<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
SCHEDULE 14D-9
(AMENDMENT NO. 1)
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
--------------
MDL INFORMATION SYSTEMS, INC.
(Name of Subject Company)
MDL INFORMATION SYSTEMS, INC.
(Name of Person Filing Statement)
--------------
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
--------------
55267R 10 2
(CUSIP Number of Class of Securities)
--------------
Steven D. Goldby
Chief Executive Officer
MDL Information Systems, Inc.
14600 Catalina Street
San Leandro, California 94577
(510) 895-1313
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications
on Behalf of the Person Filing Statement)
--------------
Copies to:
Jay K. Hachigian, Esq.
Gunderson, Dettmer Stough Villeneuve
Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, California 94025
(415) 321-2400
================================================================================
<PAGE>
INTRODUCTION
This Amendment No. 1 (the "Amendment") amends the Solicitation/
Recommendation Statement on Schedule 14D-9 of MDL Information Systems, Inc.,
filed with the Securities and Exchange Commission on March 28, 1997 by the
persons filing this Amendment as set forth below:
Item 1. Security and Subject Company.
No change.
Item 2. Tender Offer of the Bidder.
No change.
Item 3. Identity and Background.
(a) No change.
(b) No change.
Item 4. The Solicitation or Recommendation.
(a) No change.
(b) No change.
Item 5. Persons Retained, Employed or to be Compensated.
No change.
Item 6. Recent Transactions and Intent with Respect to Securities.
(a) No change.
(b) No change.
Item 7. Certain Negotiations and Transactions by the Subject Company.
(a) No change.
(b) No change.
Item 8. Additional Information to be Furnished.
No change.
1
<PAGE>
Item 9. Material to be Filed as Exhibits.
No change except the following exhibit is amended to include Schedule I
as defined therein.
(a)(1)Offer to Purchase dated March 23, 1997.
2
<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
accurate.
MDL INFORMATION SYSTEMS, INC.
BY: /s/ STEVEN D. GOLDBY
--------------------------
Steven D. Goldby
Chief Executive Officer
Dated: April 4, 1997
3
<PAGE>
EXHIBIT (A)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
MDL INFORMATION SYSTEMS, INC.
AT
$32 NET PER SHARE
BY
GOLDEN GATE ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
ELSEVIER SCIENCE INC.
AN INDIRECT WHOLLY OWNED SUBSIDIARY OF
REED INTERNATIONAL P.L.C.
AND
ELSEVIER NV
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK TIME,
ON THURSDAY, APRIL 24, 1997, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON (I) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THAT NUMBER OF SHARES
THAT SHALL CONSTITUTE A MAJORITY OF THE THEN OUTSTANDING SHARES ON A FULLY
DILUTED BASIS AND (II) THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS
IMPOSED UPON CONSUMMATION OF THE OFFER BY THE HART-SCOTT-RODINO ANTITRUST
IMPROVEMENTS ACT OF 1976, AS AMENDED (THE "HSR ACT"), AND THE REGULATIONS
THEREUNDER, AS WELL AS THE OTHER CONDITIONS DESCRIBED HEREIN.
THE BOARD OF DIRECTORS OF MDL INFORMATION SYSTEMS, INC. HAS DETERMINED THAT
EACH OF THE OFFER AND THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF MDL INFORMATION SYSTEMS, INC., AND RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
---------------
IMPORTANT
Any stockholder desiring to tender all or any portion of such stockholder's
shares of common stock, par value $.01 per share (the "Shares"), of MDL
Information Systems, Inc. should either (1) complete and sign the Letter of
Transmittal (or a facsimile thereof) in accordance with the instructions in
the Letter of Transmittal and mail or deliver it together with the
certificate(s) evidencing tendered Shares, and any other required documents,
to the Depositary or tender such Shares pursuant to the procedure for book-
entry transfer set forth in Section 3 or (2) request such stockholder's
broker, dealer, commercial bank, trust company or other nominee to effect the
transaction for such stockholder. Any stockholder whose Shares are registered
in the name of a broker, dealer, commercial bank, trust company or other
nominee must contact such broker, dealer, commercial bank, trust company or
other nominee if such stockholder desires to tender such Shares.
A stockholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedure for book-entry transfer on a timely basis, may tender such Shares by
following the procedure for guaranteed delivery set forth in Section 3.
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone numbers set forth on the back cover of this
Offer to Purchase. Questions or requests for assistance may also be directed
to the Dealer Manager at their address on the back cover of this Offer to
Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may also be obtained from
the Information Agent or from brokers, dealers, commercial banks or trust
companies.
---------------
The Dealer Manager for the Offer is:
LEHMAN BROTHERS
---------------
March 28, 1997
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
INTRODUCTION......................................................................................... 3
1. Terms of the Offer; Expiration Date.............................................................. 4
2. Acceptance for Payment and Payment for Shares.................................................... 5
3. Procedures for Accepting the Offer and Tendering Shares.......................................... 7
4. Withdrawal Rights................................................................................ 9
5. Certain Federal Income Tax Consequences.......................................................... 9
6. Price Range of Shares; Dividends................................................................. 10
7. Certain Information Concerning the Company....................................................... 10
8. Certain Information Concerning Purchaser, ESI, PLC and NV........................................ 13
9. Financing of the Offer and the Merger............................................................ 14
10. Background of the Offer; Contacts with the Company; The Merger Agreement......................... 15
11. Purpose of the Offer; Plans for the Company After the Offer and the Merger....................... 24
12. Dividends and Distributions...................................................................... 25
13. Effect of the Offer on the Market for the Shares, Exchange Listing and Exchange Act Registration. 25
14. Certain Conditions of the Offer.................................................................. 25
15. Certain Legal Matters and Regulatory Approvals................................................... 26
16. Fees and Expenses................................................................................ 28
17. Employment Agreements............................................................................ 29
18. Miscellaneous.................................................................................... 29
SCHEDULE I -- DIRECTORS AND EXECUTIVE OFFICERS OF PLC, NV, ESI AND PURCHASER
</TABLE>
2
<PAGE>
To the Holders of Common Stock of
MDL INFORMATION SYSTEMS, INC.
INTRODUCTION
Golden Gate Acquisition Corp. ("Purchaser"), a Delaware corporation, a
direct wholly owned subsidiary of Elsevier Science Inc. ("ESI"), a New York
corporation, and an indirect wholly owned subsidiary of (i) Reed International
P.L.C., a corporation organized under the laws of England ("PLC") and (ii)
Elsevier NV, a corporation organized under the laws of The Netherlands ("NV"),
hereby offers to purchase all outstanding shares of common stock, par value
$.01 per share (the "Common Stock"), of MDL Information Systems, Inc., a
Delaware corporation (the "Company"), at a price of $32 per Share, net to the
seller in cash, upon the terms and subject to the conditions set forth in this
Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer").
Tendering stockholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. Purchaser will pay all charges and expenses
of Lehman Brothers Inc. ("Lehman"), which is acting as Dealer Manager for the
Offer (in such capacity, the "Dealer Manager"), Citibank, N.A. (the
"Depositary") and MacKenzie Partners, Inc. (the "Information Agent") incurred
in connection with the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") UNANIMOUSLY HAS
DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED BELOW) IS FAIR
TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY, AND
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
TO THE OFFER.
THE OFFER IS CONDITIONED UPON (I) THERE BEING VALIDLY TENDERED AND NOT
WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST THAT NUMBER OF SHARES
THAT SHALL CONSTITUTE A MAJORITY OF THE THEN OUTSTANDING SHARES ON A FULLY
DILUTED BASIS (INCLUDING, WITHOUT LIMITATION, ALL SHARES ISSUABLE UPON THE
EXERCISE OF ANY OPTIONS, WARRANTS OR RIGHTS (THE "MINIMUM CONDITION")) AND
(II) THE EXPIRATION OR TERMINATION OF ALL WAITING PERIODS IMPOSED UPON
CONSUMMATION OF THE OFFER BY THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT
OF 1976, AS AMENDED, AS WELL AS THE OTHER CONDITIONS DESCRIBED HEREIN. SEE
SECTION 14, WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of March 23, 1997 (the "Merger Agreement"), among ESI, Purchaser and the
Company. The Merger Agreement provides that, among other things, as soon as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of the other conditions set forth in the Merger Agreement and in
accordance with the relevant provisions of the General Corporation Law of the
State of Delaware ("Delaware Law"), Purchaser will be merged with and into the
Company (the "Merger"). Following consummation of the Merger, the Company will
continue as the surviving corporation (the "Surviving Corporation") and will
become a wholly owned subsidiary of ESI. At the effective time of the Merger
(the "Effective Time"), each Share issued and outstanding immediately prior to
the Effective
3
<PAGE>
Time (other than Shares held in the treasury of the Company, shares held by
Purchaser, or Shares held by stockholders who shall have demanded and
perfected appraisal rights, if any, under Delaware Law) will be canceled and
converted automatically into the right to receive $32 in cash, or any higher
price that may be paid per Share in the Offer, without interest (the "Merger
Consideration"). The Merger Agreement is more fully described in Section 10.
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of Shares satisfying the Minimum Condition, Purchaser shall be entitled to
designate a majority of the members of the Board, subject to compliance with
Section 14(f) of the Securities and Exchange Act of 1934, as amended (the
"Exchange Act"). In the Merger Agreement, the Company has agreed to take all
actions necessary to cause Purchaser's designees to be elected as directors of
the Company, including increasing the size of the Board or securing the
resignations of incumbent directors or both.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including the approval and adoption of the Merger
Agreement by the requisite vote of the stockholders of the Company, if such
vote is required under Delaware Law. See Section 11. Under the Company's
Certificate of Incorporation and Delaware Law, the affirmative vote of the
holders of a majority of the outstanding Shares is required to approve and
adopt the Merger Agreement and the Merger. Consequently, if Purchaser acquires
(pursuant to the Offer or otherwise) at least a majority of the outstanding
Shares, Purchaser will have sufficient voting power to approve and adopt the
Merger Agreement and the Merger without the vote of any other stockholder.
Under Delaware Law, if Purchaser acquires, pursuant to the Offer or
otherwise, such number of Shares which, when added to the Shares owned of
record by Purchaser on such date, constitutes at least 90% of the then
outstanding Shares, Purchaser will be able to approve and adopt the Merger
Agreement and the Merger, without a vote of the Company's stockholders. In
such event, ESI, Purchaser and the Company have agreed to take, at the request
of Purchaser, all necessary and appropriate action to cause the Merger to
become effective as soon as reasonably practicable after such acquisition,
without a meeting of the Company's stockholders. If, however, Purchaser does
not acquire such number of Shares which, when added to the Shares owned of
record by Purchaser on such date, constitutes at least 90% of the then
outstanding Shares pursuant to the Offer or otherwise and a vote of the
Company's stockholders is required under Delaware Law, a significantly longer
period of time will be required to effect the Merger. See Section 11.
The Company has advised Purchaser that as of March 19, 1997, 8,782,265
Shares were issued and outstanding. The Company has advised Purchaser that as
of March 19, 1997, the Company had duly reserved a total of 2,764,000 Shares
for future issuance pursuant to outstanding employee stock options or stock
incentive rights granted pursuant to the Company's 1993 Stock Option and
Restricted Stock Plan (the "1993 Plan"), of which 1,985,851 Shares are subject
to outstanding grants.
The Securities and Exchange Commission (the "Commission") has adopted Rule
13e-3 under the Exchange Act, which is applicable to certain "going private"
transactions. Rule 13e-3 requires, among other things, that certain financial
information concerning the Company and certain information relating to the
fairness of the proposed transaction and the consideration offered to minority
stockholders in such transaction be filed with the Commission and disclosed to
stockholders prior to consummation of the transaction. Purchaser believes that
Rule 13e-3 will not be applicable to the Offer or the Merger. However, no
assurances can be given that the Commission will not take the position that
Rule 13e-3 is applicable to the Offer or the Merger.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ IN ITS ENTIRETY BEFORE ANY DECISION
IS MADE WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), Purchaser will accept
for payment and pay for all Shares validly tendered prior to the Expiration
Date (as
4
<PAGE>
hereinafter defined) and not withdrawn as permitted by Section 4. The term
"Expiration Date" means 12:00 midnight, New York City time, on Thursday, April
24, 1997, unless and until Purchaser, in its sole discretion (but subject to
the terms and conditions of the Merger Agreement), shall have extended the
period during which the Offer is open, in which event the term "Expiration
Date" shall mean the latest time and date at which the Offer, as so extended
by Purchaser, shall expire.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement), at any time and from
time to time, to extend for any reason the period of time during which the
Offer is open, including the occurrence of any of the conditions specified in
Section 14, by giving oral or written notice of such extension to the
Depositary. During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer, subject to the rights of a
tendering stockholder to withdraw his, her or its Shares. See Section 4.
Subject to the applicable regulations of the Commission, Purchaser also
expressly reserves the right (but subject to the terms and conditions of the
Merger Agreement), (i) to increase the price per share payable in the Offer,
(ii) to terminate the Offer and not accept for payment any Shares if the
conditions to the Offer shall not be satisfied and (iii) to waive any
condition or otherwise amend the Offer in any respect (subject to the
limitations described below), by giving oral or written notice of such delay,
termination, waiver or amendment to the Depositary and by making a public
announcement thereof. However, the Merger Agreement provides that Purchaser
will not (i) decrease the price per Share payable pursuant to the Offer, (ii)
reduce the maximum number of Shares to be purchased in the Offer, (iii) impose
conditions to the Offer in addition to those set forth in Section 14, (iv)
amend any other terms of the Offer in a manner adverse to the Company's
stockholders. Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange
Act requires Purchaser to pay the consideration offered or return the Shares
tendered promptly after the termination or withdrawal of the Offer and (ii)
Purchaser may not delay acceptance for payment of, or payment for (except as
specified in Section 14), any Shares upon the occurrence of any of the
conditions specified in Section 14(c) without extending the period of time
during which the Offer is open.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules 14d-
4(c) and 14d-6(d) under the Exchange Act.
Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, Purchaser should decide to increase the consideration being offered in
the Offer, such increase in the consideration being offered will be applicable
to all stockholders whose Shares are accepted for payment pursuant to the
Offer and, if at the time notice of any such increase in the consideration
being offered is first published, sent or given to holders of such Shares, the
Offer is scheduled to expire at any time earlier than the period ending on the
tenth business day from and including the date that such notice is first so
published, sent or given, the Offer will be extended at least until the
expiration of such ten business day period. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or federal holiday
and consists of the time period from 12:01 a.m. through 12:00 midnight, New
York City time.
The Company has provided Purchaser with the Company's stockholder list and
security position listings for the purpose of disseminating the Offer to
holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares whose names appear on
the Company's stockholder list and will be furnished, for subsequent
transmittal to beneficial owners of Shares, to brokers, dealers, commercial
banks, trust companies and similar persons whose names, or the names of whose
nominees, appear on the stockholder list or, if applicable, who are listed as
participants in a clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject
to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment),
Purchaser will accept for payment, and will pay for, all Shares validly
tendered prior to the Expiration Date and not properly withdrawn promptly
after the later to occur of (i) the Expiration Date, and (ii)
5
<PAGE>
the expiration or termination of any applicable waiting periods under the HSR
Act and any applicable foreign competition and antitrust statutes and
regulations. Subject to applicable rules of the Commission, Purchaser
expressly reserves the right to delay acceptance for payment of, or payment
for, Shares pending receipt of any regulatory approvals specified in Section
15 or in order to comply in whole or in part with any other applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
the certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of a book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company, or the
Philadelphia Depository Trust Company (each, a "Book-Entry Transfer Facility"
and, collectively, the "Book-Entry Transfer Facilities") pursuant to the
procedures set forth in Section 3, (ii) the Letter of Transmittal (or a
facsimile thereof), properly completed and duly executed, with any required
signature guarantees, or an Agent's Message (as defined below) in connection
with a book-entry transfer and (iii) any other documents required by the
Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares, that such participant has received and
agrees to be bound by the terms of the Letter of Transmittal and that the
Purchaser may enforce such agreement against such participant.
On March 26, 1997, ESI filed with the Federal Trade Commission (the "FTC")
and the Antitrust Division of the Department of Justice (the "Antitrust
Division") a Pre-merger Notification and Report Form under the HSR Act with
respect to the Offer. Accordingly, it is anticipated that the waiting period
under the HSR Act applicable to the Offer will expire at 11:59 p.m., New York
City time, on April 10, 1997. Prior to the expiration or termination of such
waiting period, the FTC or the Antitrust Division may extend such waiting
period by requesting additional information from ESI with respect to the
Offer. Upon request, the waiting period under the HSR Act may be terminated
prior to its expiration by the FTC and the Antitrust Division. See Section 15.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares pursuant to
the Offer. 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 agent
for tendering stockholders for the purpose of receiving payments from
Purchaser and transmitting such payments to tendering stockholders whose
Shares have been accepted for payment. Under no circumstances will interest on
the purchase price for Shares be paid, regardless of any delay in making such
payment.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are
submitted evidencing more Shares than are tendered, Share Certificates
evidencing unpurchased Shares will be returned, without expense to the
tendering stockholder (or, in the case of Shares tendered by book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility
pursuant to the procedure set forth in Section 3, such Shares will be credited
to an account maintained at such Book-Entry Transfer Facility), as promptly as
practicable following the expiration or termination of the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or
any portion of the Shares tendered pursuant to the Offer, but any such
transfer or assignment will not relieve Purchaser of its obligations under the
Offer and will in no way prejudice the rights of tendering stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant
to the Offer.
6
<PAGE>
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for a
holder of Shares validly to tender Shares pursuant to the Offer, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees, or an Agent's Message in
connection with a book-entry delivery of Shares, and any other documents
required by the Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase and
either (i) the Share Certificates evidencing tendered Shares must be received
by the Depositary at such address or such Shares must be tendered pursuant to
the procedure for book-entry transfer described below and a Book-Entry
Confirmation must be received by the Depositary, in each case prior to the
Expiration Date, or (ii) the tendering stockholder must comply with the
guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facilities for purposes of the Offer
within two business days after March 28, 1997. Any financial institution that
is a participant in the system of any Book-Entry Transfer Facility may make a
book-entry delivery of Shares by causing such Book-Entry Transfer Facility to
transfer such Shares into the Depositary's account at such Book- Entry
Transfer Facility in accordance with such Book-Entry Transfer Facility's
procedures for such transfer. However, although delivery of Shares may be
effected through book-entry transfer at a Book-Entry Transfer Facility, the
Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's
Message in connection with a book-entry transfer, and any other required
documents, must, in any case, be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase prior to the
Expiration Date, or the tendering stockholder must comply with the guaranteed
delivery procedure described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. No signature guarantee is required on the Letter of
Transmittal (a) if the Letter of Transmittal is signed by the registered
holder (which term, for purposes of this Section, includes any participant in
any of the Book-Entry Transfer Facilities' systems 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) if 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 Securities Transfer Agents Medallion Program, the New York Stock Exchange
Medallion Signature Guarantee Program or the Stock Exchange Medallion Program
(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 Share Certificates 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 Share Certificates for Shares not tendered or not
accepted for payment are to be returned to a person other than the registered
holder of the Share Certificates surrendered, the tendered Share Certificates
must be endorsed or accompanied by appropriate stock powers, in either case
signed exactly as the name or names of the registered holders appear on the
Share Certificates, with the signatures on the Share Certificates or stock
powers guaranteed as described above. See Instructions 1 and 5 to the Letter
of Transmittal.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's Share Certificates evidencing such Shares are
not immediately available or such stockholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such stockholder cannot complete the procedure for
delivery by book-entry transfer on a timely basis, such Shares may
nevertheless be tendered, provided that all the following conditions are
satisfied:
7
<PAGE>
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, is
received prior to the Expiration Date by the Depositary as provided below;
and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message), and any other documents
required by the Letter of Transmittal are received by the Depositary within
three National Association of Securities Dealers Automated Quotation--
National Market System ("Nasdaq") trading days after the date of execution
of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram, telex or facsimile transmission to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in
the form of Notice of Guaranteed Delivery made available by Purchaser.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile
thereof), properly completed and duly executed, with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message), and
any other documents required by the Letter of Transmittal.
Determination of Validity. All questions as to the validity, form,
eligibility (including time of receipt) and acceptance for payment of any
tender of Shares will be determined by Purchaser in its sole discretion, which
determination shall be final and binding on all parties. Purchaser reserves
the absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. Purchaser also reserves the absolute right to waive any
condition of the Offer or any defect or irregularity in the tender of any
Shares of any particular stockholder, whether or not similar defects or
irregularities are waived in the case of other stockholders. No tender of
Shares will be deemed to have been validly made until all defects and
irregularities have been cured or waived. None of Purchaser, ESI, the Dealer
Manager, the Depositary, the Information Agent or any other person will be
under any duty to give notification of any defects or irregularities in
tenders or incur any liability for failure to give any such notification.
Purchaser's interpretation of the terms and conditions of the Offer (including
the Letter of Transmittal and the instructions thereto) will be final and
binding.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering stockholder irrevocably appoints designees of Purchaser as
such stockholder's proxies, each with full power of substitution, in the
manner set forth in the Letter of Transmittal, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder
and accepted for payment by Purchaser (and with respect to any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after March 23, 1997). All such proxies shall be considered coupled with an
interest in the tendered Shares. Such appointment will be effective when, and
only to the extent that, Purchaser accepts such Shares for payment. Upon such
acceptance for payment, all prior proxies given by such stockholder with
respect to such Shares (and such other Shares and securities) will be revoked
without further action, and no subsequent proxies may be given nor any
subsequent written consent executed by such stockholder (and, if given or
executed, will not be deemed to be effective) with respect thereto. The
designees of Purchaser will, with respect to the Shares (and such other Shares
and securities) for which the appointment is effective, be empowered to
exercise all voting and other rights of such stockholder as they in their sole
discretion may deem proper at any annual or special meeting of the Company's
stockholders or any adjournment or postponement thereof, by written consent in
lieu of any such meeting or otherwise. Purchaser reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's payment for such Shares, Purchaser must be able to exercise full
voting rights with respect to such Shares (and such other Shares and
securities).
8
<PAGE>
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering stockholder and Purchaser upon the terms and subject to the
conditions of the Offer.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH STOCKHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH
STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH
STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY
COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. SEE
INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that tendered Shares may be withdrawn by the tendering
stockholder at any time prior to the Expiration Date and, unless theretofore
accepted for payment by Purchaser pursuant to the Offer, may also be withdrawn
by such stockholder at any time after May 27, 1997. If Purchaser extends the
Offer, is delayed in its acceptance for payment of Shares or is unable to
accept Shares for payment pursuant to the Offer for any reason, then, without
prejudice to Purchaser's rights under the Offer, the Depositary may,
nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares
may not be withdrawn except to the extent that tendering stockholders are
entitled to withdrawal rights as described in this Section 4. Any such delay
will be by an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover page of this Offer to
Purchase. Any such notice of withdrawal must specify the name of the person
who tendered the Shares to be withdrawn, the number of Shares to be withdrawn
and the name of the registered holder of such Shares, if different from that
of the person who tendered such Shares. If Share Certificates evidencing
Shares to be withdrawn have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such Share Certificates,
the serial numbers shown on such Share Certificates must be submitted to the
Depositary and the signature(s) on the notice of withdrawal must be guaranteed
by an Eligible Institution, unless such Shares have been tendered for the
account of an Eligible Institution. If Shares have been tendered pursuant to
the procedure for book-entry transfer as set forth in Section 3, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Shares, in which case a
notice of withdrawal will be effective if delivered to the Depositary by any
method of delivery described in the first sentence of this paragraph.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
whose determination will be final and binding. None of Purchaser, ESI, the
Dealer Manager, the Depositary, the Information Agent or any other person will
be under any duty to give notification of any defects or irregularities in any
notice of withdrawal or incur any liability for failure to give any such
notification.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer or in the Merger will be a taxable transaction for
federal income tax purposes and may also be a taxable transaction under
applicable state, local or foreign tax laws. In general, a stockholder will
recognize gain or loss for federal income tax purposes equal to the difference
between the amount of cash received in exchange for the Shares sold and such
stockholder's adjusted tax basis in such Shares. Assuming the Shares
constitute capital assets in the hands of the stockholder, such gain or loss
will be capital gain or loss. If, at the time of the Offer or the Merger, the
Shares then exchanged have been held for more than one year, such gain or loss
will be long-term
9
<PAGE>
capital gain or loss. Under current law, long-term capital gains of
individuals are, under certain circumstances, taxed at lower rates than items
of ordinary income and short-term capital gains.
THE FOREGOING DISCUSSION MAY NOT BE APPLICABLE TO CERTAIN TYPES OF
STOCKHOLDERS, INCLUDING STOCKHOLDERS WHO ACQUIRED SHARES PURSUANT TO THE
EXERCISE OF EMPLOYEE STOCK OPTIONS OR OTHERWISE AS COMPENSATION, INDIVIDUALS
WHO ARE NOT CITIZENS OR RESIDENTS OF THE UNITED STATES AND FOREIGN
CORPORATIONS.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY AND IS BASED UPON PRESENT LAW. STOCKHOLDERS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES
OF THE OFFER AND THE MERGER TO THEM, INCLUDING THE APPLICATION AND EFFECT OF
THE ALTERNATIVE MINIMUM TAX, AND STATE, LOCAL AND FOREIGN TAX LAWS.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and principally
traded on The Nasdaq National Market. The following table sets forth, for the
quarters indicated, the high and low sales prices per Share on The Nasdaq
National Market as reported by the Dow Jones News Service.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Fiscal year ending March 31, 1995:
First Quarter............................................. $ 8.625 $ 6.375
Second Quarter............................................ 8.000 5.250
Third Quarter............................................. 9.000 6.625
Fourth Quarter............................................ 13.500 8.000
Fiscal year ending March 31, 1996:
First Quarter............................................. $15.125 $11.250
Second Quarter............................................ 18.875 14.250
Third Quarter............................................. 26.250 15.625
Fourth Quarter............................................ 23.750 17.875
Fiscal Year ending March 31, 1997:
First Quarter............................................. $32.250 $20.875
Second Quarter............................................ 33.250 26.250
Third Quarter............................................. 31.625 14.000
</TABLE>
The Company historically has not declared dividends.
On March 21, 1997, the last full trading day prior to the announcement of
the execution of the Merger Agreement and of Purchaser's intention to commence
the Offer, the closing price per Share as reported on The Nasdaq National
Market was $17.25.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth
herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company
or has been taken from or based upon publicly available documents and records
on file with the Commission and other public sources. Neither Purchaser, ESI,
nor any of their respective affiliates assumes any responsibility for the
accuracy or completeness of the information concerning the Company furnished
by the Company or contained in such documents and records or for any failure
by the Company to disclose events
10
<PAGE>
which may have occurred or may affect the significance or accuracy of any such
information but which are unknown to Purchaser, ESI or their respective
affiliates.
General. The Company is a Delaware corporation with its principal executive
offices located at 14600 Catalina Street, San Leandro, California 94577. The
Company and its subsidiaries supply scientific information management
software, chemical information databases and related services to the
pharmaceutical, biotechnology, agrochemical and chemical industries. The
Company's software and database products are designed to enable its customers
to discover and develop new products more rapidly by allowing users to access
and use scientific information more effectively. The Company pioneered the
development of scientific information management software based upon the
standard graphical representation of chemical compounds and currently offers a
broad range of scientific information management software and chemical
information databases.
