<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-1/A
(Amendment No. 1)
Tender Offer Statement Pursuant to Section 14(d)(1)
of the Securities Exchange Act of 1934
and
SCHEDULE 13D/A
(Amendment No. 1)
Under the Securities Exchange Act of 1934
------------------------
METROMAIL CORPORATION
(Name of Subject Company)
GREAT UNIVERSAL ACQUISITION CORP.
THE GREAT UNIVERSAL STORES P.L.C.
(Bidders)
-----------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
-----------------------
591680 103
(CUSIP Number of Class of Securities)
-----------------------
John W. Peace
Executive Director and Chief Executive Officer
of Experian information services division
The Great Universal Stores PLC
Leconfield House, Curzon Street
London, England W1Y7FL
(44) 171 495-0070
(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications on Behalf of Bidder)
-----------------------
Copy To:
Donald G. Lubin, Esq.
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
(312) 876-8000
March 17, 1998
(Date of Event Which Requires Filing of this Statement)
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
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Transaction
Valuation* Amount of Filing Fee
- --------------------------------------------------------------------------------
<S> <C>
$734,793,239 $146,959
================================================================================
</TABLE>
* Estimated for purposes of calculating the filing fee only. This amount
assumes the purchase of 22,516,996 shares of Metromail Corporation Common
Stock, including the associated preferred stock purchase rights ("Shares"),
which are outstanding at $31.50 per Share, and 2,087,119 Shares which are
subject to outstanding options at $31.50 per Share less the exercise price
of such options. The amount of the filing fee, calculated in accordance
with Rule 0-11(d) under the Securities Exchange Act of 1934, as amended,
equals 1/50 of one percent of the value of the Shares to be purchased.
[x] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: $146,959
Form or Registration.: Schedule 14D-1
Filing Party: Great Universal Acquisition Corp. and The Great Universal
Stores P.L.C.
Date Filed: March 16, 1998
Page 1 of 5 Pages Exhibit Index on page 5
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<PAGE>
This Amendment No. 1 amends and supplements the Tender Offer Statement on
Schedule 14D-1 and Schedule 13D, originally filed on March 16, 1998 (the
"Schedule 14D-1") by The Great Universal Stores P.L.C., a corporation organized
under the laws of England, and its wholly-owned subsidiary, Great Universal
Acquisition Corp., a Delaware corporation (the "Purchaser"), relating to the
Purchaser's tender offer for all of the outstanding shares of Common Stock, par
value $.01 per share (the "Common Stock"), including the associated preferred
share purchase rights (the "Rights" and together with the Common Stock, the
"Shares"), of Metromail Corporation, a Delaware corporation (the "Company"), at
$31.50 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer to Purchase dated March 16, 1998 and the
related Letter of Transmittal, which were filed as exhibits (a)(1) and (a)(2) to
the Schedule 14D-1.
Unless otherwise defined herein, all capitalized terms used herein shall
have the respective meanings given such terms in the Schedule 14D-1. The item
numbers and responses thereto below are in accordance with the requirements of
Schedule 14D-1.
Item 10. Additional Information.
(e) The Company, certain of its directors and management employees (the
"Metromail Defendants") and Parent have been named as defendants in a lawsuit
commenced on March 17, 1998 in the Court of Chancery in and for New Castle
County, Delaware. Such action is captioned American Business Information, Inc.
v. Barton L. Faber, Thomas J. Quarles, Ronald G. Eidell, Jonathan P. Ward, Peter
F. Murphy, Metromail Corporation and Great Universal Stores P.L.C. (Case No.
16265NC). The complaint in such lawsuit (the "ABI Complaint") alleges, among
other things, that the Metromail Defendants breached their fiduciary duties to
Company stockholders by entering into the Merger Agreement, the Donnelley Stock
Purchase Agreement, the Executive Stock Purchase Agreements and the Company
Stock Purchase Agreement, that the Metromail Defendants breached their duty of
disclosure, and that Parent aided and abetted the breach of fiduciary duties by
the Metromail Defendants. More specifically, the plaintiff alleges, among other
things, that the Metromail Defendants agreed to sell Metromail to Parent for a
price that was less than Metromail's true worth in return for the acceptance by
Parent of certain improper self-dealing arrangements entered into by the
Metromail Defendants. As relief, the complaint seeks, among other things, an
injunction against consummation of the transactions contemplated by the Merger
Agreement, the Donnelley Stock Purchase Agreement, the Executive Stock Purchase
Agreements and the Company Stock Purchase Agreement, an injunction against
certain management employees of the Company from exercising certain stock
options and a declaration that such options are void, a declaration that the
change of control agreements of certain management employees of the Company are
void, a declaration that the Termination Fee and expense reimbursement
provisions of the Merger Agreement are void, and an award to ABI of its costs
and expenses, including attorneys' fees, incurred in connection with such
lawsuit. A hearing with respect to such lawsuit has been scheduled by the
Delaware court on March 27, 1998.
The above summary does not purport to be complete and is qualified in its
entirety by the full text of the ABI Complaint, which is attached hereto as
Exhibit (g)(1) and which is hereby incorporated herein by reference.
