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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
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SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D) (4) OF
THE SECURITIES EXCHANGE ACT OF 1934
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CCH INCORPORATED
(NAME OF SUBJECT COMPANY)
CCH INCORPORATED
(NAME OF PERSON(S) FILING STATEMENT)
CLASS A COMMON STOCK, $1.00 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
124883109
(CUSIP NUMBER OF CLASS OF SECURITIES)
CLASS B COMMON STOCK, $1.00 PAR VALUE
(TITLE OF CLASS OF SECURITIES)
124883208
(CUSIP NUMBER OF CLASS OF SECURITIES)
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OAKLEIGH THORNE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
CCH INCORPORATED
2700 LAKE COOK ROAD
RIVERWOODS, ILLINOIS 60015
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON
AUTHORIZED TO RECEIVE NOTICES AND COMMUNICATIONS
ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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COPIES TO:
DEIRDRE M. VON MOLTKE DOUGLAS A. DOETSCH
SIDLEY & AUSTIN MAYER, BROWN & PLATT
ONE FIRST NATIONAL PLAZA 190 SOUTH LASALLE STREET
CHICAGO, ILLINOIS 60603 CHICAGO, ILLINOIS 60603
(312) 853-7000 (312) 782-0600
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is CCH Incorporated, a Delaware corporation
(the "Company"), and the address of its principal executive offices is 2700
Lake Cook Road, Riverwoods, Illinois 60015. The respective titles of the
classes of equity securities to which this statement relates are: the
Company's Class A Common Stock, $1.00 par value per share ("Class A Common
Stock"), and the Company's Class B Common Stock, $1.00 par value per share
("Class B Common Stock," and together with the Class A Common Stock, the
"Common Stock"). At the close of business on November 27, 1995 (i) 16,638,512
shares of Class A Common Stock were issued and outstanding, (ii) 16,397,122
shares of Class B Common Stock were issued and outstanding and (iii) vested
options to purchase 1,217,000 shares of Class B Common Stock were issued and
outstanding.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer by WK Acquisition Sub, Inc. (the
"Offeror"), a Delaware corporation and a wholly owned subsidiary of Wolters
Kluwer nv, a corporation organized under the laws of The Netherlands (the
"Parent"), to purchase all outstanding shares of Common Stock (collectively,
the "Shares") at $55.50 per Share (the "Offer Price"), net to the seller in
cash without interest, upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated December 1, 1995 (the "Offer to Purchase"),
and the related Letters of Transmittal (which together with the Offer to
Purchase and any amendments or supplements thereto constitute the "Offer").
The Offer is disclosed in the Tender Offer Statement on Schedule 14D-1 dated
December 1, 1995 (the "Schedule 14D-1"), as filed by the Offeror and Parent
with the Securities and Exchange Commission (the "Commission"). The Schedule
14D-1 states that the address of the principal executive offices of the
Offeror and Parent is Stadhouderskade 1, 1054 ES Amsterdam, The Netherlands.
The Offer is being made pursuant to the terms of an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of November 27, 1995, among Parent,
the Offeror and the Company, which provides that, following completion of the
Offer, the Offeror will be merged with and into the Company upon the terms and
subject to the conditions set forth in the Merger Agreement (the "Merger"). As
a condition to signing the Merger Agreement, Parent required that the Shares
owned by the Thorne family (which include, in the aggregate, approximately 58%
of the voting Shares) be committed to the Offer upon the terms and subject to
the conditions of the Stock Option and Tender Agreement (the "Option
Agreement"), dated as of November 27, 1995, among Parent, the Offeror, and
Oakleigh B. Thorne, Honore T. Wamsler, Daniel K. Thorne and certain related
parties of such individuals (collectively, the "Stockholders"). Certain terms
and conditions of the Merger Agreement and the Option Agreement are described
below in Item 3. Copies of the Merger Agreement and the Option Agreement are
filed as exhibits to this statement and are incorporated herein by reference.
A copy of the press release issued by the Company on November 27, 1995 is
filed as an exhibit to this statement and incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person filing
this statement, are set forth in Item 1 above, which information is
incorporated herein by reference.
(b)(1) Certain contracts, agreements, arrangements and understandings
between the Company and certain of its directors and executive officers are
described in the Company's Information Statement dated December 1, 1995 under
Directors and Executive Officers of the Company, Executive Compensation,
Options/SAR Grants, Pension Plan, Supplemental Retirement Plan, Shareholder
Return Performance Information, and Stock Ownership of Principal Stockholders,
Nominee Directors, and Management. The Information Statement is attached
hereto as Schedule I, filed as Exhibit 3 to this Schedule 14D-9 and
incorporated herein by reference. In addition, certain contracts, agreements,
arrangements and understandings relating to the Company and/or the Company's
directors and executive officers are contained in the Merger Agreement and are
described below under "Merger Agreement."
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(b)(2) Certain Background Information.
In 1991, in response to declining levels of customer satisfaction, eroding
profit margins and a weakening competitive position, the Company developed a
new strategic direction focused on re-engineering the processes required to
create value for customers, building new capabilities and returning the
Company to a position of financial strength. The Company has invested
approximately $314.7 million in the re-engineering of its business units,
focusing first on CCH Legal Information Services ("CCH LIS"), which offers a
variety of services to assist attorneys in handling corporate, securities,
credit and intellectual property matters, second on Computax, which offers
software and computer services for the processing of tax returns, and last on
U.S. Publishing, a provider of legal and tax information products delivered in
print, CD-ROM and on-line formats. The re-engineering of CCH LIS has resulted
in increased customer satisfaction, sales growth and profitability. The
Company's re-engineering initiative has transformed Computax from a provider
of mainframe-based services to a provider of software-based services and
dramatically improved the operating profits of Computax. The investment
program at U.S. Publishing, which involves the re-engineering of the content
creation, operations, customer management and product management processes as
well as the development of an electronic product development capability, is
nearing completion.
All references to time in the following summary are to New York City time.
In the late spring of 1995, the Chief Executive Officer ("CEO") of the
Company met with the Chairman of the Executive Board ("Chairman") of Parent to
discuss the Company's and Parent's respective businesses and recent
developments in the publishing industry.
In mid-summer, the CEO of the Company was contacted by a senior executive
(the "Senior Executive") of another multi-national publisher ("Entity Two") to
set up a meeting. During the meeting, the Entity Two Senior Executive and the
CEO of the Company discussed a possible business combination and arranged a
meeting for mid-September.
In August, the CEO of the Company discussed with the Board of Directors of
the Company at their regularly scheduled teleconference meeting the contacts
the CEO had had with Parent and Entity Two. The CEO of the Company, in August,
also contacted Goldman, Sachs & Co. ("Goldman Sachs") to discuss an engagement
wherein Goldman Sachs would conduct a study of the Company's strategic
alternatives. Goldman Sachs was asked to present its findings at the Company's
regularly scheduled Board of Directors meeting in mid-September.
In mid-September, Goldman Sachs made a presentation to the Company's Board
of Directors. The presentation included a review of a range of alternatives,
including, but not limited to, operating the business on a stand alone basis
and implementing the Company's re-engineering plans, possible business
combinations, acquisitions and dispositions and a recapitalization. In
addition, legal counsel briefed the Company's Board of Directors about their
duties in considering the alternatives. The Board of Directors of the Company
authorized management to continue discussions with Entity Two and to engage in
discussions with other potential parties.
Following the meeting of the Board of Directors of the Company in mid-
September, the CEO of the Company, another member of the Company's senior
management and a Company consultant met with the Senior Executive and the
Chief Financial Officer ("CFO") of Entity Two to discuss the merits of a
potential business combination. Entity Two indicated that it had an interest
in pursuing a possible acquisition of the Company and that it expected to
provide a preliminary indication of its valuation for the Company.
In October, the CEO of the Company and a representative of Goldman Sachs met
with the Senior Executive and CFO of Entity Two to discuss Entity Two's
valuation of a business combination of the two companies.
Subsequent to the meeting, the CFO and another member of management of
Entity Two arranged to meet a representative of Goldman Sachs to determine how
a business combination between the Company and Entity Two could move forward
and scheduled meetings with the Company for November 7 and 8 to discuss the
Company's business activities and its financial performance.
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At the regularly scheduled meeting of the Board of Directors of the Company
on October 19, the CEO of the Company updated the Company's Board of Directors
on the discussions with Entity Two.
In late October, the Chairman of Parent contacted the CEO of the Company to
invite the CEO of the Company to meet with the Chairman of Parent at Parent's
headquarters to discuss strategic opportunities for the two companies in light
of the current activity in the legal publishing industry.
On October 30, the CEO of the Company, another member of the Company's
senior management and a representative of Goldman Sachs met with members of
the Executive Board and the CFO of Parent. Parent expressed an interest in
pursuing a possible acquisition of the Company and meetings were scheduled
with the Company for November 16 and 17 to discuss the Company's business
activities and its financial performance.
On November 7 and 8, the senior management of the Company conducted the
scheduled meetings with members of senior management of Entity Two and its
financial advisors. A further meeting was planned to review Entity Two's
evaluation of the matters discussed on November 7 and 8.
On November 16 and 17, the senior management of the Company conducted the
scheduled meetings with members of senior management of Parent. A further
meeting was planned to review Parent's evaluation of the matters discussed on
November 16 and 17.
On November 21 and 22, the CEO of the Company, another member of the
Company's senior management and a representative of Goldman Sachs met with the
Senior Executive and the CFO of Entity Two. In the late afternoon of November
21, the CFO of Entity Two presented to a member of the Company's senior
management and a representative of Goldman Sachs a letter preliminarily
outlining the terms of a cash offer for the purchase of the Company.
On the morning of November 22, the parties met again to discuss Entity Two's
offer. Following a discussion of the economic value that a business
combination would create, the Senior Executive of Entity Two agreed to convene
the Executive Board of Entity Two to reconsider its offer. After meeting with
the Executive Board of Entity Two, the Chairman made an increased cash offer
for the purchase of the Company.
In the afternoon of November 22, the CEO of the Company contacted the
Chairman of Parent and indicated that their planned meeting should occur soon
and the Chairman of Parent agreed to give the Company an indication of
Parent's ability to make an offer for the Company following a meeting of
Parent's Supervisory Board on November 23. They tentatively agreed to meet, if
appropriate, on November 24.
In the afternoon of November 23, after Parent's Supervisory Board Meeting,
the Chairman of Parent made a verbal offer of $1.9 billion. Following that
conversation, the CEO of the Company contacted the Senior Executive of Entity
Two to discuss the status of the Entity Two offer. The CEO of the Company then
consulted with the Company's legal and financial advisors and established a
formal process through which written offers would be submitted for evaluation
by the Company's Board of Directors. The process required that offer letters
be sent by Entity Two and Parent to the offices of the Company's legal
advisors by 5pm on November 24. The offers would be presented to the Company's
Board of Directors at a special meeting to be held on November 25.
In the afternoon of November 24, the Chairman of Parent, other members of
Parent's senior management and representatives of Parent's legal and financial
advisors met with the CEO of the Company, a member of Company's senior
management and representatives of Goldman Sachs to discuss the instructions
for submitting an offer.