Financial Information. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries which has
been excerpted or derived from the audited financial Statements contained in
the Company's Annual Report on Form 10-K for the fiscal year ended March 31,
1996 (the "Form 10-K") and the Company's Quarterly Reports on Form 10-Q for
the quarters ended December 31, 1996, 1995 and 1994 (the "10-Q's"). More
comprehensive financial information is included in the Form 10-K, the 10-Q's
and other documents filed by the Company with the Commission. The financial
information that follows is qualified in its entirety by reference to such
reports and other documents, including the financial Statements and related
notes contained therein. Such reports and other documents may be examined and
copies may be obtained from the offices of the Commission in the manner set
forth at the end of this Section 7.
11
<PAGE>
MDL INFORMATION SYSTEMS, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH
31,
------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................................ $61,506 $50,951 $43,381
Gross profit........................................ 51,923 42,226 37,017
Operating income.................................... 10,339 4,280 3,377
Income before income taxes.......................... 10,982 4,660 723
Net income.......................................... 12,425 3,968 37
Average number of shares outstanding (as adjusted to
give effect to stock dividends or stock splits).... 9,239 8,317 8,200
Net income per share................................ $ 1.34 $ .48 $ .00
BALANCE SHEET DATA:
Current Assets...................................... $36,409 $24,966 $19,744
Deferred Income tax................................. (2,556) -- --
Total Assets........................................ 57,132 42,182 34,151
Current Liabilities................................. 20,547 18,128 15,984
Noncurrent Portion of Long-Term Debt................ -- 1,900 --
Stockholders' Equity................................ 36,585 22,154 18,167
<CAPTION>
NINE MONTHS ENDED
DECEMBER 31,
------------------------
1996 1995 1994
------- ------- -------
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................................ $53,008 $44,601 $36,809
Gross profit........................................ 44,106 37,478 30,446
Operating income.................................... 7,932 7,430 2,686
Income before income taxes.......................... 9,156 7,953 2,864
Net income.......................................... 8,189 7,068 2,231
Average number of shares outstanding (as adjusted to
give effect to stock dividends or stock splits).... 9,593 9,172 8,200
Net income per share................................ $ .85 $ .77 $ .27
BALANCE SHEET DATA:
Current Assets...................................... $32,315 $27,587 14,765
Deferred Income tax................................. (2,556) -- --
Total Assets........................................ 58,554 44,891 32,418
Current Liabilities................................. 12,220 14,014 10,137
Noncurrent Portion of Long-Term Debt................ -- -- 1,900
Stockholders' Equity................................ 46,334 30,877 20,381
</TABLE>
12
<PAGE>
In connection with the Purchaser's and ESI's review of the Company and in
the course of the negotiations between the Company and the Purchaser and ESI
described in Section 10, the Company provided those parties with certain
business and financial information which ESI and Purchaser believe is not
publicly available. The Company provided the Purchaser and ESI with financial
forecasts in which the Company estimated its fiscal 1998 revenues could be
approximately $85 million and its fiscal 1998 operating income could be
approximately $14.8 million.
PROJECTED INFORMATION OF THIS TYPE IS BASED ON ESTIMATES AND ASSUMPTIONS
THAT ARE INHERENTLY SUBJECT TO SIGNIFICANT ECONOMIC AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE DIFFICULT TO PREDICT AND
MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE PROJECTED RESULTS WOULD BE REALIZED OR THAT ACTUAL RESULTS
WOULD NOT BE SIGNIFICANTLY HIGHER OR LOWER THAN THOSE SET FORTH ABOVE. IN
ADDITION, THESE 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 AND FORECASTS AND ARE INCLUDED IN THIS OFFER
TO PURCHASE ONLY BECAUSE SUCH INFORMATION WAS MADE AVAILABLE TO THE PURCHASER
AND ESI BY THE COMPANY. NONE OF ESI, PURCHASER, THE COMPANY, ANY OF THEIR
RESPECTIVE AFFILIATES OR ANY OTHER PARTY ASSUMES ANY RESPONSIBILITY FOR THE
ACCURACY OR VALIDITY OF THE FOREGOING PROJECTIONS.
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file periodic
reports, proxy statements and other information with the Commission relating
to its business, financial condition and other matters. Information as of
particular dates concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities and any material interest of such persons in transactions
with the Company is required to be disclosed in proxy statements distributed
to the Company's stockholders and filed with the Commission. Such reports,
proxy statements and other information should be available for inspection at
the public reference facilities maintained by the Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549, and also should be available for
inspection at the Commission's regional offices located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may also be obtained (i) by mail, upon payment of the Commission's customary
fees, by writing to its principal office at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, or (ii) at the Commission's world-wide web site
at http://www.sec.gov.
8. CERTAIN INFORMATION CONCERNING PURCHASER, ESI, PLC AND NV. Purchaser is a
newly incorporated Delaware corporation organized in connection with the Offer
and the Merger and has not carried on any activities other than in connection
with the Offer and the Merger. The principal offices of Purchaser are located
at 200 Park Avenue, 17th Floor, New York, NY 10166. Purchaser is a direct
wholly owned subsidiary of ESI.
Until immediately prior to the time that Purchaser will purchase Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger. Because Purchaser is newly formed and has minimal
assets and capitalization, no meaningful financial information regarding
Purchaser is available.
ESI is a New York corporation, with its principal office at 655 Avenue of
the Americas, New York, NY 10010. ESI's principal business is the publication
of scientific journals and provision of information services.
13
<PAGE>
PLC is a corporation organized under the laws of England, with its principal
office at 6 Chesterfield Gardens, London W1A1EJ, England. PLC's principal
business is scientific, professional, business to business and consumer
publishing and information services.
NV is a corporation organized under the laws of The Netherlands, with its
principal office at Van de Sande Bakhuyzenstraat 4, 1061 AG Amsterdam, The
Netherlands. NV's principal business is scientific, professional, business to
business and consumer publishing and information services.
The combination of PLC, NV, their jointly owned subsidiaries Reed Elsevier
plc and Elsevier Reed Finance BV (together referred to as "Reed Elsevier")
form one of the world's largest publishing and information providers.
The name, citizenship, business address, principal occupation or employment,
and five-year employment history for each of the directors and executive
officers of Purchaser and ESI and certain other information are set forth in
Schedule I hereto.
Neither ESI, PLC, NV or Purchaser nor, to the best knowledge of Purchaser,
ESI, PLC, NV, any of the persons listed in Schedule I to this Offer to
Purchase or any associate or majority-owned subsidiary of Purchaser, ESI, PLC,
NV or any of the persons so listed beneficially owns or has any right to
acquire, directly or indirectly, any Shares and (ii) neither ESI or Purchaser
nor, to the best knowledge of Purchaser and ESI, any of the persons or
entities referred to above nor any director, executive officer or subsidiary
of ESI, PLC, NV or Purchaser has effected any transaction in the Shares during
the past 60 days.
Except as provided in the Merger Agreement and as otherwise described in
this Offer to Purchase, to the best of their knowledge, none of ESI, PLC, NV,
Purchaser or any of their respective subsidiaries or any of the persons listed
in Schedule I to this Offer to Purchase, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or voting
of such securities, finder's fees, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss,
guarantees of profits, division of profits or loss or the giving or
withholding of proxies. To the best of their knowledge and except as set forth
in this Offer to Purchase, none of Purchaser, PLC, NV and ESI, nor any of the
persons listed on Schedule I hereto, has had any business relationship or
transaction with the Company or any of its executive officers, directors or
affiliates that is required to be reported under the rules and regulations of
the Commission applicable to the Offer. Set forth below in Section 10 of this
Offer to Purchase and elsewhere herein is a summary description of the mutual
contacts, negotiations and transactions between any of Purchaser, PLC, NV,
ESI, or any of their respective subsidiaries or any of the persons listed in
Schedule I to this Offer to Purchase, on the one hand, and the Company or its
affiliates, on the other hand, concerning a merger, consolidation or
acquisition, tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.
The Reed Elsevier combined audited balance sheet and the related combined
statements of income, total recognized gains and losses, changes in combined
shareholders' equity and cash flows for the three years ended December 31,
1996, 1995 and 1994 are contained in Item 19 of the combined Reed Elsevier
annual report for the year ended December 31, 1996 filed with the Commission
(the "Annual Report") and are hereby incorporated by reference. A copy of the
Annual Report may be obtained by: (i) writing to PLC at 6 Chesterfield
Gardens, London W1AEJ, England, attention: Corporate Secretary, (ii) writing
to NV at Van de Sande Bakhuyzenstraat 4, 1061 AG Amsterdam, The Netherlands,
attention: Corporate Secretary, (iii) mail, upon payment of the Commission's
customary fees, by writing to its principal office at Judiciary Plaza, 450
Fifth Street, N.W., Washington, D.C. 20549 or (iv) down-loading such report
from the Commission's world-wide web site at http://www.sec.gov. Summary
financial information can also be obtained from the Reed Elsevier world-wide
web site at http://www.reed-elsevier.com. Information obtained at such world-
wide web site shall not be deemed to be part of this Offer to Purchase.
Additionally, the Annual Report may be inspected at the Commission's offices.
14
<PAGE>
9. FINANCING OF THE OFFER AND THE MERGER. The total amount of funds required
by Purchaser to consummate the Offer and the Merger is estimated to be
approximately $284 million, including approximately $3 million to pay related
fees and expenses but excluding amounts payable by the Company with respect to
options granted pursuant to the 1993 Plan (based on 8,782,265 Shares
outstanding and 1,985,851 options for Shares outstanding as of March 19,
1997). Purchaser will obtain all of such funds from ESI, PLC, NV or one of
their respective affiliates. ESI and its affiliates will provide such funds
from working capital.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE MERGER
AGREEMENT. In late 1994, Peter Shepherd, Managing Director of Elsevier Science
S.A., an affiliate of ESI, met with representatives of the Company at the
Company's principal offices in San Leandro, California, regarding a possible
collaboration between the Company and ESI in the area of database development.
No firm proposals resulted from this meeting.
In May 1996, ESI was contacted on behalf of the Company by Goldman who
indicated that the Company wished to explore the possibility of an acquisition
of the Company by ESI and that the Company was simultaneously approaching
other possible acquirors. On May 22, 1996, Edward Reiner of ESI and Mr.
Shepherd met with representatives of Goldman and Steven Goldby and John
Hanlon, the Company's Chief Executive Officer and Senior Vice President -
Finance, respectively, to discuss a potential transaction.
On June 14, 1996, Mr. Shepherd sent a letter to Goldman indicating that ESI
was interested in pursuing discussions with a view to acquiring a majority
stake in the Company. Goldman responded on June 18, 1996, acknowledging the
receipt of the expression of interest and indicating that ESI was to be
considered one of the prospective bidders for the acquisition of the Company.
Between June 18, 1996 and early July 1996, Mr. Reiner had several telephonic
conversations with Goldman concerning the bidding process and the desire of
the Company to obtain a bid that would represent a substantial premium to the
then-current trading price for the Shares.
ESI submitted an informal and non-binding proposal to acquire the Company
which was rejected by the Company. On July 29, 1996, a representative of
Goldman informed Mr. Reiner by telephone that the auction process was being
terminated because of the lack of an adequate bid, and that the Company was no
longer interested in a possible transaction unless an adequate bid was
submitted.
From September through November of 1996, Mr. Reiner maintained occasional
contact with Goldman regarding the Company. On November 25, 1996, Mr. Shepherd
and Mr. Goldby met at Mr. Shepherd's offices at Elsevier Science S.A. in
Switzerland to discuss ESI and the Company and the strategic fit between the
two companies.
In late January and early February, ESI held several meetings in New York
with Lehman to discuss the background surrounding the prior sale process
concerning the Company and engaged Lehman to provide advice in connection with
the reinitiation of discussions with the Company regarding a possible sale of
the Company to ESI.
On February 12, 1997, at the invitation of Mr. Shepherd, Messrs. Goldby and
Hanlon and Thomas Jones, the Company's President and Chief Operating Officer,
met in the San Francisco Bay Area with Mr. Shepherd, Messrs. Spruijt, Jobsis
and Nientker of Elsevier Science B.V., and Russell White, President of ESI, to
discuss a possible transaction between the Company and ESI. Following this
meeting, the Company and ESI scheduled due diligence meetings for the week of
February 24, 1997.
Between February 24 and February 28, 1997, ESI conducted a due diligence
investigation of the Company. During this week, various representatives of ESI
and the Company, together with their respective legal and financial advisors,
met to discuss the business and financial condition of the Company.
On February 27, 1997, ESI's legal counsel, Wilson Sonsini Goodrich & Rosati
("WSGR") submitted to the Company for its review a draft term sheet outlining
the terms of a possible acquisition of the Company by ESI. The draft term
sheet did not set forth a price for the possible acquisition.
15
<PAGE>
During the following week, representatives of ESI and the Company had
several telephone conversations. On March 5, 1997, several discussions took
place between Mr. Goldby and senior management of ESI. The discussions
initially focused on the prior week's due diligence and the strategic fit of
ESI and the Company and then focused on process, timing, and price for the
possible transaction. Mr. Spruijt indicated that subject to further due
diligence, and further subject to board approval, ESI was prepared to commence
an all cash tender offer for the Company at a price of $27 per Share. Mr.
Goldby initially suggested that ESI send a team back to California to commence
negotiations on March 8, 1997, but subsequently called ESI to say that a
second bidder was conducting due diligence and that the Company could not
commence negotiations until the other bidder had completed its due diligence
investigations.
Over the next several days, representatives of Lehman and Goldman discussed
the sale process and timing, and ESI's continuing level of interest in the
Company. On March 12, 1997, Mr. Goldby called Mr. Spruijt to inquire about
ESI's interest in the Company and indicated that the second bidder was
planning to submit a proposal to acquire the Company later that day and that
the Company's board would meet the following day to evaluate both proposals
with the intention of selecting one bidder for continued negotiations.
On March 14, 1997, Mr. Nientker called Mr. Goldby to inquire as to the
status of the process and Mr. Goldby said the Company's board had directed
Goldman to contact Lehman as well as advisors for the other bidder to discuss
process. Shortly thereafter, representatives of Goldman called representatives
of Lehman to request that ESI submit a final offer, accompanied with a draft
definitive agreement containing proposed terms and conditions, by March 16,
1997 at 5:00 p.m.
