-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KWRey5QAW9CArrCqvCvGjiTZG+l9MfgXKYKEDlWrwzWVOfgkD5BphzRq/7a+bmx7 WkyzEPG8PiqqWy+uM3+JPQ== /in/edgar/work/0000950123-00-010159/0000950123-00-010159.txt : 20001109 0000950123-00-010159.hdr.sgml : 20001109 ACCESSION NUMBER: 0000950123-00-010159 CONFORMED SUBMISSION TYPE: SC TO-T PUBLIC DOCUMENT COUNT: 12 FILED AS OF DATE: 20001108 GROUP MEMBERS: ELSEVIER NV GROUP MEMBERS: REED ELSEVIER HOLDINGS BV GROUP MEMBERS: REED ELSEVIER INC GROUP MEMBERS: REED ELSEVIER OVERSEAS BV GROUP MEMBERS: REED ELSEVIER PLC GROUP MEMBERS: REED ELSEVIER US HOLDINGS INC GROUP MEMBERS: REED INTERNATIONAL PLC GROUP MEMBERS: REH MERGERSUB INC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: HARCOURT GENERAL INC CENTRAL INDEX KEY: 0000040493 STANDARD INDUSTRIAL CLASSIFICATION: [5311 ] IRS NUMBER: 041619609 STATE OF INCORPORATION: DE FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: SC TO-T SEC ACT: SEC FILE NUMBER: 005-12340 FILM NUMBER: 755833 BUSINESS ADDRESS: STREET 1: 27 BOYLSTON ST BOX 1000 CITY: CHESTNUT HILL STATE: MA ZIP: 02467 BUSINESS PHONE: 6172328200 MAIL ADDRESS: STREET 1: 27 BOYLSTON ST STREET 2: BOX 1000 CITY: CHESTNUT HILL STATE: MA ZIP: 02467 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL CINEMA CORP DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: MID WEST DRIVE IN THEATRES INC DATE OF NAME CHANGE: 19660907 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: REH MERGERSUB INC CENTRAL INDEX KEY: 0001126977 STANDARD INDUSTRIAL CLASSIFICATION: [ ] IRS NUMBER: 00000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC TO-T BUSINESS ADDRESS: STREET 1: C/O LEXIS DOCUMENT SERVICES INC STREET 2: 30 OLD RUDNICK LANE CITY: DOVER STATE: DE ZIP: 02140 BUSINESS PHONE: 000-000-0000 MAIL ADDRESS: STREET 1: C/O LEXIS DOCUMENT SERVICES INC STREET 2: 30 OLD RUDNICK LANE CITY: DOVER STATE: DE ZIP: 02140 SC TO-T 1 y42082scto-t.txt TENDER OFFER STATEMENT 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ----------------------- SCHEDULE TO (RULE 14d-100) TENDER OFFER STATEMENT PURSUANT TO SECTION 14(d)(1) OR 13(e)(1) OF THE SECURITIES EXCHANGE ACT OF 1934 HARCOURT GENERAL, INC. (Name of Subject Company) REH MERGERSUB INC. REED ELSEVIER INC. REED ELSEVIER U.S. HOLDINGS INC. REED ELSEVIER OVERSEAS BV REED ELSEVIER HOLDINGS BV REED ELSEVIER PLC REED INTERNATIONAL P.L.C. ELSEVIER NV (Offerors) COMMON STOCK, PAR VALUE $1.00 PER SHARE AND SERIES A CUMULATIVE CONVERTIBLE STOCK, PAR VALUE $1.00 PER SHARE (Title of Class of Securities) ----------------------- COMMON STOCK (41163G101) SERIES A CUMULATIVE CONVERTIBLE STOCK (41163G200) (Cusip Number of Class of Securities) HENRY Z. HORBACZEWSKI, ESQ. REED ELSEVIER INC. 275 WASHINGTON STREET NEWTON, MA 02458 TELEPHONE: (617) 558-4227 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Filing Persons) COPIES TO: JOSEPH RINALDI, ESQ. DAVIS POLK & WARDWELL 450 LEXINGTON AVENUE NEW YORK, NEW YORK 10017 TELEPHONE: (212) 450-4000 CALCULATION OF FILING FEE
Transaction Valuation* Amount of Filing Fee** ---------------------- ---------------------- $4,400,646,387 $880,130
* Estimated for purposes of calculating the amount of the filing fee only. This calculation assumes (i) the purchase of 72,313,841 shares of common stock, par value $1.00 per share (the "Common Shares"), of Harcourt General, Inc. at a price per Common Share of $59.00 in cash and (ii) the purchase of 775,713 shares of series A cumulative convertible preferred stock, par value $1.00 per share (the "Preferred Shares") of the Company at a price of $77.29 per Preferred Share. This calculation also assumes payments to holders of options with an exercise price less than $59.00 in an amount per option equal to the difference between (a) $59.00 and (b) the applicable exercise price, based on 3,289,353 outstanding options with an average weighted exercise price of $36.45 per share. ** Calculated as 1/50 of 1% of the transaction value. / / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the 2 offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. Amount Previously Paid: Not applicable. Filing Party: Not applicable. Form or Registration No.: Not applicable. Date Filed: Not applicable.
/ / Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. Check the appropriate boxes below to designate any transactions to which the statement relates: /X/ third-party tender offer subject to Rule 14d-1. / / issuer tender offer subject to Rule 13e-4. / / going-private transaction subject to Rule 13e-3. / / amendment to Schedule 13D under Rule 13d-2. Check the following box if the filing is a final amendment reporting the results of the tender offer. / / ================================================================================ 3 TENDER OFFER This Tender Offer Statement on Schedule TO (the "Schedule TO") relates to an offer by REH Mergersub Inc., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of Reed Elsevier Inc., a Massachusetts corporation ("Reed Elsevier"), to purchase (i) all outstanding shares of common stock, par value $1.00 per share (the "Common Shares") of Harcourt General, Inc. a Delaware corporation ("Harcourt"), at $59.00 per Common Share, net to the seller in cash, and (ii) all of the outstanding shares of series A cumulative convertible stock, par value $1.00 per share (the "Preferred Shares") of the Company at a price of $77.29 per Preferred Share, net to the seller in cash, upon the terms and subject to the conditions set forth in the Offer to Purchase (the "Offer to Purchase") and in the related Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(l) and (a)(2)(which are herein collectively referred to as the "Offer"). As described in the preceding paragraph, Purchaser is a wholly owned subsidiary of Reed Elsevier, which is a wholly owned subsidiary of Reed Elsevier plc. Reed Elsevier plc, a public limited company registered in England, owns Reed Elsevier through its intermediary holding companies Reed Elsevier Holdings BV, Reed Elsevier Overseas BV and Reed Elsevier U.S. Holdings Inc. 50% of the voting power of Reed Elsevier plc. is owned by Elsevier NV, a public limited company organized under the laws of The Netherlands, and 50% is owned by Reed International P.L.C., a public limited company registered in England. The information in the Offer to Purchase, including all schedules and annexes thereto, is hereby expressly incorporated herein by reference in response to all the items of this Schedule to, except as otherwise set forth below. ITEM 12. MATERIALS TO BE FILED AS EXHIBITS. (a)(1) Offer to Purchase dated November 8, 2000. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement, dated November 8, 2000. (b)(1) Commitment Letter, dated November 7, 2000, among Reed International P.L.C., Elsevier NV, Reed Elsevier, Elsevier Finance S.A., Deutsche Bank AG London (as Lead Arranger), Morgan Stanley Dean Witter Bank Limited (as Lead Arranger), Deutsche Bank AG London (as Underwriter) and Morgan Stanley Senior Funding, Inc. (as Underwriter), and attached Term Sheet. (d)(1) Agreement and Plan of Merger, dated as of October 27, 2000, among Harcourt, Reed Elsevier and the Purchaser. (d)(2) Stockholder Agreement, dated as of October 27, 2000, among Reed Elsevier, Purchaser and the stockholders named therein. (d)(3) Confidentiality Agreement, dated as of June 28, 2000, between Harcourt and Reed Elsevier plc. (g) Not applicable. (h) Not applicable.
4 SIGNATURES 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. Dated: November 8, 2000 REH Mergersub Inc. By:/s/ Henry Z. Horbaczewski ----------------------------------- Name: Henry Z. Horbaczewski Title: Vice President Reed Elsevier Inc. By:/s/ Henry Z. Horbaczewski ----------------------------------- Name: Henry Z. Horbaczewski Title: Senior Vice President Reed Elsevier U.S. Holdings Inc. By:/s/ Henry Z. Horbaczewski ----------------------------------- Name: Henry Z. Horbaczewski Title: Vice President Reed Elsevier Overseas BV By:/s/ Henry Z. Horbaczewski ----------------------------------- Name: Henry Z. Horbaczewski Title: Attorney-in-Fact Reed Elsevier Holdings BV By:/s/ Henry Z. Horbaczewski ----------------------------------- Name: Henry Z. Horbaczewski Title: Attorney-in-Fact Reed Elsevier plc By:/s/ Henry Z. Horbaczewski ----------------------------------- Name: Henry Z. Horbaczewski Title: Attorney-in-Fact Reed International P.L.C. By:/s/ Henry Z. Horbaczewski ----------------------------------- Name: Henry Z. Horbaczewski Title: Attorney-in-Fact Elsevier NV By:/s/ Henry Z. Horbaczewski ----------------------------------- Name: Henry Z. Horbaczewski Title: Attorney-in-Fact 5 [REED ELSEVIER LETTERHEAD] POWER OF ATTORNEY The undersigned, MR. ERIK EKKER for these purposes acting in his capacity as managing director with, single signing authority, of Reed Elsevier Overseas BV, a Dutch Company with limited liability established in Amsterdam, with offices at Van de Sande Bakhuyzenstraat 4 (Amsterdam Chamber of Commerce file nr. 33241720), hereinafter 'THE COMPANY'; HEREBY AUTHORISES Mr. Henry Z. Horbaczewski of 48 Thackeray Road, Wellesley Hills, Massachusetts, USA, to execute and deliver on behalf of the Company (i) the Agreement and Plan of Merger among Reed Elsevier Inc., REH Mergersub Inc. and Harcourt General, Inc., (ii) the Stockholder Agreement among Reed Elsevier Inc., REH Mergersub Inc. and the Stockholders (as defined therein) and (iii) any other documents, agreements, certificates or other instruments as contemplated by the foregoing agreements, all in the broadest sense and with the power to subdelegate. IN WITNESS WHEREOF, the undersigned has executed this power of attorney on 25 October 2000. /s/ Erik Ekker - ------------------------------------ ERIK EKKER (Managing Director) 6 [REED ELSEVIER LETTERHEAD] POWER OF ATTORNEY The undersigned, MR. ERIK EKKER for these purposes acting in his capacity as managing director with, single signing authority, of Reed Elsevier Holdings BV, a Dutch Company with limited liability established in Amsterdam, with offices at Van de Sande Bakhuyzenstraat 4 (Amsterdam Chamber of Commerce file nr. 33201111), hereinafter 'THE COMPANY'; HEREBY AUTHORISES Mr. Henry Z. Horbaczewski of 48 Thackeray Road, Wellesley Hills, Massachusetts, USA, to execute and deliver on behalf of the Company (i) the Agreement and Plan of Merger among Reed Elsevier Inc., REH Mergersub Inc. and Harcourt General, Inc., (ii) the Stockholder Agreement among Reed Elsevier Inc., REH Mergersub Inc. and the Stockholders (as defined therein) and (iii) any other documents, agreements, certificates or other instruments as contemplated by the foregoing agreements, all in the broadest sense and with the power to subdelegate. IN WITNESS WHEREOF, the undersigned has executed this power of attorney on 25 October 2000. /s/ Erik Ekker - ------------------------------------ ERIK EKKER (Managing Director) 7 [REED ELSEVIER PLC LETTERHEAD] POWER OF ATTORNEY We, Reed Elsevier plc (the "COMPANY") of 25 Victoria Street, London SW1H 0EX, England, hereby authorise Henry Horbaczewski to execute and deliver the following documents on behalf of the Company: (i) the Agreement and Plan of Merger among Reed Elsevier Inc., REH Mergersub Inc. and Harcourt General, Inc.; (ii) the Stockholder Agreement among Reed Elsevier Inc., REH Mergersub Inc. and the Stockholders (as defined therein); and (iii) any other documents, agreements, certificates or other instruments as contemplated by the foregoing agreements. Executed as a Deed on behalf of the Company this 25th day of October 2000 /s/ Mark Armour - ------------------------------------ Director /s/ Les Dixon - ------------------------------------ Deputy Secretary 8 [REED INTERNATIONAL P.L.C. LETTERHEAD] POWER OF ATTORNEY We, Reed International P.L.C. (the "COMPANY") of 25 Victoria Street, London SW1H 0EX, England, hereby authorise Henry Horbaczewski to execute and deliver the following documents on behalf of the Company: (i) the Agreement and Plan of Merger among Reed Elsevier Inc., REH Mergersub Inc. and Harcourt General, Inc.; (ii) the Stockholder Agreement among Reed Elsevier Inc., REH Mergersub Inc. and the Stockholders (as defined therein); and (iii) any other documents, agreements, certificates or other instruments as contemplated by the foregoing agreements. Executed as a Deed on behalf of the Company this 25th day of October 2000 /s/ Mark Armour - ------------------------------------ Director /s/ Les Dixon - ------------------------------------ Deputy Secretary 9 [ELSEVIER NV LETTERHEAD] POWER OF ATTORNEY The undersigned, MR. ERIK EKKER for these purposes acting in his capacity as company secretary and permanent authorised representative for all intents and purposes ('ALGEMEEN PROCURATIEHOUDER') of Elsevier NV, a Dutch Company with limited liability established in Amsterdam, with offices at Van de Sande Bakhuyzenstraat 4 (Amsterdam Chamber of Commerce file nr. 33155037), hereinafter 'THE COMPANY'; HEREBY AUTHORISES Mr. Henry Z. Horbaczewski of 48 Thackeray Road, Wellesley Hills, Massachusetts, USA, to execute and deliver on behalf of the Company (i) the Agreement and Plan of Merger among Reed Elsevier Inc., REH Mergersub Inc. and Harcourt General, Inc., (ii) the Stockholder Agreement among Reed Elsevier Inc., REH Mergersub Inc. and the Stockholders (as defined therein) and (iii) any other documents, agreements, certificates or other instruments as contemplated by the foregoing agreements, all in the broadest sense and with the power to subdelegate. IN WITNESS WHEREOF, the undersigned has executed this power of attorney on 25 October 2000. /s/ Erik Ekker - ------------------------------------ ERIK EKKER (Company Secretary) 10 \ EXHIBIT INDEX
EXHIBIT NO. (a)(1) Offer to Purchase dated November 8, 2000. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Summary Advertisement, dated November 8, 2000. (b)(1) Commitment Letter, dated November 7, 2000, among Reed International P.L.C., Elsevier NV, Reed Elsevier, Elsevier Finance S.A., Deutsche Bank AG London (as Lead Arranger), Morgan Stanley Dean Witter Bank Limited (as Lead Arranger), Deutsche Bank AG London (as Underwriter) and Morgan Stanley Senior Funding, Inc. (as Underwriter), and attached Term Sheet. (d)(1) Agreement and Plan of Merger, dated as of October 27, 2000. among Harcourt, Reed Elsevier and the Purchaser. (d)(2) Stockholder Agreement, dated as of October 27, 2000, among Reed Elsevier, Purchaser and the stockholders named therein. (d)(3) Confidentiality Agreement, dated as of June 28, 2000, between Harcourt and Reed Elsevier plc.
EX-99.A.1 2 y42082ex99-a_1.txt OFFER TO PURCHASE 1 Exhibit (a)(1) Offer To Purchase For Cash All Outstanding Shares of Common Stock and All Outstanding Shares of Series A Cumulative Convertible Stock of Harcourt General, Inc. at $59.00 Net Per Share for each Share of Common Stock and $77.29 Net Per Share for each Share of Series A Cumulative Convertible Stock by REH Mergersub Inc. a wholly owned subsidiary of Reed Elsevier Inc. ------------------------ THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, DECEMBER 7, 2000, UNLESS THE OFFER IS EXTENDED. ------------------------ THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (I) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF SHARES OF COMMON STOCK OF HARCOURT GENERAL, INC. (THE "COMPANY" or "HARCOURT") WHICH, TOGETHER WITH ANY SHARES OWNED, DIRECTLY OR INDIRECTLY, BY REED ELSEVIER INC. OR REH MERGERSUB INC. OR ANY SUBSIDIARY OR CONTROLLED AFFILIATE REPRESENT, ON THE DATE OF PURCHASE, AT LEAST A MAJORITY IN VOTING POWER OF COMMON STOCK OF THE COMPANY (DETERMINED ON A FULLY DILUTED BASIS) AND (II) ANY APPROVALS, CLEARANCES OR WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976 AND OTHER REQUISITE OR ADVISABLE APPROVALS, CLEARANCES OR WAITING PERIODS UNDER ANY OTHER MATERIAL ANTITRUST LAWS APPLICABLE TO THE OFFER, THE MERGER OR THE SUBSEQUENT TRANSACTION HAVING BEEN OBTAINED, EXPIRED OR TERMINATED. THE OFFER IS ALSO SUBJECT TO OTHER CONDITIONS. SEE "THE OFFER -- CONDITIONS TO THE OFFER". ------------------------ THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES. ------------------------ IMPORTANT If you are a holder of Harcourt common stock or preferred stock and wish to tender your shares in the offer, you must (1) complete and sign the Letter of Transmittal (or a facsimile thereof) in accordance with the instructions in the Letter of Transmittal and mail or deliver the Letter of Transmittal and all other required documents to the Depositary (as defined herein) together with certificates representing the shares tendered or follow the procedure for book-entry transfer set forth in "The Offer -- Procedures for Accepting the Offer and Tendering Shares", or (2) request your broker, dealer, commercial bank, trust company or other nominee to effect the transaction for you. If your shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you must contact that person if you wish to tender your shares. If you wish to tender your shares and cannot deliver certificates representing your shares and all other required documents to the Depositary on or prior to the Expiration Date (as defined herein) or you cannot comply with the procedures for book-entry transfer on a timely basis, you may tender your shares pursuant to the guaranteed delivery procedure set forth in "The Offer -- Procedures for Accepting the Offer and Tendering Shares". Questions and requests for assistance may be directed to MacKenzie Partners, Inc. (the "Information Agent") or Morgan Stanley & Co. Incorporated (the "Dealer Manager") at their respective addresses and telephone numbers set forth on the back cover of this Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other related materials may be obtained from the Information Agent. You may also contact your broker, dealer, commercial bank, trust company or other nominee for copies of these documents. ------------------------ The Dealer Manager for the Offer is: MORGAN STANLEY DEAN WITTER November 8, 2000 2 ------------------------ TABLE OF CONTENTS ------------------------
PAGE ---- SUMMARY TERM SHEET.......................................... 1 INTRODUCTION................................................ 5 THE OFFER................................................... 7 Terms of the Offer; Expiration Date....................... 7 Acceptance for Payment and Payment for Shares............. 9 Procedures for Accepting the Offer and Tendering Shares... 10 Withdrawal Rights......................................... 12 Material United States Federal Income Tax Consequences to Holders of Shares...................................... 13 Price Range of Shares..................................... 14 Certain Information Concerning the Company................ 15 Certain Information Concerning Reed Elsevier and Purchaser.............................................. 17 Source and Amount of Funds................................ 19 Background of the Offer................................... 20 Purpose and Structure of the Offer........................ 22 Plans for the Company..................................... 23 The Merger Agreement...................................... 24 The Stockholder Agreement................................. 36 Appraisal Rights.......................................... 37 Certain Effects of the Offer.............................. 37 Conditions to the Offer................................... 38 Certain Legal Matters; Regulatory Approvals............... 40 Fees and Expenses......................................... 43 Miscellaneous............................................. 44 SCHEDULE I Directors and Executive Officers of Reed Elsevier Inc., REH Mergersub Inc., Reed Elsevier U.S. Holdings Inc., Reed Elsevier Overseas BV, Reed Elsevier Holdings BV, Reed Elsevier plc, Reed International P.L.C., and Elsevier NV...... I-1
i 3 SUMMARY TERM SHEET Reed Elsevier Inc. ("Reed Elsevier"), through its wholly owned subsidiary, REH Mergersub Inc. ("REH"), is offering to purchase all of the outstanding common stock, par value $1.00 per share ("common stock"), of Harcourt General, Inc. ("Harcourt") for $59.00 per share in cash and all of the outstanding series A cumulative convertible stock, par value $1.00 per share ("preferred stock"), of Harcourt for $77.29 per share in cash. The following are some of the questions you, as a stockholder of Harcourt, may have and the answers to those questions. We urge you to carefully read the remainder of this Offer to Purchase and the accompanying Letter of Transmittal because the information in this summary is not complete and additional important information is contained in the remainder of this Offer to Purchase and the Letter of Transmittal. WHO IS OFFERING TO BUY MY SECURITIES? We are Reed Elsevier Inc., a Massachusetts corporation, and through our wholly owned subsidiary, REH Mergersub Inc., a Delaware corporation, we are offering to purchase all of the outstanding common stock and preferred stock of Harcourt. REH was formed for the purpose of making this tender offer. Both Reed Elsevier and REH are wholly owned subsidiaries of Reed Elsevier plc, a public limited company registered in England. WHAT ARE THE CLASSES AND AMOUNTS OF SECURITIES SOUGHT IN THE OFFER? We are seeking to purchase all of the outstanding common stock and all of the outstanding preferred stock. HOW MUCH ARE YOU OFFERING TO PAY FOR MY SECURITIES AND WHAT IS THE FORM OF PAYMENT? We are offering to pay in cash the price of $59.00 per share, net to holders of common stock, and $77.29 per share, net to holders of preferred stock. Since each share of preferred stock is convertible into 1.31 shares of common stock, the amount we are offering to pay for each share of preferred stock was determined by multiplying 1.31 by the amount we are offering to pay for each share of common stock. WILL I HAVE TO PAY ANY FEES OR COMMISSIONS? If you tender your shares to us in the offer, you will not have to pay brokerage fees, commissions or similar expenses. If you own your shares through a broker or other nominee, and your broker tenders your shares on your behalf, your broker or nominee may charge you a fee for doing so. You should consult your broker or nominee to determine whether any charges will apply. DO YOU HAVE THE FINANCIAL RESOURCES TO MAKE PAYMENT? We will provide REH with sufficient funds to purchase all of the shares tendered to us in the offer and to complete the merger which is expected to follow the successful completion of the offer. It is anticipated that the funds will be obtained from commercial paper and other short term borrowings, and if necessary by drawdown against committed bank facilities. See "The Offer -- Source and Amount of Funds". IS YOUR FINANCIAL CONDITION RELEVANT TO MY DECISION TO TENDER IN THE OFFER? We do not think our financial condition is relevant to your decision whether to tender your shares in the offer because the form of payment consists solely of cash and the offer is not conditioned on our ability to obtain financing. See "The Offer -- Certain Information Concerning Reed Elsevier and Purchaser" and "The Offer -- Source and Amount of Funds". HOW LONG DO I HAVE TO DECIDE WHETHER TO TENDER IN THE OFFER? You will have at least until 12:00 midnight, New York City time, on Thursday, December 7, 2000, to decide whether to tender your shares in the offer, unless we decide to extend the offer. Further, if you are unable to deliver the required documents in order to make a valid tender by that time, you may be able to use the guaranteed delivery procedure described in this Offer to Purchase. See "The Offer -- Terms of the Offer; Expiration Date" and "The Offer -- Procedures for Accepting the Offer and Tendering Shares". 4 HOW WILL I BE NOTIFIED IF THE OFFER IS EXTENDED? If we extend the offer, we will inform Citibank, N.A., the depositary for the offer, of that fact. We will also make a public announcement of the extension, not later than 9:00 a.m., New York City time, on the next business day after the day on which the offer was scheduled to expire. WHAT ARE THE MOST SIGNIFICANT CONDITIONS TO THE OFFER? We are not obligated to purchase any shares in the offer unless there are validly tendered and not withdrawn prior to the expiration of the offer a number of shares of common stock which, together with any other shares owned, directly or indirectly, by Reed Elsevier, or REH or any subsidiary or controlled affiliate, represent at least a majority in voting power of common stock of Harcourt (determined on a fully diluted basis). We calculate the minimum number of shares required to be tendered to be approximately 38,309,690 shares of common stock immediately prior to expiration of this offer. In addition, our obligation to purchase shares in the offer is conditioned upon any approvals, clearances or waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other requisite or advisable approvals, clearances or waiting periods under any other material antitrust laws applicable to the offer, the merger or the subsequent transaction between Reed Elsevier and The Thomson Corporation, described below, having been obtained, expired or terminated, as well as certain other conditions. See "The Offer -- Conditions to the Offer" and "The Offer -- Plans for the Company". HOW DO I TENDER MY SHARES? If you are a record holder, you may tender your shares by delivering the certificates representing your shares, together with a completed Letter of Transmittal, to Citibank, N.A., the depositary for the offer, or following the procedures for a book-entry transfer, not later than the time the offer expires. If your shares are held in street name, you must instruct your nominee to tender the shares. If you are unable to deliver the required documents to the depositary by the expiration of the offer, you may get some extra time to do so by having a broker, a bank or other fiduciary which is a member of the Securities Transfer Agents Medallion Program or other eligible institution guarantee that the missing items will be received by the depositary within three New York Stock Exchange trading days. However, the depositary must receive the missing items within that three day period. See "The Offer -- Procedures for Accepting the Offer and Tendering Shares". HOW DO I WITHDRAW PREVIOUSLY TENDERED SHARES? To withdraw shares, you must deliver a properly executed written notice of withdrawal (or a facsimile of one) with the required information to the depositary prior to the expiration of the offer. See "The Offer -- Withdrawal Rights". UNTIL WHAT TIME CAN I WITHDRAW PREVIOUSLY TENDERED SHARES? You can withdraw shares at any time until the offer has expired. See "The Offer -- Withdrawal Rights". IS THERE AN AGREEMENT GOVERNING THE OFFER? Yes. Reed Elsevier, REH and Harcourt have entered into a merger agreement dated as of October 27, 2000. The merger agreement provides, among other things, for the terms and conditions of the offer and the merger of REH into Harcourt following the offer. See "The Offer -- The Merger Agreement". WHAT DOES THE BOARD OF DIRECTORS OF HARCOURT THINK OF THE OFFER? The board of directors of Harcourt has unanimously determined that the offer and the merger are fair to and in the best interests of the stockholders of Harcourt, and recommends that Harcourt stockholders accept the offer and tender their shares. See "The Offer -- Background of the Offer" and "The Offer -- The Merger Agreement". 