The Company received offer letters from Parent and Entity Two in the early
evening on November 24.
On November 25, the Company's legal and financial advisors met with the
Board of Directors of the Company by teleconference to discuss the Parent and
Entity Two offers. Both offers were conditioned on the binding agreement of
members of the Thorne family to sell their Shares. The Board of Directors
reviewed the two offers and discussed the terms of the offers and Goldman
Sachs discussed a preliminary financial analysis of the offers. During the
meeting of the Board of Directors, a financial advisor to Entity Two called
and indicated
4
to the CEO of the Company and a representative of Goldman Sachs that Entity
Two was in a position to make an improvement to its offer, but could make only
a modest increase. Entity Two was not informed of the amount of Parent's
offer. The Board of Directors authorized senior management to enter into
discussions with Parent regarding a possible transaction. Parent's offer was
conditioned on negotiations being conducted on an exclusive basis.
The CEO of the Company contacted other members of the Thorne family to
discuss a possible transaction involving the sale of their Shares and to
solicit their views of such a transaction.
On November 25 and November 26, the legal and financial advisors to the
Company met with those of Parent to negotiate the Merger Agreement and legal
advisors to the Thorne family met with those of Parent to negotiate the Option
Agreement. In the evening of November 26, the Board of Directors met with its
financial and legal advisors. Representatives of Goldman Sachs provided a
fairness opinion orally to the Board of Directors. The Company's legal
advisors briefed the Board of Directors on the terms of the Merger Agreement
and Option Agreement. Based on the factors described below in Item 4, the
Board of Directors approved the transaction.
In the late morning of November 27, the trustees with voting power over the
Thorne family shares executed the Option Agreement. The Merger Agreement was
finalized and executed in the early afternoon of November 27. Goldman Sachs
confirmed its oral fairness opinion in writing. Public announcements were made
in the United States and The Netherlands immediately after the execution of
the Merger Agreement.
(b)(3) Merger Agreement.
The following summary of the Merger Agreement, a copy of which is filed as
an Exhibit hereto and incorporated by reference herein, is qualified by
reference to the text of the Merger Agreement.
The Offer. Pursuant to the terms of the Merger Agreement, the Offeror is
required to commence the Offer no later than December 1, 1995 and to keep the
Offer open until 5:00 p.m. (EDT) January 4, 1996. The obligations of the
Offeror to accept for payment, and pay for, any Shares tendered pursuant to
the Offer are subject to the conditions that (i) all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), applicable to the purchase of Shares pursuant to the Offer shall have
expired or been terminated, (ii) there shall have been validly tendered and
not withdrawn prior to the expiration of the Offer such number of Shares that
would constitute a majority of the voting power of the outstanding shares
(determined on a fully diluted basis) of Class A Common Stock (the "Minimum
Condition"), and (iii) on or after the date of the Merger Agreement none of
the following conditions, exist or shall occur and remain in effect:
(a) there shall have been any action taken, or any statute, rule,
regulation, judgment, order or injunction promulgated, entered, enforced,
enacted or issued, by any domestic (federal or state) court, commission,
governmental body, regulatory agency, authority or tribunal which (i)
prohibits or limits or seeks to prohibit or materially limit Parent's or
Offeror's (x) ownership, or seeks to impose material limitations on the
ability of Parent or Offeror to acquire or hold, or exercise full rights of
ownership of, any Shares accepted for payment pursuant to the Offer,
including, without limitation, the right to vote such Shares or (y)
operation of all or a material portion of the Company's business or assets,
or compels Parent to dispose of or hold separate all or a material portion
of the Company's business or assets as a result of the Offer or the Merger,
or (ii) prohibits, or limits or seeks to prohibit or materially limit, or
makes illegal, the acceptance for payment, purchase or payment for Shares
or the consummation of the Offer or the Merger and such statute, rule,
regulation, judgment, order or injunction shall remain in effect for a
period of fifteen business days after the issuance thereof; provided,
however, that in order to invoke this condition with respect to any such
statute, rule, regulation, judgment, order or injunction Parent shall have
used its reasonable best efforts to prevent such statute, rule, regulation,
judgment, order or injunction or ameliorate the effects thereof; provided,
further, that if any such order or injunction is a temporary restraining
order or preliminary injunction, Parent may not, for a period of 30 days,
by virtue of this condition alone, amend or terminate the Offer, but may
only extend the Offer and thereby postpone acceptance for payment or
purchase of Shares;
(b) the Merger Agreement shall have been terminated in accordance with
its terms;
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(c) the Company shall have breached any of its representations and
warranties set forth in the Merger Agreement (other than any matters that,
in the aggregate, would not have a material adverse effect on the Company);
(d) the Company shall have failed in any material respect to perform any
material obligation or covenant required by the Merger Agreement to be
performed or complied with by it;
(e) the Board of Directors of the Company shall have withdrawn or
modified in a manner adverse to Parent or Offeror its approval or
recommendation of the Offer, the Merger or the Merger Agreement, or
approved or recommended any Takeover Proposal (as hereinafter defined); or
(f) there shall have occurred and continued to exist for at least three
business days (i) any general suspension of trading in, or limitation on
prices for, securities on a national securities exchange in the United
States or (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or The Netherlands;
which, in the reasonable judgment of Offeror, makes it inadvisable to proceed
with the Offer or with such acceptance for payment or payment.
The foregoing conditions may be waived by Offeror, in whole or part, at any
time and from time to time, in the sole discretion of Offeror. The failure by
Offeror at any time to exercise any of the foregoing rights will not be deemed
a waiver of any right and each right will be deemed an ongoing right which may
be asserted at any time and from time to time.
Company Actions. Pursuant to the Merger Agreement, the Company has agreed
that on the date of the commencement of the Offer, subject to the fiduciary
duties of the Board of Directors of the Company under applicable law as
determined by the Board of Directors of the Company in good faith after
consultation with the Company's outside counsel, it will file with the
Commission and mail to its stockholders, a Solicitation/Recommendation
Statement on Schedule 14D-9 containing the recommendation of the Board of
Directors that the Company's stockholders accept the Offer and that the
holders of shares of Class A Common Stock approve the Merger.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions of the Merger Agreement, and in accordance with the General
Corporation Law of the State of Delaware, as amended (the "DGCL"), the Offeror
shall be merged with and into the Company at the effective time of the Merger
(the "Effective Time"). Following the Merger, the separate corporate existence
of the Offeror shall cease and the Company shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to and assume all
the rights and obligations of the Offeror in accordance with the DGCL. The
Certificate of Incorporation and Bylaws of the Offeror shall become the
Certificate of Incorporation and Bylaws of the Surviving Corporation. The
directors of the Offeror shall become the initial directors of the Surviving
Corporation and the officers of the Company shall become the initial officers
of the Surviving Corporation.
Conversion of Securities. At the Effective Time, each Share issued and
outstanding immediately prior thereto shall be cancelled and extinguished and
each Share (other than Shares held by the Company as treasury shares, Shares
owned by any wholly owned subsidiary of the Company, Shares owned by Parent,
the Offeror or any wholly owned subsidiary of Parent, and Dissenting Shares
(as defined below)) shall, by virtue of the Merger and without any action on
the part of the Offeror, Parent, the Company or the holders of the Shares, be
converted into and represent the right to receive in cash, without interest,
the per Share consideration paid in the Offer (the "Merger Consideration").
Each share of common stock of the Offeror issued and outstanding immediately
prior to the Effective Time shall, at the Effective Time, by virtue of the
Merger and without any action on the part of the Offeror, Parent, the Company
or the holders of Shares, be converted into and shall thereafter evidence one
validly issued and outstanding share of common stock of the Surviving
Corporation.
Dissenting Shares. If required by the DGCL, Shares which are held by holders
who have properly exercised appraisal rights with respect thereto in
accordance with Section 262 of the DGCL ("Dissenting
6
Shares") will not be exchangeable for the right to receive the Merger
Consideration, and holders of such Shares will be entitled to receive payment
of the appraisal value of such Shares unless such holders fail to perfect or
withdraw or lose their right to appraisal and payment under the DGCL.
Merger Without a Meeting of Stockholders. In the event that the Offeror, or
any other direct or indirect subsidiary of Parent, shall acquire at least 90%
of the outstanding Shares, the parties agree to take all necessary and
appropriate actions to cause the Merger to become effective without a meeting
of stockholders of the Company, in accordance with Section 253 of the DGCL, as
soon as practicable after the expiration of the Offer, but in no event later
than six business days thereafter.
Representations and Warranties. In the Merger Agreement, the Company has
made customary representations and warranties to Parent and the Offeror,
including, but not limited to, representations and warranties relating to the
Company's organization and qualification, capitalization, its authority to
enter into the Merger Agreement and carry out the related transactions,
filings made by the Company with the Commission under the Securities Act of
1933, as amended (the "Securities Act"), or the Securities Exchange Act of
1934, as amended (the "Exchange Act") (including financial statements included
in the documents filed by the Company under the Securities Act and the
Exchange Act), required consents and approvals, the absence of certain
material adverse changes or events, approval by the Board of Directors of the
Merger Agreement and the Option Agreement for all purposes under Section 203
of the DGCL, payment of taxes, compliance with applicable laws, litigation,
material liabilities of the Company and its subsidiaries, employee benefit
plans, intellectual property and environmental matters.
The Offeror and Parent have also made customary representations and
warranties to the Company, including, but not limited to, representations and
warranties relating to the Offeror's and Parent's organization and
qualification, capitalization, authority to enter into the Merger Agreement
and carry out the related transactions, required consents and approvals and
the availability of sufficient funds to consummate the Offer.