(f) On March 18, 1998, the Company issued a press release, a copy of which
is attached hereto as Exhibit (a)(9) and which press release is incorporated
herein by reference.
Item 11. Material To Be Filed As Exhibits.
Item 11 is hereby amended by adding the following:
(a)(9) Press Release issued by Metromail Corporation dated
March 18, 1998
(g)(1) Complaint filed on March 17, 1998 in the Chancery Court in and
for New Castle County, Delaware in an action captioned American
Business Information, Inc. v. Barton L. Faber, Thomas J. Quarles,
Ronald G. Eidell, Jonathan P. Ward, Peter F. Murphy, Metromail
Corporation and Great Universal Stores P.L.C. (Case No. 16265NC)
Page 2 of 5 Pages
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date: March 18, 1998 GREAT UNIVERSAL ACQUISITION CORP.
By: /s/ Thomas A. Gasparini
--------------------------------------
Name: Thomas A. Gasparini
Title: Vice President and General Counsel
Page 3 of 5 Pages
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and correct.
Date: March 18, 1998 THE GREAT UNIVERSAL STORES P.L.C.
By: /s/ John W. Peace
-----------------------------
Name: John W. Peace
Title: Director
Page 4 of 5 Pages
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------- -----------
(a)(9) Press Release issued by Metromail Corporation dated
March 18, 1998
(g)(1) Complaint filed on March 17, 1998 in the Chancery Court in and
for New Castle County, Delaware in an action captioned American
Business Information, Inc. v. Barton L. Faber, Thomas J. Quarles,
Ronald G. Eidell, Jonathan P. Ward, Peter F. Murphy, Metromail
Corporation and Great Universal Stores P.L.C. (Case No.
16265NC)
Page 5 of 5 Pages
<PAGE>
EXHIBIT (a)(9)
Metromail Acknowledges That ABI is Seeking to Enjoin Metromail/GUS Transaction
LOMBARD, Ill., March 18--Metromail Corporation, a leading provider of direct
marketing and database marketing services, today acknowledged that a suit has
been filed in the Delaware Chancery Court by American Business Information, Inc.
(ABI) to preliminarily and permanently enjoin the consummation of the
transactions contemplated by the previously announced merger agreement between
Metromail and The Great Universal Stores P.L.C. (GUS) pursuant to which GUS
commenced a tender offer on March 16, 1998 to acquire all of the outstanding
shares of Metromail stock for a net price of $31.50 per share in cash.
Metromail has not yet received a complete copy of the complaint for such suit
and is evaluating this situation.
Separately, Metromail announced that it has obtained an irrevocable letter of
credit that satisfies one of the conditions to the obligation of GUS to
consummate its previously announced tender offer. Please refer to Metromail's
Schedule 14D-9 for more information with respect to the transaction.
Metromail Corporation (www.metromail.com) is a leading provider of direct
marketing, database marketing and reference products and services in the United
States and United Kingdom. Metromail helps its customers identify and reach
targeted audiences, utilizing its comprehensive, proprietary consumer database
encompassing 95 percent of U.S. households, as well as providing database
marketing software and related services. Sales for the year ended December 31,
1997 increased almost 17 percent over the prior year to more than $328 million.
The company has 3,200 employees and is headquartered in Lombard, Illinois.
<PAGE>
Exhibit (g)(I)
IN THE COURT OF CHANCERY FOR THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
AMERICAN BUSINESS INFORMATION, INC., :
a Delaware Corporation, :
:
Plaintiff, :
:
v. : C.A. No. __________
:
BARTON L. FABER, THOMAS J. QUARLES, :
RONALD G. EIDELL, JONATHAN P. WARD, :
PETER F. MURPHY, METROMAIL :
CORPORATION, a Delaware Corporation, and :
GREAT UNIVERSAL STORES, P.L.C., a U.K. :
Corporation, :
:
Defendants. :
:
- ------------------------------------------:
COMPLAINT
---------
Plaintiff American Business Information, Inc. ("American Business" or
"ABI"), by and through its attorneys, upon knowledge as to itself and its own
acts and upon information and belief as to all other matters, alleges as
follows:
NATURE OF ACTION
----------------
1. American Business brings this action to prohibit defendants from
proceeding with a March 13, 1998 merger agreement (the "GUS Merger Agreement")
between defendants Great Universal Stores, P.L.C. ("GUS") and Metromail
Corporation ("Metromail" or the "Company"). The GUS Merger Agreement permits
GUS to acquire Metromail with a low ball offer of $31.50 per share in cash -- a
price lower than that previously offered by ABI -- and ends any auction for
Metromail before the process could even begin. Under the terms of the
<PAGE>
GUS Merger Agreement, GUS effectively locks up majority control of Metromail by
March 30, 1998 (the "Drop Dead Date") -- at least ten days before GUS' tender
offer for Metromail shares can close, and before GUS has purchased a single
share of Metromail stock from Metromail's public stockholders. Metromail
thereby short-circuits an auction process that Metromail itself initiated on
February 10, 1998, and which Metromail concedes resulted in numerous expressions
of interest from companies interested in bidding for Metromail.