2 5 HAVE ANY STOCKHOLDERS AGREED TO TENDER THEIR SHARES? Yes. Members of the Smith family, including Richard A. Smith, Chairman of the Board, and Robert A. Smith and Brian J. Knez, Presidents and Co-Chief Executive Officers of Harcourt, have collectively agreed to convert their shares of Class B stock of Harcourt into shares of common stock of Harcourt and to tender those shares in the offer. We believe the shares of Class B stock of Harcourt held by the Smith family along with the shares of common stock held by the Smith family which the Smith family has agreed to tender represent approximately 27.3% of the outstanding common stock of Harcourt and Class B stock of Harcourt and approximately 25.8% of the common stock of Harcourt on a fully diluted basis. See "The Offer -- The Stockholder Agreement". HOW DO I TENDER MY SHARES IF I HOLD SHARES OF CLASS B STOCK, BUT AM NOT PART OF THE SMITH FAMILY DESCRIBED ABOVE? The offer is only for shares of common stock and preferred stock of Harcourt. If you hold shares of Class B stock and wish to participate in the offer, you must first convert your shares of Class B stock into common stock. You can call Fleet National Bank, care of EquiServe, in its capacity as transfer agent for Harcourt at (800) 736-3001 for instructions on how to convert. Even if you do not convert your shares of Class B stock into common stock, your shares will become automatically converted into common stock immediately prior to the consummation of the offer as a result of the conversion by the Smith family of its Class B stock. If you do not convert your Class B stock into common stock and tender those shares in the Offer, you will not receive consideration for your shares unless and until the merger occurs. IF A MAJORITY OF THE SHARES ARE TENDERED AND ACCEPTED FOR PAYMENT, WILL HARCOURT CONTINUE AS A PUBLIC COMPANY? No. Following the purchase of the shares in the offer, we expect to consummate the merger. If the merger takes place, Harcourt will be privately owned. Even if the merger does not take place, if we purchase all the tendered shares, there may be so few remaining stockholders and publicly held shares that Harcourt's common stock will no longer be eligible to be traded on the New York Stock Exchange, there may not be a public trading market for Harcourt's stock, and Harcourt may cease making filings with the Securities and Exchange Commission or otherwise cease being required to comply with the rules of the Securities and Exchange Commission relating to publicly held companies. WILL THE OFFER BE FOLLOWED BY A MERGER IF ALL HARCOURT SHARES ARE NOT TENDERED IN THE OFFER? Yes. If the offer is consummated, Reed Elsevier and Harcourt plan to merge REH into Harcourt. The merger is subject to additional conditions, including the condition that no statute, rule, regulation, executive order, decree, ruling, injunction or other permanent order shall have been enacted, entered, promulgated or enforced by any court of competent jurisdiction or other governmental body located or having jurisdiction within the United States, any foreign state, county, city or other provincial subdivision which prohibits, restrains or enjoins the consummation of the merger and, if required, the stockholders of Harcourt shall have approved the merger. If that merger takes place, Reed Elsevier will own all of the shares of Harcourt and all remaining public stockholders (other than stockholders properly exercising appraisal rights) will receive $59.00 per share (or any other higher price per share that is paid in the offer) in cash in the case of holders of common stock, and $77.29 per share (or any other higher price that is paid in the offer) in cash in the case of holders of preferred stock. HOW WILL I BE TAXED FOR U.S. FEDERAL INCOME TAX PURPOSES? Your receipt of cash for shares of Harcourt's common stock or Harcourt's preferred stock in the offer will be a taxable transaction for U.S. federal income tax purposes. You will generally recognize gain or loss in an amount equal to the difference between (1) the cash you receive in the offer and (2) your adjusted tax basis in the shares of Harcourt's common stock or Harcourt's preferred stock you surrender in the offer. That gain or loss will be a capital gain or loss if the shares are a capital asset in your hands, and will be long term capital gain or loss if the shares have been held for more than one year at the time the offer is completed. You are urged to consult your own tax advisor as to the particular tax consequences to you of the offer and the merger. 3 6 IF I DECIDE NOT TO TENDER, HOW WILL THE OFFER AFFECT MY SHARES? If the merger described above takes place, stockholders (other than those properly exercising appraisal rights) who do not tender in the offer will receive the same amount of cash per share that they would have received had they tendered their shares in the offer. Therefore, if the merger takes place, the only difference to you between tendering your shares and not tendering your shares is that if you tender your shares in the offer, you will be paid earlier and will not have dissenters' rights. However, even if the merger does not take place, the number of stockholders and shares of Harcourt that are still in the hands of the public may be so small that there no longer will be an active public trading market (or, possibly, there may not be any public trading market) for Harcourt's shares. Also, as described above, Harcourt may cease making filings with the Securities and Exchange Commission or may no longer be required to comply with the rules of the Securities and Exchange Commission relating to publicly held companies. WHAT IS THE MARKET VALUE OF MY SHARES AS OF A RECENT DATE? On October 26, 2000, the last full trading day before we announced the merger agreement with Harcourt, the last sale price of Harcourt's common stock reported on the New York Stock Exchange was $52.10 per share and on October 25, 2000, the last full trading day on which shares of Harcourt's preferred stock were traded before we announced the merger agreement with Harcourt, the last sale price of preferred stock reported on the New York Stock Exchange was $69.00 per share. On November 7, 2000 the last full trading day before the date of this offer to purchase, the last sale price of Harcourt's common stock was $54.51 per share and on November 2, 2000, the last full trading day on which shares of Harcourt's preferred stock were traded before the date of this offer, the last sale price of preferred stock reported on the New York Stock Exchange was $71.40 per share. We advise you to obtain a recent quotation for shares of Harcourt's common stock or preferred stock, as the case may be, in deciding whether to tender your shares. WILL I RECEIVE MY QUARTERLY DIVIDEND IF I HAVE TENDERED MY SHARES AND THE OFFER HAS NOT YET BEEN CONSUMMATED? Yes. WHO CAN I TALK TO IF I HAVE QUESTIONS ABOUT THE OFFER? You can call our representatives MacKenzie Partners, Inc. at (212) 929-5500 (call collect) or (800) 322-2885 (toll free) or Morgan Stanley Dean Witter at (212) 761-4834. MacKenzie Partners, Inc. is acting as the information agent and Morgan Stanley & Co. Incorporated is acting as the dealer manager for our offer. 4 7 TO THE HOLDERS OF SHARES OF COMMON STOCK AND PREFERRED STOCK OF HARCOURT GENERAL, INC.: INTRODUCTION REH Mergersub Inc. ("Purchaser"), a Delaware corporation and a wholly owned subsidiary of Reed Elsevier Inc., a Massachusetts corporation ("Reed Elsevier"), hereby offers to purchase (i) all of the outstanding shares of common stock, par value $1.00 per share (the "Common Shares"), of Harcourt General, Inc. (the "Company" or "Harcourt") at a price of $59.00 per Common Share, net to the seller in cash (the "Common Offer Price"), and (ii) all of the outstanding shares of series A cumulative convertible stock, par value $1.00 per share (the "Preferred Shares"), of the Company at a price of $77.29 per Preferred Share, net to the seller in cash (the "Preferred Offer Price"), in each case, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). The Common Shares collectively with the Preferred Shares are referred to herein as the Shares. The Offer is being made pursuant to the Agreement and Plan of Merger dated as of October 27, 2000 (the "Merger Agreement") among Reed Elsevier, Purchaser and the Company. The Merger Agreement provides that, following completion of the Offer and the satisfaction or waiver of certain conditions in the Merger Agreement, Purchaser will be merged into the Company (the "Merger") with the Company continuing as the surviving corporation (the "Surviving Corporation"), which will be wholly owned by Reed Elsevier. At the effective time of the Merger (the "Effective Time"), each Common Share and each Preferred Share outstanding immediately prior to the Effective Time (other than Common Shares and Preferred Shares owned by Reed Elsevier or Purchaser or by the Company as treasury stock or the subsidiaries of the Company, all of which will be cancelled (other than Common Shares held by the subsidiaries of the Company), and other than Shares that are held by stockholders, if any, who properly exercise their appraisal rights under the Delaware General Corporation Law (the "DGCL")), will be converted into the right to receive $59.00 (or any greater per Common Share price paid in the Offer) in cash, without interest in the case of the Common Shares (the "Common Stock Merger Consideration") or $77.29 (or any greater per Preferred Share price paid in the Offer) in cash, without interest in the case of the Preferred Shares (the "Preferred Stock Merger Consideration"). The Merger Agreement is more fully described in "The Offer -- The Merger Agreement", which also contains a discussion of the treatment of stock options. Tendering stockholders who are record owners of their Shares and tender directly to the Depositary (as defined below) will not be obligated to pay brokerage fees or commissions or, except as otherwise provided in Instruction 6 of the Letter of Transmittal, stock transfer taxes resulting from the acquisition of Shares by Purchaser pursuant to the Offer. Stockholders who hold their Shares through a broker or bank should consult such institution as to whether it charges any service fees. Reed Elsevier or Purchaser will pay all charges and expenses of Morgan Stanley & Co. Incorporated as dealer manager ("Morgan Stanley" or the "Dealer Manager"), Citibank, N.A., as depositary (the "Depositary"), and MacKenzie Partners, Inc., as information agent (the "Information Agent"), incurred in connection with the Offer. THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD") HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF HARCOURT AND RECOMMENDS THAT HARCOURT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES. Goldman, Sachs & Co. ("Goldman Sachs"), financial advisor to the Company, has delivered to the Company Board its opinion dated October 27, 2000 (the "Financial Advisor Opinion"), to the effect that, as of such date, and based on and subject to the matters stated in such opinion, the $59.00 per Common Share in cash to be received by holders of Common Shares (other than members of the Smith Family Group as defined below) in the Offer and the Merger is fair from a financial point of view to such holders. The full text of the Financial Advisor Opinion, which sets forth the assumptions made, procedures followed, matters considered and limits on the review undertaken, is attached as Annex A to the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule 14D-9"), which has been filed by the Company with the SEC in connection with the Offer and which is being mailed to the Company's stockholders concurrently herewith. Stockholders are urged to, and should read the Financial Advisor Opinion carefully. 5 8 The Company has been advised that each of its directors and executive officers intends to tender all of his or her Shares pursuant to the Offer except to the extent that such tender would require disgorgement of profits from any such tender to the Company under Section 16 of the Securities and Exchange Act of 1934, as amended (the "Exchange Act"). THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF COMMON SHARES WHICH, TOGETHER WITH ANY SHARES OWNED, DIRECTLY OR INDIRECTLY, BY REED ELSEVIER OR PURCHASER, OR ANY SUBSIDIARY OR CONTROLLED AFFILIATE, REPRESENT, ON THE DATE OF PURCHASE, AT LEAST A MAJORITY IN VOTING POWER OF THE COMMON SHARES (DETERMINED ON A FULLY DILUTED BASIS) (THE "MINIMUM CONDITION"). THE OFFER IS ALSO CONDITIONED UPON ANY APPROVALS, CLEARANCES OR WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976 (THE "HSR ACT") AND OTHER REQUISITE OR ADVISABLE APPROVALS, CLEARANCES OR WAITING PERIODS UNDER ANY OTHER MATERIAL ANTITRUST LAWS APPLICABLE TO THE OFFER, THE MERGER OR THE SUBSEQUENT TRANSACTION (THE "SUBSEQUENT TRANSACTION") BETWEEN REED ELSEVIER AND THE THOMSON CORPORATION ("THOMSON") HAVING BEEN OBTAINED, EXPIRED OR TERMINATED AND THE SATISFACTION OF CERTAIN OTHER CONDITIONS. SEE "THE OFFER -- CONDITIONS TO THE OFFER" AND "THE OFFER -- PLANS FOR THE COMPANY". The Company has advised Reed Elsevier that, on October 26, 2000, 55,049,531 Common Shares were issued and outstanding; 3,289,353 Common Shares were subject to issuance upon the exercise or conversion of employee options; 18,111,768 Common Shares were subject to issuance upon conversion of the Class B Stock, par value $1.00 per share, of the Company (the "Class B Stock") and 1,016,184 Common Shares were subject to issuance upon conversion of the Preferred Shares. Purchaser believes that the Minimum Condition would be satisfied if approximately 38,309,690 Common Shares were validly tendered and not withdrawn immediately prior to the expiration of the Offer. Pursuant to the Stockholder Agreement, dated as of October 27, 2000 (the "Stockholder Agreement"), Richard A. Smith, Chairman of the Company, Nancy L. Marks, Mr. Smith's sister, Robert A. Smith and Brian J. Knez, Presidents and Co-Chief Executive Officers and directors of the Company, Jeffrey R. Lurie, a director of the Company, and other members of their families and various family corporations, trusts and charitable foundations (the "Smith Family Group") (each, a "Stockholder"), have collectively agreed to convert all of their shares of the Class B Stock (19,955,998 shares as of October 20, 2000) into Common Shares and tender such shares in the Offer. Collectively, the shares of Class B Stock held by the Smith Family Group, along with the Common Shares held by the Smith Family Group which the Smith Family Group has agreed to tender, represent approximately 27.3% of the outstanding Common Shares and shares of Class B Stock and approximately 25.8% of the Common Shares on a fully diluted basis. See "The Offer -- The Stockholder Agreement". The Merger Agreement provides that if requested by Reed Elsevier, the Company shall, as soon as reasonably practicable following the purchase of Shares pursuant to the Offer, and from time to time thereafter, use its best efforts to cause a majority of directors of the Company to consist of persons designated or elected by Reed Elsevier. See "The Offer -- The Merger Agreement". The Merger is subject to the satisfaction or waiver of certain conditions, including, if required, the approval of the Merger Agreement by the Company's stockholders. If the Minimum Condition is satisfied, Purchaser would have sufficient voting power to approve the Merger without the affirmative vote of any other stockholder of the Company. The Company has agreed, if required, to cause a meeting of its stockholders to be held as promptly as practicable following consummation of the Offer for the purposes of considering and taking action upon the approval and adoption of the Merger Agreement. Reed Elsevier, Purchaser and the Smith Family Group have agreed to vote their Shares in favor of the approval and adoption of the Merger Agreement. See "The Offer -- The Merger Agreement". THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 6 9 THE OFFER TERMS OF THE OFFER; EXPIRATION DATE Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of such extension or amendment), Purchaser will accept for payment and pay for all Shares validly tendered prior to the Expiration Date and not properly withdrawn as permitted under "The Offer -- Withdrawal Rights". The term "Expiration Date" means 12:00 midnight, New York City time, on Thursday, December 7, 2000, unless Purchaser shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by Purchaser, shall expire. The Offer is conditioned upon the satisfaction of the Minimum Condition and the other conditions set forth in "The Offer -- Conditions to the Offer". Subject to the provisions of the Merger Agreement, Purchaser may waive, in whole or in part at any time or from time to time, any such condition; provided that, unless previously approved by the Company in writing, Purchaser may not waive the Minimum Condition or the following conditions set forth in clauses (a), (e), and (f) under "The Offer -- Conditions to the Offer": - condition (a) that, among other things, provides that no laws or court orders applicable to Reed Elsevier, Purchaser, Harcourt, Thomson, the Offer or the Merger makes illegal, restrains or prohibits the Offer or the consummation of the Merger, or prohibits or limits in any material respect the ownership or operation by Harcourt or Reed Elsevier of a material portion of Harcourt's business or assets, or the ownership or operation by Thomson of a material portion of the business or assets to be acquired by Thomson in the Subsequent Transaction; - condition (e) that the Merger Agreement shall not have been terminated in accordance with its terms and the Offer shall not have been terminated with the consent of Harcourt; and - condition (f) that any approvals, clearances or waiting periods under the HSR Act and other requisite or advisable approvals, clearances or waiting periods under any other material antitrust law applicable to the Offer, the Merger or the Subsequent Transaction having been obtained, expired or terminated. "The Offer -- Conditions to the Offer" sets forth these conditions in their entirety. See "The Offer -- Plans for the Company" for a discussion of certain additional limitations on Purchaser's right to waive conditions to the Offer. Purchaser may not, unless previously approved by the Company in writing: - decrease the price per Share payable in the Offer, - change the form of consideration payable in the Offer, - reduce the maximum number of Shares to be purchased in the Offer, - impose conditions to the Offer in addition to the conditions set forth in "The Offer -- Conditions to the Offer", or - modify or amend the Offer Conditions or the Offer, in each case, in a manner which is adverse to the holders of Shares. Purchaser may, without the consent of the Company, (i) in its sole discretion, extend the expiration date of the Offer for one or more periods (not in excess of ten business days) but in no event later than July 24, 2001, if any condition of the Offer has not been satisfied or waived (other than as a result of the failure by Reed Elsevier or Purchaser to perform any of its obligations under the Merger Agreement) and (ii) extend the expiration date of the Offer as required by applicable law. Purchaser shall, at the request of the Company, extend the expiration date of the Offer for one or more periods (not in excess of ten business days each) but in no event later than July 24, 2001, if at the then-scheduled expiration date any of the Offer Conditions are not satisfied or waived. Purchaser shall also extend 7 10 the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission (the "SEC") or the staff thereof applicable to the Offer. Any extension, delay, termination, waiver or amendment will be followed as promptly as practicable by public announcement thereof, such announcement in the case of an extension to be made no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled Expiration Date, in accordance with the public announcement requirements of Rule 14e-1(d) under the Exchange Act. Subject to applicable law (including Rules 14d-4(d) and 14d-6(c) under the Exchange Act, which require that material changes in the information published, sent or given to stockholders in connection with the Offer be promptly disseminated to stockholders in a manner reasonably designed to inform them of such changes), and without limiting the manner in which Purchaser may choose to make any public announcement, Purchaser shall have no obligation to publish, advertise or otherwise communicate any such public announcement other than by issuing a press release to the Dow Jones News Service. If Purchaser extends the time during which the Offer is open, is delayed in its acceptance for payment of or payment for Shares or is unable to pay for Shares pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may retain tendered Shares on behalf of Purchaser, and such Shares may not be withdrawn except to the extent tendering stockholders are entitled to withdrawal rights as described herein under "The Offer -- Withdrawal Rights". However, the ability of Purchaser to delay the payment for Shares that Purchaser has accepted for payment is limited by (i) Rule 14e-1(c) under the Exchange Act which requires that a bidder pay the consideration offered or return the securities deposited by or on behalf of stockholders promptly after the termination or withdrawal of such bidder's offer and (ii) the terms of the Merger Agreement, which require that, on the terms and subject to prior satisfaction or waiver of the Offer Conditions, Purchaser shall accept for payment and pay for Shares as soon as it is permitted to do so under applicable law. If Purchaser makes a material change in the terms of the Offer or the information concerning the Offer, or if it waives a material condition of the Offer, Purchaser will disseminate additional tender offer materials (including by public announcement as set forth above) and extend the Offer to the extent required by Rules 14d-4(d), 14d-6(c) and 14e-1 under the Exchange Act. The minimum period during which an offer must remain open following material changes in the terms of the Offer, other than a change in price, percentage of securities sought or inclusion of or changes to a dealer's soliciting fee, will depend upon the facts and circumstances, including the materiality, of the changes. In the SEC's view, an offer should remain open for a minimum of five business days from the date the material change is first published, sent or given to stockholders. However, a minimum of ten (10) business days from the date of such change may be required to allow for adequate dissemination and investor response if a change relates to the price to be paid or, subject to certain limitations, a change in the percentage of securities sought or the inclusion of or change to a dealer's soliciting fee. Accordingly, if, prior to the Expiration Date, Purchaser decreases the number of Shares being sought or increases or decreases the consideration offered pursuant to the Offer, and if the Offer is scheduled to expire at any time earlier than the tenth (10th) business day from the date that notice of such increase or decrease is first published, sent or given to stockholders, Purchaser will extend the Offer until at least the expiration of such tenth (10th) business day. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or a U.S. federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, New York City time. The Company has provided Purchaser with the Company's stockholder list and security position listings for the purpose of disseminating the Offer to holders of Shares. This Offer to Purchase and the related Letter of Transmittal will be mailed to record holders of Shares whose names appear on the Company's stockholder list and will be furnished, for subsequent transmittal to beneficial owners of Shares, to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list or, if applicable, who are listed as participants in a clearing agency's security position listing. 8 11 ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES Upon the terms and subject to the conditions of the Offer, the Merger Agreement and applicable law (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), Purchaser will accept for payment and will pay for all Shares validly tendered prior to the Expiration Date and not properly withdrawn pursuant to the Offer as soon as it is permitted to do so under applicable law. Subject to the Merger Agreement and compliance with Rule 14e-1(c) under the Exchange Act, Purchaser expressly reserves the right to delay payment for Shares in order to comply in whole or in part with any applicable law. See "The Offer -- Certain Legal Matters; Regulatory Approvals". In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (1) the certificates evidencing such Shares (the "Share Certificates") or confirmation of a book-entry transfer (a "Book-Entry Confirmation") of such Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in "The Offer -- Procedures for Accepting the Offer and Tendering Shares", (2) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined below) in lieu of the Letter of Transmittal and (3) any other documents required by the Letter of Transmittal. Accordingly, payment may be made to tendering stockholders at different times if delivery of the Shares and other required documents occur at different times. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn as, if and when Purchaser gives oral or written notice to the Depositary of Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the Common Offer Price or the Preferred Offer Price, as the case may be, therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering stockholders whose Shares have been accepted for payment. If, for any reason whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or Purchaser is unable to accept for payment Shares tendered pursuant to the Offer, then, without prejudice to Purchaser's rights under "The Offer -- Terms of the Offer; Expiration Date", the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn, except to the extent that the tendering stockholders are entitled to withdrawal rights as described in "The Offer -- Withdrawal Rights" and as otherwise required by Rule 14e-1(c) under the Exchange Act. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE COMMON OFFER PRICE FOR COMMON SHARES OR THE PREFERRED OFFER PRICE FOR PREFERRED SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT. If Purchaser increases the consideration to be paid for Shares pursuant to the Offer, Purchaser will pay such increased consideration for all Shares purchased pursuant to the Offer. If any tendered Shares are not accepted for payment for any reason pursuant to the terms and conditions of the Offer, or if Share Certificates are submitted evidencing more Shares than are tendered, Share Certificates evidencing unpurchased Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer into the Depositary's account at the Book-Entry Transfer Facility pursuant to the procedure set forth in "The Offer -- Procedures for Accepting the Offer and Tendering Shares", such Shares will be credited to an account maintained at the Book-Entry Transfer Facility), as promptly as practicable following the expiration or termination of the Offer. Reed Elsevier reserves the right to transfer or assign, in whole or from time to time in part, to one or more of its affiliates, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transaction or assignment will not relieve Reed Elsevier of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 9 12 PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES Valid Tenders. In order for a stockholder validly to tender Shares pursuant to the Offer, either (1) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message in lieu of the Letter of Transmittal) and any other documents required by the Letter of Transmittal must be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and either the Share Certificates evidencing tendered Shares must be received by the Depositary at such address or such Shares must be tendered pursuant to the procedure for book-entry transfer described below and a Book-Entry Confirmation must be received by the Depositary, in each case prior to the Expiration Date, or (2) the tendering stockholder must comply with the guaranteed delivery procedures described below. The term "Agent's Message" means a message, transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, that states that the Book-Entry Transfer Facility has received an express acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that are the subject of such Book-Entry Confirmation, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that Purchaser may enforce such agreement against such participant. Book-Entry Transfer. The Depositary will establish an account with respect to the Shares at the Book-Entry Transfer Facility for purposes of the Offer within two (2) business days after the date of this Offer to Purchase. Any financial institution that is a participant in the system of the Book-Entry Transfer Facility may make a book-entry delivery of Shares by causing the Book-Entry Transfer Facility to transfer such Shares into the Depositary's account at the Book-Entry Transfer Facility in accordance with the Book-Entry Transfer Facility's procedures for such transfer. However, although delivery of Shares may be effected through book-entry transfer at the Book-Entry Transfer Facility, either the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, together with any required signature guarantees, or an Agent's Message in lieu of the Letter of Transmittal, and any other required documents, must, in any case, be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase prior to the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedure described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signature Guarantees. No signature guarantee is required on the Letter of Transmittal (1) if the Letter of Transmittal is signed by the registered holder of the Shares tendered therewith, unless such holder has completed either the box entitled "Special Delivery Instructions" or the box entitled "Special Payment Instructions" on the Letter of Transmittal or (2) if the Shares are tendered for the account of a firm that is participating in the Security Transfer Agents Medallion Program (an "Eligible Institution"). In all other cases, all signatures on a Letter of Transmittal must be guaranteed by an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If a Share Certificate is registered in the name of a person or persons other than the signer of the Letter of Transmittal, or if payment is to be made or delivered to, or a Share Certificate not accepted for payment or not tendered is to be issued in the name of, a person other than the registered holder(s), then the Share Certificate must be endorsed or accompanied by appropriate duly executed stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear on the Share Certificate, with the signature(s) on such Share Certificate or stock powers guaranteed by an Eligible Institution as provided in the Letter of Transmittal. See Instructions 1 and 5 of the Letter of Transmittal. Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to the Offer and the Share Certificates evidencing such stockholder's Shares are not immediately available or such stockholder cannot deliver the Share Certificates and all other required documents to the Depositary prior to the Expiration Date, 10 13 or such stockholder cannot complete the procedure for delivery by book-entry transfer on a timely basis, such Shares may nevertheless be tendered if all of the following conditions are satisfied: (1) such tender is made by or through an Eligible Institution; (2) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, is received prior to the Expiration Date by the Depositary as provided below; and (3) the Share Certificates (or a Book-Entry Confirmation) evidencing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message), and any other documents required by the Letter of Transmittal are received by the Depositary within three (3) New York Stock Exchange, Inc. ("NYSE") trading days after the date of execution of such Notice of Guaranteed Delivery. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile transmission or mailed to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the form of Notice of Guaranteed Delivery made available by Purchaser. In all cases, Shares will not be deemed validly tendered unless a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) is received by the Depositary. THE METHOD OF DELIVERY OF SHARES, SHARE CERTIFICATES, THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF A BOOK-ENTRY TRANSFER, RECEIPT OF A BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. Determination of Validity. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Purchaser in its sole discretion, which determination shall be final and binding on all parties. Purchaser reserves the absolute right to reject any and all tenders of any Shares determined by it not to be in proper form or if the acceptance for payment of such Shares may, in the opinion of its counsel, be unlawful. Purchaser also reserves the absolute right to waive any defect or irregularity in the tender of any Shares of any particular stockholder, whether or not similar defects or irregularities are waived in the case of other stockholders. No tender of Shares will be deemed to have been validly made until all defects and irregularities have been cured or waived to the satisfaction of Purchaser. None of Purchaser, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or incur any liability for failure to give any such notification. Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and the instructions thereto) will be final and binding. Other Requirements. By executing the Letter of Transmittal (or delivering an Agent's Message) as set forth above, a tendering stockholder irrevocably appoints designees of Purchaser as such stockholder's proxies, each with full power of substitution, in the manner set forth in the Letter of Transmittal, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by Purchaser (including, with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date of this Offer to Purchase). All such proxies shall be considered coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, Purchaser accepts such Shares for payment. Upon such acceptance for payment, all prior proxies given by such stockholder with respect to such Shares (and such other Shares and securities) will be revoked without further action, and no subsequent proxies may be given nor any subsequent written consent executed by such stockholder (and, if given or executed, will not be deemed to be effective) with respect thereto. The designees of Purchaser will, with respect to the Shares (and other securities) for which the appointment is effective, be empowered to exercise any voting and other rights of such stockholder as they in their sole discretion may deem proper at any annual or special meeting of the Company's stockholders or any adjournment or 11 14 postponement thereof, by written consent in lieu of any such meeting or otherwise. Purchaser reserves the right to require that, in order for Shares to be deemed validly tendered, immediately upon Purchaser's payment for such Shares, Purchaser must be able to exercise full voting rights with respect to such Shares to the extent such Shares have voting rights (including voting at any meeting of stockholders then scheduled or acting by written consent without a meeting). The tender of Shares pursuant to any one of the procedures described above will constitute the tendering stockholder's acceptance of the Offer, as well as the tendering stockholder's representation and warranty that (i) such stockholder owns the Shares being tendered within the meaning of Rule 14e-4 promulgated under the Exchange Act, (ii) the tender of such Shares complies with Rule 14e-4 and (iii) such stockholder has the full power and authority to tender and assign the Shares tendered, as specified in the Letter of Transmittal. Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering stockholder and Purchaser upon the terms and subject to the conditions of the Offer. TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO STOCKHOLDERS OF THE PURCHASE PRICE OF SHARES PURSUANT TO THE OFFER, EACH UNITED STATES HOLDER IS URGED TO PROVIDE THE DEPOSITARY WITH THE STOCKHOLDER'S CORRECT SOCIAL SECURITY NUMBER OR OTHER TAXPAYER IDENTIFICATION NUMBER, OR CERTIFY THAT THE STOCKHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING, BY COMPLETING THE SUBSTITUTE FORM W-9 IN THE LETTER OF TRANSMITTAL. IF THE STOCKHOLDER DOES NOT ESTABLISH THAT BACKUP WITHHOLDING DOES NOT APPLY TO THAT STOCKHOLDER, THE DEPOSITARY IS REQUIRED TO WITHHOLD 31% OF ANY PAYMENTS MADE TO SUCH STOCKHOLDER. SEE INSTRUCTIONS TO THE LETTER OF TRANSMITTAL. IF A STOCKHOLDER IS A NONRESIDENT ALIEN OR FOREIGN ENTITY NOT SUBJECT TO BACKUP WITHHOLDING, THE STOCKHOLDER IS URGED TO GIVE THE DEPOSITARY A COMPLETED W-8BEN (CERTIFICATE OF FOREIGN STATUS) PRIOR TO RECEIPT OF PAYMENT. WITHDRAWAL RIGHTS Tenders of Shares made pursuant to the Offer may be withdrawn at any time prior to the Expiration Date. Thereafter, such tenders are irrevocable, except that they may be withdrawn after January 6, 2001, unless theretofore accepted for payment as provided in this Offer to Purchase. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover page of this Offer to Purchase. Any such notice of withdrawal must specify the name and address of the person who tendered the Shares to be withdrawn, the class and number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered such Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution, unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedure for book-entry transfer as set forth in "The Offer -- Procedures for Accepting the Offer and Tendering Shares", any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and must otherwise comply with the Book-Entry Transfer Facility's procedures. If Purchaser extends the periods of time during which the Offer is open, is delayed in its acceptance for payment of Shares or is unable to accept Shares for payment pursuant to the Offer for any reason, then, without prejudice to Purchaser's rights under the Offer, the Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that tendering stockholders are entitled to withdrawal rights as described herein. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. None of Purchaser, the Dealer Manager, the Depositary, the Information Agent or any other person will be under duty to give notification of any defects or irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. 12 15 Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will thereafter be deemed not to have been validly tendered for purposes of the Offer. However, withdrawn Shares may be re-tendered at any time prior to the Expiration Date by following one of the procedures described in "The Offer -- Procedures for Accepting the Offer and Tendering Shares". MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF SHARES This summary of the material United States federal income tax consequences to the Company's stockholders of the Offer and the Merger is based on the law as currently in effect. This summary does not discuss all of the tax consequences that may be relevant to a stockholder in light of its particular circumstances or to stockholders subject to special rules, such as financial institutions, broker-dealers, tax-exempt organizations, stockholders who are not citizens or residents of the United States or that are foreign corporations, foreign partnerships or foreign estates or trusts as to the United States, dissenting stockholders, stockholders that hold their Shares as part of a straddle or a hedging, constructive sale or conversion transaction and stockholders who acquired their Shares through the exercise of an employee stock option or otherwise as compensation. STOCKHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE OFFER AND THE MERGER, INCLUDING THE EFFECT OF UNITED STATES STATE AND LOCAL TAX LAWS OR FOREIGN TAX LAWS. Offer The receipt by a stockholder of cash for Shares pursuant to the Offer will be a taxable transaction for United States federal income tax purposes. A stockholder will recognize gain or loss in an amount equal to the difference between the cash received by the stockholder pursuant to the Offer and the stockholder's adjusted tax basis in the Shares surrendered by the stockholder pursuant to the Offer. That gain or loss will be a capital gain or loss if the Shares are a capital asset in the hands of the stockholder, and will be long term capital gain or loss if the Shares have been held for more than one year at the time of the completion of the Offer. Long term capital gain of individuals is subject to tax at a maximum rate of 20%. The ability to deduct capital loss is subject to limitations. A stockholder of the Company may be subject to backup withholding at a rate of 31% unless, at the time it surrenders Shares, it provides its taxpayer identification number and certifies that the number is correct or properly certifies that it is awaiting a taxpayer identification number, or unless an exemption is demonstrated to apply. Backup withholding is not an additional tax. Amounts so withheld can be refunded or credited against the federal income tax liability of the stockholder, provided appropriate information is forwarded to the IRS. A stockholder of the Company should complete the Substitute Form W-9 that is included in the Letter of Transmittal. Merger The receipt by a stockholder of cash pursuant to the Merger would result in federal income tax consequences similar to those described above. Stockholders that receive cash pursuant to the Merger are urged to consult their own tax advisors. 13 16 PRICE RANGE OF SHARES The Common Shares are authorized for quotation on the New York Stock Exchange under the symbol "H". The following table sets forth, for the periods indicated, the high and low sales prices per Common Share for the periods indicated. Common Share prices are as reported on the New York Stock Exchange based on published financial sources.
COMMON SHARES ---------------- HIGH LOW ------ ------ FISCAL YEAR 1999:* First Quarter............................................ $54.94 $47.63 Second Quarter........................................... $50.00 $43.94 Third Quarter............................................ $54.00 $46.31 Fourth Quarter........................................... $47.13 $36.75 FISCAL YEAR 2000: First Quarter............................................ $41.50 $33.13 Second Quarter........................................... $40.50 $33.19 Third Quarter............................................ $57.56 $36.25 Fourth Quarter........................................... $62.38 $51.50 FISCAL YEAR 2001: First Quarter (through November 7, 2000)................. $55.74 $54.20
- --------------- * With the exception of the fourth quarter "low" price in fiscal 1999, these stock prices are prior to the tax-free distribution of shares in The Neiman Marcus Group, which was effective on October 22, 1999. On June 16, 2000, the last full trading day before the public announcement that the Company was exploring strategic alternatives, the last sale price per Common Share on the New York Stock Exchange was $38.01. On October 26, 2000, the last full trading day before the public announcement of the Merger Agreement, the last sale price per Common Share on the New York Stock Exchange was $52.10. On November 7, 2000, the last full day of trading before the commencement of the Offer, the last sale price per Common Share on the New York Stock Exchange was $54.51 per Common Share. Stockholders are urged to obtain a current market quotation for the Common Shares. As of November 3, 2000 there were approximately 6,987 holders of record of Common Shares and 55,113,075 outstanding Common Shares. The Preferred Shares are authorized for quotation on the New York Stock Exchange under the symbol "HPRA". The following table sets forth, for the periods indicated, the high and low sales prices per Preferred Share for the periods indicated. Preferred Share prices are as reported on the New York Stock Exchange based on published financial sources.
PREFERRED SHARES ---------------- HIGH LOW ------ ------ FISCAL YEAR 1999: First Quarter............................................ $60.00 $55.00 Second Quarter........................................... $51.25 $48.13 Third Quarter............................................ $56.75 $49.75 Fourth Quarter........................................... $52.00 $45.00 FISCAL YEAR 2000: First Quarter............................................ $52.38 $42.50 Second Quarter........................................... $50.00 $43.75 Third Quarter............................................ $75.00 $46.75 Fourth Quarter........................................... $80.00 $69.00 FISCAL YEAR 2001: First Quarter (through November 7, 2000)................. $71.40 $71.40
On June 9, 2000, the last full trading day on which Preferred Shares were traded before the public announcement that the Company was exploring strategic alternatives, the last sale price per Preferred Share 14 17 on the New York Stock Exchange was $54.38. On October 25, 2000, the last full trading day on which Preferred Shares were traded before the public announcement of the Merger Agreement, the last sale price per Preferred Share on the New York Stock Exchange was $69.00. On November 2, 2000, the last full trading day on which Preferred Shares were traded before the commencement of the Offer, the last sale price per Preferred Share on the New York Stock Exchange was $71.40 per Preferred Share. Stockholders are urged to obtain a current market quotation for the Preferred Shares. As of November 3, 2000 there were approximately 394 holders of record of Preferred Shares and 727,235 outstanding Preferred Shares. CERTAIN INFORMATION CONCERNING THE COMPANY The Company. Harcourt General, Inc. is a Delaware corporation. The address of the Company's principal executive offices is 27 Boylston Street, Chestnut Hill, Massachusetts 02467. The telephone number of the Company at such offices is (617) 232-8200. The Company is a leading global multiple-media publisher providing educational, training and assessment products and services to classroom, corporate, professional and consumer markets. Prior to October 22, 1999, the Company owned a controlling interest in The Neiman Marcus Group, Inc. ("NMG"), a high-end specialty retailer. On October 22, 1999, the Company distributed to its stockholders approximately 21.4 million of the 26.4 million shares of NMG common stock held by the Company. The Company operates its business through four principal segments, as described briefly below. The Education Group is a leading content provider to classroom and at-home K-12 and supplemental learners offering a complementary array of value-added products and services through school, library and direct-to-consumer channels. The Education Group includes the operations of Harcourt School Publishers; Holt, Rinehart and Winston ("HRW"); Steck-Vaughn; and Harcourt Trade Publishers. The Education Group publishes textbooks and related instructional materials for kindergarten to grade eight through Harcourt School and for the middle and secondary education markets through HRW. Steck-Vaughn publishes supplemental educational materials used in elementary, secondary and adult education, test preparation materials, and offers English language literacy programs for training workers for whom English is a second language. Harcourt Trade publishes children's books, general adult fiction and nonfiction hardcover books, and trade paperbacks under the Harvest imprint. The Higher Education Group brings traditional and technology-enabled content to adults seeking higher education in traditional and non-traditional settings, offering a broad array of products and services to the campus-based, direct-to-consumer and corporate markets. The Higher Education Group includes Harcourt College Publishers, Harcourt Learning Direct, Archipelago Productions and Harcourt Professional Education. Harcourt College publishes textbooks and other materials for the college and university market under the Harcourt, Saunders, Dryden and HRW imprints. Harcourt Learning Direct and Harcourt Higher Education provide traditional and technology-based distance learning opportunities in vocational, degree and professional self-study programs. Harcourt Professional Education conducts review courses under the BAR/BRI name for individuals preparing for bar examinations, as well as live-lecture and computer-based review courses for law and accounting examinations, and publishes print and electronic information resources, including reference guides and newsletters for financial, legal and human resources professionals. The Corporate and Professional Services Group produces technology-based training, assessment and educational products and services for the corporate learner market and individual professionals. The Corporate and Professional Services Group includes the operations of NETglobal (including NETg and Knowledge Communication, Inc. ("KCI")); The Psychological Corporation ("TPC"); Assessment Systems, Inc. ("ASI"); and Drake Beam Morin ("DBM"). NETg develops and sells self-study information technology and related professional training products and services which are delivered by CD-ROM, the Internet, and corporate intranets to information technology professionals. KCI provides technology-based professional development and business skills training. TPC provides tests and related products and services for educational and psychological assessment. ASI develops and administers computer-based tests and related services for professional and regulatory licensing and credentialing and corporate pre-employment testing. DBM is one of 15 18 the world's leading organizational and individual transition consulting firms, assisting organizations and individuals worldwide in outplacement, career and transition management and employee selection. The Worldwide Scientific, Technical and Medical ("STM") Group is a leading provider of information products through both traditional and new technology-enabled channels to health, scientific and technical professionals worldwide. The STM Group includes Harcourt Health Sciences, comprised of the global medical publishing operations of W.B. Saunders, Mosby and Churchill Livingstone; Academic Press; and Harcourt Publishers International. Harcourt Health Sciences publishes books, periodicals and electronic products in the health sciences, and advertising-based newsletters for health professionals. Academic Press publishes scholarly books, journals, data bases and products and value-added services in print and electronic media, in the life, physical, social and computer sciences. Harcourt Publishers International is responsible for international distribution of Harcourt English language products and the publication of adaptations, translations and indigenous materials worldwide. Capital Structure. The authorized capital of the Company consists of (a) 150,000,000 shares of Common Stock, par value $1.00 per share, (b) 80,000,000 shares of Class B Stock, par value $1.00 per share, (c) 100,000,000 shares of Class C Stock, par value $1.00 per share, and (d) 40,000,000 shares of preferred stock, par value $1.00 per share, of which 10,000,000 shares of such preferred stock were designated as Series A cumulative convertible stock. As of November 3, 2000, the Company had 55,113,075 Common Shares outstanding, 18,111,768 shares of Class B Stock outstanding, and 727,235 Preferred Shares outstanding. As of November 3, 2000, 2,276,750 Common Shares were held in the treasury of the Company. The Company has issued options to acquire shares of common stock pursuant to the Harcourt General, Inc. 1988 Stock Incentive Plan and the Harcourt General, Inc. 1997 Incentive Plan. As of November 3, 2000, there were options outstanding to purchase 3,289,353 Common Shares. Available Information. The Shares are registered under the Exchange Act. Accordingly, the Company is subject to the informational reporting requirements of the Exchange Act and, in accordance therewith, is required to file periodic reports, proxy statements and other information with the SEC relating to its business, financial condition and other matters. Such reports, proxy statements and other information can be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the SEC's regional offices located at Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Information regarding the public reference facilities may be obtained from the SEC by telephoning 1-800-SEC-0330. The Company's filings are also available to the public on the SEC's Internet site (http://www.sec.gov). Copies of such materials may also be obtained by mail from the Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. Except as otherwise stated in this Offer to Purchase, the information concerning the Company contained herein has been taken from or is based upon reports and other documents on file with the SEC or otherwise publicly available. Although neither Purchaser nor Reed Elsevier has any knowledge that would indicate that any statements contained herein based upon such reports and documents are untrue, neither Purchaser nor Reed Elsevier takes any responsibility for the accuracy or completeness of the information contained in such reports and other documents or for any failure by the Company to disclose events that may have occurred and may affect the significance or accuracy of any such information but that are unknown to Purchaser or Reed Elsevier. Certain Projections. The Company does not, as a matter of course, make public any forecasts as to its future financial performance. However, in connection with Reed Elsevier's review of the transactions contemplated by the Merger Agreement, the Company provided Reed Elsevier with certain projected financial information concerning the Company. Such information included, among other things, the Company's projections of consolidated Revenue, Gross Profit, and Total Operating Income for the Company's operating subsidiaries and excluded central corporate expenses and financing items. Set forth below is a 16 19 summary of such projections. These projections should be read together with the financial statements of the Company that can be obtained from the SEC as described above.
