder
Services, L.L.C. to serve as the Depositary in connection with the Offer. The
Information Agent and the Depositary each will receive reasonable and customary
compensation for their services, be reimbursed for certain reasonable
out-of-pocket expenses and be indemnified against certain liabilities and
expenses in connection therewith, including certain liabilities and expenses
under the U.S. federal securities laws.
Neither Parent nor the Purchaser will pay any fees or commissions to any
broker or dealer or other person (other than the Dealer Manager) in connection
with the solicitation of tenders of Shares pursuant to the Offer. Brokers,
dealers, banks, trust companies and other members will be reimbursed by the
Purchaser upon request for customary mailing and handling expenses incurred by
them in forwarding material to their customers.
45
<PAGE>
17. MISCELLANEOUS
The Offer is not being made to (nor will tenders be accepted from or on
behalf of) holders of Shares in any jurisdiction in which the making of the
Offer or the acceptance thereof would not be in compliance with the laws of such
jurisdiction. Neither Parent nor the Purchaser is aware of any jurisdiction in
which the making of the Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. To the extent Parent or the
Purchaser becomes aware of any state law that would limit the class of offerees
in the Offer, the Purchaser will amend the Offer and, depending on the timing of
such amendment, if any, will extend the Offer to provide adequate dissemination
of such information to holders of Shares prior to the expiration of the Offer.
In any jurisdiction the securities, blue sky or other laws of which require the
Offer to be made by a licensed broker or dealer, the Offer is being made on
behalf of the Purchaser by the Dealer Manager or one or more registered brokers
or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF PARENT OR THE PURCHASER NOT CONTAINED HEREIN OR IN
THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Parent and the Purchaser have filed with the Commission the Schedule TO
pursuant to Rule 14d-3 under the Exchange Act, together with exhibits,
furnishing certain additional information with respect to the Offer, and may
file amendments thereto. In addition, the Company has filed the Schedule 14D-9
pursuant to Rule 14d-9 under the Exchange Act, together with exhibits, setting
forth its recommendation with respect to the Offer and the reasons for such
recommendation and furnishing certain additional related information. Such
Schedules and any amendments thereto, including exhibits, should be available
for inspection and copies should be obtainable in the manner set forth in
Section 8 (except that such material will not be available at the regional
offices of the Commission).
PN ACQUISITION SUBSIDIARY INC.
August 7, 2000
46
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT AND THE PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PARENT. The name, business address,
present principal occupation or employment and material occupations, positions,
offices or employment for the past five years of each of the directors and
executive officers of Parent are set forth below. Unless otherwise indicated,
each such director and executive officer is a citizen of the United Kingdom.
<TABLE>
<CAPTION>
POSITION WITH PARENT; PRESENT PRINCIPAL
NAME; BUSINESS OCCUPATION OR EMPLOYMENT; MATERIAL
ADDRESS AND CITIZENSHIP POSITIONS HELD DURING THE PAST FIVE YEARS
--------------------------------------------- -----------------------------------------------------
<S> <C>
Lord Stevenson Executive Chairman of Parent since 1997;
3 Dean Trench Street Non-Executive Director of Parent from 1986 through
London SW1P 3HB 1997; Chairman of AerFi Group plc since November
1993; Chairman of Halifax plc since April 1999;
Director of Manpower Inc. since March 1988; Director
of Whitehall Trust Ltd. since May 1997; Director of
AerFi International Ltd. since September 1998;
Director of The House of Lords Appointment
Commission.
Marjorie M. Scardino Chief Executive of Parent since January 1997;
Pearson plc Director of Pearson Management Services Limited,
3 Burlington Gardens Pearson Overseas Holdings Limited and Pearson
London W1X 1LE Services Limited since February 1997; Director of
(United States) Recoletos Compania Editorial S.A. since June 1997.
Ms. Scardino is also a member of the Board of
Directors of America Online Inc., ConAgra Inc.,
Public Radio International and RTL Group plc.
David C. M. Bell Director of Parent since March 1996; "A" Director of
Pearson plc Pearson Group Pension Trustees Limited since
3 Burlington Gardens September 1997; Director of Pearson Services Limited
London W1X 1LE since September 1999; Director of Recoletos Compania
Editorial S.A. since June 1997. Mr. Bell is also a
member of the Board of Directors of Zen Research plc,
International Youth Foundation, The Millennium Bridge
Trust, The Windmill Partnership Ltd. and VITEC Group
plc.
John C. Makinson Finance Director of Parent since 1996. Mr. Makinson
Pearson plc also holds several positions as director for
3 Burlington Gardens subsidiaries and affiliates of Parent (including
London W1X 1LE President and Treasurer of the Purchaser). Mr.
Makinson is also a member of the Board of Directors
of Data Broadcasting Corporation, George Weston
Limited, MarketWatch.com Inc., RTL Group plc and
International Rescue Committee.
Lord Burns Non-Executive Director of Parent since May 1999;
13 North Avenue Member of House of Lords. Lord Burns is also a
London W13 8AP director of Legal & General Group plc and The British
Land Company.
Gill M. Lewis Non-Executive Director of Parent; Managing Partner of
Heidrick & Struggles Heidrick & Struggles since 1999. Ms. Lewis has held a
100 Piccadilly number of positions within Heidrick & Struggles since
London W1V 9FM 1995. Ms. Lewis is also a trustee of the National
Society for the Prevention of Cruelty to Children.