Covenants Relating to the Conduct of Business. The Company has agreed that
it will, and will cause its subsidiaries to, in all material respects, carry
on their respective businesses in, and not enter into any material transaction
other than in accordance with, the regular and ordinary course and, to the
extent consistent therewith, use their reasonable best efforts to preserve
intact their current business organizations, keep available the services of
their current officers and employees and preserve their relationships with
customers, suppliers and others having business dealings with them. The
Company has agreed that, except as contemplated by the Merger Agreement or as
disclosed by the Company to the Parent pursuant to the Merger Agreement, it
shall not, and shall not permit any of its significant subsidiaries (a
"Subsidiary") to, without the prior written consent of the Parent:
(a) declare, set aside or pay any dividends on, or make any other actual,
constructive or deemed distributions in respect of, any of its capital
stock, or otherwise make any payments to stockholders of the Company in
their capacity as such, other than (1) ordinary quarterly dividends by the
Company consistent with past practice in an amount not in excess of $0.17
1/2 per quarter per share of Shares, provided that the record date for any
such dividend to be paid for the fourth quarter of 1995 shall not be
earlier than January 16, 1996 or (2) dividends declared prior to the date
of the Merger Agreement,
(b) issue, deliver, sell, pledge, dispose of or otherwise encumber, or
authorize the issuance, delivery, sale, pledge, disposition or other
encumbrance of, any shares of its capital stock, any other voting
securities or equity equivalent or any securities convertible into, or any
rights, warrants or options to acquire, any such shares, voting securities
or convertible securities or equity equivalent (other than, in the case of
the Company, the issuance of Shares during the period from the date of the
Merger Agreement through the Effective Time upon the exercise of Company
stock options outstanding on the date of the Merger Agreement in accordance
with their current terms);
(c) amend its Certificate of Incorporation or Bylaws;
7
(d) acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial portion of the assets of or equity in, or by any
other manner, any business or any corporation, partnership, association or
other business organization or division thereof;
(e) other than in the ordinary course of business consistent with past
practice, sell, lease or otherwise dispose of or agree to sell, lease or
otherwise dispose of, any of its assets;
(f) incur, assume or prepay any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities or
guarantee any debt securities of others, except for borrowings or
guarantees incurred in the ordinary course of business consistent with past
practice;
(g) alter through merger, liquidation, reorganization, restructuring or
in any other manner the corporate structure or ownership of any subsidiary
of the Company;
(h) enter into or adopt any employee benefit plans or programs (which, if
currently existing, would come within the definition of Benefit Plan under
Section 4.12 of the Merger Agreement), or amend any existing Benefit Plan,
agreement or arrangement, make any contribution to any Benefit Plan which
is disproportionately large when compared to prior contributions made to
such Benefit Plan or enter into or amend any employee benefit plan or
employment or consulting agreement except (x) for certain stay bonuses,
merit bonuses and severance payments under the Company's severance policy
or as otherwise permitted by Section 7.11 of the Merger Agreement or (y)
bonuses or compensation increases associated with Benefit Plans, promotions
and reviews in the ordinary course of business;
(i) except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
(j) make any tax election or settle or compromise any federal, state,
local or foreign tax liability;
(k) settle or compromise any pending or threatened material suit, action
or claim;
(l) enter into any material contracts or modify, amend, terminate any
material contracts;
(m) take or offer or propose to take, or agree to take in writing or
otherwise any of the actions described above or any action which would make
any of the representations or warranties of the Company contained in the
Merger Agreement untrue or incorrect as of the date when made if such
action had been taken, or would result in any of the Offer conditions not
being satisfied.
During the period from the date of the Merger Agreement through the
Effective Time, the Offeror shall not engage in any activities of any nature
except as provided in or contemplated by the Merger Agreement.
No Solicitation. The Company has agreed in the Merger Agreement that the
Company, its affiliates and their respective officers, directors, employees,
representatives and agents shall immediately cease any existing discussions or
negotiations, if any, with any parties conducted heretofore with respect to
any acquisition or exchange of all or any material portion of the assets of,
or any equity interest in, the Company or any of its subsidiaries or any
business combination with the Company or any of its subsidiaries. The Company
has agreed in the Merger Agreement that, from and after the date of the Merger
Agreement, the Company will not, directly or indirectly, solicit or initiate
any Takeover Proposal from any person, or engage in discussions or
negotiations relating thereto (including by way of furnishing information);
provided, however, that (i) the Company may engage in discussions or
negotiations with a third party who seeks to initiate such discussions or
negotiations or may furnish such third party information concerning the
Company and its business, properties, assets, operating results and prospects,
in each case only in response to a request for such information or access to
any person made after the date hereof which was not encouraged, solicited or
initiated by the Company or any of its affiliates or any of its or their
respective officers, directors, employees, representatives or agents after the
date hereof, pursuant to appropriate confidentiality agreements, (ii) the
Company's Board of Directors may take and disclose to the Company's
stockholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act and (iii) following receipt of a Takeover Proposal or offer the
Board of Directors of the Company may withdraw or modify its recommendation to
the stockholders, but in each case referred to in the foregoing clauses (i)
through
8
(iii) only to the extent that the Board of Directors of the Company shall
conclude in good faith after consultation with the Company's outside counsel
that such action is appropriate in order for the Board of Directors of the
Company to act in a manner which is consistent with its fiduciary obligations
under applicable law. The Company also agreed to promptly notify Parent of its
receipt of any proposal or offer. As used in the Merger Agreement, "Takeover
Proposal" means any proposal or offer, other than a proposal or offer by Parent
or any of its affiliates, for a tender or exchange offer, a merger,
consolidation or other business combination involving the Company or any
Subsidiary of the Company or any proposal to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets of, the
Company or any of its Subsidiaries or any other transaction the consummation of
which could reasonably be expected to impede, interfere with, prevent or
materially delay the Offer or the Merger or which would reasonably be expected
to dilute materially the benefits to Parent of the transactions contemplated by
the Merger Agreement.
Company Stock Options; Tax Gross-Up. Pursuant to the Merger Agreement,
immediately upon the consummation of the Offer, all outstanding employee stock
options, whether or not then fully exercisable or vested, to purchase shares of
Common Stock (a "Company Stock Option") theretofore granted under the Company's
Long-Term Incentive Plan shall become fully exercisable and vested, and,
pursuant to the terms of the Long Term Incentive Plan, the Company Stock
Options, shall, upon their surrender to the Company by the holders thereof, be
cancelled by the Company, and the holders thereof shall receive a cash payment
from the Company in an amount equal to the number of shares of Common Stock
subject to each surrendered option multiplied by the difference between the
exercise price per share of Common Stock covered by the option and the Merger
Consideration. No additional awards shall be granted under the Long-Term
Incentive Plan. Parent acknowledged that the Company has resolved to "gross-up"
certain executives for excise taxes due on any "excess parachute payment" as a
result of the acceleration of the vesting of the Company Stock Options (subject
to a maximum "gross-up" amount of $6,000,000) and agreed to undertake to make
such payments to the extent due after the Effective Time.
Reasonable Best Efforts to Effect Merger. Upon the terms and subject to the
conditions set forth in the Merger Agreement, each of Parent, Offeror and the
Company has agreed to use its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Merger, and the other transactions contemplated by the Merger Agreement,
provided, however, that the Company shall be under no obligation to take any
action to the extent that the Board of Directors shall conclude in good faith,
after consultation with the Company's outside counsel, that such action could
be inconsistent with the Board of Directors' fiduciary obligations under
applicable law.
Indemnification. Pursuant to the Merger Agreement, Parent has agreed that,
from and after the Effective Time, it will cause the Surviving Corporation to
indemnify and hold harmless all past and present officers, directors, employees
and agents of the Company and of its Subsidiaries to the full extent such
persons may be indemnified by the Company pursuant to the Company's Certificate
of Incorporation and Bylaws as in effect as of the date of the Merger Agreement
for acts and omissions occurring at or prior to the Effective Time and shall
advance reasonable litigation expenses incurred by such persons in connection
with defending any action arising out of such acts or omissions in accordance
with the terms and provisions of such Certificate of Incorporation and Bylaws.
In addition, Parent will maintain in effect for a period of six years the
Company's current directors' and officers' liability insurance covering those
persons who are currently covered by such policy; provided, however, Parent
shall not 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, but if
the annual premiums of such insurance coverage exceed such amount, Parent shall
be obligated to obtain a policy with the greatest coverage available for a cost
not exceeding such amount.
Employee Benefits. Until at least December 31, 1996, Parent shall maintain or
cause to be maintained employee benefits and programs for retirees, directors,
officers and employees of the Company and its Subsidiaries that are no less
favorable in the aggregate than those being provided to such retirees,
directors, officers and employees on the date of the Merger Agreement. On or
after January 1, 1997, the retirees, directors, officers and employees of the
Company and its Subsidiaries shall be eligible for employee benefits and
programs
9
(including but not limited to incentive compensation, deferred compensation,
pension, life insurance, medical, profit sharing (including 401(k)),
severance, salary continuation and fringe benefits) which are no less
favorable in the aggregate than those generally available to similarly
situated retirees, directors, officers and employees of Parent and its
Subsidiaries in the relevant geographic regions. For purposes of eligibility
to participate in and vesting in all benefits provided to retirees, directors,
officers and employees of the Company and its Subsidiaries will be credited
with their years of service with the Company and its Subsidiaries and years of
service with prior employers to the extent service with prior employers is
taken into account under plans of the Company. Upon termination of any medical
plan of the Company, individuals who were directors, officers or employees of
the Company or its Subsidiaries at the Effective Time shall become eligible to
participate in the medical plan of Parent, provided that no condition that was
eligible for coverage under any medical plan of the Company at the time of
such termination shall be excluded from coverage under the medical plan of
Parent as a pre-existing condition. Amounts paid before the Effective Time by
retirees, directors, officers and employees of the Company under any medical
plans of the Company shall after the Effective Time be taken into account in
applying deductibles and maximum out-of-pocket limits applicable under the
medical plan of Parent provided as of the Effective Time to the same extent as
if such amounts had been paid under such medical plan of Parent.
Parent agreed that the following principles shall apply for purposes of
determining bonuses for 1995 under the Company's Short Term Incentive Plan for
1995: (1) the Compensation Committee's determination to pay certain persons
who are employees of the Company or any of its Subsidiaries and who are
covered by such plan (other than employees whose employment is terminated for
any reason for cause on or prior to December 31, 1995); (2) whether any
bonuses are payable under such plan to other employees and, if so, the amounts
thereof shall be determined as if the transactions contemplated by the Merger
Agreement had not occurred and the Company had remained an independent,
publicly-owned company through December 31, 1995, taking into account to the
extent reasonably applicable the limitations imposed by Section 6.1(a) of the
Merger Agreement; and (3) any bonuses payable pursuant to clause (2) above
shall be paid by February 28, 1996. The Company has estimated that the total
amount of such bonuses will not exceed $3,000,000.
Parent agreed to fulfill any obligations that may arise under any Welfare
Plan to provide health benefits to retirees or other arrangements to provide
health benefits to retirees, in either case, entered into prior to the date of
the Merger Agreement.
Merit Bonuses; Severance Policy. Pursuant to the Merger Agreement, from the
date of the Merger Agreement up to the Effective Time, the Company shall be
permitted to offer and pay bonuses, in addition to any bonuses or payments
pursuant to any existing bonus or incentive plans of the Company, payable to
officers and employees whose performance and dedication to the Company or its
significant subsidiaries merits, in the discretion of the CEO of the Company,
special compensation ("Merit Bonuses"); provided, however, that the aggregate
amount paid by the Company pursuant to such Merit Bonuses shall be no greater
than $1,000,000.
With respect to officers and employees who are or will be terminated, Parent
has agreed to maintain the Company's severance policy as in effect on the date
of the Merger Agreement, or shall replace such policy with a policy providing
equal or more favorable compensation, for a period of at least one year from
the Effective Time.
Parent has agreed to honor or cause to be honored all existing severance
policies with the Company's officers and employees.
Parent has agreed that it and its Subsidiaries will provide reasonable and
customary outplacement services ("Outplacement Services") to officers of the
Company and its Subsidiaries who are terminated as a result of, or within
eighteen months following the Merger, which Outplacement Services provided to
such officer and employees shall include one-on-one counseling and assistance.