On March 15, 1997, Mr. Nientker called Mr. Goldby to discuss the process
outlined the previous day by Goldman. Mr. Goldby and Mr. Nientker discussed
the price and other terms of ESI's previous proposal. In discussing price, Mr.
Goldby stated that the second bidder had offered a higher amount for the
Company than ESI.
Subsequent to the discussion between Messrs. Nientker and Goldby, ESI and
representatives of Lehman and WSGR discussed the current status of the sale
process, ESI's current proposal, and bidding strategy. As a result of these
discussions, ESI directed WSGR to submit a revised bid to Goldman the
following day reflecting an increase in the offer price to $29 per share.
On March 16, WSGR delivered to Goldman, on ESI's behalf, a revised bid of
$29 per Share, together with a draft acquisition agreement.
On March 18, Mr. Nientker called Mr. Goldby to inquire as to the status of
ESI's bid. Mr. Goldby informed Mr. Nientker that the Company's board had
convened and instructed management to proceed with the offer presented by the
second bidder. On March 19, Mr. Goldby called Mr. Spruijt to discuss the
possibility of commercial arrangements between ESI and the Company. Mr.
Spruijt indicated that ESI was not interested in such a discussion at that
time.
16
<PAGE>
On March 20, Mr. Spruijt sent the following letter to the Company's board of
directors:
The Board of Directors of
MDL Information Systems, Inc.
14600 Catalina Street
San Leandro, CA 94577
U.S.A.
Amsterdam, March 20th, 1997
Dear Board Members,
We were disappointed that the Board of Directors of MDL Information Systems,
Inc. has elected to terminate the negotiation process regarding our proposal
to acquire the Company. As we have indicated to your advisors, we remain
flexible regarding all aspects of our previous fully-financed cash proposal.
Specifically, we are prepared to offer a price in excess of the range of $28-
31 per share that was previously discussed. In addition, we remain open to
discussing the terms and structure of our proposal, including the lock-up
option and conditions to closing. We believe that we can consummate a
transaction quickly and efficiently.
We would like very much to enter into immediate discussions with the Company
and its advisors. We stand ready to meet at any time, at any place to continue
our discussions. Our legal and financial advisors will also be available as
necessary.
We look forward to exploring ways to preserve the Company's culture and to
recognize the past and future contributions of your talented team who are key
to the Company's success. Obviously, we will want to work together with the
Company's management in formulating suitable compensation plans and targets.
As we believe that a negotiated transaction would be the best way for the
Company to maximize shareholder value, we ask that the Board of Directors
consider our request to meet promptly so that we may negotiate and announce
our transaction. We have considered with our advisors all legal and other
requirements relating to a transaction and do not foresee any difficulties in
completing the prompt acquisition of the Company.
We look forward to hearing from you soon.
Very truly yours,
/s/ Herman P. Spruijt
- -------------------------------------
Herman P. Spruijt
Chairman
17
<PAGE>
Subsequently, on March 20, 1997, Larry Sonsini of WSGR called the Company's
counsel and Paul Parker of Lehman called representatives of Goldman to discuss
the letter sent by ESI. A representative of Goldman then called Mr. Sonsini to
discuss the terms of ESI's revised offer. Later that day, WSGR submitted a
term sheet on behalf of ESI to Mr. Hachigian proposing an all cash tender
offer for the Company at a price of $32 per Share.
On March 21, 1997 Goldman informed WSGR and Lehman that the Company was
prepared to negotiate a definitive agreement with ESI the next day.
On Saturday, March 22, 1997 representatives of ESI, WSGR, Lehman, the
Company and the Company's legal counsel negotiated a definitive agreement and
all ancillary documents. In the evening of March 22, the Company's board of
directors held a telephonic board meeting during which they reviewed and
unanimously approved the Offer and the Merger. The definitive agreements were
signed on behalf of ESI and the Company early in the morning of March 23,
1997.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is filed
as an Exhibit to the Tender Offer Statement on Schedule 14D-1 (the "Schedule
14D-1") filed by Purchaser and ESI with the Commission in connection with the
Offer. Such summary is qualified in its entirety by reference to the Merger
Agreement. Capitalized terms not otherwise defined in the following
description of the Merger Agreement have the respective meanings ascribed to
them in the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five
business days after the initial public announcement of Purchaser's intention
to commence the Offer. The obligation of Purchaser to accept for payment
Shares tendered pursuant to the Offer is subject to the satisfaction of the
Minimum Condition and certain other conditions that are described in Section
14 hereof. Purchaser and ESI have agreed that no change in the Offer may be
made which decreases the price per Share payable in the Offer, reduces the
maximum number of Shares to be purchased in the Offer, imposes conditions to
the Offer in addition to those set forth in Section 14 hereof, changes the
form of consideration payable in the Offer or amends any other material terms
of the Offer in a manner adverse to the Company's stockholders.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with Delaware Law, at the
Effective Time, Purchaser shall be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Purchaser will cease
and the Company will continue as the Surviving Corporation (the "Surviving
Corporation") and will become a direct or indirect wholly owned subsidiary of
ESI. Upon consummation of the Merger, each issued and then outstanding Share
(other than any Shares held in the treasury of the Company, or owned by
Purchaser, ESI or any direct or indirect wholly owned subsidiary of ESI or of
the Company and any Shares which are held by stockholders who have not voted
in favor of the Merger or consented thereto in writing and who shall have
demanded properly in writing appraisal for such Shares in accordance with
Delaware Law) shall be automatically converted into, and exchanged for, the
right to receive the Merger Consideration.
Pursuant to the Merger Agreement, each share of common stock, par value $.01
per share, of Purchaser issued and outstanding immediately prior to the
Effective Time shall be converted into and exchanged for one share of common
stock, par value $.01 per share, of the Surviving Corporation.
The Merger Agreement provides that the directors of Purchaser immediately
prior to the Effective Time will be the initial directors of the Surviving
Corporation and that the officers of Purchaser immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation. The
Merger Agreement provides that the Certificate of Incorporation of the
Surviving Corporation shall be amended to contain the substantive provisions
of the Certificate of Incorporation of Purchaser as in effect at the Effective
Time.
18
<PAGE>
Agreements of ESI, Purchaser and the Company. Pursuant to the Merger
Agreement, the Company will, if required by applicable law in order to
consummate the Merger, duly call, give notice of, convene and hold an annual
or special meeting of its stockholders as soon as practicable following
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement, the Merger, and any other actions contemplated thereby
which require the approval of the Company's stockholders (the "Stockholders'
Meeting"). If Purchaser acquires a majority of the outstanding Shares,
Purchaser will have sufficient voting power to approve the Merger, even if no
other stockholder votes in favor of the Merger.
The Merger Agreement provides that the Company will, if necessary, as soon
as practicable at such time and place designated by Purchaser or ESI, file
with the Commission under the Exchange Act, and use its best efforts to have
cleared by the Commission, a proxy statement and related proxy materials (the
"Proxy Statement") with respect to the Stockholders' Meeting and will cause
the Proxy Statement to be mailed to stockholders of the Company at the
earliest practicable time. The Company has agreed, subject to its fiduciary
duties under applicable law as advised by counsel, to include in the Proxy
Statement the recommendation of the Board of Directors that the stockholders
of the Company approve and adopt the Merger Agreement and the Merger and to
use its best efforts to obtain such approval and adoption. The Merger
Agreement provides that, in the event that Purchaser shall acquire at least 90
percent of the then outstanding Shares, ESI, Purchaser and the Company agree,
at the request of Purchaser, to take all necessary and appropriate action to
cause the Merger to become effective as promptly as reasonably practicable
after such acquisition, without a meeting of the Company's stockholders, in
accordance with Delaware Law.
Pursuant to the Merger Agreement, the Company has covenanted and agreed to
carry on the businesses of the Company and its subsidiaries, between the date
of the Merger Agreement and the Effective Time or such time as ESI's designees
shall constitute a majority of the Board of Directors of the Company, unless
ESI shall otherwise agree diligently and in accordance with good commercial
practice, in the usual, regular and ordinary course, in substantially the same
manner as heretofore conducted and in compliance in all material respects with
all applicable laws and regulations, to pay its debts and taxes when due
subject to good faith disputes over such debts or taxes, to pay or perform in
all material respects other material obligations when due, and use its
commercially reasonable efforts consistent with past practices and policies to
preserve intact its present business organization, keep available the services
of its present officers and employees and preserve its relationships with
customers, suppliers, distributors, licensors, licensees and others with which
it has business dealings. The Merger Agreement provides that, except as
permitted by the terms of the Merger Agreement, neither the Company nor any
subsidiary will do any of the following, without the prior written consent of
ESI: (a) waive any stock repurchase rights, accelerate, amend or change the
period of exercisability of options or restricted stock, or reprice options
granted under any employee, consultant or director stock plans or authorize
cash payments in exchange for any options granted under any of such plans; (b)
grant any severance or termination pay to any officer or employee except
payments in amounts consistent with policies and past practices or pursuant to
written agreements outstanding, or policies existing, on the date of the
Merger Agreement and as previously disclosed in writing, or adopt any new
severance plan; (c) transfer or license to any person or entity or otherwise
extend, amend or modify in any material respect any rights to the Company's
intellectual property or other proprietary rights, or enter into grants to
future patent rights, other than in the ordinary course of business,
consistent with past practice; (d) declare or pay any dividends on or make any
other distributions (whether in cash, stock or property) in respect of any
capital stock or split, combine or reclassify any capital stock or issue or
authorize the issuance of any other securities in respect of, in lieu of or in
substitution for any capital stock; (e) repurchase or otherwise acquire,
directly or indirectly, any shares of capital stock except pursuant to rights
of repurchase of any such shares under any employee, consultant or director
stock plan existing on the date of the Merger Agreement; (f) issue, deliver,
sell, authorize or propose the issuance, delivery or sale of, any shares of
capital stock or any securities convertible into shares of capital stock, or
subscriptions, rights, warrants or options to acquire any shares of capital
stock, or any securities convertible into shares of capital stock, or enter
into other agreements or commitments of any character obligating it to issue
any such shares or convertible securities, other than the issuance of Shares,
pursuant to the exercise of stock options therefor outstanding as of the date
of the Merger Agreement; (g) cause, permit or propose any amendments to any
charter document or Bylaw; (h) acquire
19
<PAGE>
or agree to acquire by merging or consolidating with, or by purchasing an
equity interest in or a material portion of the assets of, or by any other
manner, any business or any corporation, partnership interest, association or
other business organization or division thereof, or otherwise acquire or agree
to acquire any assets which are material, individually or in the aggregate, to
the business of the Company, or enter into any joint ventures, strategic
partnerships or alliances; (i) sell, lease, license, encumber or otherwise
dispose of any properties or assets which are material, individually or in the
aggregate, to the business of the Company, except in the ordinary course of
business consistent with past practice; (j) incur any indebtedness for
borrowed money (other than ordinary course trade payables or pursuant to
existing credit facilities in the ordinary course of business) or guarantee
any such indebtedness or issue or sell any debt securities or warrants or
rights to acquire debt securities, or guarantee any debt securities of others;
(k) adopt or amend any employee benefit or employee stock purchase or employee
option plan, or enter into any employment contract, pay any special bonus or
special remuneration to any director or employee, or increase the salaries or
wage rates of its officers or employees other than in the ordinary course of
business, consistent with past practice, or change in any material respect any
management policies or procedures; (l) pay, discharge or satisfy any claim,
liability or obligation (absolute, accrued, asserted or unasserted, contingent
or otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business; (m) make any grant of exclusive rights to any
third party; or (n) agree in writing or otherwise to take any of the actions
described in (a) through (m) above.
The Merger Agreement provides that, promptly upon the purchase by Purchaser
pursuant to the Offer of such number of Shares which satisfies the Minimum
Condition, and from time to time thereafter, ESI will be entitled to designate
a majority of the members of the Company's Board of Directors. The Merger
Agreement also provides that the Company shall, upon request by ESI, promptly
increase the size of the Board of Directors to the extent permitted by its
Certificate of Incorporation and/or secure the resignations of such number of
directors as is necessary to enable ESI's designees to be elected to the Board
of Directors and shall cause ESI's designees to be so elected.
The Merger Agreement provides that following the election or appointment of
ESI's designees in accordance with the immediately preceding paragraph and
prior to the Effective Time, any amendment or termination of the Merger
Agreement by the Company or any extension by the Company of the time for the
performance of or waiver of any of the obligations or other acts of ESI or
Purchaser or waiver of any of the Company's rights thereunder, will require
the concurrence of a majority of those directors of the Company then in office
who were not designated by ESI.
Pursuant to the Merger Agreement, from the date of the Merger Agreement
until the Effective Time, the Company will, and will cause its subsidiaries,
officers, directors, employees and agents to, afford the officers, employees
and agents of ESI, Purchaser and their affiliates and the attorneys,
accountants, banks, other financial institutions and investment banks working
with ESI or Purchaser, and their respective officers, employees and agents,
complete access at all reasonable times to its officers, employees, agents,
properties, books, records and contracts, and shall furnish ESI, Purchaser and
their affiliates and the attorneys, banks, other financial institutions and
investment banks working with ESI or Purchaser, all financial, operating and
other data and information as they reasonably request.