</TABLE>
47
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PARENT; PRESENT PRINCIPAL
NAME; BUSINESS OCCUPATION OR EMPLOYMENT; MATERIAL
ADDRESS AND CITIZENSHIP POSITIONS HELD DURING THE PAST FIVE YEARS
--------------------------------------------- -----------------------------------------------------
<S> <C>
Reuben Mark Non-Executive Director of Parent since May of 1988;
The Colgate Palmolive Company Chairman and Chief Executive Officer of The Colgate
300 Park Avenue Palmolive Company since 1983. Mr. Mark is also a
New York, New York 10022 member of the Board of Directors of Citigroup Inc.
(United States) and Time Warner Inc.
Vernon L. Sankey Non-Executive Director of Parent since January 1993;
Thomson Travel Director of Thomson Travel Group plc since January
Greater London House 2000. Mr. Sankey is also a director of Allied Zurich
Hampstead Road plc, Zurich Allied AG and Zurich Financial Services.
London NW1 7SD
Rana Talwar Non-Executive Director of Parent since March 2000;
Standard Chartered Bank Chief Executive of Standard Chartered plc since
1 Aldermanbury Square October 1998; Executive Director of Standard
London EC2V 7SB Chartered Bank from April 1997 through September
(India) 1998; Executive Vice President of Citicorp from 1969
through March 1997.
Peter Jovanovich Chief Executive Officer of Pearson Education since
Pearson Education, Inc. November 1998; Chairman and Chief Executive Officer
One Lake Street of Addison Wesley Longman, Inc. from August 1997
Upper Saddle River, through November 1998; President of McGraw Hill
New Jersey 07458 Educational and Professional Publishing Group from
(United States) April 1995 through August 1997.
Stephen Hill Chief Executive and Director of Financial Times Group
Financial Times Group Limited Limited since March 1996. Mr. Hill also holds several
One Southwark Bridge positions as director for subsidiaries and affiliates
London, SE1 9HL of Financial Times Group Limited. Mr. Hill is also a
member of the Board of Directors of Data Broadcasting
Corporation and MarketWatch.com Inc.
David A. Wan President of The Penguin Group since January 2000;
The Penguin Group Executive Vice President and Chief Financial Officer
375 Hudson Street of The Penguin Group from December 1998 through
New York, New York 10014 December 1999; President K-12 Group of Simon &
(United States) Schuster Inc. from October 1996 through December
1998; Executive Vice President--Strategy and
Development of Simon & Schuster Inc. from May 1995
through October 1996.
</TABLE>
48
<PAGE>
2. DIRECTOR AND EXECUTIVE OFFICERS OF THE PURCHASER. The name,
citizenship, business address, present principal occupation or employment and
material occupations, positions, offices or employment for the past five years
of the sole director and executive officers of the Purchaser are set forth
below.
<TABLE>
<CAPTION>
POSITION WITH THE PURCHASER; PRESENT
PRINCIPAL OCCUPATION OR EMPLOYMENT;
MATERIAL POSITIONS HELD DURING THE PAST
NAME FIVE YEARS
---- -----------------------------------------------------
<S> <C>
Robert L. Dancy Director, Vice President and Secretary of the
One Lake Street Purchaser; Senior Vice President and General Counsel
Upper Saddle River, of Pearson Education, Inc. since November 1998; Vice
New Jersey 07458 President and General Counsel of Addison Wesley
(United States) Longman, Inc. from February 1995 through November
1998.
John C. Makinson President and Treasurer of the Purchaser; Finance
Pearson plc Director of Parent since 1996. Mr. Makinson also
3 Burlington Gardens holds several positions as director for subsidiaries
London W1X 1LE and affiliates of Parent. Mr. Makinson is also a
(United Kingdom) member of the Board of Directors of Data Broadcasting
Corporation, George Weston Limited, MarketWatch.com
Inc., RTL Group plc and International Rescue
Committee.
</TABLE>
49
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be accepted.
The Letter of Transmittal, certificates for Shares and any other required
documents should be sent or delivered by each shareholder of the Company or such
shareholder's broker, dealer, bank, trust company or other nominee to the
Depositary at one of its addresses set forth below.
THE DEPOSITARY FOR THE OFFER IS
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
<TABLE>
<CAPTION>
BY MAIL: BY HAND: BY COURIER:
<S> <C> <C>
ChaseMellon Shareholder Services, ChaseMellon Shareholder Services, ChaseMellon Shareholder Services,
L.L.C. L.L.C. L.L.C.
Reorganization Department Reorganization Department Reorganization Department
P.O. Box 3301 120 Broadway 85 Challenger Road
South Hackensack, New Jersey 13th Floor Mail Stop--Reorg
07606 New York, New York 10271 Ridgefield Park, New Jersey 07660
</TABLE>
BY FACSIMILE TRANSMISSION:
(For Eligible Institutions only)
(201) 296-4293
CONFIRM FACSIMILE TRANSMISSION:
(By telephone only)
(201) 296-4860
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Manager at their respective addresses set forth below.
Additional copies of the Offer to Purchase, the Letter of Transmittal, the
Notice of Guaranteed Delivery or any other tender offer materials may be
obtained from the Information Agent. You may also contact your broker, dealer,
bank, trust company or other nominee for assistance concerning the Offer.
THE INFORMATION AGENT FOR THE OFFER IS:
Georgeson Shareholder Communications Inc.
17 STATE STREET, 10TH FLOOR
NEW YORK, NEW YORK 10004
BANKS AND BROKERAGE FIRMS CALL COLLECT: (212) 440-9800
ALL OTHERS CALL TOLL FREE: (800) 223-2064
THE DEALER MANAGER FOR THE OFFER IS:
GOLDMAN, SACHS & CO.
85 BROAD STREET
NEW YORK, NEW YORK 10004
(212) 902-1000 (CALL COLLECT)
(800) 323-5678 (CALL TOLL FREE)