FISCAL YEARS ENDING OCTOBER 31, -------------------------------------------------------------------- 2000 2001 2002 2003 2004 2005 -------- -------- -------- -------- -------- -------- (IN MILLIONS) Revenue..................... $2,383.9 $2,597.6 $2,869.3 $3,173.6 $3,562.8 $3,910.3 Gross Profit................ 1,595.8 1,743.4 1,947.0 2,172.9 2,469.5 2,725.8 Total Operating Income*..... 384.8 437.0 514.2 611.2 734.3 835.7
- --------------- * Total Operating Income is presented after amortization of goodwill and intangible assets. REED ELSEVIER AND PURCHASER UNDERSTAND THAT THE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE OR COMPLIANCE WITH PUBLISHED GUIDELINES OF THE SEC OR THE GUIDELINES ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING PROJECTIONS OR FORECASTS AND ARE INCLUDED HEREIN ONLY BECAUSE SUCH INFORMATION WAS PROVIDED TO REED ELSEVIER AND PURCHASER IN CONNECTION WITH THEIR EVALUATION OF A BUSINESS COMBINATION TRANSACTION. THESE FORWARD-LOOKING STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE PROJECTIONS. THE COMPANY HAS ADVISED PURCHASER AND REED ELSEVIER THAT THESE PROJECTIONS WERE TO BE USED INTERNALLY FOR BUDGETING AND OTHER MANAGEMENT DECISIONS AND ARE SUBJECTIVE IN MANY RESPECTS AND THUS SUSCEPTIBLE TO INTERPRETATIONS AND PERIODIC REVISION BASED ON ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENTS. ALTHOUGH PRESENTED WITH NUMERICAL SPECIFICITY, THE PROJECTIONS ALSO REFLECT NUMEROUS ASSUMPTIONS (NOT ALL OF WHICH WERE PROVIDED TO REED ELSEVIER AND PURCHASER), ALL MADE BY MANAGEMENT OF THE COMPANY, WITH RESPECT TO INDUSTRY PERFORMANCE, GENERAL BUSINESS, ECONOMIC, MARKET, COMPETITIVE AND FINANCIAL CONDITIONS AND OTHER MATTERS INCLUDING THE IMPACT OF TECHNOLOGY, ALL OF WHICH ARE DIFFICULT TO PREDICT, MANY OF WHICH ARE BEYOND THE COMPANY'S CONTROL, AND NONE OF WHICH WERE SUBJECT TO APPROVAL BY REED ELSEVIER OR PURCHASER. ACCORDINGLY, THERE CAN BE NO ASSURANCE THAT THE ASSUMPTIONS MADE IN PREPARING THE PROJECTIONS, INCLUDING WITHOUT LIMITATION ASSUMPTIONS ON THE IMPACT OF NEW AND DEVELOPING BUSINESSES AND MARKETS, WILL PROVE ACCURATE OR THAT ANY OF THE PROJECTIONS WILL BE REALIZED. MOREOVER SUCH PROJECTIONS ARE SUBJECT TO SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES WHICH ARE COMPOUNDED TO THE EXTENT THE PROJECTIONS ARE FURTHER REMOVED FROM THE DATE OF PREPARATION. THE COMPANY EXPECTS THAT THERE WILL BE DIFFERENCES BETWEEN ACTUAL AND PROJECTED RESULTS, AND ACTUAL RESULTS MAY BE MATERIALLY GREATER OR LESS THAN THOSE CONTAINED IN THE PROJECTIONS. THE INCLUSION OF THE PROJECTIONS HEREIN SHOULD NOT BE REGARDED AS AN INDICATION THAT ANY OF REED ELSEVIER, PURCHASER, THE COMPANY OR THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES CONSIDERED OR CONSIDER THE PROJECTIONS TO BE A RELIABLE PREDICTION OF FUTURE EVENTS, AND THE PROJECTIONS SHOULD NOT BE RELIED UPON AS SUCH. NONE OF REED ELSEVIER, PURCHASER, THE COMPANY OR ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES HAS MADE OR MAKES ANY REPRESENTATION TO ANY PERSON REGARDING THE ULTIMATE PERFORMANCE OF THE COMPANY COMPARED TO THE INFORMATION CONTAINED IN THE PROJECTIONS, AND NONE OF THEM INTENDS TO UPDATE OR OTHERWISE REVISE THE PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING THE PROJECTIONS ARE SHOWN TO BE IN ERROR. THE PROJECTIONS DO NOT REFLECT THE CONSEQUENTIAL EFFECTS OF THE MERGER NOR THE IMPACT ON THE COMPANY OF THE SUBSEQUENT TRANSACTION, NOR DO THEY TAKE ANY ACCOUNT OF THE MANNER IN WHICH REED ELSEVIER MAY WISH TO MANAGE THE BUSINESS OF THE COMPANY NOR THE EFFECTS OF COMBINING THE BUSINESS OF THE COMPANY WITH THE BUSINESS OF REED ELSEVIER. CERTAIN INFORMATION CONCERNING REED ELSEVIER AND PURCHASER Reed Elsevier is a Massachusetts corporation with its principal offices located at 275 Washington Street Newton, MA 02458. The telephone number of Reed Elsevier is (617) 964-3030. Reed Elsevier, through its several divisions and subsidiaries, is principally engaged in the following sectors: scientific and technical information; business-to-business information; and legal information. 17 20 Purchaser is a Delaware corporation with its principal offices located at 275 Washington Street Newton, MA 02458, c/o Reed Elsevier Inc. The telephone number of Purchaser is (617) 558-4227. Purchaser is a wholly-owned subsidiary of Reed Elsevier. Purchaser has not carried on any activities other than in connection with the Merger Agreement. Each of Reed Elsevier and Purchaser are wholly-owned subsidiaries of Reed Elsevier U.S. Holdings Inc., a Delaware corporation ("Reed Elsevier US"). Reed Elsevier US's principal offices are located at 1105 North Market Street, 9th Floor, Wilmington, Delaware 19801 and its telephone number is (302) 427-2672. It is a holding company for companies that are principally engaged in the following sectors: scientific and technical information; business-to-business information; and legal information. 92.04% of the outstanding shares of capital stock of Reed Elsevier US is owned by Reed Elsevier Overseas BV, a company organized under the laws of The Netherlands ("Reed Elsevier Overseas") and the remaining 7.96% is owned by Reed Elsevier (7.50%) and Reed Technology & Information Services Inc., a Delaware corporation ("Reed Technology & Information Services") (0.46%). Reed Elsevier Overseas' principal offices are located at Van de Sande Bakhuyzenstraat 4, 1061 AG, Amsterdam, The Netherlands, and its telephone number is (31) (20) 515-9341. It is a holding company for companies that are principally engaged in the following sectors: scientific and technical information; business-to-business information; and legal information. Reed Technology & Information Services is a wholly-owned subsidiary of Reed Elsevier that is principally involved in electronic database management. Reed Technology & Information Services' principal offices are located at 1 Progress Drive, Horsham, Pennsylvania 19044 and its telephone number is (215) 682-5000. 95% of the outstanding shares of capital stock of Reed Elsevier Overseas is owned by Reed Elsevier Holdings BV, a company organized under the laws of The Netherlands ("Reed Elsevier Holdings") and the remaining 5% is owned by Elsevier NV, a public limited company organized under the laws of The Netherlands ("Elsevier"). Reed Elsevier Holdings' principal offices are located at Van de Sande Bakhuyzenstraat 4, 1061 AG Amsterdam, The Netherlands, and its telephone number is (31)(20) 515-9341. It is a holding company for companies that are principally engaged in the following sectors: scientific and technical information; business-to-business information; and legal information. Elsevier's principal offices are located at Van de Sande Bakhuyzenstraat 4, 1061 AG Amsterdam, The Netherlands, and its telephone number is (31)(20) 515-9341. It is a holding company for companies that are principally engaged in the following sectors: scientific and technical information; business-to-business information; and legal information. Shares of Elsevier are listed on the Amsterdam Stock Exchange and London Stock Exchange and, through American Depositary Shares, on the New York Stock Exchange. Reed Elsevier Holdings is a wholly-owned subsidiary of Reed Elsevier plc, a public limited company registered in England. Reed Elsevier plc's principal offices are located at 25 Victoria Street, London SW1H 0EX, England, and its telephone number is (44)(20) 7222-8420. Reed Elsevier plc is a world leading publisher and information provider with its principal operations in the following sectors: scientific and technical information; business-to-business information and legal information. 50% of the voting power of Reed Elsevier plc is owned by Elsevier, and 50% is owned by Reed International P.L.C., a public limited company registered in England ("Reed International"). Reed International is a holding company for companies that are principally engaged in the following sectors: scientific and technical information; business-to-business information; and legal information. Reed International's principal offices are located at 25 Victoria Street, London SW1H 0EX, England, and its telephone number is (44)(20) 7222-8420. Shares of Reed International are listed on the London Stock Exchange, Amsterdam Stock Exchange and, through American Depositary Shares, on the New York Stock Exchange. Reed International owns indirectly a 5.8% interest in Elsevier. The name, citizenship, business address, business phone number, principal occupation or employment and five-year employment history for each of the directors and executive officers of Reed Elsevier, Purchaser, Reed Elsevier US, Reed Elsevier Overseas, Reed Elsevier Holdings, Reed Elsevier plc, Reed International and Elsevier and certain other information are set forth in Schedule I hereto. 18 21 Except as described in this Offer to Purchase, (1) none of Reed Elsevier, Purchaser nor, to the best knowledge of Reed Elsevier and Purchaser, any of the persons listed in Schedule I to this Offer to Purchase or any associate or majority-owned subsidiary of Reed Elsevier or Purchaser or any of the persons so listed beneficially owns or has any right to acquire, directly or indirectly, any Shares and (2) none of Reed Elsevier, Purchaser nor, to the best knowledge of Reed Elsevier and Purchaser, any of the persons or entities referred to above nor any director, executive officer or subsidiary of any of the foregoing has effected any transaction in the Shares during the past 60 days. Except as provided in the Merger Agreement or as otherwise described in this Offer to Purchase, none of Reed Elsevier, Purchaser nor, to the best knowledge of Reed Elsevier and Purchaser, any of the persons listed in Schedule I to this Offer to Purchase, has any contract, arrangement, understanding or relationship with any other person with respect to any securities of the Company, including, but not limited to, any contract, arrangement, understanding or relationship concerning the transfer or voting of such securities, finder's fees, joint ventures, loan or option arrangements, puts or calls, guarantees of loans, guarantees against loss, guarantees of profits, division of profits or loss or the giving or withholding of proxies. Except as set forth in this Offer to Purchase, during the past two years, none of Reed Elsevier, Purchaser nor, to the best knowledge of Reed Elsevier and Purchaser, any of the persons listed on Schedule I hereto, has had any business relationship or transaction with the Company or any of its executive officers, directors or affiliates that is required to be reported under the rules and regulations of the SEC applicable to the Offer. Except as set forth in this Offer to Purchase, there have been no contacts, negotiations or transactions between Reed Elsevier or any of its subsidiaries or, to the best knowledge of Reed Elsevier, any of the persons listed in Schedule I to this Offer to Purchase, on the one hand, and the Company or its affiliates, on the other hand, concerning a merger, consolidation or acquisition, tender offer or other acquisition of securities, an election of directors or a sale or other transfer of a material amount of assets. None of the persons listed in Schedule I has, during the past five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). None of the persons listed in Schedule I has, during the past five years, been a party to any judicial or administrative proceeding (except for matters that were dismissed without sanction or settlement) that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. SOURCE AND AMOUNT OF FUNDS The Offer is not conditioned upon any financing arrangements. The total amount of funds available to Purchaser to consummate the Offer and the Merger is approximately $6.5 billion, covering the acquisition cost, the potential refinancing of Harcourt debt and the funding of working capital and net corporate liabilities. This amount has not been reduced by proceeds to be received from Thomson in connection with the Subsequent Transaction. Purchaser will acquire all such funds from Reed Elsevier, which intends to obtain funds from commercial paper and other short term borrowings and if necessary by drawing against committed facilities, in accordance with the terms of a commitment letter dated November 7, 2000 ("Commitment Letter") among Reed International P.L.C., Elsevier NV, Reed Elsevier, Elsevier Finance SA, Deutsche Bank AG London ("Deutsche Bank"), Morgan Stanley Dean Witter Bank Limited (together with Deutsche Bank, the "Lead Arrangers") and Morgan Stanley Senior Funding Inc. (together with Deutsche Bank, the "Underwriters"). Pursuant to the Commitment Letter, the Underwriters have committed to make available to Reed Elsevier, Elsevier Finance SA and their wholly owned subsidiaries, including Purchaser, up to $8.5 billion of credit facilities. These facilities include the $6.5 billion available to complete the Offer and the Merger, together with the replacement and retirement of an existing $1 billion bilateral bank facility with Morgan Stanley Senior Funding Inc. and other existing facilities totaling $1 billion, should these facilities not be renewed prior to December 11, 2000. The interest rate payable on any funds made available under these credit facilities will generally be in a range from 0.35% to 0.625% over the relevant London Interbank Offered Rate (LIBOR). 19 22 The credit facilities are expected to be reduced by the $2.06 billion of gross proceeds, less applicable taxes, to be received from Thomson in connection with the Subsequent Transaction and by any of the $0.85 billion of Harcourt public long term debt assumed at the Effective Time. It is also intended, subject to market conditions, that the facilities will be reduced through the issuance of term debt securities. New equity of up to 10% of the issued share capitals of Reed International P.L.C. and Elsevier NV, will also be considered, subject to market conditions. The proceeds from any such new equity would also be used to reduce the indebtedness outstanding under these facilities. BACKGROUND OF THE OFFER On June 19, 2000, the Company announced to the public that it was exploring strategic alternatives. Shortly thereafter Reed Elsevier received a telephone call from a representative of Goldman Sachs who inquired as to Reed Elsevier's possible interest in acquiring the Company and whether Reed Elsevier would be interested in receiving further information. On June 28, 2000, the Company and Reed Elsevier entered into the confidentiality and standstill agreement for the purpose of facilitating the delivery of confidential information regarding the Company to Reed Elsevier. On June 30, 2000, Reed Elsevier received a confidential memorandum from Goldman Sachs, on behalf of the Company. On July 27, 2000, Reed Elsevier received a letter from Goldman Sachs inviting Reed Elsevier to provide a preliminary indication of its interest by August 18, 2000. On August 18, 2000, Reed Elsevier expressed its preliminary indication of interest in acquiring the Company as a whole. During the period following the delivery of its preliminary indication of interest, Reed Elsevier and its representatives were given access to a confidential data room to conduct business, legal and financial due diligence on the business and properties of the Company. In addition, on September 13, 2000 the Company made management presentations to Reed Elsevier in Boston, Massachusetts and on September 27, 2000, the Company made management presentations to Reed Elsevier in New York, New York. On October 2, 2000, Reed Elsevier received a letter from Goldman Sachs, on behalf of the Company, outlining the procedures for submitting a final bid for the Company as a whole by October 12, 2000, accompanied by a draft merger agreement that had been prepared by the Company's legal counsel. Early in the week of October 2, 2000, representatives of Thomson informed Goldman Sachs that Thomson was not prepared to make a bid for the entire Company but wished to acquire certain of the Company's assets. Representatives of Reed Elsevier also informed Goldman Sachs that it was their intention to acquire the entire Company and then resell certain portions of the Company at the close of the transaction. To minimize its risk in connection with the resale, Reed Elsevier stated that it wished to arrange the resale in advance of the finalization of its bid for the Company. Later that week, after consulting with Goldman Sachs, the Company granted Thomson and Reed Elsevier permission to coordinate efforts with each other to facilitate such a resale. Subsequently, representatives of Thomson and Reed Elsevier negotiated the terms of such resale. On October 11, 2000, GC Companies, Inc. which had been spun-out from Harcourt in 1993, filed for Chapter 11 bankruptcy and as a result the Company announced that it anticipated recording a one-time charge of $100 million, or about $1.38 per share, to cover potential liabilities associated with the Company's liability with respect to certain leases assigned to GC Companies, Inc. and others. In anticipation of this announcement, at the direction of the Company, Goldman Sachs extended the due date for final bids to October 16, 2000. On October 16, 2000, shortly before Reed Elsevier submitted its bid for the Company to Goldman Sachs, Reed Elsevier and Thomson executed a letter agreement pursuant to which Thomson agreed to enter into the Sale and Purchase Agreement (as defined below) with Reed Elsevier, substantially in the form attached to such letter agreement. Such agreement was subject to the condition that at the time Reed Elsevier entered into a definitive merger agreement with the Company, the definitive merger agreement contained substantially the same terms and conditions as set forth in Reed Elsevier's mark-up of the draft merger agreement attached to such letter, with only such changes that would not in any manner materially prejudice the position or obligations of Thomson under the Sale and Purchase Agreement. 20 23 In its bid Reed Elsevier proposed a cash tender offer to purchase all of the outstanding Common Shares and Preferred Shares for $55.00 per share and $72.05 per share, respectively. The Reed Elsevier bid stated that Reed Elsevier and Thomson would, simultaneously with the execution of the Merger Agreement, enter into an agreement whereby a portion of the Company's assets would be sold to Thomson in the event that the transaction was completed and that, accordingly, the proposal was conditioned on the receipt of regulatory approvals for the sale to Thomson. In addition, Reed Elsevier proposed that members of the Smith Family Group sign a Stockholder Agreement committing them to tender their shares in the Offer and vote against all other transactions until one year after the termination of the Merger Agreement. Between October 18 and October 20, 2000, representatives of Reed Elsevier's financial advisor, Morgan Stanley and its outside legal counsel, Davis Polk & Wardwell, were contacted by the Company's advisors to clarify the material terms reflected in Reed Elsevier's proposal and to identify aspects of its proposal which raised issues for the Company. The Company's advisors stated that the Company required a direct commitment from Thomson to obtain antitrust approvals. The Company's advisors also stated that the commitments of the Smith Family Group in the Stockholder Agreement surviving the termination of the Merger Agreement was problematic from the perspective of both the Smith Family Group and the Company. On October 19, 2000, a meeting of the Board of Directors of the Company was convened. The Company's outside legal counsel again reviewed the Board's legal duties in light of a possible sale of the Company. Representatives of Goldman Sachs outlined for the Board a summary of the sale process that had been conducted since the Board meeting in June. Goldman Sachs and Simpson Thacher & Bartlett then reviewed for the Board the bids that had been received by the Company including Reed Elsevier's bid. The Board discussed the proposals and posed questions to the Company's management and its financial and legal advisors. Based on these presentations and discussions, the Board authorized management and its advisors to pursue negotiations with Reed Elsevier and another bidder with respect to the sale of the entire Company. On October 21, 2000, the Company's outside legal counsel sent to Reed Elsevier's outside legal counsel a revised draft of the Merger Agreement reflecting aspects of the Reed Elsevier proposal that the Company was prepared to accept. Between October 22 and October 25, 2000, representatives of the Company's and Reed Elsevier's respective legal advisors had numerous discussions relating to the terms of the Merger Agreement and, together with Goulston & Storrs, the Smith Family Group's legal counsel, the Stockholder Agreement. On October 25, 2000, representatives of Simpson Thacher & Bartlett, Axinn, Veltrop & Harkrider, the Company's outside antitrust counsel, and Shearman & Sterling, Thomson's outside legal counsel, finalized the terms of a letter agreement reflecting Thomson's commitments to the Company with respect to seeking antitrust approvals in connection with its proposed transaction with Reed Elsevier. On October 24, 2000, representatives of Reed Elsevier were contacted by representatives of Goldman Sachs to inform them that a meeting of the Smith Family Group had been scheduled for the evening of October 25, 2000 to discuss the proposals from Reed Elsevier and the other bidder and that a meeting of the Board of Directors had been scheduled for the following day. Reed Elsevier was requested to present its best and final proposal on October 25. On October 25, 2000, Reed Elsevier submitted a revised proposal to purchase all of the outstanding Common Shares and Preferred Shares for $59.00 per share and $77.29 per share, respectively. In consideration of an increased bid, Reed Elsevier proposed that the termination fee be increased to $180 million and agreed that the Stockholder Agreement would terminate upon termination of the Merger Agreement. Later that evening, the Smith Family Group meeting was held. During the course of the day on October 26, 2000, counsel for the parties negotiated substantially all of the remaining terms of the Merger Agreement and the Stockholder Agreement. On October 26, 2000, the Board of Directors of the Company met to consider and review the terms of the revised offers submitted by Reed Elsevier and the other bidder. The Company's outside legal counsel reviewed 21 24 for the Board its fiduciary and other legal duties. Management reviewed again, among other matters, the rationale for the transaction and the outlook of the Company on a stand-alone basis. Goldman Sachs gave a presentation that analyzed, among other matters, on a comparative basis the financial aspects of the two proposals, the Company's strategic plan and certain other strategic alternatives available to the Company. The Board requested that Goldman Sachs render an opinion as to whether the transaction proposed by Reed Elsevier was fair from a financial point of view. After its presentation, Goldman Sachs delivered its oral opinion, subsequently confirmed in writing (the "Financial Advisor Opinion"), that as of such date, and subject to the assumptions made, matters considered and limitations on the review undertaken, the $59.00 per share proposed to be received by the holders of Common Shares (other than members of the Smith Family Group) pursuant to the Offer and the Merger was fair from a financial point of view to such holders. The full text of the Financial Advisor Opinion, which sets forth the assumptions made, procedures followed, matters considered and limits on the review undertaken, is attached as Annex A to the Schedule 14D-9, which has been filed by the Company with the SEC in connection with the Offer and which is being mailed to the Company's stockholders concurrently herewith. STOCKHOLDERS ARE URGED TO AND SHOULD READ THE FINANCIAL ADVISOR OPINION CAREFULLY AND IN ITS ENTIRETY. After the Goldman Sachs presentation, representatives of Axinn, Veltrop & Harkrider gave a presentation relating to the antitrust aspects of the transaction. Representatives of Simpson Thacher & Bartlett then reviewed for the Board in detail the terms of the Merger Agreement and the Stockholder Agreement and the other legal aspects of the revised proposals of both Reed Elsevier and the other bidder. Management and the advisors responded to numerous questions from the Board. The Board discussed, among other matters, the risks and benefits of the two proposals and compared them, taking into account the presentations and analyses provided for the Board, with the values anticipated to be obtained for stockholders pursuant to the Company's strategic plan, along with the execution risks relating to such plan. After additional discussion and deliberation, the Board of Directors approved the Merger Agreement and the transactions contemplated thereby and resolved to recommend that holders of Shares accept the Offer and tender their Shares pursuant thereto. On October 27, 2000, the Merger Agreement was executed by the Company and Reed Elsevier and the Stockholder Agreement was executed by the Smith Family Group and Reed Elsevier. On that day, each of the Company and Reed Elsevier issued separate press releases announcing the execution of the Merger Agreement and the Stockholder Agreement. Also on October 27, 2000, the definitive Sale and Purchase Agreement between Reed Elsevier and Thomson was executed by such parties. PURPOSE AND STRUCTURE OF THE OFFER The purpose of the Offer is for Reed Elsevier to acquire control of, and the entire equity interest in, the Company. The purpose of the Merger is for Reed Elsevier to acquire all outstanding Shares not tendered and purchased pursuant to the Offer. If the Offer is successful, Reed Elsevier and Purchaser intend to consummate the Merger as promptly as practicable. Upon consummation of the Merger, the Company will become a wholly owned subsidiary of Reed Elsevier. Depending upon the number of Common Shares purchased by Purchaser pursuant to the Offer or otherwise, the Company's Board may be required to submit the Merger Agreement to the Company's stockholders for approval at a stockholders' meeting convened for that purpose in accordance with the DGCL. If stockholder approval is required, the Merger Agreement must be approved by a majority of all votes cast by stockholders at a meeting at which a quorum is present. If the Minimum Condition is satisfied, Purchaser will have sufficient voting power to approve the Merger Agreement at the stockholders' meeting without the affirmative vote of any other stockholder. If Purchaser acquires at least 90% of the then outstanding Common Shares pursuant to the Offer or otherwise, the Merger may be consummated without a stockholders' meeting and without the approval of the Company's stockholders. If, however, Purchaser does not acquire at least 90% of the outstanding Common Shares 22 25 pursuant to the Offer or otherwise and a vote of the Company's stockholders is required under the DGCL, a significantly longer period of time may be required to effect the Merger. Under the DGCL, holders of Shares do not have appraisal rights in the Offer but will have appraisal rights in the Merger. PLANS FOR THE COMPANY Pursuant to the terms of the Merger Agreement, Reed Elsevier currently intends, promptly after consummation of the Offer, to exercise its right under the Merger Agreement to appoint a majority of directors to the Company Board. Purchaser currently intends, as soon as practicable after consummation of the Offer, to consummate the Merger. Reed Elsevier has entered into a definitive agreement dated as of October 27, 2000 (the "Sale and Purchase Agreement") with Thomson (headquartered in Toronto, Canada) to sell to Thomson for a total purchase price of $2.06 billion in cash (to be paid by Thomson upon consummation of the sale) the Company's Higher Education business and the Company's Corporate and Professional Services business, other than the Company's educational and clinical testing businesses. Reed Elsevier will retain the other businesses of the Company, including the Company's Scientific, Technical and Medical (STM) business, its K-12 (kindergarten to grade 12) Education businesses and its educational and clinical testing businesses. The obligations of Reed Elsevier and Thomson to consummate the transactions contemplated by the Sale and Purchase Agreement are subject to the satisfaction of the following conditions: (a) the approvals, clearances or waiting periods referred to in paragraph (f) of "The Offer -- Conditions to the Offer" insofar as they relate to the transactions contemplated by the Sale and Purchase Agreement, also referred to as the Subsequent Transaction, shall have been obtained, expired or been terminated; (b) none of the events set forth in paragraph (a) of "The Offer -- Conditions to the Offer" insofar as they relate to the transactions contemplated by the Sale and Purchase Agreement, also referred to as the Subsequent Transaction, shall have occurred; (c) the Merger shall have been consummated; and (d) Steck-Vaughn Publishing Corporation and its subsidiaries shall have been separated from the businesses being sold to Thomson. In addition, (i) the obligation of Thomson to consummate the closing under the Sale and Purchase Agreement (the "Subsequent Transaction Closing") is subject to (A) Reed Elsevier having performed in all material respects all of its obligations under the Sale and Purchase Agreement required to be performed by it on or prior to the date of the Subsequent Transaction Closing, (B) the representations and warranties of Reed Elsevier contained in the Sale and Purchase Agreement and in any certificate or other writing delivered by Reed Elsevier pursuant to such agreement being true in all material respects at and as of the date of the Subsequent Transaction Closing as if made at and as of such date except to the extent that such representations and warranties speak as of an earlier date and (C) Thomson having received a certificate signed by an appropriate officer of Reed Elsevier to the foregoing effect and (ii) the obligation of Reed Elsevier to consummate the Subsequent Transaction Closing is subject to (A) Thomson having performed in all material respects all of its obligations under the Sale and Purchase Agreement required to be performed by it on or prior to the date of the Subsequent Transaction Closing, (B) the representations and warranties of Thomson contained in the Sale and Purchase Agreement and in any certificate or other writing delivered by Thomson pursuant to such agreement being true in all material respects at and as of the date of the Subsequent Transaction Closing as if made at and as of such date except to the extent that such representations and warranties speak as of an earlier date and (C) Reed Elsevier having received a certificate signed by an appropriate officer of Thomson to the foregoing effect. Subject to satisfaction of the above conditions, the sale under the Sale and Purchase Agreement will take place immediately following consummation of the Merger. 