2. GUS is able to acquire majority control of Metromail by the Drop Dead
Date as a result of two side agreements. Under the first, entered into by GUS
and certain Metromail stockholders (including Metromail's top officers,
defendants Faber, Quarles and Eidell), GUS acquires approximately 40% of
Metromail's outstanding stock (the "Metromail Shareholders Agreement"). Under
the second, entered into by Metromail and GUS, Metromail agrees to sell to GUS
approximately 10% of Metromail's authorized but unissued stock at $31.50 per
share in cash (the "Metromail Stock Purchase Agreement"). When these two
agreements are consummated, GUS will have acquired a majority of Metromail's
stock on a fully diluted basis.
3. The result of the Metromail Shareholders Agreement and the Metromail
Stock Purchase Agreement is that GUS' tender offer for Metromail stock (the
"Tender Offer"), which GUS is required to make pursuant to the GUS Merger
Agreement, is a sham. As described by Metromail in its Schedule 14D-9 filed on
March 16, 1998, the Tender Offer conditions are satisfied "without taking into
account any shares [to be] acquired pursuant to the [Tender O]ffer." Simply
put, even if GUS does not purchase a single share of Metromail stock in the
Tender Offer, it will still have acquired control of Metromail. A true and
correct copy of Metromail's Schedule 14D-9, which includes the GUS Merger
Agreement, the Metromail
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Shareholders Agreement and the Metromail Stock Purchase Agreement, is attached
at Exhibit A hereto.
4. The Metromail Stock Purchase Agreement, pursuant to which Metromail
agrees to sell GUS enough treasury shares to give GUS a majority of Metromail's
outstanding stock, also is a sham. Because GUS will have control of Metromail
on the Drop Dead Date, GUS effectively is paying itself to acquire these shares.
The money GUS spends to buy the Metromail treasury stock goes to Metromail (not
its shareholders), which GUS will control.
5. As a result of these agreements, control of Metromail passes to GUS on
the Drop Dead Date -- when all of the conditions to these agreements expire and
before GUS has acquired a single share of Metromail stock pursuant to the Tender
Offer. Thus, under the terms of the GUS Merger Agreement, Metromail's ability
to (i) terminate the GUS Merger Agreement, (ii) accept a superior proposal or
(iii) change its recommendation regarding the GUS Tender Offer all end on the
Drop Dead Date. Indeed, even if Metromail's board of directors (the "Metromail
Board") were to conclude, between March 31, 1998 and April 9, 1998 (the day
before the Tender Offer pursuant is scheduled to expire) that GUS had breached
any (or all) of the representations and warranties GUS made to Metromail, the
Metromail Board would be unable to terminate the GUS Merger Agreement: The
right of the Metromail Board to terminate the GUS Merger Agreement expires by
its own terms on the Drop Dead Date.
6. The GUS Merger Agreement kills any potential auction for Metromail
before it can begin. Amazingly, even though the GUS Merger Agreement is a
"show-stopper," the price to be paid to Metromail shareholders falls materially
below what ABI previously had told Metromail that ABI would pay. Specifically,
shortly before Metromail entered into the GUS
-3-
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Merger Agreement, ABI offered to acquire Metromail in an all cash offer for at
least $32 per share. Additionally, ABI told Metromail that ABI was willing to
pay $0.25 more per share than any other bidder for Metromail and that Metromail
should therefore not accept an alternative offer which included a break-up fee.
Metromail inexplicably ignored ABI's better offer and ABI's offer to top any
other bid.
7. Metromail also skewed the auction process to preclude a fair result.
On February 10, 1998, Metromail put itself up for auction. Both before and
after that date, Metromail allowed GUS to complete extensive due diligence on
Metromail. By contrast, Metromail only began allowing ABI to conduct limited
due diligence in March 1998. At the same time, Metromail required ABI to enter
into a confidentiality agreement that precludes ABI from making an offer not
approved by the Metromail Board. As part of ABI's due diligence, ABI discovered
numerous apparently improper payments to a few senior Metromail officers and/or
directors, including the individual defendants. ABI questioned Metromail about
these payments in a letter sent to Metromail on March 12, 1998.
8. After ABI sent the March 12 letter, ABI reconfirmed its willingness
and desire to acquire Metromail and further indicated that ABI stood by its
earlier offers. At this time, Metromail had told ABI that Metromail would
solicit bids for the Company during the week of March 16, 1998.
9. Metromail's representations were false. In fact, on March 13, 1997,
the day after ABI wrote to Metromail to question the secret payments (and at a
time when ABI still had due diligence meetings with Metromail scheduled for the
week of March 16), Metromail entered into the GUS Merger Agreement.