Management Contracts. The Company has agreed to use its reasonable best
efforts to cause the key members of its senior management to enter into
employment arrangements with the Surviving Corporation on
10
terms and conditions satisfactory to Parent and pursuant to which they shall
remain as employees of the Surviving Corporation following the Effective Time.
Company Stockholder Approval; Proxy Statement. The Company has agreed that
if approval of the Merger by the holders of Class A Common Stock ("Class A
Holders") is required by applicable law, the Company shall either (i) call a
meeting of its Class A Holders (the "Stockholder Meeting") for the purpose of
voting upon the Merger and shall use its reasonable best efforts to obtain
Class A Holder approval of the Merger or (ii) if the holders of a majority of
the outstanding shares of Class A Common Stock intend to act by written
consent, comply with the requirements of Rule 14c-2 promulgated under the
Exchange Act. The Stockholder Meeting, if necessary, shall be held as soon as
practicable following the purchase of Shares pursuant to the Offer and the
Company will, through its Board of Directors, but subject to the fiduciary
duties of its Board of Directors under applicable law as determined by the
Board of Directors in good faith after consultation with the Company's outside
counsel, recommend to its Class A Holders the approval of the Merger and not
rescind its declaration that the Merger is advisable. The record date for the
Stockholder Meeting shall be a date subsequent to the date Parent or the
Offeror becomes a record holder of Shares purchased pursuant to the Offer.
If required by applicable law, the Company will, as soon as practicable
following the expiration of the Offer, prepare and file a preliminary Proxy
Statement or Information Statement (each as defined in the Merger Agreement),
as the case may be, with the Commission and will use its reasonable best
efforts to respond to any comments of the Commission or its staff and to cause
the Proxy Statement to be mailed to the Class A Holders. The Company will
notify Parent of the receipt of any comments from the Commission or its staff
and of any request by the Commission or its staff for amendments or
supplements to the Proxy Statement or for additional information and will
supply Parent with copies of all correspondence between the Company or any of
its representatives, on the one hand, and the Commission or its staff, on the
other hand, with respect to the Proxy Statement or the Merger. If at any time
prior to the approval of this Agreement by the Class A Holders at the
Stockholder Meeting, if necessary, there shall occur any event that should be
set forth in an amendment or supplement to the Proxy Statement, the Company
will prepare and mail to its stockholders such an amendment or supplement.
Parent agreed to cause all shares of Class A Common Stock purchased pursuant
to the Offer and all other shares of Class A Common Stock owned by Offeror or
any other Subsidiary of Parent to be voted in favor of the approval of the
Merger.
Access to Information. The Company has agreed that it shall, and shall cause
each of its Subsidiaries to, afford to Parent, and to Parent's accountants,
counsel, financial advisors and other representatives, reasonable access and
permit them to make such inspections as they may reasonably require during
normal business hours during the period from the date of the Merger Agreement
through the Effective Time to all their respective properties, books,
contracts, commitments and records (including the availability of an office at
the Company's corporate headquarters where Parent's representatives may work
on a day-to-day basis) and, during such period, the Company shall, and shall
cause each of its Subsidiaries to, furnish certain information promptly to
Parent; provided that, in no event shall the Company be requested to supply to
Parent, or to Parent's accountants, counsel, financial advisors or other
representatives, any information relating to indications of interest from, or
discussions with, any other potential acquirors of the Company which were
received or conducted prior to the date of the Merger Agreement, except to the
extent necessary for use in the Offer Documents (as defined in the Merger
Agreement), the Schedule 14D-9 (as defined in the Merger Agreement) and the
Proxy Statement and/or the Information Statement. Except as required by law,
Parent will hold, and will cause its affiliates, associates and
representatives to hold, any nonpublic information in confidence until such
time as such information otherwise becomes publicly available and shall use
its reasonable best efforts to ensure that such affiliates, associates and
representatives do not disclose such information to others without the prior
written consent of the Company. In the event of termination of the Merger
Agreement for any reason, Parent shall promptly return or destroy all
nonpublic documents so obtained from the Company or any of its Subsidiaries
and any copies made of such documents for Parent.
11
Conditions Precedent. The respective obligations of each of Parent, the
Offeror and the Company to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Time of the following conditions: (a)
if approval of the Merger by the Class A Holders is required by applicable
law, the Merger shall have been approved by the requisite vote of such
holders; (b) Offeror shall have accepted for payment and paid for the Shares
properly tendered pursuant to the Offer; provided, however, that this
condition will be deemed satisfied with respect to the obligations of Parent
and Offeror if Offeror fails to accept for payment and pay for any Shares
pursuant to the Offer in violation of the terms of the Merger Agreement or the
Offer; (c) no Governmental Entity (as defined in the Merger Agreement) or
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree or
injunction prohibiting the consummation of the Merger; provided, however, that
the Company, Parent and the Offeror shall use their reasonable best efforts to
have any such order, decree or injunction vacated and (d) the applicable
waiting period under the HSR Act shall have expired or been terminated.
Termination. The Merger Agreement provides that it may be terminated at any
time prior to the Effective Time, whether prior to or after approval by the
stockholders of the Company:
(a) by mutual written consent of Parent and the Company;
(b) by the Company if (i) the Offer has not been timely commenced in
accordance with the Merger Agreement; or (ii) the Offer shall expire or is
terminated without any Shares being purchased thereunder due to the
conditions set forth in Exhibit A (other than the Minimum Condition)
(herein referred to as the "Exhibit A Conditions") failing to be met; or
(iii) there is an offer to acquire all of the outstanding Shares or
substantially all of the assets of the Company for consideration that
provides stockholders of the Company a value per Share which, in the good
faith judgment of the Board of Directors of the Company, provides a higher
value per Share than the consideration per Share pursuant to the Offer or
the Merger and as a result of which, the Board of Directors of the Company
is obligated in accordance with its fiduciary duty under applicable law, as
advised by its counsel, to terminate the Merger Agreement; or (iv) there
has been (y) a material breach by Parent or the Offeror of any
representation or warranty that is not qualified as to materiality or (z) a
breach by Parent or the Offeror of any representation or warranty that is
qualified as to materiality, in each case which breach has not been cured
within five business days following receipt by Parent or the Offeror of
notice of the breach; or (v) Parent or the Offeror fails to comply in any
material respect with any of its material obligations or covenants
contained in the Merger Agreement which failure to perform is incapable of
being cured or has not been cured within five business days following
receipt by Parent or the Offeror of written notice of the failure to
perform;
(c) by either Parent or the Company if (i) the Merger has not been
effected on or prior to the close of business on May 31, 1996; provided,
however, that the right to terminate the Merger Agreement pursuant to such
provision shall not be available (y) to Parent if the Offeror or any
affiliate of the Offeror acquires Shares pursuant to the Offer, or (z) to
any party whose failure to fulfill any obligation of the Merger Agreement
has been the cause of, or resulted in, the failure of the Merger to have
occurred on or prior to the aforesaid date; or (ii) any court of competent
jurisdiction or any governmental, administrative or regulatory authority,
agency or body shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting
the transactions contemplated by the Merger Agreement and such order,
decree, ruling or other action shall have become final and nonappealable;
or (iii) if the stockholders of the Company fail to give any approval
required by applicable law; or (iv) if as the result of the failure of any
of the Exhibit A Conditions (except for the Minimum Condition), the Offer
shall have terminated or expired in accordance with its terms without the
Offeror having purchased any Shares pursuant to the Offer or pursuant to
the Option Agreement in accordance with its terms; provided, however, that
the right to terminate the Merger Agreement pursuant to Section 9.1(c)(iv)
of the Merger Agreement shall not be available to any party whose failure
to fulfill any of its obligations under the Merger Agreement results in the
failure of any such condition;
(d) by Parent if the Board of Directors of the Company shall have failed
to recommend, or withdrawn, modified or amended in any material respect its
approval or recommendations of the Offer or the Merger or shall have
resolved to do any of the foregoing.
12
Fees and Expenses. Whether or not the Merger is consummated, all costs and
expenses incurred in connection with the Merger Agreement and the transactions
contemplated thereby shall be paid by the party incurring such costs and
expenses.
The foregoing description of the terms and provisions of the Merger Agreement
is qualified in its entirety by reference to the text of the Merger Agreement,
which is filed as an exhibit hereto and is incorporated herein by reference.
(b)(4) Option Agreement.
The following summary of the Option Agreement, a copy of which is filed as an
Exhibit hereto and incorporated by reference herein, is qualified by reference
to the text of the Option Agreement.
General. As a condition of Parent entering into the Merger Agreement, Parent
required that each of the Stockholders enter into the Option Agreement. The
Stockholders include trusts for the benefit of certain members of the Thorne
family and individual members of the Thorne family.
Agreement to Tender. Pursuant to the Option Agreement, the Stockholders
severally (and not jointly) have agreed to tender pursuant to the Offer, a
total of 9,568,967 shares of Class A Common Stock owned by the Stockholders,
representing approximately 58% of the outstanding Class A Common Stock, and
9,497,701 shares of Class B Common Stock owned by the Stockholders,
representing approximately 58% of the outstanding Class B Common Stock. Each
Stockholder severally has agreed to deliver to the depositary for the Offer, no
later than the tenth business day following the date of the Offer to Purchase,
the Letter(s) of Transmittal together with the certificates for such
Stockholder's Shares, if available, or a "Notice of Guaranteed Delivery," if
the Stockholder's Shares are not available; provided, that each Stockholder has
agreed to use all reasonable efforts to make such deliveries within five
business days following the date of the Offer to Purchase. Each of the
Stockholders has also severally agreed not to withdraw any Shares tendered into
the Offer.
Option to Purchase. Each Stockholder has also severally granted to the
Offeror an irrevocable option (the "Stock Option") to purchase all of such
Stockholder's Shares legally and/or beneficially owned by such
Stockholder at a purchase price equal to $55.50 per Share. The exercise period
for the Stock Option commences on the later of January 2, 1996 and the
termination or expiration of the Offer and ends ten business days after the
later of such dates; provided, however, if the Merger Agreement terminates
solely by reason of an offer for the Company being made for consideration that
provides the stockholders of the Company a per Share value which, in the good
faith judgment of the Board of Directors of the Company, provides a higher
value per Share than the consideration per Share pursuant to the Offer or the
Merger and as a result of which the Board of Directors of the Company, in
accordance with its fiduciary duties under applicable law, as advised by
counsel, terminates the Merger Agreement (a "Fiduciary Duty Termination"), such
exercise period for the Stock Option would commence on the date of termination
of the Merger Agreement and end ten business days thereafter.
Conditions To Delivery of the Shares. The Option Agreement provides that the
obligation of the Stockholders to deliver the Stockholders' Shares upon
exercise of the Stock Option is subject to (i) all waiting periods under the
HSR Act applicable to the exercise of the Stock Option having expired or been
terminated, (ii) there being no preliminary or permanent injunction or other
order by any court of competent jurisdiction restricting, preventing or
prohibiting the exercise of the Stock Option or the delivery of the Shares in
respect of such exercise, and (iii) the Offer having expired or terminated
without any Shares being purchased thereunder and without any violation of the
Offer by Parent or the Offeror.