23 26 In the Sale and Purchase Agreement, Thomson and Reed Elsevier have made commitments to one another, including cooperating with one another, with respect to obtaining applicable regulatory approvals required pursuant to the Sale and Purchase Agreement. Under the Sale and Purchase Agreement, Reed Elsevier has agreed not to take certain actions under the Merger Agreement (including with respect to the Offer) which would in any manner materially prejudice Thomson's position or obligations under the Sale and Purchase Agreement, without the prior written consent of Thomson (which consent shall not be unreasonably withheld). In addition, Reed Elsevier has agreed not to terminate the Merger Agreement under certain circumstances without the prior written consent of Thomson (which consent shall not be unreasonably withheld). Except as otherwise provided in this Offer to Purchase, it is expected that, initially following the Merger, the business and operations of the Company being retained by Reed Elsevier will be continued substantially as they are currently being conducted. Reed Elsevier will continue to evaluate the business and operations of the Company during the pendency of the Offer and after the consummation of the Offer and the Merger and will take such actions as it deems appropriate under the circumstances then existing. Reed Elsevier intends to seek additional information about the Company during this period. Thereafter, Reed Elsevier intends to review such information as part of a comprehensive review of the Company's business, operations, capitalization and management with a view to optimizing development of the Company's potential in conjunction with Reed Elsevier's businesses. Except as described above or elsewhere in this Offer to Purchase, Purchaser and Reed Elsevier have no present plans or proposals that would relate to or result in (i) any extraordinary corporate transaction involving the Company or any of its subsidiaries (such as a merger, reorganization or liquidation), (ii) any purchase, sale or transfer of a material amount of assets of the Company or any of its subsidiaries, (iii) any change in the Company Board or management of the Company, (iv) any material change in the Company's capitalization or dividend policy, or (v) any other material change in the Company's corporate structure or business. THE MERGER AGREEMENT THE FOLLOWING IS A SUMMARY OF THE MATERIAL PROVISIONS OF THE MERGER AGREEMENT, A COPY OF WHICH IS FILED AS AN EXHIBIT TO THE TENDER OFFER STATEMENT ON SCHEDULE TO FILED BY REED ELSEVIER AND PURCHASER UNDER THE EXCHANGE ACT (THE "SCHEDULE TO"). THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPLETE TEXT OF THE MERGER AGREEMENT. THE OFFER The Merger Agreement provides for the making of the Offer. The obligation of Purchaser to accept for payment and pay for Shares tendered pursuant to the Offer is subject to the satisfaction or waiver of the Minimum Condition and certain other conditions that are described below in "The Offer -- Conditions to the Offer". Subject to the provisions of the Merger Agreement, Purchaser may waive, in whole or in part at any time or from time to time, any such condition; provided that, unless previously approved by the Company in writing, Purchaser may not waive the Minimum Condition or the following conditions set forth in clauses (a), (e), and (f) under "The Offer -- Conditions to the Offer": - condition (a) that, among other things, provides that no laws or court orders applicable to Reed Elsevier, Purchaser, Harcourt, Thomson, the Offer or the Merger makes illegal, restrains or prohibits the Offer or the consummation of the Merger; or prohibits or limits in any material respect the ownership or operation by Harcourt or Reed Elsevier of a material portion of Harcourt's business or assets, or the ownership or operation by Thomson of a material portion of the business or assets to be acquired by Thomson in the Subsequent Transaction; - condition (e) that the Merger Agreement shall not have been terminated in accordance with its terms and the Offer shall not have been terminated with the consent of Harcourt; and - condition (f) that any approvals, clearances or waiting periods under the HSR Act and other requisite or advisable approvals, clearances or waiting periods under any other material antitrust law applicable to the Offer, the Merger or the Subsequent Transaction having been obtained, expired or terminated. 24 27 "The Offer -- Conditions to the Offer" sets forth these conditions in their entirety. See "The Offer -- Plans for the Company" for a discussion of certain additional limitations on Purchaser's right to waive conditions to the Offer. Purchaser may not, unless previously approved by the Company in writing: - decrease the price per Share payable in the Offer, - change the form of consideration payable in the Offer, - reduce the maximum number of Shares to be purchased in the Offer, - impose conditions to the Offer in addition to the conditions set forth in "The Offer -- Conditions to the Offer", or - modify or amend the Offer Conditions or the Offer, in each case, in a manner which is adverse to the holders of Shares. Purchaser may, without the consent of the Company, (i) in its sole discretion, extend the expiration date of the Offer for one or more periods (not in excess of ten business days) but in no event later than July 24, 2001, if any condition of the Offer has not been satisfied or waived (other than as a result of the failure by Reed Elsevier or Purchaser to perform any of its obligations under the Merger Agreement) and (ii) extend the expiration date of the Offer as required by applicable law. Purchaser shall, at the request of the Company, extend the expiration date of the Offer for one or more periods (not in excess of ten business days each) but in no event later than July 24, 2001, if at the then-scheduled expiration date any of the Offer Conditions are not satisfied or waived. Purchaser shall also extend the Offer for any period required by any rule, regulation, interpretation or position of the SEC or the staff thereof applicable to the Offer. RECOMMENDATION The Board of Directors has (i) unanimously determined that each of the Merger Agreement, the Offer and the Merger is advisable and fair to, and in the best interests of, the holders of Shares, (ii) approved the Merger Agreement and the transactions contemplated thereby, including each of the Offer and the Merger and (iii) resolved to recommend that the stockholders of the Company accept the Offer and tender their Shares thereunder to Purchaser and adopt the Merger Agreement. This recommendation of the Board of Directors of the Company may be withdrawn or modified by the Board as described herein under "The Offer -- The Merger Agreement -- Covenants -- Recommendations". THE MERGER The Merger Agreement provides that as soon as practicable after the purchase of Shares pursuant to the Offer, the approval of the Merger Agreement by the Company's stockholders (if required by the DGCL) and the satisfaction or waiver of the other conditions to the Merger, Purchaser will be merged with and into the Company. The Merger shall become effective at such time as a certificate of merger (the "Certificate of Merger") is filed with the Secretary of State of the State of Delaware or at such later time as is specified in the Certificate of Merger (the "Effective Time"). As a result of the Merger, the separate corporate existence of Purchaser will cease and the Company will be the surviving corporation (the "Surviving Corporation"). The Merger Agreement provides that the directors of the Company immediately prior to the Effective Time shall submit their resignation to be effective as of the Effective Time. The directors of the Purchaser and the officers of the Company at the Effective Time shall, from and after the Effective Time, be the directors and officers of the Surviving Corporation, in each case until the earlier of their resignation or removal or their respective successors are duly elected or appointed and qualified. At the Effective Time, (i) each Common Share issued and outstanding immediately prior to the Effective Time will be converted into the right to receive $59.00 in cash or any higher price that may be paid pursuant to the Offer, without interest, and (ii) each Preferred Share issued and outstanding immediately 25 28 prior to the Effective Time will be converted into the right to receive $77.29 in cash or any higher price that may be paid pursuant to the Offer, without interest, in each case, other than Shares owned by Reed Elsevier or Purchaser or by the Company as treasury stock or by subsidiaries of the Company, all of which will be canceled (except for Shares held by the subsidiaries of the Company, all of which will remain issued), and other than Shares that are held by stockholders, if any, who properly exercise their appraisal rights under the DGCL. Stockholders who perfect their appraisal rights under the DGCL will be entitled to the amounts determined pursuant to such proceedings. See "The Offer -- Appraisal Rights". EMPLOYEE STOCK OPTIONS AND RESTRICTED STOCK The Merger Agreement provides that the Company shall take all action necessary so that, immediately prior to the Effective Time, each outstanding employee stock option that is, or shall become, vested and exercisable as of the Effective Time (an "Employee Option"), shall be canceled and the holder thereof shall be entitled to receive at the Effective Time from the Company or as soon as practicable thereafter (but in no event later than ten (10) days after the Effective Time) from the Surviving Corporation in consideration for such cancellation an amount equal to the product of (A) the number of Common Shares previously subject to such Employee Option and (B) the excess, if any, of the Common Stock Merger Consideration over the exercise price per Common Share previously subject to such Employee Option, less any withholding taxes. Each restricted Common Share granted pursuant to any plan or program of the Company providing for the issuance of restricted shares to employees or directors which is outstanding immediately prior to the Effective Time shall vest and become free of restrictions as of the Effective Time to the extent provided by the terms thereof and the holder thereof shall be entitled to receive at the Effective Time the Common Stock Merger Consideration with respect to each such share, less any required withholding taxes. REPRESENTATIONS AND WARRANTIES Pursuant to the Merger Agreement, the Company has made customary representations and warranties to Reed Elsevier and Purchaser, including representations relating to its organization and qualification and subsidiaries; its certificate of incorporation and bylaws; capitalization; corporate authorizations; absence of conflicts; required filings and consents; compliance with laws; SEC filings; financial statements; absence of certain changes or events (including any material adverse effect on the business, results of operations, assets or financial condition of the Company); absence of undisclosed liabilities; litigation; employee benefit plans; tax matters; intellectual property; environmental matters; contracts; and other matters. Certain of the Company's representations and warranties are qualified as to "materiality" or "Material Adverse Effect." When used in connection with the Company or any of its subsidiaries, the term "Material Adverse Effect" means any change or effect that would be materially adverse to the business, financial condition, assets or results of operations of the Company and its subsidiaries taken as a whole, other than any change or effect resulting from (i) changes in general economic conditions, (ii) the announcement and performance of the Merger Agreement and the transactions contemplated thereby and compliance with the covenants set forth in the Merger Agreement, (iii) general changes or developments in the industries in which the Company and its subsidiaries operate or (iv) changes in any tax laws or regulations or applicable accounting regulations or principles. Pursuant to the Merger Agreement, Reed Elsevier and Purchaser have made customary representations and warranties to the Company, including representations relating to their corporate organization; authority relative to the Merger Agreement; absence of conflicts; financing; delivery of the Sale and Purchase Agreement and other matters. COVENANTS The Merger Agreement contains various covenants of the parties thereto. Company Conduct of Business Covenants. Prior to the Effective Time and except as permitted by the Merger Agreement and subject to certain exceptions, unless Purchaser shall otherwise agree in writing, the 26 29 Company and its subsidiaries (i) will conduct their business in the ordinary course consistent with past practice, (ii) will use their reasonable best efforts to comply with all applicable laws, rules and regulations, and (iii) to the extent consistent therewith, use their reasonable best efforts to preserve substantially intact their business organizations, and to preserve their relationships with customers, suppliers, employees, licensors, licensees, distributors, authors and other content providers and other persons with which they have business relations. Except as otherwise permitted by the Merger Agreement, neither the Company nor any of its subsidiaries will, without the prior written consent of Reed Elsevier, among other things and subject to certain exceptions: (i) amend their organizational documents; (ii) issue, deliver, sell, pledge, dispose of or encumber any shares of capital stock of any class or rights of any kind to acquire any shares of capital stock, except in connection with the conversion of shares of Class B Stock or Preferred Shares into Common Shares; (iii) declare, set aside, make or pay any dividend, except for (i) any dividend by a wholly-owned subsidiary of the Company, (ii) regular quarterly dividends of the Company in an amount not to exceed $0.21 per Common Share and $0.189 per share of Class B Stock or (iii) quarterly dividends on the Preferred Stock as provided for in the Company's Restated Certificate of Incorporation; (iv) purchase, redeem or otherwise acquire any shares of their capital stock or rights to acquire any such shares; (v) reclassify, combine, split or subdivide any capital stock or other securities, except in connection with the conversion of shares of Class B Stock or Preferred Shares into Common Shares; (vi) make material acquisitions or dispositions; (vii) enter into, amend or terminate material contracts; (viii) make or authorize any material new capital expenditures; (ix) repurchase, prepay or incur any indebtedness or guarantee any indebtedness of another person; (x) make any loans, advances or capital contributions to, or investments in, any other person; (xi) pay, discharge, settle or satisfy any material claims, liabilities or obligations; (xii) waive, release, grant or transfer any right of material value; (xiii) waive any material benefit of, or fail to enforce, any material confidentiality agreement; (xiv) increase the compensation or fringe benefits of any of its directors, officers or employees, except in the ordinary course of business consistent with past practice; (xv) grant any severance or termination pay not provided for under any agreement, benefit plan or program of the Company; (xvi) enter into any employment, consulting, or severance agreement or arrangement with any present or former director, officer or employee of the Company or any of its subsidiaries, or establish, adopt, enter into or amend in any material respect or terminate any collective bargaining, bonus, profit sharing, stock option or other plan, agreement, arrangement or practice for the benefit of any directors, officers or employees; (xvii) agree to materially limit in any respect the ability to sell any product or service, engage in any line business or compete with any person; (xviii) make any significant change in any accounting principles; (xix) accelerate the payment, right to payment or vesting of any compensation or benefits; 27 30 (xx) make any tax election or enter into settlement or compromise of any tax liability that is material to the Company and its subsidiaries as a whole; (xxi) (a) agree to any modification, amendment, or waiver of any provision of (i) the Amended and Restated Reimbursement and Security Agreement dated as of January 26, 1999 between the Company and GC Companies, Inc. ("GCX") or (ii) the Intercreditor Agreement dated as of January 26, 1999 among BankBoston, N.A., the Company and GCX, without Reed Elsevier's consent; or (b) settle or compromise any claim made by GCX, or any other person, or any liability or obligation of the Company or its subsidiaries relating to GCX, any of its properties or relating to any other matter arising in any reorganization, recapitalization, liquidation or bankruptcy proceedings of GCX, without Reed Elsevier's consent (provided that the Company may make payments to any third party (which in the aggregate will not exceed $1 million), or take any emergency or temporary action, in order to preserve the assets or operations associated with any GCX obligations for which the Company is liable). Further, the Company agrees to assert and defend, consistent with advice of counsel, all rights it may have with respect to any matter affecting GCX, and use its reasonable best efforts, consistent with advice of counsel, to mitigate any losses, obligations or claims relating to GCX or its properties including any guarantee of leases or any other obligations of GCX; provided, however, that Reed Elsevier consents to the implementation of the Company's agreement dated October 13, 2000 with DJM Asset Management and W/S Discount Acquisition II, LLC. In addition, the Company shall promptly notify Reed Elsevier of any material development or change with respect to any matters related to GCX after the date of the Merger Agreement and shall thereafter keep Reed Elsevier informed in all respects as to the status of any such material developments or changes. (xxiii) authorize or agree to take any of the foregoing actions. Stockholder Meeting. The Merger Agreement provides that, if required by applicable law and the Company's Restated Certificate of Incorporation and By-Laws, as soon as reasonably practicable following the consummation of the Offer, the Company will duly call, give notice of, convene and hold a meeting of its stockholders for the purpose of adopting the Merger Agreement. In connection with such meeting, the Company will use its reasonable best efforts to obtain the necessary adoption of the Merger Agreement by its stockholders. Recommendations. The Company's Board of Directors has determined that the Offer and the Merger are advisable and fair to, and in the best interests of, the holders of Shares and will recommend that the Company's stockholders accept the Offer, tender their Shares in the Offer and adopt the Merger Agreement. The Company's Board of Directors shall be permitted to withdraw (or modify in a manner adverse to Reed Elsevier or Purchaser) or propose publicly to withdraw (or modify in a manner adverse to Reed Elsevier or Purchaser) its recommendation to its stockholders or declaration of advisability, or recommend, or propose publicly to recommend, the approval or adoption of any Acquisition Proposal (as defined below) (each such action being referred to as an "Adverse Recommendation Change"), if the Company's Board of Directors or a committee thereof determines in good faith, based on such matters as it deems appropriate, after consulting with legal counsel, that such action is necessary for the Company's Board of Directors to comply with its fiduciary duties under applicable law. No Solicitation. The Company, its subsidiaries and their respective officers, directors and employees will not, and the Company will use its reasonable best efforts to cause its and its subsidiaries' agents and representatives not to: - directly or indirectly, initiate, solicit or knowingly encourage or facilitate any inquiries or the making of any proposal or offer with respect to any: - tender offer or exchange offer, - merger, consolidation, share exchange, business combination, sale of substantially all of the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the 28 31 Company or any of its subsidiaries whose assets, individually or in the aggregate, constitute more than 20% of the consolidated assets or the earning power of the Company, or - acquisition or purchase, direct or indirect, of more than 20% of the consolidated assets of the Company and its subsidiaries or more than 20% of any class of equity or voting securities of the Company or any of its subsidiaries whose assets, individually or in the aggregate, constitute more than 20% of the consolidated assets or earning power of the Company (other than the transactions contemplated by the Merger Agreement) (any such proposal or offer being referred to as an "Acquisition Proposal"); or - directly or indirectly, continue, enter into or engage in any negotiations or discussions concerning, any Acquisition Proposal, furnish any information relating to the Company or any of its subsidiaries or provide access to the properties, books and records or any confidential information or data of the Company or any of its subsidiaries to, any person relating to an Acquisition Proposal. However, the Company or its Board of Directors shall not be prevented from: (i) making any communication to its stockholders in connection with the making or amendment of a tender offer or exchange offer or making any legally required disclosure to stockholders with regard to an Acquisition Proposal, (ii) prior to the purchase of any Shares pursuant to the Offer, providing access to properties, books and records and providing information or data in response to a request therefor by a person who has made an unsolicited bona fide written Acquisition Proposal if the Board of Directors receives from the person so requesting such information an executed confidentiality agreement on terms substantially similar to those contained in the confidentiality agreement between the Company and Reed Elsevier plc, or (iii) prior to the purchase of any Shares pursuant to the Offer, engaging in any negotiations or discussions with any person who has made an unsolicited bona fide written Acquisition Proposal; if and only to the extent that in connection with the foregoing clauses (ii) and (iii), (A) the Board of Directors of the Company shall have determined in good faith, after consultation with its legal counsel and financial advisors, that such actions would reasonably be expected to lead to a Superior Proposal (as defined below), and (B) the Board of Directors of the Company determines in good faith after consultation with outside legal counsel that such action is necessary in order for the directors to comply with their fiduciary duties under applicable law. The Company has ceased and caused to be terminated any existing activities, discussions or negotiations with any persons conducted prior to the date of the Merger Agreement with respect to any Acquisition Proposal and will use its reasonable best efforts to cause any such person (or its agents and advisors) in possession of confidential information about the Company or any of its subsidiaries that was furnished by or on behalf of the Company to return or destroy all such information. The Company will notify Reed Elsevier promptly (but in no event later than 24 hours) after receipt of any Acquisition Proposal or any indication of interest in making an Acquisition Proposal and will keep Reed Elsevier informed in all material respects of the status and details of such Acquisition Proposal. Superior Proposal. Neither the Board of Directors of the Company nor any committee thereof will (i) adopt or approve, or propose publicly to adopt or approve, any Acquisition Proposal, or (ii) cause or permit the Company to enter into any letter of intent, memorandum of understanding or any kind of agreement which is intended to, or is reasonably likely to lead to, any Acquisition Proposal. However, if at any time prior to the purchase of any Shares pursuant to the Offer, the Company's Board of Directors determines in good faith, after consultation with its financial advisors and outside counsel, in response to an Acquisition Proposal that was unsolicited and that did not otherwise result from a breach of the terms of the Merger Agreement 29 32 regarding an Acquisition Proposal, that such proposal is a Superior Proposal, the Company or its Board of Directors may terminate the Merger Agreement, if: - the Company prior to or concurrently with such termination pays to Reed Elsevier the Termination Fee described below under "Fees and Expenses" and enters into a definitive agreement concerning the Superior Proposal; - the Company has complied in all material respects with the requirements of the Merger Agreement regarding an Acquisition Proposal; - the Company has given Reed Elsevier at least three business days prior written notice of its intention to terminate the Merger Agreement (it being understood and agreed that any amendment to the amount or form of consideration of the Superior Proposal shall require a new notice and a new three business day period); - during such three business days or greater period, the Company has engaged in good faith negotiations with Reed Elsevier with respect to such changes as Reed Elsevier may propose to the terms of the Merger and the Merger Agreement; and - Reed Elsevier has not made prior to such termination of the Merger Agreement a definitive and binding offer to enter into a definitive agreement which the Board of Directors of the Company determines, in good faith after consultation with its financial advisors, is at least as favorable to the stockholders of the Company as the Superior Proposal. The term "Superior Proposal" means any bona fide written Acquisition Proposal not solicited by or on behalf of the Company or any of its subsidiaries made by a third party that the Board of Directors of the Company determines in its good faith judgment (after consultation with a financial advisor of nationally recognized reputation) would, if consummated, be superior from a financial point of view to the stockholders of the Company, taking into account, among other things, any changes to the terms of the Merger Agreement proposed by Reed Elsevier in response to such Superior Proposal (provided that, for purposes of this definition of "Superior Proposal," the term Acquisition Proposal shall have the meaning assigned to such term, described above, except that the reference to "more than 20%" in the definition of "Acquisition Proposal" shall be deemed to be a reference to "a majority"). Employment and Employee Benefits Matters. As of the Effective Time, the obligations of the Company and its subsidiaries under each Company plan and employment agreement will continue as obligations of the Surviving Corporation and its subsidiaries, respectively. Without limiting any additional rights that any employee may have under any employment agreement or Company plan, Reed Elsevier will cause the Surviving Corporation and each of its subsidiaries, for a period commencing at the Effective Time and ending on the first anniversary thereof (or such longer period provided for in any such employment agreement or Company plan), to maintain the severance-related provisions of existing Company plans and to provide 100% of the cash severance payments required thereunder, reduced by any severance payments otherwise required under existing severance and employment agreements or applicable law, to any individual who is actively employed by the Company or any of its subsidiaries immediately prior to the Effective Time terminated during that twelve-month (or longer) period. Without limiting any additional rights that any employee may have under any employment agreement or Company plan, Reed Elsevier will cause the Surviving Corporation, for the period commencing at the Effective Time and ending on the first anniversary thereof, to maintain for any individual who is actively employed by the Company or any of its subsidiaries immediately prior to the Effective Time (other than employees covered by a collective bargaining agreement) (i) compensation levels that in the aggregate are no less favorable, (ii) Company plans that in the aggregate are no less favorable, and (iii) severance plans that are no less favorable, than the overall compensation levels and Company plans, and the severance plans, respectively, such employees are entitled to immediately prior to the Effective Time, and employees covered by collective bargaining agreements will be provided with such benefits as may be required under the terms of any applicable collective bargaining agreement. The Merger Agreement does not prevent the amendment or 30 33 termination of any Company plan or interfere with the Surviving Corporation's right or obligation to make such changes as are necessary to conform with applicable law. After the expiration of the one-year period, Reed Elsevier will provide employees who were actively employed by the Company or any of its subsidiaries immediately prior to the Effective Time (other than those covered by collective bargaining agreements) with employee benefits, in the aggregate, that are no less favorable in the aggregate than those employee benefits provided to similarly situated employees of Reed Elsevier or its subsidiaries. Generally, any individual who is actively employed by the Company or any of its subsidiaries immediately prior to the Effective Time will be given credit for all service with the Company and its subsidiaries, to the same extent as such service was credited for such purpose by the Company, under each employee benefit plan, program or arrangement of Reed Elsevier in which such employees are eligible to participate (the "Parent Plan"). With respect to each Parent Plan that is a welfare benefit plan, Reed Elsevier or its subsidiaries will (a) cause to be waived any pre-existing condition or eligibility limitations and (b) to the extent administratively feasible, give effect, in determining any deductible and maximum out-of-pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, such employees under similar plans maintained by the Company and its subsidiaries immediately prior to the Effective Time. The Company will take all action necessary to provide for full vesting of the account balances of any individual who is actively employed by the Company or any of its subsidiaries immediately prior to the Effective Time after one year of service under the Harcourt Savings Plan. Further Action; Reasonable Best Efforts. Subject to the terms and conditions of the Merger Agreement, each of Reed Elsevier, Purchaser and the Company will use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the Offer, the Merger, the Subsequent Transaction with Thomson and the other transactions contemplated by the Merger Agreement. The Merger Agreement provides further that each of Reed Elsevier, Purchaser and the Company agrees, and Reed Elsevier agrees to use its reasonable best efforts to cause Thomson: - to make an appropriate filing of a Notification and Report Form pursuant to the HSR Act and any other applicable Antitrust Law with respect to the transactions contemplated by the Merger Agreement and the Subsequent Transaction with Thomson as promptly as practicable after the date of the Merger Agreement, - to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act and any other applicable Antitrust Law, and - to use, subject to the terms set forth below, its reasonable best efforts to take all other actions necessary, proper or advisable to cause the expiration or termination of the applicable waiting