-4-
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10. Metromail entered into the GUS Merger Agreement rather than pursue a
bid from ABI because GUS agreed to permit millions of dollars in improper
payments to Metromail insiders. The specific benefits Metromail's insiders
received as a result of the GUS Merger Agreement included:
a. Metromail's three top officers, defendants Faber, Quarles and Eidell
(the "Insider Defendants"), received tens of thousands of stock options in
February 1998 at a price of $16.69 per share -- a time after Metromail had
already decided to sell itself at a price in excess of $20 per share. As a
result of the GUS Merger Agreement, all of these options will accelerate, become
fully vested, and sold to GUS at the $31.50 price, giving these three defendants
millions of dollars in illegal profits.
b. The Insider Defendants entered into lucrative "change of control"
agreements providing for payments of over $7.1 million dollars -- including at
least three times their annual salaries and bonuses. The GUS Merger Agreement
will trigger these payments.
c. Metromail's former CEO -- an individual who has never been employed by
Metromail since it became a public company -- received a $1.2 million "severance
agreement."
d. GUS (not Metromail) agreed to fully indemnify and pay all of the legal
fees of the Insider Defendants and the members of the Metromail Board, even
before completion of the GUS Merger Agreement, in the event the Metromail Board
members were sued as a result of their decision to enter into the GUS Merger
Agreement.
11. In an effort to ensure that the GUS Merger Agreement would be
consummated and the Insider Defendants thereby enriched, the Metromail Board
agreed to pay GUS more than $15 million in "break-up" fees and reimbursement of
expenses if the GUS Merger Agreement
-5-
<PAGE>
was not consummated (the "Break Up Fee and Reimbursement Provision"). The
Metromail Board agreed to this provision despite ABI's earlier written
notification to Metromail that no such agreement was necessary to get a higher
bid from ABI.
12. On information and belief, the Metromail Board knew that Metromail's
shareholders would not accept the "slush payments" they had engineered for the
Insider Defendants, and they further knew that Metromail could obtain more than
$31.50 per share in a sale of the Company. Nevertheless, the Metromail Board
wanted to deal with GUS because GUS agreed to allow the Insider Defendants to
keep their ill-gotten gains and to maximize their own personal interests, to the
detriment of Metromail's shareholders. GUS and Metromail therefore structured
the GUS Merger Agreement to end the auction process before it could begin, and
give GUS control of Metromail on the Drop Dead Date.
13. The actions of the Metromail Board in entering into the GUS Merger
Agreement constitute a gross breach of the directors' fiduciary duties. The
Metromail Board members ignored completely their obligations to Metromail's
shareholders under Delaware law to seek the best transaction reasonably
available in a sale of the Company, and instead abdicated their fiduciary duties
by accepting a low-ball offer that would enrich the Insider Defendants
personally. The Metromail Board's decision to enter into the GUS Merger
Agreement was made when the Metromail Board specifically knew that ABI was
willing to pay more than $31.50 per share for Metromail, and after ABI had told
Metromail that (i) it was willing to pay $0.25 per share more than any other
bidder, and (ii) Metromail should not obligate itself to pay any "break-up" fees
if it accepted another bid. GUS aided and abetted the Metromail Board's
-6-
<PAGE>
breach of fiduciary duty by agreeing to make all of the slush payments to the
Insider Defendants so that GUS could buy Metromail on the cheap.
14. In sharp contrast to the actions of GUS and the Metromail Board, ABI
stands by its earlier representations and continues to desire a full and fair
auction in which Metromail's shareholders will benefit from the best transaction
available. Consistent with this view and Metromail's obligations under the
confidentiality agreement, ABI is sending today to the Metromail Board a fully
financed, all-cash, all-shares bid to acquire Metromail for $33 per share. In
addition, ABI's offer includes a provision whereby ABI will distribute to
Metromail's shareholders any savings recovered as a result of this action that
ABI otherwise would have to pay to acquire Metromail, such as the Break-Up Fee
and or any improper payments made by GUS or Metromail to the Metromail
Defendants.
15. ABI requests that the Court enjoin defendants from proceeding with the
GUS Merger Agreement, the Metromail Stock Purchase Agreement, and the Metromail
Shareholder Agreements and void the improper payments to the Insider Defendants.
Importantly, such an order only can be effective if issued prior to the Drop
Dead Date, when GUS will acquire control of a majority of Metromail's stock on a
fully-diluted basis and Metromail will lose its right to terminate the GUS
Merger Agreement. ABI further requests, both as the likely highest bidder for
Metromail and as the owner of approximately 1,000,000 Metromail shares, that the
Court require Metromail to conduct a fair auction for Metromail as required by
Delaware law.
-7-
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PARTIES
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16. Plaintiff ABI is a Delaware corporation with its principal place of
business in Omaha, Nebraska. ABI is the leading provider of marketing
information on 11 million businesses. ABI owns approximately 1,000,000 Metromail
shares.
17. Defendant Metromail is a Delaware corporation with its principal place
of business in Lombard, Illinois. Metromail is a provider of direct marketing
information and services and is a publicly-traded corporation listed on the New
York Stock Exchange.
18. Defendant Barton L. Faber is Chairman of Metromail's board of
directors. In 1996, Faber received a salary of $310,008, bonuses and other
annual compensation totaling $119,797, stock awards of $357,000, securities
underlying options of $170,000 and other compensation of $7,864. On or about
February 5, 1998, Faber also received additional options to purchase tens of
thousands of shares of Metromail stock at the price of $16.69 per share. These
options were part of a total package of 562,000 shares granted to the Insider
Defendants. Faber also enjoys a lucrative "change of control" agreement which
provides for a cash payment equal to the total of three times his base salary,
plus three times his annual bonus for the last two years, plus three years of
pension benefits and three years of life, health and disability insurance.