Representations and Warranties. The Option Agreement contains customary
representations and warranties by each Stockholder, including those relating to
(i) authority to enter into the Option Agreement and sell Shares owned by such
Stockholder, (ii) no options, warrants or other purchase rights existing as to
such Shares, (iii) good and marketable title to the Shares owned by such
Stockholder free and clear of all liens, claims, encumbrances and security
interests, (iv) legality, validity and binding effect of the Option Agreement,
and (v) no violation of agreements, judgments, laws, rules and regulations. The
Option Agreement also contains various
13
customary representations and warranties by Parent and the Offeror, including
those relating to authority to enter into the Option Agreement, the
sufficiency of funds of Parent, legality, validity and binding effect of the
Option Agreement and no violation of agreements, judgments, laws, rules and
regulations.
No Disposition of Shares and No Acquisition of Shares. In the Option
Agreement, each Stockholder severally has agreed that, except as contemplated
by the Option Agreement, such Stockholder will, and none would offer or agree
to, sell, transfer or otherwise dispose of, or create any security interest,
pledge, option, right of first refusal, limitation on such Stockholder's
voting rights or other encumbrance with respect to, such Stockholder's Shares.
Each such Stockholder has also agreed that it will not, and will not offer to
agree to, acquire any additional Shares or options, warrants or other rights
to acquire Shares, without the prior written consent of the Offeror.
Covenants of Parent and the Offeror. Each of Parent and the Offeror has
agreed that it will not sell, offer to sell or otherwise dispose of the Shares
in violation of the Securities Act. Each of Parent and the Offeror also has
agreed that it will perform in all material respects all of its respective
obligations under the Merger Agreement. Pursuant to the Option Agreement,
Parent and the Offeror have agreed that if Parent and the Offeror exercise the
Stock Option or any of their other rights under the Option Agreement at a time
when the Merger Agreement has terminated, Parent and the Offeror will effect a
merger pursuant to which each outstanding Share (other than those held by
Parent, the Offeror, the Company or any subsidiary of the Company) shall be
converted into the right to receive not less than $55.50 per Share, net to
the Stockholder, in cash at the earliest practicable date after the closing of
the Stock Option.
No Solicitation. Each Stockholder has agreed in the Option Agreement that it
shall immediately cease any existing discussions or negotiations, if any, with
any parties conducted heretofore with respect to any acquisition or exchange
of all or any material portion of the assets of, or any equity interest in,
the Company or any of its subsidiaries or any business combination with the
Company or any of its subsidiaries. Each Stockholder has also agreed that,
from and after the date of the Option Agreement, no Stockholder will directly
or indirectly solicit or initiate any takeover proposal or offer from any
person, or engage in discussions or negotiations relating thereto (including
by way of furnishing information). Each Stockholder will promptly notify
Parent of its receipt of any
takeover proposal. The definition of "Takeover Proposal" in the Option
Agreement is the same as in the Merger Agreement.
Voting Agreement and Proxy. The Option Agreement provides that during the
time the Option Agreement is in effect, each Stockholder will vote all such
Stockholder's Shares (i) in favor of the Merger, the Merger Agreement and the
transactions contemplated by the Merger Agreement, (ii) against any action or
agreement that would result in a breach in any material respect of any
covenant, representation or warranty or any other obligation of the Company
under the Merger Agreement, and (iii) against any action or agreement that
would materially impede, interfere with or attempt to discourage the Offer or
the Merger. Each Stockholder also has agreed that, if the Merger Agreement
terminates by reason of a Fiduciary Duty Termination, such Stockholder will
(i) attend or otherwise participate in all stockholder meetings or actions by
written consent, (ii) vote such Stockholder's Shares to enlarge the Board of
Directors of the Company to enable the Offeror to nominate a majority of the
members of the Board of Directors, and (iii) vote such Stockholder's Shares so
as to prevent the Company from taking certain actions provided for in the
Merger Agreement. The Option Agreement further provides that in the event any
Stockholder fails to vote any of such Stockholder's shares in the manner
irrevocably prescribed in this paragraph, such Stockholder will be deemed to
have appointed the Offeror as the proxy of such Stockholder pursuant to
Section 212 of the DGCL to vote and otherwise act (by written consent or
otherwise) with respect to all of such Stockholder's Shares (other than to
reduce the price paid pursuant to the Offer or the Merger or to otherwise
modify or amend the Merger Agreement to reduce the rights or benefits of the
Company or any stockholders of the Company under the Offer or the Merger
Agreement or to reduce the obligations of Parent or the Offeror thereunder).
This irrevocable proxy expires if (x) the Offer expires or terminates without
any Shares being purchased thereunder in violation of the terms of the Offer
or (y) Parent or the Offeror is in violation of the terms of the Option
Agreement.
14
Termination. The Option Agreement shall terminate, without any action by any
of the parties, on the date on which the Merger Agreement terminates in
accordance with its terms, except with respect to the exercise of the Stock
Option. The Stock Option may be exercised after termination of the Merger
Agreement on the terms described above under "Stock Option".
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) The Board of Directors of the Company, at a meeting held on November
26, 1995, determined that the Merger is advisable and that the terms of the
Offer and the Merger are fair to, and in the best interests of, the
Company's stockholders, and acted unanimously to approve the Offer and the
Merger and the execution and delivery of the Merger Agreement, approve the
Merger Agreement and the Option Agreement for all purposes under Section
203 of the DGCL, and recommend that the Company's stockholders accept the
Offer and (if required by applicable law or otherwise) approve the Merger
Agreement and the Merger. A copy of the Company's letter to stockholders
dated December 1, 1995, is filed as an exhibit to this statement and is
incorporated herein by reference.
(b) In reaching the determinations described in paragraph (a) above, the
Board of Directors of the Company considered a number of factors, including
the following:
(1) The financial condition and results of operations of the Company.
(2) The projected financial condition, results of operations,
prospects and strategic objectives of the Company, as well as the risks
involved in achieving those prospects and objectives in the publishing
industry with the current economic and market conditions.
(3) Presentations to the Board of Directors by Goldman Sachs, which
included valuation analyses of the Company.
(4) The fact that the $55.50 per Share to be received by the
Company's stockholders in both the Offer and Merger represents a
substantial premium over the respective closing market prices of $27.75
per share of Class A Common Stock and $26.00 per share of Class B
Common Stock on November 24, 1995 (the last trading day prior to the
Board of Directors meeting referred to in paragraph (a) of this Item
4); and the fact that the $55.50 per Share to be received by the
Company's stockholders in both the Offer and the Merger represents a
56% premium over the ten-year high per share market price of the Class
A Common Stock.
(5) The relationship of the Offer Price to the respective historical
market prices of the shares of Class A Common Stock and Class B Common
Stock and to the Company's book value and the respective net asset
values per share of Class A Common Stock and Class B Common Stock.
(6) Discussions (described in Item 3 above under "Certain Background
Information") with other parties as to possible transactions.
(7) The Board's view, after consultation with management and Goldman
Sachs regarding the likelihood of the existence of other viable buyers
on terms as favorable as those in the Offer and Merger.
(8) Developments relating to the consolidation in the professional
publishing industry.
(9) The oral opinion of Goldman Sachs (subsequently confirmed in
writing as of November 27, 1995) that, as of such date, the proposed
consideration to be received by the holders of Shares pursuant to the
Offer and the Merger is fair to such holders. The full text of the
written opinion of Goldman Sachs, which sets forth assumptions made,
procedures followed, matters considered and limits on the review
undertaken, is attached as Exhibit 6 to this statement and is
incorporated herein by reference. THE COMPANY'S STOCKHOLDERS ARE URGED
TO READ THIS OPINION IN ITS ENTIRETY.
(10) The availability of appraisal rights under Section 262 of the
DGCL for Dissenting Shares.
(11) The terms and conditions of the Merger Agreement and the course
of the negotiations resulting in the execution thereof (including the
terms of the Merger Agreement that permit the
15
Company's Board of Directors, in the exercise of its fiduciary duties,
to furnish information to or enter into discussions or negotiations
with any third party that requests such information or initiates such
discussions or negotiations, pursuant to appropriate confidentiality
agreements, in connection with any proposal or offer for a tender or
exchange offer, a merger, consolidation or other business combination
involving the Company or any proposal to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets
of, the Company (although the Company is not permitted by the Merger
Agreement to initiate, solicit or encourage any such third party
proposal or offer or discussions or negotiations regarding the same),
and under certain circumstances to terminate the Merger Agreement).
(12) The likelihood that the proposed acquisition would be
consummated, including the likelihood of satisfaction of the regulatory
approvals required pursuant to, and the other conditions to, the Offer
and the Merger contained in the Merger Agreement, the experience,
reputation and financial condition of the Parent and the risks to the
Company if the acquisition were not consummated.
(13) The requirement by each of Parent and Entity Two, as a condition
to a transaction, that the Stockholders enter into a binding agreement
for the sale of their Shares; the stated desire of the Stockholders to
proceed with the Merger; and the decision of the Stockholders to enter
into the Option Agreement.
(14) The recommendation of the Company's management with respect to
the proposed transaction.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to its letter agreement dated September 26, 1995 with the Company,
Goldman Sachs is entitled to a transaction fee of approximately 0.70% of the
aggregate consideration (as defined in the letter agreement) paid in
connection with the Offer and the Merger (less any amounts previously paid by
the Company in connection with the Company's retention of Goldman Sachs),
which shall become payable upon the purchase of 50% or more of the Class A
Common Stock or the Common Stock. The Company has also agreed to reimburse
Goldman Sachs for certain out-of-pocket expenses. In addition, the Company has
agreed to indemnify and hold harmless Goldman Sachs and its affiliates and
their respective directors, officers, employees and controlling persons
against certain liabilities and expenses, including liabilities under the
federal securities laws, arising out of or in connection with its engagement.
Goldman Sachs from time to time provides financial advisory services for the
Company and has received fees for the rendering of these services.
Neither the Company nor any person acting on its behalf currently intends to
employ, retain or compensate any person to make solicitations or
recommendations to security holders on its behalf concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, no transactions in Shares have
been effected during the past 60 days by the Company or by any executive
officer, director, affiliate or subsidiary of the Company except as follows:
(i) pursuant to the Option Agreement described in Item 3 above under "Option
Agreement," members of the Thorne family and certain trusts with Thorne family
members as beneficiaries have agreed to tender their shares (including an
aggregate of approximately 58% of the outstanding voting Shares (i.e., Class A
Common Stock)) into the tender offer and to vote such shares in favor of the
Merger, and have granted an option to Parent to purchase such shares; and
(ii) certain executive officers of the Company (some of whom are directors)
participate in the CCH Employees' Profit Sharing Plan (which includes the CCH
Stock Fund) pursuant to elections made prior to October 1, 1995.