The Company has agreed that, until the earlier of the Effective Time or
termination of the Merger Agreement, it and its subsidiaries will not, and
will instruct their respective directors, officers, employees,
representatives, investment bankers, agents and affiliates not to, directly or
indirectly, (i) solicit or encourage submission of, any proposals or offers by
any person, entity or group (other than ESI and its affiliates, agents and
representatives), or (ii) participate in any discussions or negotiations with,
or disclose any non-public information concerning the Company or any of its
subsidiaries to, or afford any access to the properties, books or records of
the Company or any of its subsidiaries to, or otherwise assist or facilitate,
or enter into any agreement or understanding with, any person, entity or group
(other than ESI and its affiliates, agents and representatives), in connection
with any Acquisition Proposal with respect to the Company. Under the Merger
Agreement, an "Acquisition Proposal" with respect to an entity means any
proposal or offer relating to (i) any merger, consolidation, sale of
substantial assets or similar transactions involving the entity or any
subsidiaries of
20
<PAGE>
the entity (other than sales of assets or inventory in the ordinary course of
business or as permitted under the terms of the Merger Agreement), (ii) the
acquisition by any person of beneficial ownership or a right to acquire
beneficial ownership of, or the formation of any "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder)
which beneficially owns, or has the right to acquire beneficial ownership of,
10% or more of the then outstanding shares of capital stock of the entity
(except for acquisitions for passive investment purposes only in circumstances
where the person or group qualifies for and files a Schedule 13G with respect
thereto); or (iii) any public announcement of a proposal, plan or intention to
do any of the foregoing or any agreement to engage in any of the foregoing.
The Company has also agreed that it will immediately cease any and all
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. Pursuant to the Merger
Agreement, the Company will (i) notify ESI as promptly as practicable if any
inquiry or proposal is made or any information or access is requested in
connection with an Acquisition Proposal or potential Acquisition Proposal and
(ii) as promptly as practicable notify ESI of the terms and conditions of any
such Acquisition Proposal. In addition, from and after the date of this
Agreement until the earlier of the Effective Time and termination of this
Agreement pursuant to its terms, the Company and its subsidiaries will not,
and will instruct their respective directors, officers, employees,
representatives, investment bankers, agents and affiliates not to, directly or
indirectly, make or authorize any public statement, recommendation or
solicitation in support of any Acquisition Proposal made by any person, entity
or group (other than ESI); provided, however, that nothing in the Merger
Agreement shall prohibit the Company' Board of Directors from taking and
disclosing to the Company' stockholders a position with respect to a tender
offer pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act.
Notwithstanding the foregoing, the Merger Agreement provides that, prior to
consummation of the Offer, the Company may, to the extent the Board of
Directors of the Company determines, in good faith, after consultation with
outside legal counsel, that the Board's fiduciary duties under applicable law
require it to do so, participate in discussions or negotiations with, and
furnish information to any person, entity or group after such person, entity
or group has delivered to the Company in writing, an unsolicited bona fide
Acquisition Proposal which the Board of Directors of the Company in its good
faith reasonable judgment determines, after consultation with its independent
financial advisors, would result in a transaction more favorable than the
Offer and the Merger to the stockholders of the Company from a financial point
of view and for which financing, to the extent required, is then committed or
which, in the good faith reasonable judgment of the Board of Directors of the
Company (based upon the advice of independent financial advisors), is
reasonably capable of being financed by such person, entity or group and which
is likely to be consummated (a "Superior Proposal"). In the event the Company
receives a Superior Proposal, nothing contained in this Agreement (but subject
to the terms hereof) will prevent the Board of Directors of the Company from
recommending such Superior Proposal to the Company's stockholders, if the
Board determines, in good faith, after consultation with outside legal
counsel, that such action is required by its fiduciary duties under applicable
law; provided, however, that the Company shall not recommend to its
stockholders a Superior Proposal for a period of not less than 48 hours after
ESI's receipt of a copy of such Superior Proposal (or a description of the
terms and conditions thereof, if not in writing). Notwithstanding anything to
the contrary in the Merger Agreement, the Company will not provide any non-
public information to a third party unless the Company provides such non-
public information pursuant to a nondisclosure agreement with terms regarding
the protection of confidential information at least as restrictive as such
terms in the Confidentiality Agreement and such non-public information has
been previously delivered to ESI.
Pursuant to the Merger Agreement, upon the Effective Time, each of the
options then outstanding under the 1993 Plan (the "Options") shall terminate
and be converted into a right to receive quarterly cash payments (the "Option
Payments") from the Surviving Corporation. With respect to each Option, the
amount of the Option Payment for each calendar quarter shall be equal to the
product of (a) the Merger Consideration minus the exercise price per Share of
such Option multiplied by (b) the number of shares for which such Option would
have become exercisable during such quarter if such Option had not been
terminated. The Option Payment for a quarter shall be made to the holder of
the Option (or his or her successors) not later than 15 days following the
close of such quarter. In the case of Options that are exercisable upon the
Effective Time, or would have become
21
<PAGE>
exercisable at the Effective Time as a result of the transactions contemplated
by the Merger Agreement (including, without limitation, all Options held by
the non-employee directors of the Company), the Option Payment shall be made
upon the Effective Time. The provisions of the 1993 Plan and the applicable
stock option agreement shall control in determining when an Option would have
become exercisable and to what extent an Option is forfeited in the event that
the holder's service with the Company terminates.
Pursuant to the Merger Agreement, the Purchaser and ESI have agreed that all
rights to indemnification for acts or omissions occurring prior to the
Effective Time now existing in favor of the current or former directors or
officers (the "Indemnified Parties") of the Company and its subsidiaries as
provided in their respective certificates of incorporation or by-laws (or
similar organizational documents) or existing indemnification contracts as
filed with the Commission shall survive the Merger and shall continue in full
force and effect in accordance with their terms. For six years from the
Effective Time, ESI shall, unless ESI agrees in writing to guarantee the
indemnification obligations set forth in the Merger Agreement, maintain in
effect the Company's current directors' and officers' liability insurance
covering those persons who are currently covered by the Company's directors'
and officers' liability insurance policy (a copy of which has been heretofore
delivered to ESI); provided, however, that in no event shall ESI be required
to expend in any one year an amount in excess of 150% of the annual premiums
currently paid by the Company for such insurance which the Company represents
is not more than $250,000; and, provided, further, that if the annual premiums
of such insurance coverage exceed such amount, ESI shall be obligated to
obtain a policy with the greatest coverage available for a cost not exceeding
such amount.
The Merger Agreement provides that, subject to its terms and conditions,
each of the parties thereto agrees to use all reasonable efforts to take, or
cause to be taken, all actions, and to do, or cause to be done, all things
necessary, proper or advisable to consummate and make effective as promptly as
practicable the transactions contemplated by the Merger Agreement (including
consummation of the Offer and the Merger) and to cooperate with each other in
connection with the foregoing. In addition the Merger Agreement provides that,
each of the parties to this Agreement agrees to use (i) all reasonable efforts
to obtain all necessary waivers, consents and approvals from other parties to
loan agreements, leases, licenses and other contracts, and (ii) all reasonable
efforts to obtain all necessary consents, approvals and authorizations as
required to be obtained under any federal, state or foreign law or
regulations, including, but not limited to, those required under the HSR Act,
to defend all lawsuits or other legal proceedings challenging the Merger
Agreement or the consummation of the transactions contemplated thereby, to
lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions
contemplated thereby, to effect all necessary registrations and filings,
including, but not limited to, filings under the HSR Act and submissions of
information requested by Governmental Entities, and to fulfill all conditions
to the Merger Agreement.
In case at any time after the Effective Time any further action is necessary
or desirable to carry out the purposes of the Merger Agreement, the proper
officers and directors of each party to the Merger Agreement are required to
use their reasonable efforts to take all such action.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto including
representations by the Company as to the absence of certain changes or events
concerning the Company's business, compliance with law, litigation, employee
benefit plans, real property and leases, intellectual property, environmental
matters, and material contracts.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions: (a) if required
by Delaware Law, the Merger Agreement and the Merger shall have been approved
and adopted by the requisite vote of the stockholders of the Company; (b) any
waiting period (and any extension thereof) applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated; (c) Shares
shall have purchased pursuant to the Offer; and (d) no temporary restraining
order, preliminary or permanent injunction, judgment or other order, decree or
ruling nor any statute, rule, regulation or order shall be in effect which
would (i) make the acquisition or holding by ESI or its affiliates of Shares
or shares of Common Stock of
22
<PAGE>
the Surviving Corporation illegal or otherwise prevent the consummation of the
Merger, (ii) prohibit ESI's or Purchaser's ownership or operation of, or
compel ESI or Purchaser to dispose of or hold separate, all or a material
portion of the business or assets of Purchaser, the Company or any subsidiary
thereof, (iii) compel ESI, Purchaser or the Company to dispose of or hold
separate all or a material portion of the business or assets of ESI or any of
its subsidiaries or the Company or any of its subsidiaries, (iv) impose
material limitations on the ability of ESI or Purchaser or their affiliates
effectively to exercise full ownership and financial benefits of the Surviving
Corporation, or (v) impose any material condition to the Offer, the Merger
Agreement or the Merger, which would be adverse to ESI.
Termination; Fees and Expenses. The Merger Agreement provides that it may be
terminated and the Merger and the other transactions contemplated thereby may
be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of the Merger Agreement and the Transactions
by the stockholders of the Company: (a) by mutual written consent duly
authorized by the Boards of Directors of ESI and the Company; (b) by ESI or
the Company if (i) the Offer shall be terminated or expire without any Shares
having been purchased pursuant to the Offer; provided, however, that a party
shall not be entitled to terminate the Merger Agreement if it is in material
breach of its representations and warranties, covenants or other obligations
thereunder or (ii) any court of competent jurisdiction in the United States or
other United States governmental authority shall have issued an order, decree
or ruling or shall have taken any other action restraining, enjoining or
otherwise prohibiting the Offer or the Merger and such order, decree, ruling
or other action shall have become final and nonappealable; (c) by ESI (i) if
the Board of Directors of the Company or any committee thereof shall have
approved, or recommended that stockholders of the Company accept or approve,
an Acquisition Proposal by a third party, or shall have resolved to do any of
the foregoing; (ii) if the Board of Directors of the Company or any committee
thereof shall have withdrawn or modified its approval of, or recommendation
that the stockholders of the Company accept or approve (as the case may be),
the Offer, the Merger Agreement and the Merger, or shall have resolved to do
any of the foregoing; (iii) if the Company shall have failed to include in the
Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") the recommendation of the Board of Directors of the Company
that the stockholders of the Company accept the Offer; (iv) prior to the
purchase of Shares pursuant to the Offer, in the event that any waiting period
(and any extension thereof) under the HSR Act applicable to the purchase of
Shares shall not have expired or been terminated, or the Minimum Condition
shall not be satisfied; or (v) at any time on or after the date of the Merger
Agreement, any of the following events shall have occurred: (A) there shall
have been any action taken or threatened, or any statute, rule, regulation,
judgment, temporary restraining order, preliminary or permanent injunction or
other order, decree or ruling proposed, sought, promulgated, enacted, entered,
enforced or deemed applicable to the Offer or the Merger by any Governmental
Entity or arbitration panel that could reasonably be expected to, directly or
indirectly, (1) make the acceptance for payment or the payment for, or the
purchase of some or all of the Shares pursuant to the Offer illegal or
otherwise delay, restrict or prohibit consummation of the Offer or the Merger
or the consummation of any transaction contemplated by the Merger Agreement,
(2) result in a delay in or restrict the ability of Purchaser, or render
Purchaser unable, to accept for payment, pay for or purchase some or all of
the Shares, (3) require the divestiture by ESI, Purchaser, the Company or any
of their respective Subsidiaries or affiliates of all or any portion of the
business, assets or property of any of them or any Shares or impose any
material limitation on the ability of any of them to conduct their business
and own such assets, properties or Shares, (4) impose any material limitation
on the ability of ESI, Purchaser or their affiliates to acquire or hold or to
exercise effectively all rights of ownership of the Shares, including the
right to vote any Shares purchased by any of them on all matters properly
presented to the stockholders of the Company, including, without limitation,
the adoption and approval of the Merger Agreement and the Merger, (5) result
in a material diminution in the benefits expected to be derived by ESI or
Purchaser as a result of the transactions contemplated by the Offer or the
Merger Agreement, or (6) impose any material condition to the Offer, the
Merger Agreement or the Merger which would be adverse to ESI; or (B) the
Company shall have breached, or failed to comply with, in any material
respect, any of its covenants or obligations under the Merger Agreement or any
representation or warranty of the Company in the Merger Agreement shall have
been incorrect, in any material respect, when made or shall have since ceased
to be true and correct in any material respect; or (C) the Board of Directors
of the Company or any committee thereof shall have (1) withdrawn or modified
(including
23
<PAGE>
without limitation, by amendment of the Company's Schedule 14D-9) in a manner
adverse to ESI or Purchaser its approval or recommendation of the Offer, the
Merger or the Merger Agreement, (2) approved or recommended any Acquisition
Proposal by a third party other than the Offer and the Merger, (3) publicly
resolved to do any of the foregoing, or (4) upon a request to reaffirm the
Company's approval or recommendation of the Offer, the Merger Agreement or the
Merger, the Board of Directors of the Company shall fail to do so within two
business days after such request is made; or (D) the Merger Agreement shall
have been terminated in accordance with its terms; or (E) there shall have
occurred any Material Adverse Effect on the Company, or any event, fact or
change which could reasonably be expected to result in a Material Adverse
Effect on the Company; or (F) the Employment Agreements of Steven D. Goldby
and Thomas D. Jones shall not be in full force and effect other than by reason
of their respective deaths or incapacities; or (vi) if the Company is in
material breach of any of its covenants or obligations under this Agreement,
or any representation or warranty of the Company contained in the Merger
Agreement shall have been incorrect, in any material respect, when made or
shall have since ceased to be true and correct in any material respect; or (d)
by the Company, (i) if the Offer shall not have been commenced or ESI or
Purchaser shall have failed to purchase validly tendered Shares in violation
of the terms of the Offer within ten business days after the expiration of the
Offer; provided, however, that the Company shall not be entitled to terminate
the Merger Agreement if it is in material breach of its representations and
warranties, covenants or other obligations under the Merger Agreement; (ii) if
the Board of Directors of the Company has resolved to, and in fact does,
recommend to the Company's Stockholders that they accept a Superior Proposal,
provided that all the provisions of the Merger Agreement with respect to
Superior Proposals have been fully complied with, and provided further that
the Company shall have paid to ESI the Initial Break-up Fee (as defined
below); or (iii) prior to the purchase of Shares pursuant to the Offer, if ESI
or Purchaser is in material breach of any of its covenants or obligations
under the Merger Agreement, or any representation or warranty of ESI or
Purchaser contained in the Merger Agreement shall have been incorrect, in any
material respect, when made or shall have since ceased to be true and correct
in any material respect.