19. Defendant Thomas J. Quarles is Metromail's Senior Vice President,
Chief Administrative Officer, General Counsel and Secretary. In 1996, Quarles'
total cash compensation exceeded $200,000. In addition, Quarles received
options on 70,000 shares of Metromail stock and other long-term compensation
benefits. On information and belief, in February 1998 Quarles received tens of
thousands of stock options at an exercise price of $16.69
-8-
<PAGE>
per share. Quarles also enjoys a lucrative "change of control" agreement
pursuant to which he is entitled to a cash payment equal to three times his
annual salary and bonus.
20. Defendant Ronald G. Eidell is a Senior Vice President and Chief
Financial Officer of Metromail. In 1996, Eidell received cash compensation in
excess of $200,000, options on 64,000 shares of Metromail stock, and other long-
term compensation benefits. On information and belief, in February 1998 Eidell
received tens of thousands of Metromail stock options at an exercise price of
$16.69 per share. Eidell also entered into a lucrative "change of control"
agreement pursuant to which he is entitled to receive three times the total of
his annual salary and bonus, three years of pension benefits and three years of
life, health and disability insurance, as a result of the GUS Merger Agreement.
21. Defendants Jonathan P. Ward and Peter F. Murphy are currently members
of Metromail's board of directors (together with the Insider Defendants, the
"Metromail Defendants"). On information and belief, Ward and Murphy are under
the dominion and control of the Insider Defendants.
22. Defendant GUS is a holding company organized under the laws of
England. GUS owns companies involved in a variety of businesses, including
personal credit information on approximately 190 million Americans.
23. The Metromail Defendants, by reason of their management positions
and/or representation on the Board, are liable directly as participants in, and
aiders and abettors of, the wrongs complained of herein. Among other things,
the Metromail Defendants direct the actions of the Company, and control the
content of the Company's public statements and press releases.
-9-
<PAGE>
FACTUAL BACKGROUND
------------------
24. On information and belief, beginning in the fall of 1997, and
continuing through January 1998, numerous companies (including ABI) approached
Metromail about potential transactions involving the sale of the Company. At or
about this time, the Metromail Board and Metromail management considered various
alternatives with the alleged goal of maximizing value for Metromail's
stockholders.
25. In response to these inquiries, in January 1998 Metromail
informed various potential bidders (including ABI) that it was going to put
itself up for auction beginning in February 1998. At the same time, however,
Metromail was meeting secretly with GUS to allow GUS to conduct due diligence to
acquire Metromail before an auction could even begin. Based in part upon
discussions with GUS, the Metromail Defendants believed at the time that any
sale of the Company would result in a price considerably in excess of $20 per
share. As demonstrated by the offers that Metromail subsequently received,
including the offer from ABI, a full and fair auction for the Company would have
generated significantly greater value for Metromail's shareholders.
26. On February 5, 1998, at a time when the Metromail Defendants
already had decided to sell Metromail and already had received offers to acquire
Metromail for $23.00 or more per share, the Metromail Defendants took for
themselves options to acquire 562,000 shares of Metromail stock (the "Insider
Options"). The exercise price for the Insider Options was set at $16.69, well
below the average trading price of Metromail common stock during this period and
significantly below the initial offers that Metromail already had received. On
information and belief, the Insider Defendants received a significant portion of
these Insider Options.
-10-
<PAGE>
27. The Insider Options served no legitimate corporate purpose. To
the contrary, the sold purpose of the Insider Options was to "line the pockets"
of the Insider Defendants at the expense of Metromail's public shareholders.
28. On February 10, 1998 -- just five days after Metromail's board
granted the 562,000 Insider Options to, among others, the Insider Defendants --
Metromail publicly announced its decision to sell itself. A true and correct
copy of Metromail's press release announcing this decision is attached as
Exhibit B hereto.
METROMAIL'S FLAWED AUCTION PROCESS
----------------------------------
29. Although Metromail publicly undertook to conduct a fair auction
process that would maximize value for Metromail's shareholders, in fact
Metromail grossly and unfairly tilted the playing field to GUS, its favored
bidder.
30. First, on information and belief, Metromail allowed GUS to conduct
full and complete due diligence on Metromail beginning even before the February
10, 1998, auction announcement. GUS' due diligence lasted seven weeks, beginning
in mid-January 1998, and included lengthy interviews with top Metromail
management and visits to numerous Metromail facilities. In contrast, although
ABI entered into a confidentiality agreement with Metromail to permit due
diligence, ABI was not given anything remotely resembling the same opportunity
to conduct reasonable due diligence as GUS.
31. Despite this disadvantage, ABI persisted in its efforts to acquire
Metromail. On February 20, 1998, ABI wrote to Metromail stating that ABI was
prepared to acquire Metromail at a price between $32 and $34 per share, subject
to completion of due diligence. At that same time, ABI urged Metromail to allow
ABI to start the due diligence process. ABI reiterated its
-11-
<PAGE>
offer by letter dated February 23, 1998, in which ABI again stated its ability
and willingness to begin due diligence immediately.
32. On February 24, 1998, ABI again asked to meet with Metromail
representatives to conduct due diligence regarding a potential acquisition of
the Company. Metromail refused.