(b) To the best of the Company's knowledge, all of its executive officers
and directors currently intend to tender to the Offeror, pursuant to the
Offer, all Shares which are held of record or beneficially owned by such
persons except for certain Shares purchasable upon exercise of options, which
options will be cancelled pursuant to the Merger Agreement in exchange for the
cash payment as described in Item 3 above.
16
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in Items 3 and 4, none.
(b) None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
EXHIBIT NO.
1. Agreement and Plan of Merger, dated as of November 27, 1995, among Wolters
Kluwer N.V., WK Acquisition Sub, Inc. and CCH Incorporated.
2. Stock Option and Tender Agreement, dated as of November 27, 1995, among
Wolters Kluwer nv, WK Acquisition Sub, Inc. and Oakleigh B. Thorne, Honore
T. Wamsler, Daniel K. Thorne and certain related parties of such
individuals.
3. The Company's Information Statement pursuant to Section 14(f) of the
Securities Exchange Act of 1934 and Rule 14f-1 thereunder.
4. Press Release of CCH Incorporated issued on November 27, 1995.
5. Letter to Stockholders of CCH Incorporated dated December 1, 1995.*
6. Opinion of Goldman, Sachs & Co.*
- --------
* Included in copies mailed to stockholders.
17
SIGNATURE
AFTER REASONABLE INQUIRY AND TO THE BEST OF MY KNOWLEDGE AND BELIEF, I
CERTIFY THAT THE INFORMATION SET FORTH IN THIS STATEMENT IS TRUE, COMPLETE,
AND CORRECT.
CCH Incorporated
/s/ Oakleigh Thorne
By: _________________________________
Oakleigh Thorne
President and Chief Executive
Officer
Dated: December 1, 1995
18
SCHEDULE I
CCH INCORPORATED
2700 Lake Cook Road
Riverwoods, Illinois 60015
----------------
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about December 1, 1995 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") to holders of the Shares of the Company. Capitalized terms
used and not otherwise defined herein shall have the meaning set forth in the
Schedule 14D-9. You are receiving this Information Statement in connection
with the possible election of persons designated by Offeror to a majority of
the seats on the Board of Directors of the Company (the "Board").
Pursuant to the Merger Agreement, on December 1, 1995, the Offeror commenced
the Offer. The Offer is scheduled to expire at 5:00 P.M., New York City time,
on January 4, 1996, unless extended.
This Information Statement is required by Section 14(f) of the Securities
Exchange Act of 1934 and Rule 14f-1 thereunder. You are urged to read this
Information Statement carefully. You are not, however, required to take any
action.
The information contained in this Information Statement (including
information incorporated by reference) concerning Parent and the Offeror and
the Designees (as defined herein) has been furnished to the Company by Parent
and the Offeror and the Company assumes no responsibility for the accuracy or
completeness of such information.
GENERAL INFORMATION REGARDING THE COMPANY
GENERAL
The Class A Common Stock is the only class of voting securities of the
Company outstanding. Each share of Class A Common Stock has one vote. As of
November 27, 1995, (i) there were 16,638,512 shares of Class A Common Stock
outstanding, (ii) 16,397,122 shares of Class B Common Stock outstanding and
(iii) outstanding employee stock options granted under the Company's 1993
Long-Term Incentive Plan to purchase an aggregate of 1,217,000 shares of Class
B Common Stock. The Board currently consists of eight members and there are
currently no vacancies on the Board. Each director serves a term of one year
or until his successor is duly elected and qualified or until his earlier
death, resignation or removal.
DESIGNEES
Pursuant to the Option Agreement the Stockholders severally agreed that, if
the Merger Agreement shall terminate solely by reason of the Company's
Fiduciary Duty Termination, and for as long as the Exercise Period (as defined
in the Merger Agreement) has not ended, the Stockholders shall vote the Shares
owned by such Stockholders to enlarge the Board to provide the Offeror with a
majority of members of the Board elected by the Offeror (the "Designees").
Offeror has informed the Company that it will choose the Designees from the
directors and executive officers listed in the section herein entitled
"Information With Respect to Designees." Offeror has informed the Company that
each of the directors and executive officers listed in such section has
consented to act as a director, if so designated. The business address of
Parent and Offeror is Stadhouderskade 1, 1054 ES Amsterdam, The Netherlands.
I-1
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
DIRECTORS OF THE COMPANY
The names of the current directors, their ages as of March 2, 1995 and
certain other information about them are set forth below.
YEAR FIRST POSITION WITH THE COMPANY OR
ELECTED A PRINCIPAL OCCUPATION DURING THE PAST FIVE
NAME OF DIRECTOR AGE DIRECTOR YEARS
- ---------------- --- ---------- -------------------------------------------
John C. Burton...... 62 1979 John C. Burton has been a Director of the
Company since 1979. Mr. Burton has been
Ernst & Young Professor of Accounting and
Finance at Columbia University, New York,
New York, since 1962 except from 1976 to
1977, when he served as Deputy Mayor for
Finance for the City of New York, and from
1972 to 1976, when he served as Chief Ac-
countant of the Securities and Exchange
Commission. Mr. Burton is also a director
of Scholastic, Inc., Manville Corporation,
CPAC, Inc., and Salomon Swapco, a wholly-
owned subsidiary of Salomon Brothers Inc,
and was a Governor at Large for the Na-
tional Association of Securities Dealers
from 1991 to 1994.
William C. Egan 49 1993 Mr. Egan has served as the Executive Vice
III................ President of Consumer Products Worldwide of
Johnson & Johnson Inc. since January 1995.
He also served as the President of the Arm
& Hammer Division of Church & Dwight, Inc.,
and Chairman of Church & Dwight, Ltd. (Can-
ada) from 1990 to 1991.
Robert H. Mundheim.. 62 1981 Mr. Mundheim has served as Executive Vice
President and General Counsel for Salomon,
Inc. and a Managing Director and member of
the Executive Committee of Salomon Brothers
Inc since 1992. He served as Co-Chairman of
the law firm of Fried, Frank, Harris,
Shriver and Jacobson from 1989 to 1992 and
University Professor of Law and Finance
Emeritus, University of Pennsylvania Law
School. Mr. Mundheim has been a member of
the faculty of the University of Pennsylva-
nia since 1965, except for the period from
1977 to 1980, when he served as General
Counsel of the Treasury Department. He also
served the National Association of Securi-
ties Dealers as Governor at Large from 1988
to 1991 and Vice Chairman-Finance, 1990-
1991.
Daniel K. Thorne.... 43 1977 Mr. Thorne is a private investor and a Di-
rector of Imperial Holly Corporation.
I-2
YEAR FIRST POSITION WITH THE COMPANY OR
ELECTED A PRINCIPAL OCCUPATION DURING THE PAST FIVE
NAME OF DIRECTOR AGE DIRECTOR YEARS
- ---------------- --- ---------- -------------------------------------------
Edward L. Massie.... 65 1981 Edward L. Massie served as President, Chief
Executive Officer and a member of the Exec-
utive Committee of the Company from 1991 to
April, 1995. Mr. Massie also served as Ex-
ecutive Vice President of the Company from
1980 to 1991.
Oakleigh B. Thorne.. 62 1959 Oakleigh B. Thorne has served as Chairman
of the Company since 1973. Mr. Thorne is
also a Director of the Bank of Millbrook
and Fiduciary Trust Company International.
Oakleigh Thorne..... 37 1988 Oakleigh Thorne has served as President and
Chief Executive Officer since April, 1995,
as a member of the Company's Executive Com-
mittee since 1992 and as Executive Vice
President of the Company from 1991 to 1992.
Mr. Thorne also served as the President of
CCH Legal Information Services, Inc. from
1988 to 1992.
Ralph C. Whitley.... 52 1993 Ralph C. Whitley has been a member of the
Company's Executive Committee since 1992.
Mr. Whitley also served as the President of
CCH Computax, Inc. ("Computax") from 1992
to 1994 and Executive Vice President of
Computax from 1978 to 1992.
Each of the directors has been engaged in the principal occupation(s)
described above during the past five (5) years. Oakleigh B. Thorne and Daniel
K. Thorne are brothers and Oakleigh Thorne is a son of Oakleigh B. Thorne.
William C. Egan III is a cousin (by marriage) of Oakleigh B. Thorne.
INFORMATION CONCERNING THE BOARD OF DIRECTORS
During 1994 there were 11 meetings of the Board. The Board has an Audit
Committee and a Compensation Committee. The Board does not have a standing
nominating committee or any committee serving similar functions, nor is there
an executive committee of the Board. The Executive Committee of the Company
mentioned above is an executive management committee responsible for day-to-day
operations, but it cannot act in lieu of the Board.
The Audit Committee of the Board consists of John C. Burton (Chairman),
Robert H. Mundheim and Daniel K. Thorne and met two times during 1994. The
principal functions of the Audit Committee of the Board are to recommend
independent auditors to be engaged by the Board, to review with the auditors
the scope and results of the audit engagement, to review the Company's
financial statements, financial accounting policies, and decisions embodied in
the annual financial statements, and to exercise general oversight with respect
to the Company's internal accounting control systems.
The Compensation Committee consists of Robert H. Mundheim (Chairman), John C.
Burton and William C. Egan, III, and met five times during 1994. The principal
function of the Compensation Committee is to determine the compensation of all
executive officers of the Company, to recommend to the Board the terms of
principal compensation plans requiring stockholder approval or benefiting
executive officers, and to administer the plans.
I-3
Each non-employee director is entitled to receive $30,000 annually for
serving as a director of the Company. Employee directors receive $250 for each
meeting of the Board they attend. The directors who chair the Audit Committee
and the Compensation Committee each receive an additional $5,000 annually for
such services, and directors serving on those committees receive $500 for each
Audit or Compensation Committee meeting they attend. Each non-employee director
made a one-time irrevocable election in 1993 (or, if later, when such non-
employee director began serving on the Board) to substitute phantom units of
Class B Common Stock for all or a portion of such director's next ten years of
cash compensation for services as a director. Such phantom units will be
settled ten years after the deferral election was made or the director's
retirement from the Board, whichever is earlier, in an amount equal to the then
fair market value of the corresponding Class B Common Stock.
The number of phantom stock units credited to a director's account is
determined by dividing the amount of the director's deferred compensation by an
amount equal to 75% of the price of the Class B Common Stock on February 11,
1993, in the case of a director elected on March 15, 1993, or, in the case of a
director joining the Board thereafter, by an amount equal to 75% of the price
of the Class B Common Stock on the date the director becomes eligible to
participate in the plan. In addition, each director's phantom stock account is
credited with phantom dividends in the form of additional phantom stock. The
amount of phantom stock so credited is calculated by dividing the amount of
dividends that would have been paid on the phantom shares already credited to
the director's account had those phantom shares been actual Class B Common
Stock by a amount equal to 75% of the price of Class B Common Stock on February
11, 1993, in the case of a director elected on March 15, 1993, or, in the case
of a director joining the Board thereafter, by an amount equal to 75% of the
price of the Class B Common Stock on the date the director becomes eligible to
participate in the plan.