The Merger Agreement provides that the Company shall pay to ESI, in same day
funds, upon demand an amount equal to $1,500,000 (the "Initial Break-Up Fee")
in the event that (a) if the Board of Directors of the Company or any
committee thereof shall have approved, or recommended that stockholders of the
Company accept or approve, an Acquisition Proposal by a third party, or shall
have resolved to do any of the foregoing; (b) the Board of Directors of the
Company or any committee thereof shall have withdrawn or modified its approval
of, or recommendation that the stockholders of the Company accept or approve
(as the case may be), the Offer, the Merger Agreement and the Merger, or shall
have resolved to do any of the foregoing; (c) the Company shall have failed to
include in the Schedule 14D-9 the recommendation of the Board of Directors of
the Company that the stockholders of the Company accept the Offer. In
addition, the Company shall pay to ESI, in same day funds, upon demand an
amount equal to $6,500,000 if within a six-month period following the
occurrence of any of the events set forth in (a), (b) and (c) above, the
Company shall consummate any merger, consolidation or sale of all or
substantially all of its assets; or any person, entity or "group" (as that
term is used in Section 13(d)(3) of the Exchange Act), shall beneficially own
(as that term is used in Section 13(d)(3) of the Exchange Act), or shall have
acquired, 50% or more of the Shares, or shall have been granted any option or
right, conditional or otherwise, to acquire 50% or more of the Shares. The
above fees shall not be deemed (either individually or together) to be
liquidated damages, and the right to the payment of such fees shall be in
addition to (and not a maximum payment in respect of) any other damages or
remedies at law or in equity to which ESI or Purchaser may be entitled as a
result of the Company's violation or breach of any term or provision of the
Merger Agreement.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE
MERGER.
Purpose of the Offer. The purpose of the Offer and the Merger is for ESI to
acquire control of, and the entire equity interest in, the Company. The
purpose of the Merger is for ESI to acquire all Shares not purchased pursuant
to the Offer. Upon consummation of the Merger, the Company will become an
indirect wholly owned subsidiary of ESI. The Offer is being made pursuant to
the Merger Agreement.
24
<PAGE>
Under Delaware Law, the approval of the Board and the affirmative vote of
the holders of a majority of the outstanding Shares is required to approve and
adopt the Merger Agreement and the transactions contemplated thereby,
including the Merger. The Board of Directors of the Company has unanimously
approved and adopted the Merger Agreement and the transactions contemplated
thereby, and, unless the Merger is consummated pursuant to the short-form
merger provisions under Delaware Law described below, the only remaining
required corporate action of the Company is the approval and adoption of the
Merger Agreement and the transactions contemplated thereby by the affirmative
vote of the holders of a majority of the Shares. Accordingly, if the Minimum
Condition is satisfied, Purchaser will have sufficient voting power to cause
the approval and adoption of the Merger Agreement and the transactions
contemplated thereby without the affirmative vote of any other stockholder.
In the Merger Agreement, the Company has agreed to take all action necessary
to convene a meeting of its stockholders as soon as practicable after the
consummation of the Offer for the purpose of considering and taking action on
the Merger Agreement and the transactions contemplated thereby, if such action
is required. ESI and Purchaser have agreed that all Shares owned by them and
their subsidiaries will be voted in favor of the Merger Agreement and the
transactions contemplated thereby at any such meeting.
If Purchaser purchases Shares sufficient to satisfy the Minimum Condition to
the Offer, the Merger Agreement provides that Purchaser will be entitled to
designate representatives to serve on the Board in proportion to Purchaser's
ownership of Shares following such purchase. See Section 10. Purchaser expects
that such representation would permit Purchaser to exert control over the
Company's conduct of its business and operations.
Under Delaware Law, if Purchaser acquires, pursuant to the Offer or
otherwise, such number of Shares which, when added to the Shares owned of
record by Purchaser on such date, constitutes at least 90% of the then
outstanding Shares, Purchaser will be able to approve and adopt the Merger
Agreement and the transactions contemplated thereby, including the Merger,
without a vote of the Company's stockholders. In such event, ESI, Purchaser
and the Company have agreed to take, at the request of Purchaser, all
necessary and appropriate action to cause the Merger to become effective as
soon as reasonably practicable after such acquisition, without a meeting of
the Company's stockholders. If, however, Purchaser does not acquire such
number of Shares which, when added to the Shares owned of record by Purchaser
on such date, constitutes at least 90% of the then outstanding Shares pursuant
to the Offer or otherwise and a vote of the Company's stockholders is required
under Delaware Law, a significantly longer period of time will be required to
effect the Merger.
No appraisal rights are available in connection with the Offer. However, if
the Merger is consummated, stockholders will have certain rights under
Delaware Law to dissent and demand appraisal of, and to receive payment in
cash of the fair value of, their Shares. Such rights to dissent, if the
statutory procedures are complied with, could lead to a judicial determination
of the fair value of the Shares, as of the day prior to the date on which the
stockholders' vote was taken approving the Merger or similar business
combination (excluding any element of value arising from the accomplishment or
expectation of the Merger), required to be paid in cash to such dissenting
holders for their Shares. In addition, such dissenting stockholders would be
entitled to receive payment of a fair rate of interest from the date of
consummation of the Merger on the amount determined to be the fair value of
their Shares. In determining the fair value of the Shares, the court is
required to take into account all relevant factors.
The Commission has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain "going private" transactions. Rule 13e-3 requires, among
other things, that certain financial information concerning the Company and
certain information relating to the fairness of the proposed transaction and
the consideration offered to minority stockholders in such transaction be
filed with the Commission and disclosed to stockholders prior to consummation
of the transaction. Purchaser believes that Rule 13e-3 will not be applicable
to the Offer or the Merger. However, no assurances can be given that the
Commission will not take the position that Rule 13e-3 is applicable to the
Offer or the Merger.
25
<PAGE>
Plans for the Company. It is expected that, initially following the Merger,
the business and operations of the Company will, except as set forth in this
Offer to Purchase, be continued by the Company substantially as they are
currently being conducted. ESI will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger, and will take such actions as it
deems appropriate under the circumstances then existing. ESI intends to seek
additional information about the Company during this period. Thereafter, ESI
intends to review such information as part of a comprehensive review of the
Company's business, operations, capitalization and management with a view to
optimizing realization of the Company's potential in conjunction with ESI's
businesses. It is expected that the business and operations of the Company
would form an important part of ESI's future business plans.
As more fully described in Section 17 hereof, ESI intends to enter into
employment agreements with certain key employees of the Company.
Except as indicated in this Offer to Purchase, ESI does not have any present
plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any Subsidiary, a sale or transfer of a material
amount of assets of the Company or any Subsidiary or any material change in
the Company's capitalization or dividend policy or any other material changes
in the Company's corporate structure or business, or the composition of the
Board or the Company's management.
12. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement provides that the
Company will not, between the date of the Merger Agreement and the Effective
Time, without the prior written consent of ESI, declare or pay any dividends
on or make any other distributions (whether in cash, stock or property) in
respect of any capital stock or split, combine or reclassify any capital stock
or issue or authorize the issuance of any other securities in respect of, in
lieu of or in substitution for any capital stock.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES, EXCHANGE LISTING AND
EXCHANGE ACT REGISTRATION. The purchase of Shares by Purchaser pursuant to the
Offer will reduce the number of Shares that might otherwise trade publicly and
will reduce the number of holders of Shares, which could adversely affect the
liquidity and market value of the remaining Shares held by the public.
ESI intends to cause the delisting of the Shares by The Nasdaq National
Market and the termination of registration of the Shares pursuant to Rule 12g-
4 under the Exchange Act following consummation of the Offer.
14. CERTAIN CONDITIONS OF THE OFFER. The Merger Agreement provides that,
notwithstanding any other provision of the Offer, and in addition to (and not
in limitation of) Purchaser's rights to extend and amend the Offer at any
time, Purchaser shall not be required to accept for payment, purchase or pay
for, or may terminate or amend the Offer and may postpone the acceptance of,
and payment for, subject to Rule 14e-1(c) under the Exchange Act (whether or
not any Shares have theretofore been accepted for payment or paid for pursuant
to the Offer), any Shares tendered pursuant to the Offer if (a) any waiting
period (and any extension thereof) under the HSR Act applicable to the
purchase of Shares pursuant to the Offer shall not have expired or been
terminated; (b) the Minimum Condition is not satisfied; or (c) at any time on
or after the date of the Merger Agreement, any of the following events shall
have occurred: (i) there shall have been any action taken or threatened, or
any statute, rule, regulation, judgment, temporary restraining order,
preliminary or permanent injunction or other order, decree or ruling proposed,
sought, promulgated, enacted, entered, enforced or deemed applicable to the
Offer or the Merger by any Governmental Entity or arbitration panel that could
reasonably be expected to, directly or indirectly, (1) make the acceptance for
payment or the payment for, or the purchase of some or all of the Shares
pursuant to the Offer illegal or otherwise delay, restrict or prohibit
consummation of the Offer or the Merger or the consummation of any transaction
contemplated by the Merger Agreement, (2) result in a delay in or restrict the
ability of Purchaser, or render Purchaser unable, to accept for payment, pay
for or purchase some or all of the Shares, (3) require the divestiture by ESI,
Purchaser, the Company or any of their respective subsidiaries or affiliates
of all or any portion of the business, assets or property of any of them or
any Shares or impose any material limitation on the ability of any of them to
conduct their business and own such assets,
26
<PAGE>
properties or Shares, (4) impose any material limitation on the ability of
ESI, Purchaser or their affiliates to acquire or hold or to exercise
effectively all rights of ownership of the Shares, including the right to vote
any Shares purchased by any of them on all matters properly presented to the
stockholders of the Company, including, without limitation, the adoption and
approval of the Merger Agreement and the Merger, (5) result in a material
diminution in the benefits expected to be derived by ESI or Purchaser as a
result of the transactions contemplated by the Offer or the Merger Agreement,
or (6) impose any material condition to the Offer, the Merger Agreement or the
Merger which would be adverse to ESI; (ii) the Company shall have breached, or
failed to comply with, in any material respect, any of its covenants or
obligations under the Merger Agreement or any representation or warranty of
the Company in the Merger Agreement shall have been incorrect, in any material
respect, when made or shall have since ceased to be true and correct in any
material respect; or (iii) the Board of Directors of the Company or any
committee thereof shall have (1) withdrawn or modified (including without
limitation, by amendment of the Company's Schedule 14D-9) in a manner adverse
to ESI or Purchaser its approval or recommendation of the Offer, the Merger or
the Merger Agreement, (2) approved or recommended any Acquisition Proposal by
a third party other than the Offer and the Merger, (3) publicly resolved to do
any of the foregoing, or (4) upon a request to reaffirm the Company's approval
or recommendation of the Offer, the Merger Agreement or the Merger, the Board
of Directors of the Company shall fail to do so within two business days after
such request is made; or (iv) the Merger Agreement shall have been terminated
in accordance with its terms; or (v) there shall have occurred any Material
Adverse Effect on the Company, or any event, fact or change which could
reasonably be expected to result in a Material Adverse Effect on the Company;
or (vi) the Employment Agreements of Steven D. Goldby and Thomas D. Jones
shall not be in full force and effect other than be reason of their respective
deaths or incapacities.
The Merger Agreement provides that the foregoing conditions are for the sole
benefit of ESI, Purchaser and their affiliates and may be asserted by ESI or
Purchaser regardless of the circumstances (including any action or inaction by
ESI or Purchaser or any of their affiliates) giving rise to such condition.
All the foregoing conditions may be waived by ESI or Purchaser in whole or in
part at any time and from time to time in the sole discretion of ESI or
Purchaser. The failure by ESI or Purchaser at any time to exercise its rights
with respect to the foregoing conditions shall not be deemed a waiver of any
such condition, and each condition shall be deemed an ongoing condition with
respect to which ESI or Purchaser may assert its rights at any time and from
time to time.
15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
General. Based upon its examination of publicly available information with
respect to the Company and the review of certain information furnished by the
Company to ESI and discussions of representatives of ESI with representatives
of the Company during ESI's investigation of the Company (see Section 10),
neither Purchaser nor ESI is aware of any license or other regulatory permit
that appears to be material to the business of the Company and the
subsidiaries, taken as a whole, which might be adversely affected by the
acquisition of Shares by Purchaser pursuant to the Offer or, except as set
forth below, of any approval or other action by any domestic (federal or
state) or foreign governmental, administrative or regulatory authority or
agency which would be required prior to the acquisition of Shares by Purchaser
pursuant to the Offer. Should any such approval or other action be required,
it is Purchaser's present intention to seek such approval or action. Purchaser
does not currently intend, however, to delay the purchase of Shares tendered
pursuant to the Offer pending the outcome of any such action or the receipt of
any such approval (subject to Purchaser's right to decline to purchase Shares
if any of the conditions in Section 14 shall have occurred). There can be no
assurance that any such approval or other action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result
to the business of the Company, Purchaser or ESI or that certain parts of the
businesses of the Company, Purchaser or ESI might not have to be disposed of
or held separate or other substantial conditions complied with in order to
obtain such approval or other action or in the event that such approval was
not obtained or such other action was not taken. Purchaser's obligation under
the Offer to accept for payment and pay for Shares is subject to certain
conditions, including conditions relating to the legal matters discussed in
this Section 15. See Section 14.