33. On February 25, 1998, ABI again wrote to Metromail to express its
willingness to acquire the Company. In this letter, ABI stated that because of
the synergies available in an ABI-Metromail combination, ABI could afford to pay
more for Metromail than any other bidder. Accordingly, ABI told Metromail that
it would pay $0.25 per share more to acquire Metromail than any other bona fide
written offer received by Metromail. ABI further told Metromail that, as a
result of its topping offer, Metromail should not enter into any agreement which
would require Metromail to pay any type of "break-up" fee.
ENDING THE AUCTION BEFORE IT BEGAN --
THE GUS-METROMAIL MERGER AGREEMENT
----------------------------------
34. Despite ABI's repeated requests to bid on Metromail, Metromail refused
to allow ABI to participate in an auction process. Instead, at the time the
Metromail Defendants had received ABI's letters, they already had decided to
enter into an agreement with GUS. The Metromail Defendants made this decision
not because GUS would pay the highest price to Metromail's shareholders, but
rather because GUS would allow the Insider Defendants to keep their ill-gotten
gains, including the 562,000 Insider Options issued barely one month earlier.
35. Metromail finally allowed ABI to begin due diligence in early March.
Metromail representatives also told ABI's representatives that bids for
Metromail would not be accepted before the week of March 16, 1998. At the same
time, and unbeknownst to ABI, Metromail was completing negotiations with GUS for
an acquisition of Metromail.
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<PAGE>
36. Only as a result of due diligence did ABI find out about the
incredible self-dealing engaged in by the Insider Defendants. As a result, on
March 12, 1998, ABI sent Metromail a letter identifying these self-dealing
transactions, along with other issues, and asking for additional information.
On that same day, ABI also reiterated its willingness to pay more than any other
bidder for the Company, including ABI's readiness to pay at least $32 per share
for the Company.
37. The very next day, Friday, March 13, 1998 - on a day when ABI had
due diligence meetings scheduled and without anyone asking ABI to bid for
Metromail - Metromail entered into the GUS Merger Agreement.
38. The GUS Merger Agreement contains numerous improper provisions,
all designed to ensure that the Insider Defendants receive their improper
payments. In return, GUS acquires Metromail on the cheap. The losers in the
deal are Metromail's stockholders and the bidders who tried to play by the
rules, including ABI.
39. Among the improper features of the GUS Merger Agreement are the
following:
a. GUS entered into the Metromail Shareholder Agreements, pursuant to
which all of the options owned by the Insider Defendants are
accelerated, vested and to be sold to GUS at a price of $31.50 per
share. Thus the Insider Defendants will receive millions of dollars
on their portion of the 562,000 Insider Options granted barely one
month ago.
b. Pursuant to the Metromail Stock Purchase Agreement, the Metromail
Defendants agreed to sell GUS previously unissued shares such that,
when these shares are added to those GUS will purchase as a result of
the Metromail Shareholder
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Agreements, GUS will obtain a majority of Metromail's outstanding
shares on a fully diluted basis. This agreement is a sham, because
GUS is essentially paying itself for these shares. All conditions
(assuming no antitrust issues) to the Merger Agreement and the
Metromail Shareholder Agreement expire on the Drop Dead Date.
c. GUS (not Metromail) has agreed to indemnify the Metromail Defendants
in connection with any litigation -- even before GUS acquires a single
share of Metromail stock -- arising out of the GUS Merger Agreement.
d. Metromail has agreed to pay all of GUS' expenses, in the event the GUS
Merger Agreement is not consummated plus a $15 million break-up fee.
Metromail agreed to these provisions despite ABI's express warning in
the February 24 letter that such fees were unnecessary.
e. GUS has agreed to accept all of the incredibly lucrative change of
control agreements enjoyed by the Insider Defendants, thereby
guaranteeing the Insider Defendants millions of dollars in undeserved
payments. The Insider Defendants hardly need financial protection
from a change of control that they themselves engineered.
f. GUS agreed to pay Metromail's former CEO - a person who has not been
employed by Metromail since it became a public company - a "severance"
payment in excess of $1.2 million.
40. According to Metromail's press release dated March 13, 1998, and
Schedule 14(d)(9) filed March 16, 1998, all conditions to both the Metromail
Shareholder Agreement and
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the Metromail Stock Purchase Agreement expire on the Drop Dead Date, giving GUS
effective majority ownership of Metromail before it purchases a single share of
Metromail stock. The result is that absent an injunction before the Drop Dead
Date, Metromail's public stockholders will become, in effect, minority
shareholders in a company in which GUS has locked in a controlling ownership
position on a fully diluted basis. This result blocks any other bids from being
made and prevents Metromail shareholders from receiving an adequate price for
their shares.
41. Under the terms of the GUS Merger Agreements, Metromail's ability to
terminate the GUS Merger Agreement or accept a superior proposal also ends on
the Drop Dead Date. Indeed, under the terms of the GUS Merger Agreement,
Metromail cannot terminate that agreement after the Drop Dead Date, even if it
learns after this date that GUS breached any of the representations or
warranties GUS gave to Metromail.