In addition, non-employee directors who do not have benefits under any other
employee retirement plan of the Company are entitled to a retirement annuity
ranging from 50% (for 10 years of service) to 100% (for 20 years of service) of
the amount payable to such directors for services during the final year of
service. Benefits under this plan will normally begin at the later of the
attainment of age 70 or retirement from the Board. The retired director will
receive full benefits for life or for the number of years of service on the
Board, whichever is less.
EXECUTIVE OFFICERS OF THE COMPANY
The following individuals currently serve as executive officers of the
Company:
NAME POSITION(S) HELD
- ---- ----------------
Edward L. Massie*......................... President and Chief Executive Officer
Jonathan Copulsky......................... Senior Officer, Product/Customer Mgt.
Richard G. Honor.......................... Senior Officer, International
Oakleigh B. Thorne........................ Chairman of the Board
Oakleigh Thorne*.......................... Member of Executive Committee
Ralph C. Whitley.......................... Member of Executive Committee
Hugh J. Yarrington........................ Senior Officer, Knowledge
- --------
*In April, 1995 Oakleigh Thorne was elected President and Chief Executive
Officer.
I-4
EXECUTIVE COMPENSATION
The following table sets forth all compensation awarded to, earned by or paid
to the Company's President and Chief Executive Officer and each of the
Company's six most highly compensated Executive Officers (other than the
President and Chief Executive Officer) whose total annual salary and bonus
exceeded $100,000 for all services rendered in all capacities to the Company
and its subsidiaries for the Company's fiscal year ended December 31, 1994.
LONG-TERM COMPENSATION
------------------------------
ANNUAL COMPENSATION AWARDS PAYMENTS
--------------------------------------- --------------------- --------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL COMPENSATION AWARD(S) OPTIONS/ PAYOUTS COMPENSATION(1)
POSITION YEAR SALARY($) BONUS($) ($) ($) SARS(#) ($) $
------------------ ---- --------- -------- ------------ ---------- ---------- -------- ---------------
EDWARD L. MASSIE*
President and Chief
Executive Officer...... 1994 405,962 196,800 -- -- 35,000 -- 6,400
President and Chief
Executive Officer...... 1993 391,546 153,734 -- -- 120,000 -- 7,613
President and Chief
Executive Officer...... 1992 380,000 110,000 -- -- -- -- 13,459
JONATHAN COPULSKY
Sr. Officer,
Product/Customer Mgt... 1994 202,308 87,571 -- -- 20,000 -- 2,824
Sr. Officer,
Product/Customer Mgt... 1993 191,538 63,677 9,742(2) -- 60,000 -- 2,585
Sr. Officer,
Product/Customer Mgt... 1992 180,000 25,000 34,882(3) -- -- -- --
RICHARD G. HONOR
Sr. Officer, Interna-
tional................. 1994 210,923 81,408 36,000(4) -- 3,750 -- 3,475
Sr. Officer, Interna-
tional................. 1993 206,154 29,515 36,571(5) -- 30,000 -- 4,157
Sr. Officer, Interna-
tional................. 1992 180,870 6,250 11,778(6) -- -- -- 1,491
OAKLEIGH B. THORNE
Chairman of the Board... 1994 290,000 0 -- -- 0 -- 4,661
Chairman of the Board... 1993 200,000 90,000 -- -- 0 -- 4,315
Chairman of the Board... 1992 200,000 90,000 -- -- -- -- 7,084
OAKLEIGH THORNE*
Member of Executive Com-
mittee................. 1994 224,077 110,400 -- -- 35,000 -- 791
Member of Executive Com-
mittee................. 1993 206,154 80,954 -- -- 100,000 -- 4,099
Member of Executive Com-
mittee................. 1992 200,000 65,000 -- -- -- -- 7,084
RALPH C. WHITLEY
Member of Executive Com-
mittee................. 1994 235,962 115,200 12,500(2) -- 35,000 -- 3,850
Member of Executive Com-
mittee................. 1993 229,717 129,909(7) 41,367(3) -- 100,000 -- 4,264
Member of Executive Com-
mittee................. 1992 216,000 69,000 -- -- -- -- 7,604
HUGH J. YARRINGTON(8)
Sr. Officer, Knowledge.. 1994 207,308 87,539 3,013(2) -- 20,000 -- 1,280
Sr. Officer, Knowledge.. 1993 73,077 26,520 28,932(3) -- 60,000 -- 262
- --------
(1) The totals in this column reflect the value of the CCH contributions to the
CCH Employees' Profit-Sharing Plan. The 1994 amounts include additional
1994 Plan contributions that have been estimated because the contribution
is not calculable at this time. The estimate is expected to be accurate to
within ^ 5%. The 1993 contributions shown here are actual, whereas in last
year's proxy statement they were estimated.
(2) Represents reimbursements for taxes incurred as a result of relocation in
the previous year.
(3) Represents reimbursements for relocation expenses.
(4) Represents automobile and housing allowances.
(5) Of this amount, $36,000 was for automobile and housing allowances, $207 was
for relocation expenses, and $364 represents reimbursement for taxes
incurred as a result of relocation expense reimbursement in the previous
year.
(6) Of this amount, $9,692 was for automobile and housing allowances and
$11,778 was for relocation.
(7) Of this amount, $42,339 was for payment of accrued vacation upon transfer
from Computax to CCH.
(8) Hired August 16, 1993.
* In April, 1995 Oakleigh Thorne was elected President and Chief Executive
Officer.
I-5
OPTIONS/SAR GRANTS
The following tables set forth information pertaining to grants of stock
options to the Executive Officers during 1994 as well as to stock options held
by the Executive Officers at the end of 1994. All such options were granted
under the 1993 Long-Term Incentive Plan and relate to Class B Common Stock. No
stock appreciation rights were granted during 1994. None of the Executive
Officers exercised any stock options during 1994.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------
% OF TOTAL
NUMBER OF OPTIONS/
SECURITIES SARS
UNDERLYING GRANTED TO EXERCISE
OPTIONS/ EMPLOYEES OR BASE GRANT DATE
SARS IN FISCAL PRICE EXPIRATION PRESENT
NAME GRANTED YEAR ($/SH) DATE(1) VALUE ($)(2)
---- ---------- ---------- -------- ---------- ------------
Edward L. Massie........ 35,000 13.1% 17.000 2/10/04 173,950
Jonathan Copulsky....... 20,000 7.5% 17.000 2/10/04 99,400
Richard G. Honor........ 3,750 1.4% 17.000 2/10/04 18,638
Oakleigh B. Thorne...... 0 0 -- -- 0
Oakleigh Thorne......... 35,000 13.1% 17.000 2/10/04 173,950
Ralph C. Whitley........ 35,000 13.1% 17.000 2/10/04 173,950
Hugh J. Yarrington...... 20,000 7.5% 17.000 2/10/04 99,400
- --------
(1) In general, the options granted in 1994 to all executive officers (other
than the Chief Executive Officer and Richard G. Honor) become exercisable
at the rate of one half on the second anniversary of the grant date and one
quarter on the third and fourth anniversaries of the grant date. For Mr.
Massie and Mr. Honor, all of their 1994 options become exercisable on the
second anniversary of the date of grant. Under the terms of the 1993 Long-
Term Incentive Plan, in the event of a change of control, as defined in the
Plan, all options become immediately vested and exercisable.
(2) The Black-Scholes option pricing model has been used to calculate present
value as of the date of grant, February 10, 1994. The present value as of
the date of grant, calculated using the Black-Scholes model, is based on
assumptions about future interest rates, stock price volatility, and
dividend yield. The Black-Scholes model is a complicated mathematical
formula widely used to value exchange-traded options. However, stock
options granted by CCH to its executive officers differ from exchange-
traded options in three key respects: CCH's options are long-term, non-
transferable, and subject to vesting restrictions, while exchange-traded
options are short-term and can be exercised or sold immediately in a liquid
market. There is no assurance that the assumptions used, as described below
will prove to be true in the future. Consequently, the grant date present
values set forth in the table are only theoretical values and may not
accurately determine present value. The actual value, if any, that may be
realized by each individual will depend on the market price of Class B
Shares on the date of exercise. The following key assumptions were used in
the calculation: a risk-free rate of return equal to the interest rate on a
U.S. Treasury security with a maturity date corresponding to that of the
option term (5.923%); a 9-month volatility of 25% as reported in Bloomberg
Financial Services as of February 28, 1994; a dividend yield of 3.20%; and
time of exercise of 10 years (exercisable only at maturity).
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUES
NUMBER OF SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FISCAL YEAR-END (#) FISCAL YEAR-END ($)
-------------------- -------------------
SHARES ACQUIRED VALUED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($) UNEXERCISABLE UNEXERCISABLE
---- --------------- ------------ -------------------- -------------------
Edward L. Massie........ -- -- 0/155,000 0/0
Jonathan Copulsky....... -- -- 0/80,000 0/0
Richard G. Honor........ -- -- 0/33,750 0/0
Oakleigh B. Thorne...... -- -- 0/0 0/0
Oakleigh Thorne......... -- -- 0/135,000 0/0
Ralph C. Whitley........ -- -- 0/135,000 0/0
Hugh J. Yarrington...... -- -- 0/80,000 0/0
I-6
PENSION PLAN
CCH maintains an integrated pension plan (the "Pension Plan") that provides
for defined benefits to eligible officers and employees of CCH and its
participating subsidiaries upon retirement at a specified age. These benefits
are based on the participant's number of years of service, final average pay
(the individual's highest average pay in any 60 consecutive months in his or
her last 120 months of service), and the individual's "excess final average
pay" (the portion, if any, of final average pay that exceeds the average amount
of pay subject to Social Security tax). Under the Pension Plan, a participant's
pay includes base salary, overtime, commissions, and bonuses (subject to
certain limitations under the Code). CCH also maintains an unfunded
supplemental employee retirement plan, described more fully below (the "SERP").
The estimated aggregate benefits payable upon retirement under the Pension Plan
and the SERP to persons in specified final average pay and years of service
classifications are listed in the table below. The normal retirement pension at
age 65 is shown in the table below in the form of a straight life annuity
(although other options, including lump sum and a joint and survivor annuity
option, are available) for different levels of earnings and years of service.
YEARS OF SERVICE
-----------------------------------------------------
AVERAGE ANNUAL
EARNINGS 15 20 25 30 35 40
-------------- -------- -------- -------- -------- -------- --------
$ 25,000.............. $ 4,417 $ 5,939 $ 7,462 $ 8,837 $ 10,112 $ 11,362
$ 50,000.............. 11,205 15,030 18,874 21,624 24,174 26,674
$100,000.............. 24,780 33,239 41,699 47,199 52,299 57,299
$250,000.............. 65,505 87,839 110,174 123,924 136,674 149,174
$500,000.............. 133,380 178,839 224,299 251,799 277,299 302,299
$750,000.............. 201,255 269,839 338,424 379,674 417,924 455,424
As of January 1, 1995, each Named Executive Officer had the following number
of years of service under the Pension Plan and the SERP:
YEARS OF
SERVICE
--------
Edward L. Massie 40
Jonathan Copulsky 3
Richard G. Honor(/1/) 2
Oakleigh B. Thorne 33
Oakleigh Thorne 8
Ralph C.Whitley 26
Hugh J. Yarrington 1
The Pension Plan formula provides that a participant's annual benefit will
equal the sum of (a) 1.2% of final average pay multiplied by the participant's
years of service prior to 1989 plus 1.1% of final average pay multiplied by the
participant's years of service after 1988 (up to 25 years of service), (b) 1%
of final average pay multiplied by the participant's years of service over 25,
and (c) .65% of "excess final average pay" multiplied by the participant's
years of service up to 25.