27
<PAGE>
State Takeover Laws. The Company is incorporated under the laws of the State
of Delaware. In general, Section 203 of Delaware Law prevents an "interested
stockholder" (generally a person who owns or has the right to acquire 15% or
more of a corporation's outstanding voting stock, or an affiliate or associate
thereof) from engaging in a "business combination" (defined to include mergers
and certain other transactions) with a Delaware corporation for a period of
three years following the date such person became an interested stockholder
unless, among other things, prior to such date the board of directors of the
corporation approved either the business combination or the transaction in
which the interested stockholder became an interested stockholder. Section 203
is inapplicable to the Offer and the Merger.
A number of other states have adopted laws and regulations applicable to
attempts to acquire securities of corporations which are incorporated, or have
substantial assets, stockholders, principal executive offices or principal
places of business, or whose business operations otherwise have substantial
economic effects, in such states. In Edgar v. MITE Corp., the Supreme Court of
the United States invalidated on constitutional grounds the Illinois Business
Takeover Statute, which, as a matter of state securities law, made takeovers
of corporations meeting certain requirements more difficult. However, in 1987
in CTS Corp. v. Dynamics Corp. of America, the Supreme Court held that the
State of Indiana may, as a matter of corporate law and, in particular, with
respect to those aspects of corporate law concerning corporate governance,
constitutionally disqualify a potential acquiror from voting on the affairs of
a target corporation without the prior approval of the remaining stockholders.
The state law before the Supreme Court was by its terms applicable only to
corporations that had a substantial number of stockholders in the state and
were incorporated there.
The Company, directly or through subsidiaries, conducts business in a number
of states throughout the United States, some of which have enacted takeover
laws. Purchaser does not know whether any of these laws will, by their terms,
apply to the Offer or the Merger and has not complied with any such laws.
Should any person seek to apply any state takeover law, Purchaser will take
such action as then appears desirable, which may include challenging the
validity or applicability of any such statute in appropriate court
proceedings. In the event it is asserted that one or more state takeover laws
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,
Purchaser might be required to file certain information with, or receive
approvals from, the relevant state authorities. In addition, if enjoined,
Purchaser might be unable to accept for payment any Shares tendered pursuant
to the Offer, or be delayed in continuing or consummating the Offer, and the
Merger. In such case, Purchaser may not be obligated to accept for payment any
Shares tendered. See Section 14.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
until certain information has been furnished to the Antitrust Division and the
FTC and certain waiting period requirements have been satisfied. The
acquisition of Shares by Purchaser pursuant to the Offer is subject to such
requirements. See Section 2.
Pursuant to the HSR Act, on March 26, 1997, ESI filed a Pre-merger
Notification and Report Form in connection with the purchase of Shares
pursuant to the Offer with the Antitrust Division and the FTC. Under the
provisions of the HSR Act applicable to the Offer, the purchase of Shares
pursuant to the Offer may not be consummated until the expiration of a 15-
calendar day waiting period following the filing by ESI. Accordingly, the
waiting period under the HSR Act applicable to the purchase of Shares pursuant
to the Offer will expire at 11:59 p.m., New York City time, on April 10, 1997,
unless such waiting period is earlier terminated by the FTC and the Antitrust
Division or extended by a request from the FTC or the Antitrust Division for
additional information or documentary material prior to the expiration of the
waiting period. If either the FTC or the Antitrust Division were to request
additional information or documentary material from ESI and/or the Company
with respect to the Offer, the waiting period with respect to the Offer would
expire at 11:59 p.m., New York City time, on the tenth calendar day after the
date of substantial compliance by ESI and the Company with such request.
Thereafter, the waiting period could be extended only by court order. If the
acquisition of Shares is delayed pursuant to a request by the FTC or the
Antitrust Division for additional information or documentary material pursuant
to the HSR Act, the Offer may, but need not, be extended and, in any event,
the purchase of and payment for Shares will be deferred until 10 days after
the request is substantially complied with, unless the
28
<PAGE>
extended period expires on or before the date when the initial 15-day period
would otherwise have expired, or unless the waiting period is sooner
terminated by the FTC and the Antitrust Division. Only one extension of such
waiting period pursuant to a request for additional information is authorized
by the HSR Act and the rules promulgated thereunder, except by court order.
Any such extension of the waiting period will not give rise to any withdrawal
rights not otherwise provided for by applicable law. See Section 4. It is a
condition to the Offer that the waiting period applicable under the HSR Act to
the Offer expire or be terminated. See Section 2 and Section 14.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares
by Purchaser pursuant to the Offer. At any time before or after the purchase
of Shares pursuant to the Offer by Purchaser, the FTC or the Antitrust
Division 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 seeking the divestiture of Shares purchased
by Purchaser or the divestiture of substantial assets of ESI, the Company or
their respective subsidiaries. Private parties and state attorneys general may
also bring legal action under federal or state antitrust laws under certain
circumstances. Based upon an examination of information available to ESI
relating to the businesses in which ESI, the Company and their respective
subsidiaries are engaged, ESI and Purchaser believe that the Offer and the
Merger will not violate the antitrust laws. Nevertheless, there can be no
assurance that a challenge to the Offer on antitrust grounds will not be made
or, if such a challenge is made, what the result would be. See Section 14 for
certain conditions to the Offer.
16. FEES AND EXPENSES. Except as set forth below, Purchaser will not pay any
fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer.
Lehman has been retained on an exclusive basis to render financial advisory
services in connection with the Offer and the Merger. In addition, Lehman has
been engaged to act as Dealer Manager in connection with the Offer. Lehman
will be paid $2 million in connection with such engagements upon successful
completion of the transactions contemplated by the Merger Agreement. Lehman
will also be reimbursed for its reasonable fees and expenses and has been
granted customary indemnity.
MacKenzie Partners, Inc. has been retained to serve as the Information Agent
in connection with the Offer. The Information Agent will be paid approximately
$7,500 in fees for its services, will be reimbursed for reasonable out-of-
pocket expenses and has been provided with customary indemnity. The
Information Agent may contact holders of Shares by mail, telephone, telex,
telecopy, telegraph or personal interview and may request banks, brokers,
dealers and other nominee stockholders to forward materials relating to the
Offer to beneficial owners.
Citibank, N.A. has been retained as the Depository in connection with the
Offer. The Depository will be paid reasonable and customary compensation for
its services in connection with the Offer, will be reimbursed for its
reasonable out-of-pocket expenses in connection therewith and has been
provided with customary indemnity for certain liabilities and expenses in
connection therewith. In addition, brokers, dealers, commercial banks and
trust companies will be reimbursed for customary handling and mailing expenses
incurred by them in forwarding material to their customers.
17. EMPLOYMENT AGREEMENTS. Contemporaneously with the execution of the
Merger Agreement on March 23, 1997, the Company and each of Steven D. Goldby,
Thomas D. Jones, John J. Hanlon and Dan E. Kingman (collectively with John
Priestley, the "Employees") entered into employment agreements (the
"Employment Agreements"). Messrs. Goldby, Jones, Hanlon and Kingman currently
serve as the Company's Chief Executive Officer, President and Chief Operating
Officer, Senior Vice President and Chief Financial Officer and Vice President
of Human Resources, respectively. With the exception of Mr. Goldby's three
year term, each of the Employment Agreements is for a two year term. The
Employment Agreements are automatically extended for additional one-year
periods unless six months' advance notice of non-renewal is given by either
party. The Employment Agreements provide for an annual salary ($360,000 for
Mr. Goldby, $285,000
29
<PAGE>
for Mr. Jones, $165,000 for Mr. Hanlon and $134,000 for Mr. Kingman) as well
as an annual car allowance ($15,000 for Mr. Goldby, and $12,000 for each of
the other Employees). Each Employment Agreement contemplates an annual bonus
based on the Company's achievement of certain milestones. In addition, the
Employment Agreements provide for a retention bonus that is due and payable to
each Executive Officer upon the consummation of the Offer in an amount equal
to the Executive Officer's annual salary (with the exception of Mr. Kingman,
whose retention bonus is $50,000).
The Company and John Priestley, the Company's Senior Vice President of Sales
and Services, have reached an understanding with respect to the principal
terms of a two-year employment agreement (the "Proposed Employment
Agreement"). The Proposed Employment Agreement will automatically extend for
additional one-year periods unless six months' advance notice of non-renewal
is given by either party. The Proposed Employment Agreement provides for an
annual salary of $180,000, a $12,000 annual car allowance and a bonus not in
excess of $20,000 due and payable quarterly based on sales objectives. In
addition, the Proposed Employment Agreement provides for a retention bonus of
$50,000 that is due and payable to Mr. Priestley upon the consummation of the
Offer.
The Employment Agreements provide for severance benefits in the event that
an Employee's employment is terminated during the term of the Employment
Agreement or the Proposed Employment Agreement by the Company without cause or
in the event that an Employee resigns after a material reduction in his
responsibility, a reduction in his compensation in excess of 10%, or a
relocation in excess of 35 miles. The severance benefits include continuation
of salary, bonus and health care coverage for 24 months and full vesting of
all remaining payments attributable to options held by the Employee at the
time of the Merger. In addition, under the terms of the Proposed Employment
Agreement, in the event that Mr. Priestley's employment is terminated by the
Company without cause or he resigns for any of the reasons set forth in the
first sentence of this paragraph at the end of his two-year employment term or
at any time prior to the third anniversary of the consummation of the Offer,
then Mr. Priestley's severance benefits will also include full vesting of all
remaining payments attributable to options held by Mr. Priestley at the time
of the Merger. This description of the Employment Agreements and the Proposed
Employment Agreement is qualified in its entirety with reference to the
Employment Agreements and the Proposed Employment Agreement (which has not yet
been executed and is subject to further negotiation) which have been filed as
exhibits hereto and are incorporated herein by reference in their entirety.
18. MISCELLANEOUS. Purchaser is not aware of any jurisdiction where the
making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, Purchaser will make a good faith effort to comply with any
such state statute. If, after such good faith effort, Purchaser cannot comply
with any such state statute, the Offer will not be made to (nor will tenders
be accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of Purchaser by the Dealer Manager or by one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OR THE COMPANY NOT CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, ESI and Purchaser have filed with the Commission the Schedule
14D-1, together with exhibits, furnishing certain additional information with
respect to the Offer. The Schedule 14D-1 and any amendments thereto, including
exhibits, may be inspected at, and copies may be obtained from, the same
places and in the same manner as set forth in Section 7 (except that they will
not be available at the regional offices of the Commission).
Golden Gate Acquisition Corp.
March 28, 1997
30
<PAGE>
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
ESI, PLC, NV AND PURCHASER
1. DIRECTORS AND EXECUTIVE OFFICERS OF PLC AND NV. The following table sets
forth the name, current business address, citizenship, position with PLC and NV
and present principal occupation or employment (if different), and material
occupations and positions, for the past five years (if different), of each
Director or executive officer of PLC and NV. Unless otherwise indicated each
such person (i) has held his Principal Occupation for the past five years and
(ii) has not been convicted in a criminal proceeding and has not been party to
a proceeding related to U.S. state and federal securities laws.
The directors and executive officers of each of PCL and NV are:
<TABLE>
<CAPTION>
PRINCIPAL OR RELATED
OCCUPATIONS
-------------------------------
ELSEVIER REED
NAME PLC* NV** REED ELSEVIER PLC FINANCE BV
--------------------- ---------------------- ------------------------ ------------------ ------------
<S> <C> <C> <C> <C>
Herman Bruggink (NL) Non-executive Director Chairman of the Co-Chairman,
Executive Board Chairman of the
Executive
Committee
Nigel Stapleton (UK) Deputy Chairman Member of the Executive Co-Chairman, Member of
Board Chairman of the the
Executive Supervisory
Committee Board
John Mellon (UK) Executive Director Member of the Executive
Supervisory Board Director, Member
of the Executive
Committee
Paul Vlek (NL) Non-executive Director Deputy Chairman of the Executive Member of
Executive Board Director, Member the
of the Executive Supervisory
Committee Board
Mark Armour (UK) Finance Director Chief Financial
Officer
Neville Cusworth (UK) Member of the Executive Executive Director
Board
Herman Spruijt (NL) Member of the Executive Executive Director
Board
Richard Bodman (USA) Non-executive Director Non-executive
Director
Anthony Greener (UK) Non-executive Director Non-executive
Director
Paul Hamlyn (UK) Non-executive Director Non-executive
Director
Sir Christopher Non-executive Director Non-executive
Lewinton (UK) Director
Roelof Nelissen (NL) Member of the Non-executive
Supervisory Board Director
Albert Schuitemaker Member of the Non-executive
(NL) Supervisory Board Director
Loek van Vollenhoven Deputy Chairman of the Non-executive
(NL) Supervisory Board Director
Pierre Vinken (NL) Chairman of the Non-executive Chairman of
Supervisory Board Director the
Supervisory
Board
David Webster (UK) Non-executive Director Non-executive
Director
Cornelius Alberti Member of the Executive Managing
(NL) Board Director
Jules Van Dijck (NL) Member of the
Supervisory Board
Otto ter Haar (NL) Member of the
Supervisory Board
Ian Irvine (UK) Chairman Member of the
Supervisory Board
Robert van de Vijver Member of the Member of
(NL) Supervisory Board the
Supervisory
Board
Mark Radcliffe (UK) Company Secretary Company Secretary
Erik Ekker (NL) Company Secretary Legal Director
(Continental
Europe)
</TABLE>
- -------
* Business address: 6 Chesterfield Gardens, London W1A 1EJ, London, England.
** Business address: Van de Sande Bankhuyzenstraat 4, 1061 AG Amsterdam, the
Netherlands.
(NL) Citizen of the Netherlands.
(UK) Citizen of the United Kingdom of Great Britain and Northern Ireland.
(USA) Citizen of the United States of America.
I-1
<PAGE>
Mr. Bruggink became Co-Chairman of the Board of Reed Elsevier plc, Co-
Chairman of the Reed Elsevier Executive Committee ("REEC"), Chairman of the
Executive Board of NV and a non-executive director of PLC in April 1995,
having been an executive Director of Reed Elsevier plc and a member of the
Executive Board of NV since 1993. He joined NV in 1991. He will stand down as
a non-executive Director of PLC on April 16, 1997.