42. As a result, after the Drop Dead Date, Metromail and its stockholders
are locked-up with GUS. Metromail's shareholders cannot accept a higher bid,
and Metromail cannot terminate the GUS Merger Agreement. Absent relief from
this Court, the auction for Metromail will be over on March 31, 1998, -- before
GUS ever purchases a single share of Metromail stock pursuant to the Tender
Offer.
43. All of these transactions are the part of an illegal conspiracy and
agreement among GUS and the Metromail Defendants, whereby the Metromail
Defendants agreed to sell Metromail for a low-ball price, in return for which
GUS agreed to accept all of the improper self-dealing arrangements entered into
by the Metromail Defendants. The losers are Metromail's
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shareholders, who are getting far less than Metromail is worth, and ABI, both in
its capacity as a Metromail shareholder and as a bidder for Metromail.
COUNT I
-------
(Injunctive Relief: Breach of Fiduciary Duty by the
Metromail Defendants in Entering Into The GUS Merger Agreement)
---------------------------------------------------------------
44. Plaintiff repeats and realleges the foregoing allegations as if fully
set forth herein.
45. Each of Metromail's directors owes the Company and its stockholders
fiduciary duties of the highest order, including, among other things, a duty to
manage the affairs of the corporation in good faith, with due care and with
loyalty. Having determined to sell Metromail in a transaction in which
Metromail shareholders would be cashed-out or become minority-owners in a
privately-controlled company, the sole responsibility of the Metromail Board was
to act in good faith to obtain the best transaction reasonably available for
Metromail's stockholders. In this regard, the Metromail Defendants must be
guided by the single principle of the best interests of Metromail's stockholders
with due regard for ABI's willingness to pay the highest price for Metromail.
The Metromail Defendants may not place their own self-interests and personal
considerations ahead of the interests of the Metromail stockholders.
46. Defendants entered into the GUS Merger Agreement for the sole or
primary purpose of benefitting themselves at the expense of Metromail's
stockholders.
47. Defendants have breached and/or will continue to breach their
fiduciary duties by the acts described above, including but not limited to (i)
improperly granting themselves the Insider Options, (ii) entering into the
Metromail Stock Purchase Agreement, (iii) entering into the Metromail
Shareholder Agreement and (iv) entering into the GUS Merger Agreement, and
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which includes the improper and illegal $15 million "break-up" fee and expense
reimbursement, which was entered into at a time when ABI was willing to make a
higher offer for Metromail.
48. As a result of the foregoing, the Metromail Defendants have breached
their fiduciary duties of care and loyalty under Delaware law.
49. Plaintiff has no adequate remedy at law.
COUNT II
--------
(Against the Metromail Defendants For Declaratory and Injunctive Relief:
Violation of Obligation to Treat Bidders Fairly and Equally
in the Sale of the Company)
50. Plaintiff repeats and realleges the foregoing allegations as if fully
set forth herein.
51. Metromail's directors owe Metromail and its stockholders fiduciary
duties of the highest order, including, among other things, a duty to manage the
affairs of the corporation in good faith, with due care and with loyalty.
Having determined to sell the Company, the Metromail Board now must act in good
faith to obtain the best transaction reasonably available for the stockholders
of the Company. In this regard, defendants were and are obligated to consider
ABI's offer and all other reasonable acquisition proposals in a timely fashion
and on an informed basis. The Metromail Defendants also are obligated to
conduct a fair auction and must not improperly favor one bidder over another to
advance their own personal interests.
52. The Metromail Defendants violated these obligations by entering into
the GUS Merger Agreement, thereby precluding any competing offers after the Drop
Dead Date, and refusing to allow ABI to make an offer for Metromail. The acts
set forth herein demonstrate that the Metromail Defendants improperly and
illegally tilted the auction process to favor GUS for the sole purpose of
benefitting themselves at the expense of Metromail's shareholders.
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53. As a result of the foregoing, the Metromail Defendants have breached
their duties of care and loyalty under Delaware law.
54. Plaintiff is entitled to declaratory and injunctive relief to ensure
that defendants act in good faith to obtain the best transaction reasonably
available to the stockholders of the Company.
55. Plaintiff has no adequate remedy at law.
COUNT III
---------
(Against the Metromail Defendants: For Breach of the Duty of Disclosure)
------------------------------------------------------------------------
56. Plaintiff repeats and realleges the foregoing allegations as if fully
set forth herein.
57. The Metromail Defendants owe to all Metromail stockholders a duty to
disclose fully and truthfully all material facts relating to their decision to
enter into the GUS Merger Agreement. The duty of disclosure is intended to
ensure that fiduciaries provide stockholders with all the information necessary
for each stockholder to make an informed decision about issues that affect the
corporation and the stockholders' interests.