The Pension Plan is integrated with Social Security. However, benefit amounts
are not subject to deduction for Social Security benefits or other offset
amounts.
SUPPLEMENTAL RETIREMENT PLAN
The SERP provides benefits to certain "highly compensated" employees (as
declined in Section 414(q)(1)(B) of the Code) equal to the excess, if any, of
the benefit they would have received under the Pension Plan formula as it
existed on December 31, 1988, without regard to certain limitations contained
in the Code that generally are applicable under the Pension Plan, over the
benefit they receive under the Pension Plan. The Pension Plan formula as of
December 31, 1988 provided that a participant's annual benefit would equal the
sum of (a) 2% of final average pay multiplied by the participant's years of
service up to 25 and (b) 1% of final average pay multiplied by the
participant's years of service over 25, reduced by (c) 2% of the participant's
estimated primary Social Security benefit multiplied by the participant's years
of service up to 25.
Under the SERP, a participant's pay generally is the same as his or her pay
under the Pension Plan but is not subject to any limitations imposed on the
Pension Plan by the Code. The benefit under the SERP is integrated with Social
Security, and the formula incorporates a deduction for Social Security
benefits.
- --------
(/1/) Mr. Honor retired under the pension plan of CCH Australia in 1992 prior to
relocating to the United States to establish the International
Organization for the parent company.
I-7
SHAREHOLDER RETURN PERFORMANCE INFORMATION
Set forth below is a line graph comparing the yearly percentage change in the
cumulative total shareholder return on the Class A Common Stock against the
change in the cumulative total return of the Russell 2500 market index and the
Information Industry Bulletin 45 U.S. Cumulative Total Return Index for the
five-year period that commenced January 1, 1990 and ended December 31, 1994.
Russell 2500
The Company believes that the companies listed in the S&P 500 are too large
to be representative of the market influences on the Company's stock. The
Company is not within the S&P 500 Stock Index. The Russell 2500 index is made
up of the next 2500 largest companies by market capitalization after the S&P
500. The Company believes that the Russell 2500 is more representative than the
S&P 500 because the average market capitalization of the companies comprising
the Russell 2500 approximates that of the Company.
Peer Group
The Company has chosen the Information Industry Bulletin 45 U.S. Index for
its peer group index. The IIB 45, a published and readily available index,
tracks companies that derive at least 50% of their annual revenues from
information activities. The Company believes that the industry factors and
market conditions faced by the IIB 45 companies are similar to those
encountered by the Company. Moreover, since this group consists of domestic
companies only, it provides an index that is not subject to the fluctuations of
overseas stock markets.
[CHART]
Five-Year Cumulative Return Comparison*
CCH Class A, Russell 2500 Index and IIB 45 U.S. Index
CCH Class A, IIB 45 and Russell 2500 Indicies, Trailing
Twelve Months
December 31, 1994
CCH Russell 2500 IIB 45 Index
Annual Indexed Index Annual Indexed Index
Annual Indexed Index
Year Return Return Value Return Return Value
Return Return Value
1989 100.00 100.00 100.00
1990 6.74% 1.0674 106.74 (14.87%) 0.8513 85.13
(17.00%) 0.8300 83.00
1991 (4.72%) 0.9528 101.70 46.68% 1.4668
124.87 23.00% 1.2300 102.09
1992 (7.56%) 0.9244 94.01 16.17% 1.1617
145.06 12.20% 1.1220 114.54
1993 3.84% 1.0384 97.62 16.54% 1.1654
169.05 16.50% 1.1650 133.44
1994 (3.10%) 0.9690 94.60 (1.60%) 0.9840
166.35 (8.15%) 0.9185 122.57
- --------
*Total return assumes reinvestment of dividends.
**Returns are based on information from outside sources. Stocks in the index
are selected from the Information Industry Bulletin's index for domestic
companies.
I-8
STOCK OWNERSHIP OF PRINCIPAL STOCKHOLDERS, NOMINEE DIRECTORS, AND MANAGEMENT
The following table shows the number of shares of Class A Common Stock and
Class B Common Stock beneficially owned and the percentage of the outstanding
shares of Class A Common Stock and Class B Common Stock so owned, as of
February 10, 1995, as to (1) each person known to the management of the Company
to be the beneficial owner of more than five percent of the outstanding shares
of Class A Common Stock or Class B Common Stock, (2) each nominee director, and
(3) the Named Executive Officers. Unless otherwise indicated, the Shares owned
are less than 1% of the indicated class. Unless otherwise indicated, the owner
has sole voting and investment power with respect to the listed Shares.
CLASS A PERCENT OF CLASS B PERCENT OF
BENEFICIAL OWNER COMMON STOCK CLASS A COMMON STOCK CLASS B
AND ADDRESS(1) OWNED COMMON STOCK OWNED(2) COMMON STOCK
---------------- ------------ ------------ ------------ ------------
Ariel Capital Management 1,429,585 8.4% 0
Inc.(3)..................
307 North Michigan Avenue
Chicago, Illinois
David L. Babson & Co., 0 1,259,110 7.4%
Inc.(4)..................
One Memorial Drive
Cambridge, Massachusetts
John C. Burton............ 2,000 2,000
Jonathan Copulsky......... 245 7,782
William C. Egan, III...... 0 0
Richard G. Honor.......... 1,000 15,000
Edward L. Massie.......... 13,545 75,391
Robert H. Mundheim........ 500 2,000
Daniel K. Thorne.......... 1,546,852 9.0% 1,546,852 9.2%
Oakleigh B. Thorne(5)..... 8,017,427 47.0% 8,021,272 47.4%
Oakleigh Thorne........... 1,370 14,042
Ralph C. Whitley.......... 4,249 17,373
Hugh J. Yarrington........ 0 0
All Executive Officers and
Directors as a group (18
persons)................. 9,581,973 56.2% 9,750,933 57.2%
All Executive Officers and
Directors as a group (16
persons) other than
Oakleigh B. and
Daniel K. Thorne......... 27,694 182,809 1.1%
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(1) Address of 5% stockholders is 2700 Lake Cook Road, Riverwoods, IL, except
where specified.
(2) Shares of Class B Common Stock owned includes shares issuable upon the
exercise of options that will be exercisable within 60 days as follows:
Edward L. Massie, 60,000; Jonathan Copulsky, 7,500; Richard G. Honor,
15,000; Oakleigh Thorne, 12,500; Ralph Whitley, 12,500; all other executive
officers and directors as a group, 43,750; all executive officers and
directors as a group, 151,250.
(3) Based on the most recent report on Schedule 13G filed with the SEC, Ariel
Capital Management Inc. reported sole voting power with respect to 940,150
shares of Class A Common Stock, shared voting power with respect to 91,975
shares of Class A Common Stock, and sole investment discretion for
1,429,585 shares of Class A Common Stock.
(4) Based on the most recent report on Schedule 13G filed with the SEC, David
L. Babson & Co., Inc. reported sole voting power with respect to 568,370
shares of Class B Common Stock, shared voting power with respect to 690,740
shares of Class B Common Stock, and sole investment discretion for
1,259,110 shares of Class B Common Stock.
(5) Includes 7,673,945 Shares held by certain trusts over which Oakleigh B.
Thorne has sole or shared voting and investment authority and 200,009
Shares held by a charitable foundation of which Oakleigh B. Thorne is a co-
trustee. Chemical Banking Corporation and its subsidiary, Chemical Bank,
277 Park Avenue, New York, New York, have advised the Company that they
have shared voting authority over 1,912,852 Shares, sole voting authority
over 3,000 shares of Class A Common Stock, and shared investment authority
over 1,912,852 Shares (11.2% and 11.3% of shares of Class A Common Stock
and shares of Class B Common Stock, respectively). Oakleigh B. Thorne has
advised CCH that substantially all of the Shares that are held by various
trusts of which he is co-trustee with Chemical Bank are included in the
table above. CCH has been advised that an additional 1,268,816 Shares (7.4%
and 7.5% of shares of Class A Common Stock and shares of Class B Common
Stock, respectively) included in the table above are held by Oakleigh B.
Thorne and John Akin of Seattle, Washington, as co-trustees under a trust
in which voting authority over such shares of Class A Common Stock is held
by Mr. Thorne and investment authority over all such Common Stock is shared
with Mr. Akin.
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INFORMATION WITH RESPECT TO DESIGNEES
Set forth below is the name, age, business address, principal occupation or
employment and five year employment history of the persons who will be the
Parent Designees. Unless otherwise indicated, each such person has held the
occupation listed opposite his name for at least the past five years and each
occupation refers to employment with the Parent. Unless otherwise indicated,
the business address of all persons listed below is c/o Wolters Kluwer nv,
Stadhouderskode 1, 1054 ES Amsterdam, The Netherlands. Unless otherwise
indicated, all persons listed below are citizens of The Netherlands. None of
the persons listed below owns any Shares.
PRESENT PRINCIPAL OCCUPATION
NAME AND OR EMPLOYMENT AND FIVE-YEAR
BUSINESS ADDRESS AGE EMPLOYMENT HISTORY
---------------- --- ----------------------------
C. J. Brakel.......................... 58 Chairman of the Executive Board since 1995;
Member of Executive Board since 1987
C. H. van Kempen...................... 50 Member of the Executive Board since 1993;
Chief Executive Officer of Wolters Kluwer
Italy, an indirect wholly owned subsidiary
of Wolters Kluwer nv from 1990 through
1993
Robert Pieterse....................... 53 Member of the Executive Board since 1987
Peter W. van Wel...................... 49 Member of the Executive Board since 1993;
Chief Executive Officer of Wolters Kluwer
U.S. Corporation, an indirect wholly owned
subsidiary of Wolters Kluwer nv ("Wolters
Kluwer U.S.") from 1990 through 1993
Hans E. M. van Dinter................. 50 Chief Financial Officer for more than the
past five years
Bruce C. Lenz......................... 52 Executive Vice President and Chief
c/o Wolters Kluwer U.S. Corporation Financial Officer of Wolters Kluwer U.S.
1185 Avenue of the Americas for more than the past five years
New York, New York 10036
(United States citizen)
F. H. Simons.......................... 47 Head of Legal Department for more than the
past five years
John Marozsan......................... 54 President of Aspen Publishers, Inc., an
c/o Aspen Publishers, Inc. indirect wholly owned subsidiary of
1185 Avenue of the Americas Parent, for more than the past five years
New York, New York 10036
(United States citizen)
Paul C. Kooijmans..................... 47 Director of Accounting and Control for more
than the past five years
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