Mr. Stapleton became Co-Chairman of the Board of Reed Elsevier plc and Co-
Chairman of the REEC in July 1996. Prior to that he had been an ex-officio
member of the REEC and an executive Director and Chief Financial Officer of
Reed Elsevier plc since 1993. He is also a member of the Supervisory Board of
Elsevier Reed Finance BV, having been Deputy Chairman of the Board of Elsevier
Reed Finance BV since 1993. He is a member of the Executive Board of NV and
will resign from that position on April 16, 1997. Mr. Stapleton became Deputy
Chairman of PLC in June 1994, having been Finance Director since 1986, and
will become Chairman in April 1997. He is Chairman of Lexis-Nexis, Reed
Reference Publishing and Reed Technology and Information Services. Mr.
Stapleton joined PLC in 1986.
Mr. Mellon has been a member of the REEC since June 1994 and a member of the
Supervisory Board of NV since April 1995, having been an executive Director of
Reed Elsevier plc since 1993. He has been an executive Director of PLC since
January 1990. Mr. Mellon is Chairman of IPC Magazines and Reed Business
Publishing. He joined PLC in 1968.
Mr. Vlek became Deputy Chairman of the Executive Board of NV in April 1995
and became a member of the REEC and a non-executive director of PLC in
November 1995, having been an executive Director of Reed Elsevier plc since
1993 and a member of the Executive Board of NV since 1991. He has been a
member of the Supervisory Board of Elsevier Reed Finance BV since July 1996.
He joined NV in 1973.
Mr. Armour was appointed Finance Director of PLC and Chief Financial Officer
of Reed Elsevier plc in July 1996, having been Deputy Chief Financial Officer
of Reed Elsevier plc since February 1995. He was previously a partner in Price
Waterhouse, Chartered Accountants.
Mr. Cusworth became an executive director of Reed Elsevier plc and a member
of the Executive Board of NV in April 1995. He is Chairman of the Reed
Elsevier Legal Division, having joined PLC in 1967.
Mr. Spruijt became an executive director of Reed Elsevier plc and a member
of the Executive Board of NV in April 1995. He is Chairman of Elsevier
Science, having joined Elsevier in 1987.
Mr. Bodman has been a non-executive Director of PLC and Reed Elsevier plc
since May 1996. He is Managing General Partner at AT&T Ventures.
Mr. Greener has been a non-executive Director of Reed Elsevier plc since
1993 and a non-executive Director of PLC since 1990. He is Executive Chairman
of Guinness PLC and he is a Director of LVMH.
Mr. Hamlyn has been a non-executive Director of Reed Elsevier plc since 1993
and a Director of PLC since 1987. He is Chairman of Reed International Books.
He was the founder of the Hamlyn Group and the Octopus Publishing Group.
Sir Christopher Lewinton has been a non-executive Director of Reed Elsevier
plc since 1993 and a non-executive Director of PLC since 1990. He is Chairman
and Chief Executive of TI Group plc.
Mr. Nelissen has been a non-executive Director of Reed Elsevier plc since
1993. He has been a member of the Supervisory Board of NV since 1990. Mr.
Nelissen is a member of the Supervisory Boards of ABN AMRO Bank and Ahold.
Mr. Schuitemaker has been a non-executive Director of Reed Elsevier plc
since 1993. He has been a member of the Supervisory Board of NV since 1972 and
was Chairman from 1990 until April 1995. He will retire as a non-executive
Director of Reed Elsevier plc and member of the Supervisory Board of NV in
April 1997. Mr. Schuitemaker is a member of the Supervisory Board of Sarah
Lee/Douwe Egberts and SHV Holdings.
I-2
<PAGE>
Mr. van Vollenhoven has been a non-executive Director of Reed Elsevier plc
since November 1995, having been an executive Director of Reed Elsevier plc, a
member of the REEC and a non-executive Director of PLC since 1993 until
November 1995. Mr. van Vollenhoven has been a member of the Supervisory Board
of NV since November 1995 having been, until that date, a member of the
Executive Board since 1982 and the Deputy Chairman of the Executive Board
since 1987. He joined NV in 1977.
Mr. Vinken has been Chairman of the Supervisory Board of NV and a non-
executive Director of Reed Elsevier plc since April 1995, having been Co-
Chairman of the Board of Reed Elsevier plc and Co-Chairman of the REEC and a
non-executive Director of PLC since 1993 until April 1995. Mr. Vinken was a
member of the Executive Board of NV from 1972 and was the Chairman of the
Executive Board of NV from 1979 until April 1995. He is Chairman of the
Supervisory Board of Elsevier Reed Finance BV. Mr. Vinken joined NV in 1971.
He is also Chairman of the Supervisory Board of MeesPierson, a non-executive
director of Logica and a member of the Supervisory Board of other Dutch
companies.
Mr. Webster has been a non-executive Director of Reed Elsevier plc since
1993 and a non-executive Director of PLC since 1992. He is Chairman-elect of
Safeway.
Mr. Alberti has been a member of the Executive Board of NV since 1984 and
Managing Director of Elsevier Reed Finance BV since 1993. He was an executive
Director of Reed Elsevier plc since 1993 until December 1996. He joined NV in
1978 and was Chief Financial Officer from 1978 to 1984.
Mr. van Dijck has been a member of the Supervisory Board of NV since 1984.
He is professor of Industrial and Organizational Sociology at the University
of Tilburg. Mr. van Dijck is a member of the Supervisory Board of ABN AMRO
Bank, Hoechst Holland and Dutch Philips Industries.
Mr. ter Haar has been a member of the Supervisory Board of NV since 1990. He
was previously a member of the Executive Board of NV, with responsibility for
Elsevier Science.
Mr. Irvine has been Chairman of PLC since June 1994, having been Deputy
Chairman from January 1993 to June 1994. He has been a member of the
Supervisory Board of NV since 1993. He was Co-Chairman of the Board of Reed
Elsevier plc and Co-Chairman of the REEC from June 1994 until July 1996,
having previously been executive Director of Reed Elsevier plc and a member of
the REEC since 1993. He will retire as Chairman of PLC and a member of the
Supervisory Board of NV in April 1997.
Mr. van de Vijver has been a member of the Supervisory Board of NV since
1984, and was a non-executive director of Reed Elsevier plc from 1993 until
November 1995. He has been a member of the Supervisory Board of Elsevier Reed
Finance BV since July 1995. He will rejoin the Reed Elsevier plc Board as a
non-executive director in April 1997. He is a senior partner of the law firm
Loeff Claeys Verbeke (Amsterdam) and a member of the Supervisory Board of KNP
BT and of Krasnapolsky.
Mr. Radcliffe, an English Barrister, has been Company Secretary and Director
of Corporate Services of Reed Elsevier plc and Company Secretary of PLC since
1995. Prior to his appointment he was Company Secretary and Director of
Corporate Services of Reed International Books.
Mr. Ekker, a Dutch lawyer, has been Legal Director (Continental Europe) of
Reed Elsevier plc since 1993. He has been Company Secretary of NV since 1989.
Mr. Ekker joined NV in 1997 as legal counsel.
I-3
<PAGE>
2. DIRECTORS AND EXECUTIVE OFFICERS OF ESI. The following table sets forth
the name, current business address, citizenship, position with ESI, present
principal occupation or employment (if different), and material occupations,
positions, offices or employments and business addresses thereof for the past
five years (if different), of each member of the Board of Directors and
executive officer of ESI. Unless otherwise indicated each such person (i) has
held his Principal Occupation for the past five years, (ii) is a citizen of
the United States and (iii) has not been convicted in a criminal proceeding
and has not been party to a proceeding related to state and federal securities
laws.
<TABLE>
<CAPTION>
POSITION WITH
NAME ESI PRINCIPAL OCCUPATION PRIOR POSITION BUSINESS ADDRESS
- -------------------- --------------- ---------------------- ---------------- --------------------------
<S> <C> <C> <C> <C>
Herman P. Spruijt* Chairman and Chairman and Chief Sara Burgerhartstraat 25
Director (since Executive, Elsevier 1055 KV Amsterdam
1995) Science B.V. (since The Netherlands
1990)
Russell C. White President and President, 655 Avenue of the Americas
Director (since Warren Gorham & New York, NY 10010-5107
1996) Lamont, 1993-
1995; executive
with McGraw-
Hill,
1978-1993
James E. Rowan Senior Vice 655 Avenue of the Americas
President- New York, NY 10010-5107
Finance,
Assistant
Treasurer and
Director
Vera J. Lang Treasurer Treasurer/Director of Director of 200 Park Avenue
(since 1996) Financial Services, Financial 17th Floor
Reed Elsevier Inc. Accounting and New York, NY 10166
(since 1995) Controls, Reed
Travel Group
division of Reed
Elsevier Inc.,
1995. Audit
Manager, Price
Waterhouse LLP
1987-1994
Charles P. Fontaine, Assistant Tax Director, Reed Senior Tax 275 Washington Street
Esq. Treasurer Elsevier Inc. (since Counsel, Reed Newton, MA 02158-1630
(since 1996) 1993) Elsevier Inc.,
1991-1993
Henry Z. Secretary Vice President, 275 Washington Street
Horbaczewski, Esq. (since 1996) General Counsel, and Newton, MA 02158-1630
Secretary, Reed
Elsevier Inc.
Mark L. Seeley, Esq. Assistant General Legal Counsel, Associate Sara Burgerhartstraat 25
Secretary Elsevier Science B.V. Counsel 1055 KV Amsterdam
(since 1997) (since 1995) (1993-1995); The Netherlands
Intellectual
Property Manager
(1989-1993),
Reed Elsevier
Inc.
</TABLE>
- -------
* Netherlands citizen
I-4
<PAGE>
3. DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER. The following table sets
forth the name, current business address, citizenship, position with
Purchaser, present principal occupation or employment (if different), and
material occupations, positions, offices or employments and business addresses
thereof for the past five years (if different), of each member of the Board of
Directors and executive officer of Purchaser. Unless otherwise indicated each
such person (i) has held his Principal Occupation for the past five years,
(ii) is a citizen of the United States and (iii) has not been convicted in a
criminal proceeding and has not been party to a proceeding related to state
and federal securities laws.
<TABLE>
<CAPTION>
POSITION WITH
NAME PURCHASER PRINCIPAL OCCUPATION PRIOR POSITION BUSINESS ADDRESS
- -------------------- --------------- ---------------------- ---------------- --------------------------
<S> <C> <C> <C> <C>
Herman P. Spruijt* Chairman and Chairman and Chief Sara Burgerhartstraat 25
Director (since Executive, Elsevier 1055 KV Amsterdam
1997) Science B.V. (since The Netherlands
1990)
I. Malcolm Highet** President and Executive Vice- Chief Financial 200 Park Avenue
Director (since President--Corporate Officer, Reed 17th Floor
1997) Development, Reed Travel Group New York, NY 10166
Elsevier Inc. (since division of Reed
1996) Elsevier Inc.
(1990 to 1996)
Russell C. White Director (since President and President, 655 Avenue of the Americas
1997) Director, Elsevier Warren Gorham & New York, NY 10010-5107
Science Inc. (since Lamont, 1993-
1996) 1995; executive
with McGraw-
Hill,
1978-1993
James E. Rowan Vice Senior Vice President, 655 Avenue of the Americas
President-- Finance, Assistant New York, NY 10010-5107
Finance (since Treasurer and
1997) Director, Elsevier
Science, Inc.
Vera J. Lang Treasurer Treasurer/Director of Director of 200 Park Avenue
(since 1997) Financial Services, Financial 17th Floor
Reed Elsevier Inc. Accounting and New York, NY 10166
(since 1995) Controls, Reed
Travel Group
division of Reed
Elsevier Inc.,
1995. Audit
Manager, Price
Waterhouse LLP
1987-1994
Charles P. Fontaine, Assistant Tax Director, Reed Senior Tax 275 Washington Street
Esq. Treasurer Elsevier Inc. (since Counsel, Reed Newton, MA 02158-1630
(since 1997) 1993) Elsevier Inc.,
1991-1993
Henry Z. Vice President Vice President, 275 Washington Street
Horbaczewski, Esq. and Secretary General Counsel, and Newton, MA 02158-1630
(since 1997) Secretary, Reed
Elsevier Inc.
Mark L. Seeley, Esq. Assistant General Legal Counsel, Associate Sara Burgerhartstraat 25
Secretary Elsevier Science B.V. Counsel 1055 KV Amsterdam
(since 1997) (since 1995) (1993-1995); The Netherlands
Intellectual
Property Manager
(1989-1993),
Reed Elsevier
Inc.
Ralph E. Knupp Vice President Vice President--Human 255 Washington Street
Resources, Reed Newton, MA 02158-1630
Elsevier Inc. (since
1989)
</TABLE>
- -------
* Netherlands citizen
** New Zealand citizen
I-5
<PAGE>
The Depositary for the Offer is:
CITIBANK, N.A.
<TABLE>
<CAPTION>
BY MAIL: BY OVERNIGHT CARRIER: BY HAND:
<S> <C> <C>
Citibank, N.A. Citibank, N.A. Citibank, N.A.
c/o Citicorp Data c/o Citicorp Data Corporate Trust Window
Distribution, Distribution, Inc. 111 Wall Street, 5th Floor
Inc. 404 Sette Drive New York, NY 10043
P.O. Box 7072 Paramus, NJ 07652
Paramus, NJ 07653
</TABLE>
Facsimile for Eligible Institutions: (201) 262-3240
To confirm by telephone: (800) 422-2066
Questions or requests for assistance may be directed to the Information Agent
at its address and telephone numbers listed below or to the Dealer Manager at
its address and telephone numbers listed below. Additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
may be obtained from the Information Agent. A stockholder may also contact
brokers, dealers, commercial banks or trust companies for assistance concerning
the Offer.
The Information Agent for the Offer is:
[Logo of Mackenzie Partners, Inc.]
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
LEHMAN BROTHERS
3 World Financial Center
New York, NY 10285
Call: (800) 438-3242
or
collect at (212) 526-3252