58. The Metromail Defendants have concluded that Metromail's stockholders
would not accept or approve the Metromail Defendants' self-dealing arrangements
or the GUS Merger Agreement. In order to avoid this result, the Metromail
Defendants, in violation of their duties of disclosure and loyalty, have
authorized the filing and dissemination of the Metromail Press Release
announcing the GUS Merger Agreement, the Metromail Form 8-K Report and the
Metromail Schedule 14D-9, all of which are false and misleading in several
material respects. Specifically, these documents:
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(i) Fail to disclose the facts and circumstances surrounding the February
5, 1998 grant to the Metromail Defendants of the 562,000 Insider
Options at an exercise price of $16.69 per share;
(ii) Fail to disclose that ABI previously had told Metromail that it was
willing to pay at least $32.00 per share to acquire Metromail;
(iii) Fail to disclose that ABI previously had offered to pay $0.25 more
per share for Metromail than any other bona fide offer received by
Metromail;
(iv) Fail to disclose that the purpose and effect of the Metromail Stock
Purchase Agreement, the Metromail Shareholder Agreement, and the GUS
Merger Agreement are to lock-up effective control of Metromail by GUS
of the Drop Dead Date -- before GUS has purchased a single share of
Metromail stock pursuant to the Tender Offer;
(v) Fail to disclose the positions of the Insider Defendants with
Metromail following GUS' acquisition, and in particular GUS' agreement
to allow these Insider Defendants to continue to run Metromail; and
(vi) Fail to disclose the other agreements and understandings between GUS
and Metromail, all of which are designed to enrich the Insider
Defendants at the expense of Metromail's shareholders.
59. The materially false and misleading statements referred to above
constitute a violation of the fiduciary duties of disclosure and loyalty and
were intended to hide the truth from Metromail's stockholders.
60. Plaintiff and Metromail's stockholders have no adequate remedy at law.
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COUNT IV
--------
(Against GUS -- Aiding and Abetting the
Metromail Defendants' Breach of Fiduciary Duty)
-----------------------------------------------
61. Plaintiff repeats and realleges the foregoing allegations as if fully
set forth herein.
62. GUS has played an integral role in the Metromail Defendants'
breach of fiduciary duty. Specifically, GUS encouraged, agreed to and accepted
all of the self-dealing and other illegal activity engaged in by the Metromail
Defendants so that GUS could buy Metromail "on the cheap" for the low-ball bid
of $31.50 per share.
63. As part of this management, GUS insisted that the GUS Merger
Agreement, Metromail Stock Purchase Agreement and the Metromail Shareholder
Agreements become unconditional after the Drop Dead Date. GUS made this demand
so it could receive favorable accounting treatment in the United Kingdom for the
Metromail acquisition. GUS fully recognized that it would be very difficult for
any court to issue an injunction prior to March 30, 1998 if it announced the
transaction on Friday, March 13, 1998. GUS thus structured the timing of the
GUS Merger Agreement to protect the Metromail Defendants' breaches of fiduciary
duty from discovery or remedy.
64. GUS also knowingly aided and abetted the breaches of fiduciary
duty committed by the Metromail Defendants when it agreed to fully indemnify
these defendants and allow all of the other payments to these defendants. GUS
effectively "paid off" the Metromail Defendants, including the Insider
Defendants, to get their agreement to sell Metromail at a substantial discount
and in a manner designed to freeze out competing bidders.
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65. As a result of the foregoing, GUS has aided and abetted the
breaches of fiduciary duty committed by the Metromail Defendants. Indeed, the
breaches by the Metromail Defendants could not have occurred without the active
assistance and participation of GUS.
66. Plaintiff has no adequate remedy at law.
WHEREFORE, Plaintiff respectfully demands judgment against defendants as
follows:
(a) preliminarily and permanently enjoining Metromail and the Metromail
Defendants, their agents, employees, and anyone acting on their
behalf, from facilitating, effectuating, enforcing or taking any steps
to facilitate, effectuate, enforce or consummate the GUS Merger
Agreement and declaring the GUS Merger Agreement void;
(b) preliminarily and permanently enjoining Metromail, GUS, the Metromail
Defendants, their agents, employees, and anyone acting on their behalf
from facilitating or consummating either the Metromail Shareholder
Agreement or the Metromail Stock Purchase Agreement and declaring
these agreements void;
(c) preliminarily and permanently enjoining the Insider Defendants from
exercising the Insider Options and declaring the Insider Options void;
(d) declaring void the Insider Defendants' change of control agreements;
(e) requiring that appropriate corrective disclosures be made to cure all
of the materially false and misleading statements and omissions made
by Metromail in connection with the GUS Merger Agreement;
(f) compelling the Metromail Board to conduct a fair and even-handed
auction and not to tilt the process in favor of any particular bidder;
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(g) declaring the Break-Up Fee and Reimbursement Provision in the GUS
Merger Agreement unreasonable and void;
(h) awarding ABI its costs and expenses, including attorneys' fees,
incurred in this action; and
(i) granting plaintiff such other and further relief as the Court deems
just and proper.
OF COUNSEL: ---------------------------
Jesse A. Finkelstein
Steven M. Schatz J. Travis Laster
David J. Berger Richards, Layton & Finger
Wilson Sonsini Goodrich & Rosati One Rodney Square
650 Page Mill Road P.O. Box 551
Palo Alto, California 94304 Wilmington, Delaware 19899
(650) 493-9300 (302) 658-6541
Attorneys for Plaintiff
Deborah J. Palmer
Matthew L. Woods
Robins, Kaplan, Miller & Ciresi
2800 La Salle Plaza
Minneapolis, MN 55402
(612) 349-8500
Dated: March 17, 1998
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