periods under the HSR Act and any other applicable Antitrust Law as soon as practicable. Each of Reed Elsevier, Purchaser and the Company shall, in connection with the efforts to obtain all requisite approvals and authorizations for the transactions contemplated by the Merger Agreement under the HSR Act or any other Antitrust Law, use its reasonable best efforts to, and Reed Elsevier shall use its reasonable best efforts to cause Thomson to, subject to applicable law: - cooperate in all respects with each of the other parties to the Merger Agreement and the Sale and Purchase Agreement in connection with any filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private party; - keep each of the other parties to the Merger Agreement and the Sale and Purchase Agreement informed of any communication received by such party from, or given by such party to, the Federal Trade Commission (the "FTC"), the Antitrust Division of the Department of Justice (the "DOJ") or any other U.S. or foreign governmental authority ("Governmental Authority") and of any communication received or given in connection with any proceeding by a private party, in each case regarding any of the transactions contemplated by the Merger Agreement, including the Subsequent Transaction; and 31 34 - permit each of the other parties to the Merger Agreement and the Sale and Purchase Agreement to review in advance any communication intended to be given by it to, and consult with the other parties in advance of any meeting or conference with, the FTC, the DOJ or any such other Governmental Authority or, in connection with any proceeding by a private party, with any other person, and to the extent permitted by the FTC, the DOJ or such other applicable Governmental Authority or other person, give the other parties the opportunity to attend and participate in such meetings and conferences. For purposes of the Merger Agreement, "Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other federal, state and foreign statutes, rules, regulations, orders, decrees, administrative and judicial doctrines and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition. If any objections are asserted with respect to the transactions contemplated by the Merger Agreement, including the Subsequent Transaction, under any Antitrust Law or if any suit is instituted (or threatened to be instituted) by the FTC, the DOJ or any other applicable Governmental Authority or any private party challenging any of such transactions as violative of any Antitrust Law or which would otherwise prohibit or materially impair or materially delay the consummation of such transactions, each of Reed Elsevier, Purchaser and the Company shall use its reasonable best efforts to resolve any such objections or suits so as to permit consummation of the transactions contemplated by the Merger Agreement, including the Subsequent Transaction, including, without limitation, in order to resolve such objections or suits which, in any case if not resolved, could reasonably be expected to prohibit or materially impair or delay the consummation of the transactions contemplated by the Merger Agreement, including the Subsequent Transaction, beyond July 24, 2001, selling, holding separate or otherwise disposing of or conducting its business in a manner which would resolve such objections or suits or agreeing to sell, hold separate or otherwise dispose of or conduct its business in a manner which would resolve such objections or suits or permitting the sale, holding separate or other disposition of, any of its assets or the assets of its subsidiaries or the conducting of its business in a manner which would resolve such objections or suits, provided, however, that nothing in the Merger Agreement shall require Reed Elsevier or Purchaser or any of Reed Elsevier's subsidiaries to agree to or take any action or limitation referred to in this paragraph which would reasonably be expected to have either (i) a Parent Material Adverse Effect (as defined below) or (ii) a Material Adverse Effect on the Company. When used in connection with Reed Elsevier, Purchaser or any of Reed Elsevier's other subsidiaries, the term "Parent Material Adverse Effect" means any change or effect that would reasonably be expected to be materially adverse to the business, financial condition, assets or results of operations of Reed Elsevier, Purchaser and any of Reed Elsevier's other affiliates taken as a whole. In the event that any administrative or judicial action or proceeding is instituted (or threatened to be instituted) by a Governmental Authority or private party challenging any transaction contemplated by the Merger Agreement, including the Subsequent Transaction, each of Reed Elsevier, Purchaser and the Company shall cooperate in all respects with each other and Thomson to the extent any such action or proceeding principally involves assets to be acquired by such third party in the Subsequent Transaction and use its respective reasonable best efforts to contest any such action or proceeding and to have overturned any decree, judgment, injunction or other order that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated by the Merger Agreement. To the extent reasonably requested by Reed Elsevier, the Company will use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to facilitate the Subsequent Transaction; provided that no action or conduct that causes the Company or its subsidiaries to incur meaningful costs or liabilities will be required. Reed Elsevier will not agree to any amendment or waiver of any provision of the Sale and Purchase Agreement in any manner adverse to the Company. Further, Reed Elsevier agrees to assert and defend consistent with the advice of counsel all rights, and perform and comply with all obligations, it may have under the Sale and Purchase Agreement with respect to compliance with any Antitrust Law. 32 35 In connection with the Company entering into the Merger Agreement and Thomson entering into the Sale and Purchase Agreement, Thomson and the Company have made commitments to one another, including cooperation with one another, with respect to obtaining the applicable regulatory approvals required pursuant to the Sale and Purchase Agreement. Thomson and the Company have made commitments to one another with respect to such matters to the same extent Reed Elsevier and Thomson have made commitments to with respect to such matters under the Sale and Purchase Agreement. Directors' and Officers' Indemnification and Insurance. Reed Elsevier has agreed that for six years after the Effective Time, it will, or will cause the Surviving Corporation to, indemnify and hold harmless each present and former officer and director of the Company and its subsidiaries (the "Indemnified Parties") against all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses (including attorney's fees and disbursements) incurred in connection with any claim, action, suit, proceeding or investigation, arising out of or pertaining to (i) the fact that the Indemnified Party is or was an officer or director of the Company or any of its subsidiaries and (ii) acts or omissions occurring at or prior to the Effective Time, whether asserted or claimed prior to, at or after the Effective Time. For a period of six years from the Effective Time, Reed Elsevier will, or will cause the Surviving Corporation to, maintain in effect the current policies of the directors' and officers' liability insurance maintained by the Company on the date of the Merger Agreement (provided that Reed Elsevier or the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are not materially less advantageous to any beneficiary thereof) with respect to acts or omissions occurring at or prior to the Effective Time, provided that if the aggregate annual premium for such insurance at any time during such period shall exceed 200% of the per annum rate of premium paid by the Company as of the date of the Merger Agreement for such insurance, then Reed Elsevier will, or will cause its subsidiaries to, provide only such coverage as shall then be available at any annual premium equal to 200% of such rate. CONDITIONS TO THE MERGER The Merger Agreement provides that the respective obligations of Reed Elsevier, Purchaser and the Company to effect the Merger are subject to the satisfaction or waiver at or prior to the Effective Time of the following conditions: (a) if required by the DGCL, the Merger Agreement shall have been adopted by the affirmative vote of the stockholders of the Company by a requisite vote in accordance with the Company's Restated Certificate of Incorporation and the DGCL; (b) no statute, rule, regulation, executive order, decree, ruling injunction or other permanent order shall have been enacted, entered, promulgated or enforced by any court of competent jurisdiction or other governmental body located or having jurisdiction within the United States, any foreign state, county, city or other provincial subdivisions which prohibits, restrains or enjoins the consummation of the Merger; and (c) Purchaser shall have purchased the Shares pursuant to the Offer. TERMINATION The Merger Agreement may be terminated and the Merger may be abandoned at any time prior to the Effective Time (notwithstanding approval of the Merger Agreement by the stockholders of the Company): (a) prior to the purchase of any Shares pursuant to the Offer, by mutual written agreement of the Company, Purchaser and Reed Elsevier; (b) by either the Company or Reed Elsevier if any court of competent jurisdiction or other governmental body located or having jurisdiction within the United States, any foreign country or any domestic or foreign state, county, city or other provincial subdivision (other than any such court or governmental body having jurisdiction outside the United States in a territory in which no significant assets, 33 36 properties or rights of either the Company and its subsidiaries or Reed Elsevier and its affiliates are located and whose statutes, rules, regulations, executive orders, decrees, rulings, injunctions or other orders would not be reasonably expected to have a Material Adverse Effect on the Company or a Parent Material Adverse Effect) shall have issued a final order, decree or ruling or taken any other final action restraining, enjoining or otherwise prohibiting the Offer or the Merger and such order, decree, ruling or other action is or shall have become final and nonappealable; (c) by Reed Elsevier if, due to an occurrence or circumstance which resulted in a failure to satisfy any of the Offer Conditions, Purchaser shall have - not purchased Shares pursuant to the Offer and the Offer shall have expired or been terminated, or - failed to pay for Shares pursuant to the Offer on or prior to July 24, 2001; provided that the right to terminate the Merger Agreement pursuant to this clause (c) shall not be available to Reed Elsevier if the failure by Reed Elsevier or Purchaser to perform any of its obligations under the Merger Agreement results in the failure of the Offer to be consummated; (d) by the Company - if there shall have been a breach of any representation, warranty, covenant or agreement on the part of Reed Elsevier or Purchaser contained in the Merger Agreement which materially adversely affects Reed Elsevier's or Purchaser's ability to consummate (or materially delays commencement or consummation of) the Offer or the Merger, and - in the case of any such representation or warranty, there is no reasonable possibility that such breach can be cured prior to July 24, 2001 and - in the case of such covenant or agreement, such breach cannot be and has not been cured prior to the earlier of (i) 10 business days following notice of such breach and (ii) the Expiration Date of the Offer, as it may be extended; provided that the Company shall not have the right to terminate the Merger Agreement pursuant to this clause if the Company is then in material breach of any of its covenants or agreements contained in the Merger Agreement, - if Purchaser fails to pay for Shares pursuant to the Offer on or prior to July 24, 2001, or Purchaser shall have not purchased Shares pursuant to the Offer and the Offer shall have expired or been terminated; provided that the right to terminate the Merger Agreement pursuant to this clause shall not be available to the Company if the failure by the Company to perform any of its obligations under the Merger Agreement results in the failure of the Offer to be consummated, or - prior to the purchase of any Shares pursuant to the Offer, if the Company receives a Superior Proposal subject to the terms and conditions set forth under "The Offer -- The Merger Agreement -- Covenants -- Superior Proposal"; or (e) by Reed Elsevier prior to the purchase of Shares pursuant to the Offer if - there shall have been a breach of any representation, warranty, covenant or agreement on the part of the Company contained in the Merger Agreement such that the conditions set forth in clause (c) or clause (d) under "The Offer -- Conditions to the Offer" would not be satisfied and - in the case of any such representation or warranty, there is no reasonable possibility that such breach can be cured prior to July 24, 2001 and - in the case of such covenant or agreement, such breach cannot be and has not been cured prior to the earlier of (i) 10 business days following notice of such breach and (ii) the Expiration Date of the Offer, as it may be extended; 34 37 provided that Reed Elsevier shall not have the right to terminate the Merger Agreement pursuant to this clause if Reed Elsevier or Purchaser is then in material breach of any of its covenants or agreements contained in the Merger Agreement, or - in the event an Adverse Recommendation Change has occurred (see "The Offer --The Merger Agreement --Covenants --Recommendations"). If the Merger Agreement is terminated, the Merger Agreement will become void and of no effect with no liability on the part of the Company, Reed Elsevier or Purchaser other than obligations of Reed Elsevier under certain provisions of the Merger Agreement with respect to the treatment of confidential non-public information concerning the Company and its subsidiaries, and obligations of the Company under certain provisions of the Merger Agreement to pay certain fees to Reed Elsevier or Purchaser as described in "Fees and Expenses" below. FEES AND EXPENSES Except as otherwise specified below, all fees and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby will be paid by the party incurring such expenses. The Company will pay $180,000,000 to Reed Elsevier if the Merger Agreement is terminated in any of the following circumstances: - by the Company because it has received a Superior Proposal as described under "The Offer -- The Merger Agreement -- Covenants -- Superior Proposal", - by Reed Elsevier because an Adverse Recommendation Change has occurred, or - by Reed Elsevier as described in clause (c) under "Termination" (solely due to the failure to satisfy the Minimum Condition or the conditions described in (c) and (d) under "Conditions to the Offer") and - after the date of the Merger Agreement and prior to such termination, there shall have been made and publicly announced or publicly communicated to the Company's stockholders an Acquisition Proposal (which shall not have been withdrawn in good faith) and - concurrently with or within twelve (12) months of the date of such termination the Company enters into a definitive agreement with respect to an Acquisition Proposal (which is subsequently consummated) or an Acquisition Proposal is consummated (provided that for purposes of this provision, the term Acquisition Proposal shall have the meaning assigned to such term, described in "Covenants -- No Solicitation" above, except that the reference to "more than 20%" in the definition of "Acquisition Proposal" shall be deemed to be a reference to "a majority"). AMENDMENT At any time prior to the Effective Time, the Merger Agreement may be amended by the parties by an instrument in writing signed by the parties. However, after adoption of the Merger Agreement by the stockholders of the Company, no amendment may be made which by law requires the further approval of the stockholders of the Company without such further approval. PERFORMANCE Reed Elsevier plc agrees to take all action necessary to cause Reed Elsevier, Purchaser or the Surviving Corporation, as applicable, to perform all of its respective agreements, covenants and obligations under the Merger Agreement and whenever the Merger Agreement requires Purchaser to take any action, such requirement shall be deemed to include an undertaking of Reed Elsevier and Reed Elsevier plc to cause Purchaser to take such action. 35 38 THE STOCKHOLDER AGREEMENT THE FOLLOWING IS A SUMMARY OF THE MATERIAL PROVISIONS OF THE STOCKHOLDER AGREEMENT, A COPY OF WHICH IS FILED AS AN EXHIBIT TO THE SCHEDULE TO. THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPLETE TEXT OF THE STOCKHOLDER AGREEMENT. In connection with the execution of the Merger Agreement, Reed Elsevier and Purchaser entered into the Stockholder Agreement with Richard A. Smith, Chairman of the Company, Nancy L. Marks, Mr. Smith's sister, Robert A. Smith and Brian J. Knez, Presidents and Co-Chief Executive Officers and directors of the Company, Jeffrey R. Lurie, a director of the Company, and/or other members of their families and various family corporations, trusts and charitable foundations (the "Smith Family Group") (each, a "Stockholder"). The Smith Family Group has agreed to convert all of its shares of Class B Stock (19,955,998 shares as of October 20, 2000) into Common Shares and tender such Shares in the Offer. Collectively, the shares of Class B Stock held by the Smith Family Group, along with the Common Shares held by the Smith Family Group which the Smith Family Group has agreed to tender, represent approximately 27.3% of the outstanding Common Shares and shares of Class B Stock and approximately 25.8% of the Common Shares on a fully diluted basis. All of the shares of Class B Stock owned by the Smith Family Group as at October 20, 2000 (being a total of 19,955,998 shares) (together with any other shares of Class B Stock acquired by any Stockholder and any Common Shares acquired by any Stockholder by conversion of Class B Stock, in each case from October 20, 2000 through the term of the Stockholder Agreement) are subject to the Stockholder Agreement (the "Subject Shares"), and during the term of the Stockholder Agreement, each Stockholder has agreed to take the following action with respect to the Subject Shares beneficially owned by such Stockholder: - to convert all of its Subject Shares into Common Shares immediately prior to the expiration of the Offer provided that Reed Elsevier shall have delivered an irrevocable binding notice to the Stockholders and the Company that each of the Offer Conditions have been satisfied (or would be satisfied, in the case of the Minimum Condition, upon such conversion of the Subject Shares and the tender of the Common Shares issuable upon such conversion into the Offer) or waived in accordance with the Merger Agreement together with a certificate from the Depositary setting forth the number of Common Shares validly tendered into the Offer and not withdrawn as immediately prior to such time as practicable; - immediately after such conversion, to tender pursuant to the Offer, and not withdraw, all of the Subject Shares (including all Common Shares issuable upon the conversion of the Subject Shares) promptly upon request by Reed Elsevier; - to vote its Subject Shares in favor of the approval and adoption of the Merger and the Merger Agreement and against (1) any Acquisition Proposal, (2) any extraordinary dividend or distribution by the Company or any of its subsidiaries, (3) any change in the capital structure of the Company or any of its subsidiaries (other than pursuant to the Merger Agreement) or (4) any other action that would reasonably be expected to, in any material respect, prevent, impede, interfere with, delay, postpone, frustrate the purposes of or attempt to discourage the transactions contemplated by the Merger Agreement; each Stockholder has granted to Purchaser an irrevocable proxy to vote or otherwise use such voting power in the manner contemplated by the foregoing; and - not to sell, pledge or otherwise dispose of any of its Subject Shares (other than (i) transfers to persons becoming bound by the Stockholder Agreement, (ii) transfers of an aggregate total of 100,000 Common Shares (including shares transferred by any other Stockholder) to charitable organizations) or (iii) the transfer of 847,458 Subject Shares to the Company in exchange for a $50 million contingent promissory note from the Company. Each Stockholder has also agreed not to solicit or initiate any Acquisition Proposal or furnish information to or participate in any discussions or negotiations with any person that is considering making or has made an Acquisition Proposal. The Stockholder Agreement will terminate upon the earlier of the Effective Time and the date of termination of the Merger Agreement in accordance with its terms. 36 39 Immediately upon the conversion by the Smith Family Group of its shares of Class B Stock into Common Shares pursuant to the Stockholder Agreement, all other outstanding shares of Class B Stock will become automatically converted into Common Shares. If a stockholder does not convert its shares of Class B Stock into Common Shares and tender those shares in the Offer, such stockholder will not receive any consideration for such shares unless and until the Merger has occurred. APPRAISAL RIGHTS Holders of Shares do not have appraisal rights as a result of the Offer. However, if the Merger is consummated, each holder of Shares who has neither voted in favor of the Merger nor consented thereto in writing will be entitled to an appraisal by the Delaware Court of Chancery of the fair value of his Shares, exclusive of any element of value arising from the accomplishment or expectation of the Merger, together with a fair rate of interest, if any, to be paid. In determining such fair value, the Court may consider all relevant factors. The value so determined could be more or less than the consideration to be paid in the Offer and the Merger. Any judicial determination of the fair value could be based upon considerations other than or in addition to the market value of the Shares, including, among other things, asset value and earning capacity. If any holder of Shares who demands appraisal under Section 262 of the DGCL fails to perfect, or effectively withdraws or loses his rights to appraisal as provided in the DGCL, the Shares of such stockholder will be converted into the Merger Consideration in accordance with the Merger Agreement. A stockholder may withdraw his demand for appraisal by delivery to Purchaser of a written withdrawal of his demand for appraisal and acceptance of the Merger. The foregoing discussion is not a complete statement of law pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL. Failure to follow the steps required by Section 262 of the DGCL for perfecting appraisal rights may result in the loss of such rights. CERTAIN EFFECTS OF THE OFFER Market for the Shares. The purchase of Shares pursuant to the Offer will reduce the number of holders of Shares and the number of Shares that might otherwise trade publicly, which could adversely affect the liquidity and market value of the remaining Shares held by stockholders other than Purchaser. Neither Reed Elsevier nor the Purchaser can predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether such reduction would cause future market prices to be greater or less than the Common Offer Price or Preferred Offer Price, as the case may be. Stock Exchange Listing. Depending upon the number of Common Shares and Preferred Shares purchased pursuant to the Offer, either the Common Shares, the Preferred Shares or both may no longer meet the requirements of the NYSE for continued listing and may, therefore, be delisted from such exchange. According to the NYSE's published guidelines, the NYSE would consider delisting the Common Shares or the Preferred Shares, as the case may be, if, among other things, with respect to either the Common Shares or the Preferred Shares (i) there were fewer than 400 stockholders, (ii) there were fewer than 1,200 stockholders and the average monthly trading volume was less than 100,000 shares for the most recent 12 months, (iii) the number of publicly-held shares (excluding shares held by directors, officers, or their immediate families and by any other beneficial owners of 10% or more) was less than 600,000, (iv) the Company's total global market capitalization was less than $50,000,000 and total stockholders' equity was less than $50,000,000, or (v) the Company's average global market capitalization over a consecutive 30 trading-day period was less than $15,000,000. The Company informed Reed Elsevier and Purchaser that there were approximately 6,987 holders of record of Common Shares as of November 3, 2000 and 394 holders of record of Preferred Shares as of November 3, 2000. If, as a result of the purchase of the Common Shares and the Preferred Shares pursuant to the Offer, either the Common Shares or the Preferred Shares no longer meet the requirements of the NYSE for continued listing and the listing of such Shares is discontinued, the market for such Shares could be adversely affected. 37 40 If the NYSE were to delist the Common Shares and the Preferred Shares (which delisting Purchaser intends to cause the Company to seek if it acquires control of the Company and the Common Shares and the Preferred Shares no longer meet the NYSE listing requirements), it is possible that the Common Shares and the Preferred Shares would trade on another securities exchange or in the over-the-counter market and that price quotations for the Common Shares and the Preferred Shares would be reported by such exchange or through the National Association of Securities Dealers Automated Quotation Systems or other sources. The extent of the public market for the Common Shares and the Preferred Shares and availability of such quotations would, however, depend upon such factors as the number of holders and/or the aggregate market value of the publicly held Common Shares and the Preferred Shares at such time, the interest in maintaining a market in the Common Shares and the Preferred Shares on the part of securities firms, the possible termination of registration of the Common Shares and the Preferred Shares under the Exchange Act and other factors. Margin Regulations. The Shares are currently "margin securities" under the regulations of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit using such Shares as collateral. Depending upon factors similar to those described above regarding listing and market quotations, it is possible, that following the Offer the Common Shares and/or the Preferred Shares might no longer constitute "margin securities" for the purposes of the Federal Reserve Board's margin regulations in which event the Shares could no longer be used as collateral for loans made by brokers. Exchange Act Registration. Each of the Common Shares and the Preferred Shares are currently registered under the Exchange Act. Either such registration may be terminated upon application of the Company to the SEC if the Common Shares and the Preferred Shares, as the case may be, are neither listed on a national securities exchange nor held by 300 or more holders of record. Termination of the registration of the Common Shares and the Preferred Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to its stockholders and to the SEC and would make certain of the provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement pursuant to Section 14(a) in connection with a stockholders' meeting and the related requirement of furnishing an annual report to stockholders, no longer applicable to the Company. Furthermore, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of such securities pursuant to Rule 144 promulgated under the Securities Act of 1933, as amended. If registration of the Common Shares and the Preferred Shares under the Exchange Act were terminated, the Common Shares and the Preferred Shares would no longer be "margin securities" or be eligible for NYSE listing. Reed Elsevier and Purchaser currently intend to seek to cause the Company to terminate registration of the Common Shares and the Preferred Shares under the Exchange Act as soon after consummation of the Offer as the requirements for termination of registration of the Common Shares and the Preferred Shares are met. CONDITIONS TO THE OFFER Notwithstanding any other provision of the Offer, but subject to the terms and conditions of the Merger Agreement, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for any Shares tendered pursuant to the Offer, and may postpone the acceptance for payment or, subject to the restriction referred to above, payment for any Shares tendered pursuant to the Offer (whether or not any Shares have theretofore been purchased or paid for) and may terminate or amend the Offer in accordance with the Merger Agreement if, (i) at the expiration of the Offer as it may be extended pursuant to the provisions of the Merger Agreement, a number of Common Shares which, together with any Shares owned, directly or indirectly, by Reed Elsevier or Purchaser, or any subsidiary or controlled affiliate, represent, on the date of purchase, at least a majority in voting power of the Company's Common Stock (determined on a fully-diluted basis) shall not have been validly tendered and not properly withdrawn prior to the expiration of the Offer (the "Minimum 38 41 Condition") or (ii) at any time on or after the date of the Merger Agreement and at or prior to the acceptance for payment of Shares, any of the following conditions occurs or has occurred: (a) there shall have been entered any order, preliminary or permanent injunction, decree, judgment or ruling in any action or proceeding before any court of competent jurisdiction or governmental, administrative or regulatory authority or agency, or any statute, rule or regulation, enacted, entered, enforced, promulgated, amended or issued that is applicable to Reed Elsevier, Purchaser, the Company or Thomson, or any subsidiary of Reed Elsevier, Thomson, or the Company or to the Offer or the Merger, by any legislative body, court, government or governmental, administrative or regulatory authority or agency which: - makes illegal or otherwise restrains or prohibits the making of the Offer in accordance with the Merger Agreement or the consummation of the Offer or the Merger, - prohibits or limits in any material respect the ownership or operation by (A) the Company, Reed Elsevier, or any of their respective affiliates of a material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or (B) Thomson or any of its affiliates of a material portion of the business or assets to be acquired by Thomson under the Sale and Purchase Agreement; or requires any such person to dispose of or hold separate any material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or Reed Elsevier and its subsidiaries, taken as a whole, as a result of the Offer, to the extent any such prohibition, limitation or requirement would reasonably be expected to have either a Material Adverse Effect on the Company or a Parent Material Adverse Effect, - prohibits the ownership or operation of a portion of the business of the Company or its subsidiaries, taken as a whole, by Reed Elsevier or Purchaser, to the extent any such prohibition would reasonably be expected to have either a Material Adverse Effect on the Company or a Parent Material Adverse Effect, or - imposes material limitations on the ability of Reed Elsevier or Purchaser to acquire or hold or to exercise full rights of ownership of the Shares, including voting rights with respect to all matters properly presented to stockholders of the Company (other than in a jurisdiction outside the United States in a territory in which no significant assets, properties or rights of either the Company and its subsidiaries or Reed Elsevier and its affiliates are located and whose statutes, rules, regulations, executive orders, decrees, rulings, injunctions or other orders would not be reasonably expected to have a Material Adverse Effect on the Company or a Parent Material Adverse Effect); (b) there shall have occurred (I) any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange (other than suspensions or limitations triggered by price fluctuations on a trading day) for a period in excess of three hours (excluding suspensions or limitations resulting solely from physical damage or interference with such exchange not related to market conditions) or (II) a declaration of a banking moratorium in the United States or any suspension of payments in respect of banks in the United States or Europe; (c) (i) any representation or warranty of the Company contained in the Merger Agreement that is qualified as to Material Adverse Effect shall not be true and correct; (ii) any representation or warranty of the Company in the Merger Agreement that is not so qualified shall not be true and correct in all material respects, in each case as of the date of consummation of the Offer as though made on or as of such date (other than representations and warranties that by their terms address matters only as of another specified date, which shall be true and correct only as of another specified date), except where the failure of such representations and warranties referred to in clause (ii) to be so true and correct, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on the Company; or (iii) except to the extent disclosed in the disclosure schedules delivered by the Company to Reed Elsevier in connection with the Merger Agreement or the SEC reports filed by the Company prior to the date of the Merger 39 42 Agreement, since the date of the Merger Agreement, any change or event shall have occurred that has had or is reasonably likely to have a Material Adverse Effect on the Company; (d) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or material covenant of the Company to be performed or complied with by it under the Merger Agreement; (e) the Merger Agreement shall have been terminated in accordance with its terms or the Offer shall have been terminated with the consent of the Company; (f) any (i) approvals, clearances or waiting periods under the HSR Act applicable to the purchase of Shares pursuant to the Offer, the Merger or the Subsequent Transaction shall not have been obtained, expired or been terminated or (ii) any other requisite or advisable approvals, clearances or waiting periods under any other material Antitrust Law applicable to the purchase of Shares pursuant to the Offer, the Merger or the Subsequent Transaction shall not have been obtained, expired or been terminated; or (g) all shares of Class B Stock shall not have been converted into Common Shares in accordance with the terms of the Stockholder Agreement; which, in the reasonable judgment of Purchaser with respect to each and every matter referred to above and regardless of the circumstances giving rise to any such condition, makes it inadvisable to proceed with the Offer or with such acceptance for payment of or payment for Shares or to proceed with the Merger. The foregoing conditions are for the sole benefit of Purchaser and may be asserted by Purchaser regardless of the circumstances giving rise to any such condition or may be waived by Purchaser in whole or in part at any time and from time to time in its sole discretion (subject to the terms of the Merger Agreement and the Sale and Purchase Agreement). The failure by Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances, and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. See "The Offer -- Plans for the Company" for a discussion of certain additional limitations on Purchaser's right to waive conditions to the Offer. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS General. Purchaser is not aware of any pending legal proceeding relating to the Offer. Except as described in this section, based on its examination of publicly available information filed by the Company with the SEC and other publicly available information concerning the Company, Purchaser is not aware of any governmental license or regulatory permit that appears to be material to the Company's business that might be adversely affected by Purchaser's acquisition of Shares as contemplated herein or of any approval or other action by any governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of Shares by Purchaser or Reed Elsevier as contemplated herein. Should any such approval or other action be required, Purchaser currently contemplates that, except as described below under "State Takeover Statutes," such approval or other action will be sought. While Purchaser does not currently intend to delay acceptance for payment of Shares tendered pursuant to the Offer pending the outcome of any such matter (except as described below), there can be no assurance that any such approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that if such approvals were not obtained or such other actions were not taken, adverse consequences might not result to the Company's business, or certain parts of the Company's business might not have to be disposed of, any of which could cause Purchaser to elect to terminate the Offer without the purchase of Shares thereunder under certain conditions. See "The Offer -- Conditions to the Offer". Delaware Law. In general, Section 203 of the DGCL prevents an "interested stockholder" (generally, a stockholder owning 15% or more of a corporation's outstanding voting stock or an affiliate thereof) from engaging in a "business combination" (defined to include a merger and certain other transactions as described below) with a Delaware corporation for a period of three years following the time on which such stockholder 40 43 became an interested stockholder unless (i) prior to such time the corporation's board of directors approved either the business combination or the transaction which resulted in such stockholder becoming an interested stockholder, (ii) upon consummation of the transaction which resulted in such stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the corporation's voting stock outstanding at the time the transaction commenced (excluding shares owned by certain employee stock option plans and persons who are directors and also officers of the corporation) or (iii) on or subsequent to such time, the business combination is approved by the corporation's board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least 66 2/3% of the outstanding voting stock not owned by the interested stockholder; such action may not be taken by written consent. The Board of Directors of the Company has determined that Section 203 of the DGCL does not apply to the Merger Agreement, the Offer, the Merger or the transactions contemplated thereby. State Takeover Statutes. A number of states have adopted laws which purport, to varying degrees, to apply to attempts to acquire corporations that are incorporated in, or which have substantial assets, stockholders, principal executive offices or principal places of business or whose business operations otherwise have substantial economic effects in, such states. The Company, directly or through subsidiaries, conducts business in a number of states throughout the United States, some of which have enacted such laws. Except as described herein, Purchaser does not know whether any of these laws will, by their terms, apply to the Offer or any merger or other business combination between Purchaser or any of its affiliates and the Company and has not complied with any such laws. To the extent that certain provisions of these laws purport to apply to the Offer or the Merger, Purchaser believes that there are reasonable bases for contesting such laws. In 1982, in Edgar v. MITE Corp., the Supreme Court of the United States invalidated on constitutional grounds the Illinois Business Takeover Statute which, as a matter of state securities law, made takeovers of corporations meeting certain requirements more difficult. However, in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court of the United States held that the State of Indiana could, as a matter of corporate law, constitutionally disqualify a potential acquiror from voting shares of a target corporation without the prior approval of the remaining stockholders where, among other things, the corporation is incorporated, and has a substantial number of stockholders, in the State of Indiana. Subsequently, in TLX Acquisition Corp. v. Telex Corp., a Federal District Court in Oklahoma ruled that the Oklahoma takeover statutes were unconstitutional insofar as they apply to corporations incorporated outside Oklahoma in that they would subject such corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v. McReynolds, a Federal District Court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as applied to corporations incorporated outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit. In December 1988, a Federal District Court in Florida held in Grand Metropolitan PLC v. Butterworth, that the provisions of the Florida Affiliated Transactions Act and the Florida Control Share Acquisition Act were unconstitutional as applied to corporations incorporated outside of Florida. If any government official or third party should seek to apply any state takeover law to the Offer or the Merger, Purchaser will take such action as then appears desirable, which action may include challenging the applicability or validity of such statute in appropriate court proceedings. In the event it is asserted that one or more state takeover statutes is applicable to the Offer or the Merger and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer or Merger, Purchaser might be required to file certain information with, or to receive approvals from, the relevant state authorities or holders of Shares, and Purchaser might be unable to accept for payment, or pay for, Shares tendered pursuant to the Offer, or be delayed in continuing or consummating the Offer or the Merger. In such case, Purchaser may not be obligated to accept for payment, or pay for, any tendered Shares. See "The Offer -- Conditions to the Offer". United States Antitrust Compliance. Under the HSR Act and the rules that have been promulgated thereunder by the FTC, certain acquisition transactions may not be consummated unless certain information has been furnished to the Antitrust Division of the Department of Justice (the "Antitrust Division") and the FTC and certain waiting period requirements have been satisfied. Both the purchase of Shares pursuant to the Offer and the Subsequent Transaction with Thomson are subject to such requirements. Until such 41 44 requirements have been satisfied Purchaser is not obligated to accept for payment, or pay for, any tendered Shares. See "The Offer -- Conditions to the Offer". Pursuant to the requirements of the HSR Act, Purchaser filed, on November 2, 2000, and Thomson is expected, promptly after the date hereof, to file, a Notification and Report Form with respect to the Offer and Merger and the Subsequent Transaction, respectively, with the Antitrust Division and the FTC. As a result, the waiting period applicable to the purchase of Shares pursuant to the Offer is scheduled to expire at 11:59 p.m., New York City time, on November 17, 2000 and the waiting period with respect to the Subsequent Transaction with Thomson is scheduled to expire at 11:59 p.m, New York City time, 30 days after such filing. However, prior to such times, the Antitrust Division or the FTC may extend either waiting period by requesting additional information or documentary material relevant to the Offer from Purchaser or relevant to the Subsequent Transaction from Thomson, as the case may be. If any such requests are made, the waiting period subject to such request will be extended until 11:59 p.m., New York City time, on the tenth day after substantial compliance by Purchaser or on the 20th day after substantial compliance by Thomson, the Company and Reed Elsevier, as the case may be, with such request. Thereafter, such waiting period can be extended only by court order. The Antitrust Division and the FTC scrutinize the legality under the antitrust laws of transactions such as the acquisition of Shares by Purchaser pursuant to the Offer and the Subsequent Transaction. At any time before or after the consummation of any such transactions, the Antitrust Division or the FTC could take such action under the antitrust laws of the United States as it deems necessary or desirable in the public interest, including seeking to enjoin the purchase of Shares pursuant to the Offer or the Subsequent Transaction or seeking divestiture of the Shares so acquired or divestiture of substantial assets of Reed Elsevier, Thomson or the Company. Private parties (including individual States) may also bring legal actions under the antitrust laws of the United States. Purchaser does not believe that the consummation of the Offer or the Subsequent Transaction will result in a violation of any applicable antitrust laws. However, there can be no assurance that a challenge to the Offer or the Subsequent Transaction on antitrust grounds will not be made, or if such a challenge is made, what the result will be. See "The Offer -- Conditions to the Offer", including conditions with respect to litigation and certain governmental actions, "The Offer -- Plans for the Company" for a summary of the material terms of the Subsequent Transaction and "The Offer -- The Merger Agreement" for certain termination rights and obligations to make certain divestitures. Other Filings. Reed Elsevier and its affiliates, as well as the Company and Thomson, conduct operations and/or have sales in a number of foreign countries, and filings will have to be made with foreign governments under their pre-merger notification statutes. - United Kingdom. The United Kingdom Fair Trading Act 1973 (the "Fair Trading Act") will apply to an acquisition of the Company by the Purchaser. Under the Fair Trading Act, the Director General of Fair Trading can recommend to the Secretary of State for Trade and Industry that the Secretary refer the proposed acquisition to the Competition Commission which would then be required to determine whether the proposed acquisition "operates, or may be expected to operate, against the public interest". The Secretary of State for Trade and Industry has statutory powers to order, among other things, a disinvestment if the Competition Commission reports unfavorably on any acquisition. Purchaser intends to file notice of the Offer and Merger with the Office of Fair Trading and to seek confirmation that the Secretary of State does not intend to refer the Offer and Merger to the Competition Commission. - Republic of Ireland. Under the Competition Act 1991, as amended, the Offer and Merger must be notified to the Minister for Enterprise and Employment (the "Minister") within one month of the date of the Merger Agreement. Title to any shares or assets does not pass until clearance has been obtained. The Minister has 30 days from notification to refer the Offer and Merger to the Competition Authority. This period may be extended by a request by the Minister for further information. If the Minister refers the Offer and Merger to the Competition Authority, the Competition Authority has a further 30 days to report on its investigation (unless the Minister specifies a longer period). The Minister must publish the Competition Authority's report within a further two months. 42 45 In view of the limited activities of the Company in Ireland, the Purchaser intends to submit a short-form notification requesting a letter from the Minister confirming that the transaction is not notifiable and that the Minister does not intend to make a prohibition order or an order imposing conditions. - Federal Republic of Germany. Under the Act Against Restraints of Competition of the Federal Republic of Germany (the "German Cartel Act"), certain transactions may not be consummated unless a notification has been filed with the German Cartel Office (the "Cartel Office") and clearance has been obtained. The consummation of the Offer and the Merger are subject to such requirements. Pursuant to the requirements of the German Cartel Act, Purchaser expects to file a notification with respect to the Offer and Merger with the Cartel Office. The waiting period applicable to the purchase of Shares pursuant to the Offer is scheduled to expire one month after such filing. However, at the expiration of such time, the Cartel Office may instead of approving the transaction decide to make further investigations and, in connection with such further investigation, may extend the waiting period to a date that is up to four months from the date of filing. - Canada. Thomson has indicated that pre-notification to the Commissioner of Competition (the "Commissioner") is likely to be required with respect to the Subsequent Transaction pursuant to certain provisions of Canada's Competition Act. If the Subsequent Transaction is notifiable, it may not be completed prior to the expiration or earlier termination of the applicable waiting period after notice of such transaction has been delivered to the Commissioner. The waiting period may be 14 or 42 days from the time information is provided to the Commissioner, depending upon the type of information required to be provided to the Commissioner. If the Commissioner determines that the Subsequent Transaction would have the likely effect of lessening or preventing competition substantially, the Commissioner may apply to the Competition Tribunal (a special purpose Canadian tribunal) for an order to require, among other things, the disposition of the Canadian assets or shares acquired in such Subsequent Transaction. Thomson has indicated that it intends to file notice of its intent to complete the Subsequent Transaction with the Commissioner, if required. - Other Jurisdictions. The filing requirements of various jurisdictions are being analyzed by the parties and, where necessary, the parties intend to make such filings. If any requisite or advisable waiting period under applicable material antitrust law shall not have expired or been terminated by the Expiration Date, Purchaser may or, upon request of the Company, shall extend the Expiration Date. Although Reed Elsevier and Purchaser believe that neither the acquisition of the Shares pursuant to the Offer nor the Subsequent Transaction would violate or be prohibited by applicable foreign antitrust or competition laws, there can be no assurance that a challenge to the Offer or the Subsequent Transaction on antitrust or competition grounds will not be made or, if such a challenge is made, what the outcome will be. If the consummation of the Offer or the Merger is prohibited by law, rule, regulation, judgment, injunction or certain similar actions, Purchaser shall not be obligated to accept for payment or pay for any tendered Shares and may terminate the Offer. See "The Offer -- Conditions to the Offer" for certain conditions to the Offer, including conditions with respect to litigation and certain government actions. FEES AND EXPENSES Morgan Stanley is acting as the Dealer Manager in connection with the Offer and is acting also as financial advisor to Reed Elsevier in connection with Reed Elsevier's proposed acquisition of the Company. Morgan Stanley will receive reasonable and customary compensation for its services relating to the Offer and will be reimbursed for certain out-of-pocket expenses. Reed Elsevier and Purchaser will indemnify Morgan Stanley and certain related persons against certain liabilities and expenses in connection with its engagement, including certain liabilities under the federal securities laws. Morgan Stanley or its affiliates may also receive fees in connection with the credit facilities contemplated in the Commitment Letter and any contemplated equity offering. Reed Elsevier and Purchaser have retained MacKenzie Partners, Inc. to be the Information Agent and Citibank, N.A. to be the Depositary in connection with the Offer. The Information Agent may contact holders 43 46 of Shares by mail, telephone, telecopy, telegraph and personal interview and may request banks, brokers, dealers and other nominees to forward materials relating to the Offer to beneficial owners of Shares. The Information Agent and the Depositary each will receive reasonable and customary compensation for their respective services in connection with the Offer, will be reimbursed for reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under federal securities laws. Neither Reed Elsevier nor Purchaser will pay any fees or commissions to any broker or dealer or to any other person (other than to the Dealer Manager, the Depositary and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will, upon request, be reimbursed by Purchaser for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers. MISCELLANEOUS The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION ON BEHALF OF REED ELSEVIER OR PURCHASER NOT CONTAINED HEREIN OR IN THE LETTER OF TRANSMITTAL, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. Purchaser has filed with the SEC a Tender Offer Statement on Schedule TO pursuant to Rule 14d-3 of the General Rules and Regulations under the Exchange Act, together with exhibits furnishing certain additional information with respect to the Offer, and may file amendments thereto. In addition, the Company has filed with the SEC a Solicitation/Recommendation Statement on Schedule 14D-9, together with exhibits, pursuant to Rule 14d-9 under the Exchange Act, setting forth the recommendation of the Company Board with respect to the Offer and the reasons for such recommendation and furnishing certain additional related information. A copy of such documents, and any amendments thereto, may be examined at, and copies may be obtained from, the SEC (but not the regional offices of the SEC) in the manner set forth under "The Offer -- Certain Information about the Company". REH MERGERSUB INC. November 8, 2000 44 47 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS 1. DIRECTORS AND EXECUTIVE OFFICERS OF REED ELSEVIER INC. The name, citizenship, business address, current principal occupation or employment and five-year employment history of each director and executive officer of Reed Elsevier Inc. and certain other information are set forth below. None of the directors and officers of Reed Elsevier Inc. listed below has, during the past five years, (i) been convicted in a criminal proceeding or (ii) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Directors are identified by an asterisk.
CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME (CITIZENSHIP) AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - --------------------------------------- ------------------------------------------ LOUIS J. ANDREOZZI........................... Executive Vice President, Reed Elsevier Inc. (United States) (September 2000 to date); President and Chief 9443 Springboro Pike Executive Officer, North American Legal Markets of Miamisburg, Ohio 45342 Lexis-Nexis, a division of Reed Elsevier Inc. (May 2000 to date); President, Martindale-Hubbell, a division of Reed Elsevier Inc. (1996 to May 2000); Corporate Lawyer, Lexis-Nexis, a division of Reed Elsevier Inc. (1994 to 1996) MARK ARMOUR*................................. Director and Chief Financial Officer, Reed (British) International P.L.C. and Reed Elsevier plc (1996 to 25 Victoria Street date) (Deputy Chief Financial Officer, 1995 to London SW1H 0EX 1996); Member of the Executive Board and Chief United Kingdom Financial Officer, Elsevier NV (1999 to date); Chair, Reed Elsevier Inc. (February 2000 to date); Chair, REH Mergersub Inc. (October 2000 to date) CHARLES P. FONTAINE*......................... Director, Vice President -- Tax and Assistant Clerk, (United States) Reed Elsevier Inc. (1998 to date); Tax Director and 275 Washington Street Assistant Treasurer, Reed Elsevier Inc. (1994 to Newton, MA 02458 1998); Assistant Treasurer and Assistant Secretary, Reed Elsevier U.S. Holdings Inc. (1991 to date); Director, Vice President and Treasurer, REH Mergersub Inc. (October 2000 to date) JULIE GOLDWEITZ.............................. Associate General Counsel (1999 to date) and Assistant (United States) Clerk (1998 to date), Reed Elsevier Inc.; Corporate 275 Washington Street Counsel, Reed Elsevier Inc. (1995 to 1999) Newton, MA 02458 HENRY Z. HORBACZEWSKI*....................... Director, Senior Vice President, General Counsel and (United States) Clerk, Reed Elsevier Inc. (1986 to date); Director 275 Washington Street (1994 to date), Vice President, General Counsel and Newton, MA 02458 Secretary, Reed Elsevier U.S. Holdings Inc. (1991 to date); Director, Vice President and Secretary, REH Mergersub Inc. (October 2000 to date) MICHAEL JACOBS............................... Assistant Clerk, Reed Elsevier Inc. (1996 to date); (United States) Vice President and General Counsel, Lexis-Nexis, a 9443 Springboro Pike division of Reed Elsevier Inc. (1997 to date); Miamisburg, OH 45342 Deputy General Counsel, Lexis-Nexis, a division of Reed Elsevier Inc. (1990 to 1997)
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CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME (CITIZENSHIP) AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - --------------------------------------- ------------------------------------------ STEVEN F. KORTE.............................. Executive Vice President, Reed Elsevier Inc. (United States) (September 2000 to date); President, Rigby, a 500 Coventry Lane, Suite 200 division of Reed Elsevier Inc. (1994 to date) Crystal Lake, IL 60014 GAIL H. LITTLEJOHN........................... Vice President -- Government Relations, Reed Elsevier (United States) Inc. (1998 to date); Senior Vice 1150 18th Street N.W. President -- Corporate Communications, Lexis-Nexis, Washington D.C. 20036 a division of Reed Elsevier Inc. (1998 to 1999); Vice President -Editorial Publishing, Lexis-Nexis, a division of Reed Elsevier Inc. (1995 to 1998) KEITH MCGARR................................. Chief Technology Officer, Reed Elsevier plc (July 2000 (United States) to date); Executive Vice President -- Technology, Reed 2 Park Avenue, 7th Floor Elsevier Inc. (September 2000 to date); Vice New York, NY 10016 President, Federal Express Corporation (1983 to July 2000) BRIAN NAIRN.................................. Executive Vice President, Reed Elsevier Inc. (1999 to (British) date); President and Chief Operating Officer, Cahners 350 Hudson Street Business Information, a division of Reed Elsevier New York, NY 10023 Inc. (1996 to date); President, Advanstar Publishing (1991 to 1996) WILLARD W. PARDUE............................ Executive Vice President, Reed Elsevier Inc. (United States) (September 2000 to date); President and Chief 9443 Springboro Pike Executive Officer, US Corporate and Federal Markets, Miamisburg, OH 45342 Lexis-Nexis, a division of Reed Elsevier Inc. (May 2000 to date); Chief Operating Officer, Nexis (1999 to May 2000); Vice President & Publisher, Lexis-Nexis, a division of Reed Elsevier Inc. (1998 to 1999); Vice President -- Marketing, Lexis-Nexis, a division of Reed Elsevier Inc. (1997 to 1998); Director of Marketing, The Washington Post Company (1993 to 1997) ANDREW PROZES................................ Executive director, Reed International P.L.C. and Reed (Canada) Elsevier plc (2000 to date); Vice Chair, Reed 2 Park Avenue, 7th Floor Elsevier Inc. (September 2000 to date); Global CEO New York, NY 10016 of Reed Elsevier plc's Legal Information Group (July 2000 to date); Executive Vice President of West Group (1997 to July 2000); President and Chief Executive Officer of EBC Software (1996 to 1997); Group President Southam Inc. (1994 to 1996) JOHN J. REGAZZI.............................. Executive Vice President, Reed Elsevier Inc. (United States) (September 2000 to date); President & Chief 655 Avenue of the Americas Executive Officer, Elsevier Science Inc. (December New York, NY 10010 1999 to date); President & Chief Executive Officer, Engineering Information (1989 to date) PAUL RICHARDSON*............................. Group Treasurer, Reed Elsevier plc (1997 to date); (British) Director and Senior Vice President -- Finance, Reed 2 Park Avenue, 7th Floor Elsevier Inc. (1998 to date) and Treasurer (April New York, NY 10016 2000 to date); Director (1999 to date), Vice President -- Finance and Treasurer, Reed Elsevier U.S. Holdings Inc. (1995 to date); Director and President, REH Mergersub Inc. (October 2000 to date)
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CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME (CITIZENSHIP) AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - --------------------------------------- ------------------------------------------ MARK L. SEELEY............................... Assistant Clerk, Reed Elsevier Inc. (1997 to date); (United States) Corporate Counsel, Reed Elsevier Inc. (1989 to 1995); Elsevier Science/Cell Press General Counsel, Elsevier Science (1995 to date) 1100 Massachusetts Avenue Cambridge, MA 02138 MARC TEREN................................... Executive Vice President, Reed Elsevier Inc. (March (United States) 2000 to date); Chief Executive Officer, Cahners 350 Hudson Street Business Information, a division of Reed Elsevier New York, NY 10023 Inc. (January 2000 to date); Chief Executive Officer, Washington Post -- Newsweek Interactive (1997 to January 2000); Vice President, Disney Interactive Entertainment (1992 to 1997) CHRISTOPHER D. THOMAS........................ Senior Vice President, Reed Elsevier Inc. (June 2000 (British) to date); Director -- Compensation & Benefits, Reed 25 Victoria Street Elsevier (UK) Ltd (1994 to date) London SW1H 0EX United Kingdom RICHARD E. WHITE............................. Executive Vice President, Reed Elsevier Inc. (1999 to (United States) date); President and Chief Executive Officer, Reed 383 Main Avenue Exhibition Companies, a division of Reed Elsevier Norwalk, CT 06851 Inc. (1999 to date); GM, Subsidiary Brands, Nike, Inc. (1997 to 1999); Chief Executive Officer, Strategic Merchandising Association (1994 to 1997)
I-3 50 2. DIRECTORS AND EXECUTIVE OFFICERS OF REH MERGERSUB INC. The name, citizenship, business address, current principal occupation or employment and five-year employment history of each director and executive officer of REH Mergersub Inc. and certain other information are set forth below. None of the directors and officers of REH Mergersub Inc. listed below has, during the past five years, (i) been convicted in a criminal proceeding or (ii) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Directors are identified by an asterisk.
CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME (CITIZENSHIP) AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - --------------------------------------- ------------------------------------------ MARK ARMOUR*................................. Director and Chief Financial Officer, Reed (British) International P.L.C. and Reed Elsevier plc (1996 to 25 Victoria Street date) (Deputy Chief Financial Officer, 1995 to London SW1H 0EX 1996); Member of the Executive Board and Chief United Kingdom Financial Officer, Elsevier NV (1999 to date); Chair, Reed Elsevier Inc. (February 2000 to date); Chair, REH Mergersub Inc. (October 2000 to date) CHARLES P. FONTAINE*......................... Director, Vice President -- Tax and Assistant Clerk, (United States) Reed Elsevier Inc. (1998 to date); Tax Director and 275 Washington Street Assistant Treasurer, Reed Elsevier Inc. (1994 to Newton, MA 02458 1998); Assistant Treasurer and Assistant Secretary, Reed Elsevier U.S. Holdings Inc. (1991 to date); Director, Vice President and Treasurer, REH Mergersub Inc. (October 2000 to date) HENRY Z. HORBACZEWSKI*....................... Director, Senior Vice President, General Counsel and (United States) Clerk, Reed Elsevier Inc. (1986 to date); Director 275 Washington Street (1994 to date), Vice President, General Counsel and Newton, MA 02458 Secretary, Reed Elsevier U.S. Holdings Inc. (1991 to date); Director, Vice President and Secretary, REH Mergersub Inc. (October 2000 to date) PAUL RICHARDSON*............................. Group Treasurer, Reed Elsevier plc (1997 to date); (British) Director and Senior Vice President -- Finance, Reed 2 Park Avenue, 7th Floor Elsevier Inc. (1998 to date) and Treasurer (April New York, NY 10016 2000 to date); Director (1999 to date), Vice President -- Finance and Treasurer, Reed Elsevier U.S. Holdings Inc. (1995 to date); Director and President, REH Mergersub Inc. (October 2000 to date)
I-4 51 3. DIRECTORS AND EXECUTIVE OFFICERS OF REED ELSEVIER U.S. HOLDINGS INC. The name, citizenship, business address, current principal occupation or employment and five-year employment history of each director and executive officer of Reed Elsevier U.S. Holdings Inc. and certain other information are set forth below. None of the directors and officers of Reed Elsevier U.S. Holdings Inc. listed below has, during the past five years, (i) been convicted in a criminal proceeding or (ii) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Directors are identified by an asterisk.
CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME (CITIZENSHIP) AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - --------------------------------------- ------------------------------------------ CHARLES P. FONTAINE............... Director, Vice President -- Tax and Assistant Clerk, Reed (United States) Elsevier Inc. (1998 to date); Tax Director and Assistant 275 Washington Street Treasurer, Reed Elsevier Inc. (1994 to 1998); Assistant Newton, MA 02458 Treasurer and Assistant Secretary, Reed Elsevier U.S. Holdings Inc. (1991 to date); Director, Vice President and Treasurer, REH Mergersub Inc. (October 2000 to date) HENRY Z. HORBACZEWSKI*............ Director, Senior Vice President, General Counsel and Clerk, (United States) Reed Elsevier Inc. (1986 to date); Director (1994 to date), 275 Washington Street Vice President, General Counsel and Secretary, Reed Newton, MA 02458 Elsevier U.S. Holdings Inc. (1991 to date); Director, Vice President and Secretary, REH Mergersub Inc. (October 2000 to date) VERA J. LANG...................... Treasurer, Reed Elsevier Inc. (1995 to February 2000); (United States) Assistant Treasurer, Reed Elsevier U.S. Holdings Inc. (1995 121 Chanlon Road to date); Chief Financial Officer, Reed Elsevier New New Providence, NJ 07974 Providence (February 2000 to date); PAUL RICHARDSON*.................. Group Treasurer, Reed Elsevier plc (1997 to date); Director (British) and Senior Vice President -- Finance, Reed Elsevier Inc. 2 Park Avenue, 7th Floor (1998 to date) and Treasurer (April 2000 to date); New York, NY 10016 Director (1999 to date), Vice President -- Finance and Treasurer, Reed Elsevier U.S. Holdings Inc. (1995 to date); Director and President, REH Mergersub Inc. (October 2000 to date)
I-5 52 4. DIRECTORS AND EXECUTIVE OFFICERS OF REED ELSEVIER OVERSEAS BV. The name, citizenship, business address, current principal occupation or employment and five-year employment history of each director and executive officer of Reed Elsevier Overseas BV and certain other information are set forth below. None of the directors and officers of Reed Elsevier Overseas BV listed below has, during the past five years, (i) been convicted in a criminal proceeding or (ii) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Directors are identified by an asterisk.
CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME (CITIZENSHIP) AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - --------------------------------------- ------------------------------------------ MARK ARMOUR*................................. Director and Chief Financial Officer, Reed International P.L.C. and Reed Elsevier plc (1996 to (British) date) (Deputy Chief Financial Officer, 1995 to 25 Victoria Street 1996); Member of the Executive Board and Chief London SW1H 0EX Financial Officer, Elsevier NV (1999 to date); United Kingdom Chair, Reed Elsevier Inc. (February 2000 to date); Chair, REH Mergersub Inc. (October 2000 to date); Member of the Management Board of Reed Elsevier Holdings BV and Reed Elsevier Overseas BV ERIK EKKER*.................................. Company Secretary, Elsevier NV; Legal Director -- Continental Europe, Reed Elsevier plc (1993 to (The Netherlands) date); Member of the Management Board of Reed Van de Sande Bakhuyzenstraat 4 Elsevier Holdings BV and Reed Elsevier Overseas BV 1061 AG, Amsterdam The Netherlands DERK HAANK*.................................. Director, Reed Elsevier plc and Reed International P.L.C. (1999 to date); Member of the Executive (The Netherlands) Board, Elsevier NV (2000 to date); Chief Executive Sara Burgerhartstraat 25 Officer, Elsevier Science (1998 to date); Chief 1055 NV Amsterdam Executive Officer, Elsevier Business Information The Netherlands (1991 to 1998); Member of the Management Board of Reed Elsevier Holdings BV and Reed Elsevier Overseas BV
I-6 53 5. DIRECTORS AND EXECUTIVE OFFICERS OF REED ELSEVIER HOLDINGS BV. The name, citizenship, business address, current principal occupation or employment and five-year employment history of each director and executive officer of Reed Elsevier Holdings BV and certain other information are set forth below. None of the directors and officers of Reed Elsevier Holdings BV listed below has, during the past five years, (i) been convicted in a criminal proceeding or (ii) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Directors are identified by an asterisk.
CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME (CITIZENSHIP) AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - --------------------------------------- ------------------------------------------ MARK ARMOUR*................................. Director and Chief Financial Officer, Reed International P.L.C. and Reed Elsevier plc (1996 to (British) date) (Deputy Chief Financial Officer, 1995 to 25 Victoria Street 1996); Member of the Executive Board and Chief London SW1H 0EX Financial Officer, Elsevier NV (1999 to date); United Kingdom Chair, Reed Elsevier Inc. (February 2000 to date); Chair, REH Mergersub Inc. (October 2000 to date); Member of the Management Board of Reed Elsevier Holdings BV and Reed Elsevier Overseas BV ERIK EKKER*.................................. Company Secretary, Elsevier NV; Legal Director -- Continental Europe, Reed Elsevier plc (1993 to (The Netherlands) date); Member of the Management Board of Reed Van de Sande Bakhuyzenstraat 4 Elsevier Holdings BV and Reed Elsevier Overseas BV 1061 AG, Amsterdam The Netherlands DERK HAANK*.................................. Director, Reed Elsevier plc and Reed International P.L.C. (1999 to date); Member of the Executive (The Netherlands) Board, Elsevier NV (2000 to date); Chief Executive Sara Burgerhartstraat 25 Officer, Elsevier Science (1998 to date); Chief 1055 NV Amsterdam Executive Officer, Elsevier Business Information The Netherlands (1991 to 1998); Member of the Management Board of Reed Elsevier Holdings BV and Reed Elsevier Overseas BV
I-7 54 6. DIRECTORS AND EXECUTIVE OFFICERS OF REED ELSEVIER PLC. The name, citizenship, business address, current principal occupation or employment and five-year employment history of each director and executive officer of Reed Elsevier plc and certain other information are set forth below. None of the directors and officers of Reed Elsevier plc listed below has, during the past five years, (i) been convicted in a criminal proceeding or (ii) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Directors are identified by an asterisk.
CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME (CITIZENSHIP) AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - --------------------------------------- ------------------------------------------ MARK ARMOUR*................................. Director and Chief Financial Officer, Reed International P.L.C. and Reed Elsevier plc (1996 to (British) date) (Deputy Chief Financial Officer, 1995 to 25 Victoria Street 1996); Member of the Executive Board and Chief London SW1H 0EX Financial Officer, Elsevier NV (1999 to date); United Kingdom Chair, Reed Elsevier Inc. (February 2000 to date); Chair, REH Mergersub Inc. (October 2000 to date) JOHN BROCK*.................................. Non-executive director of Reed Elsevier plc and Reed International P.L.C., and member of the Supervisory (United States) Board of Elsevier NV (1996 to date); Chief Operating Cadbury Schweppes Officer, Cadbury Schweppes plc (March 2000 to date); 25 Berkeley Square Managing Director and Chief Executive London W1X 6HT Officer -- Global Beverages Stream, Cadbury United Kingdom Schweppes plc (1996 to March 2000); Chief Executive Officer, Dr Pepper 7 Up (DPSU) (1995 to 1996) CRISPIN DAVIS*............................... Director and Chief Executive Officer, Reed International P.L.C. and Reed Elsevier plc (1999 to (British) date); Chief Executive Officer and Member of the 25 Victoria Street Executive Board, Elsevier NV (1999 to date); Chief London SW1H 0EX Executive Officer, Aegis Group plc (1994 to 1999) United Kingdom DERK HAANK*.................................. Director, Reed Elsevier plc and Reed International P.L.C. (1999 to date); Member of the Executive Board, (The Netherlands) Elsevier NV (2000 to date); Chief Executive Officer, Sara Burgerhartstraat 25 Elsevier Science (1998 to date); Chief Executive 1055 NV Amsterdam Officer, Elsevier Business Information (1991 to The Netherlands 1998); Member of the Management Board of Reed Elsevier Holdings BV and Reed Elsevier Overseas BV ROELOF NELISSEN*............................. Member of the Supervisory Board, Elsevier NV (1990 to date); Non-executive director, Reed Elsevier plc and (The Netherlands) Reed International P.L.C. (1999 to date) (having Hoog Hoefloo 36 previously been a non-executive director of Reed 1251 ED LAREN N-H Elsevier plc from 1993 to 1998); Non-executive The Netherlands director NVLS (1973 to date); Non-executive director KBB NV (1993 to date); Non-executive director Ahold NV (1985 to date); formerly Chief Executive Officer of ABN AMRO Bank NV
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CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME (CITIZENSHIP) AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - --------------------------------------- ------------------------------------------ STEVEN PERRICK*.............................. Member of the Supervisory Board, Elsevier NV (1998 to date); Non-executive director, Reed Elsevier plc (The Netherlands) (1998 to date); Non-executive director, Reed Apollolaan 151 International P.L.C. (1999 to date); Lawyer, 1077 AR Amsterdam Freshfields Bruckhaus Deringer (1999 to date); The Netherlands Lawyer, DBBW (1996 to 1999); Lawyer, Loeff Claeys Verbeke (1996 to 1997); Professor at Erasmus University, Rotterdam ANDREW PROZES*............................... Executive director, Reed International P.L.C. and Reed Elsevier plc (2000 to date); Vice Chair, Reed (Canada) Elsevier Inc. (September 2000 to date); Global CEO 2 Park Avenue, 7th Floor of Reed Elsevier plc's Legal Information Group (July New York, NY 10016 2000 to date); Executive Vice President of West Group (1997 to July 2000); President and Chief Executive Officer of EBC Software (1996 to 1997); Group President Southam Inc. (1994 to 1996) MARK RADCLIFFE............................... Company Secretary & Director of Corporate Services, Reed Elsevier plc (1995 to date); Company Secretary, (British) Reed International P.L.C. (1995 to date) 25 Victoria Street London SW1H 0EX United Kingdom PAUL RICHARDSON.............................. Group Treasurer, Reed Elsevier plc (1997 to date); Director and Senior Vice President -- Finance, Reed (British) Elsevier Inc. (1998 to date) and Treasurer (April 2 Park Avenue, 7th Floor 2000 to date); Director (1999 to date), Vice New York, NY 10016 President -- Finance and Treasurer, Reed Elsevier U.S. Holdings Inc. (1995 to date); Director and President, REH Mergersub Inc. (October 2000 to date) ROLF STOMBERG*............................... Non-executive director, Reed International P.L.C. and Reed Elsevier plc and a member of the Supervisory (German) Board, Elsevier NV (1999 to date); Chairman of the 25 Ely Place Board, John Mowlem & Co. plc; Managing Director BP London EC1N 6TD Co. plc (1995 to 1997) United Kingdom MORRIS TABAKSBLAT*........................... Chairman of Reed Elsevier plc and Reed International P.L.C., and Chairman of the Supervisory Board of (The Netherlands) Elsevier NV (1999 to date); Chairman of the Van de Sande Bakhuyzenstraat 4 Supervisory Board, Aegon Verzekeringen N.V.; Member 1061 AG, Amsterdam of the Supervisory Board, TNT Post Group; Chairman The Netherlands and Chief Executive Officer, Unilever NV (1994 to 1999); Chairman, European Round Table of Industrialists (ERT) DAVID WEBSTER*............................... Non-executive director, Reed International P.L.C. (1992 to date) and Reed Elsevier plc (1993 to date); (British) Member of the Supervisory Board, Elsevier NV (1999 6 Millington Road to date); Chairman, Safeway plc Hayes, Middlesex U834AY United Kingdom
I-9 56 7. DIRECTORS AND EXECUTIVE OFFICERS OF ELSEVIER NV. Elsevier NV has a two-tier board structure comprising a Supervisory Board of eight members, all of whom are non-executives and an Executive Board of three members. The name, citizenship, business address, current principal occupation or employment and five-year employment history of each director (of both the Supervisory Board and the Executive Committee) and executive officer of Elsevier NV and certain other information are set forth below. None of the directors and officers of Elsevier NV listed below has, during the past five years, (i) been convicted in a criminal proceeding or (ii) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Directors of the Supervisory Board are identified by an asterisk. The three current members of the Executive Board are Crispin Davis (Chief Executive Officer), Mark Armour (Chief Financial Officer) and Derk Haank.
CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME (CITIZENSHIP) AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - --------------------------------------- ------------------------------------------ MARK ARMOUR.................................. Director and Chief Financial Officer, Reed International P.L.C. and Reed Elsevier plc (1996 to (British) date) (Deputy Chief Financial Officer, 1995 to 25 Victoria Street 1996); Member of the Executive Board and Chief London SW1H 0EX Financial Officer, Elsevier NV (1999 to date); United Kingdom Chair, Reed Elsevier Inc. (February 2000 to date); Chair, REH Mergersub Inc. (October 2000 to date) MRS G J DE BOER-KRUYT*....................... Member of the Supervisory Board, Elsevier NV (April 2000 to date); Non-executive director, Sara Lee/ (The Netherlands) DE; Non-executive director H.B.G.; Non-executive Hoofdgracht 65 director InternatioMuller 1411 LB Naarden The Netherlands JOHN BROCK*.................................. Non-executive director of Reed Elsevier plc and Reed International P.L.C., and member of the (United States) Supervisory Board of Elsevier NV (1996 to date); Cadbury Schweppes Chief Operating Officer, Cadbury Schweppes plc 25 Berkeley Square (March 2000 to date); Managing Director and Chief London W1X 6HT Executive Officer -- Global Beverages Stream, United Kingdom Cadbury Schweppes plc (1996 to March 2000); Chief Executive Officer, Dr Pepper 7 Up (DPSU) (1995 to 1996) CRISPIN DAVIS................................ Director and Chief Executive Officer, Reed International P.L.C. and Reed Elsevier plc (1999 to (British) date); Chief Executive Officer and Member of the 25 Victoria Street Executive Board, Elsevier NV (1999 to date); Chief London SW1H 0EX Executive Officer, Aegis Group plc (1994 to 1999) United Kingdom ERIK EKKER................................... Company Secretary, Elsevier NV; Legal Director -- Continental Europe, Reed Elsevier plc (1993 to (The Netherlands) date); Member of the Management Board of Reed Van de Sande Bakhuyzenstraat 4 Elsevier Holdings BV and Reed Elsevier Overseas BV 1061 AG, Amsterdam The Netherlands OTTO TER HAAR*............................... Member of the Supervisory Board, Elsevier N.V. (1990 to date) (The Netherlands) 11 Hishfield Kilnaleck, Co. Caven Ireland
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CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME (CITIZENSHIP) AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - --------------------------------------- ------------------------------------------ DERK HAANK................................... Director, Reed Elsevier plc and Reed International P.L.C. (1999 to date); Member of the Executive (The Netherlands) Board, Elsevier NV (2000 to date); Chief Executive Sara Burgerhartstraat 25 Officer, Elsevier Science (1998 to date); Chief 1055 NV Amsterdam Executive Officer, Elsevier Business Information The Netherlands (1991 to 1998); Member of the Management Board of Reed Elsevier Holdings BV and Reed Elsevier Overseas BV ROELOF NELISSEN*............................. Member of the Supervisory Board, Elsevier NV (1990 to date); Non-executive director, Reed Elsevier plc (The Netherlands) and Reed International P.L.C. (1999 to date) Hoog Hoefloo 36 (having previously been a non-executive director 1251 ED LAREN N-H of Reed Elsevier plc from 1993 to 1998); The Netherlands Non-executive director NVLS (1973 to date); Non-executive director KBB NV (1993 to date); Non-executive director Ahold NV (1985 to date); formerly Chief Executive Officer of ABN AMRO Bank NV STEVEN PERRICK*.............................. Member of the Supervisory Board, Elsevier NV (1998 to date); Non-executive director, Reed Elsevier plc (The Netherlands) (1998 to date); Non-executive director, Reed Apollolaan 151 International P.L.C. (1999 to date); Lawyer, 1077 AR Amsterdam Freshfields Bruckhaus Deringer (1999 to date); The Netherlands Lawyer, DBBW (1996 to 1999); Lawyer, Loeff Claeys Verbeke (1996 to 1997); Professor at Erasmus University, Rotterdam ROLF STOMBERG*............................... Non-executive director, Reed International P.L.C. and Reed Elsevier plc and a member (1999 to date); (German) Member of the Supervisory Board, Elsevier NV (1999 25 Ely Place to date); Chairman of the Board, John Mowlem & Co. London EC1N 6TD plc; Managing Director BP Co. plc (1995 to 1997) United Kingdom MORRIS TABAKSBLAT*........................... Chairman of Reed Elsevier plc and Reed International P.L.C., and Chairman of the Supervisory Board of (The Netherlands) Elsevier NV (1999 to date); Chairman of the Van de Sande Bakhuyzenstraat 4 Supervisory Board, Aegon Verzekeringen N.V.; 1061 AG, Amsterdam Member of the Supervisory Board, TNT Post Group; The Netherlands Chairman and Chief Executive Officer, Unilever NV (1994 to 1999); Chairman, European Round Table of Industrialists (ERT) DAVID WEBSTER*............................... Non-executive director, Reed International P.L.C. (1992 to date) and Reed Elsevier plc (1993 to date); (British) Member of the Supervisory Board, Elsevier NV (1999 6 Millington Road to date); Chairman, Safeway plc Hayes, Middlesex U834AY United Kingdom
I-11 58 8. DIRECTORS AND EXECUTIVE OFFICERS OF REED INTERNATIONAL P.L.C. The name, citizenship, business address, current principal occupation or employment and five-year employment history of each director and executive officer of Reed International P.L.C. and certain other information are set forth below. None of the directors and officers of Reed International P.L.C. listed below has, during the past five years, (i) been convicted in a criminal proceeding or (ii) been a party to any judicial or administrative proceeding that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws. Directors are identified by an asterisk.
CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME (CITIZENSHIP) AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - --------------------------------------- ------------------------------------------ MARK ARMOUR*................................. Director and Chief Financial Officer, Reed International P.L.C. and Reed Elsevier plc (1996 to (British) date) (Deputy Chief Financial Officer, 1995 to 25 Victoria Street 1996); Member of the Executive Board and Chief London SW1H 0EX Financial Officer, Elsevier NV (1999 to date); United Kingdom Chair, Reed Elsevier Inc. (February 2000 to date); Chair, REH Mergersub Inc. (October 2000 to date) JOHN BROCK*.................................. Non-executive director of Reed Elsevier plc and Reed International P.L.C., and member of the (United States) Supervisory Board of Elsevier NV (1996 to date); Cadbury Schweppes Chief Operating Officer, Cadbury Schweppes plc 25 Berkeley Square (March 2000 to date); Managing Director and Chief London W1X 6HT Executive Officer -- Global Beverages Stream, United Kingdom Cadbury Schweppes plc (1996 to March 2000); Chief Executive Officer, Dr Pepper 7 Up (DPSU) (1995 to 1996) CRISPIN DAVIS*............................... Director and Chief Executive Officer, Reed International P.L.C. and Reed Elsevier plc (1999 to (British) date); Chief Executive Officer and Member of the 25 Victoria Street Executive Board, Elsevier NV (1999 to date); Chief London SW1H 0EX Executive Officer, Aegis Group plc (1994 to 1999) United Kingdom DERK HAANK*.................................. Director, Reed Elsevier plc, Reed International P.L.C.; Member of the Executive Board, Elsevier NV; (The Netherlands) Chief Executive Officer, Elsevier Science (1998 to Sara Burgerhartstraat 25 date); Chief Executive Officer, Elsevier Business 1055 NV Amsterdam Information (1991 to 1998); Member of the The Netherlands Management Board of Reed Elsevier Holdings BV and Reed Elsevier Overseas BV ROELOF NELISSEN*............................. Member of the Supervisory Board, Elsevier NV (1990 to date); Non-executive director, Reed Elsevier plc (The Netherlands) and Reed International P.L.C. (1999 to date) Hoog Hoefloo 36 (having previously been a non-executive director 1251 ED LAREN N-H of Reed Elsevier plc from 1993 to 1998); The Netherlands Non-executive director NVLS (1973 to date); Non-executive director KBB NV (1993 to date); Non-executive director Ahold NV (1985 to date); formerly Chief Executive Officer of ABN AMRO Bank NV
I-12 59
CURRENT PRINCIPAL OCCUPATION OR EMPLOYMENT NAME (CITIZENSHIP) AND BUSINESS ADDRESS AND FIVE-YEAR EMPLOYMENT HISTORY - --------------------------------------- ------------------------------------------ STEVEN PERRICK*.............................. Member of the Supervisory Board, Elsevier NV (1998 to date); Non-executive director, Reed Elsevier plc (The Netherlands) (1998 to date); Non-executive director, Reed Apollolaan 151 International P.L.C. (1999 to date); Lawyer, 1077 AR Amsterdam Freshfields Bruckhaus Deringer (1999 to date); The Netherlands Lawyer, DBBW (1996 to 1999); Lawyer, Loeff Claeys Verbeke (1996 to 1997); Professor at Erasmus University, Rotterdam ANDREW PROZES*............................... Executive director, Reed International P.L.C. and Reed Elsevier plc (2000 to date); Vice Chair, Reed (Canada) Elsevier Inc. (September 2000 to date); Global CEO 2 Park Avenue, 7th Floor of Reed Elsevier plc's Legal Information Group New York, NY 10016 (July 2000 to date); Executive Vice President of West Group (1997 to July 2000); President and Chief Executive Officer of EBC Software (1996 to 1997); Group President Southam Inc. (1994 to 1996) MARK RADCLIFFE............................... Company Secretary & Director of Corporate Services, Reed Elsevier plc (1995 to date); Company Secretary, (British) Reed International P.L.C. (1995 to date) 25 Victoria Street London SW1H 0EX United Kingdom ROLF STOMBERG*............................... Non-executive director, Reed International P.L.C. and Reed Elsevier plc and a member of the (German) Supervisory Board, Elsevier NV (1999 to date); 25 Ely Place Chairman of the Board, John Mowlem & Co. plc; London EC1N 6TD Managing Director BP Co. plc (1995 to 1997) United Kingdom MORRIS TABAKSBLAT*........................... Chairman of Reed Elsevier plc and Reed International P.L.C., and Chairman of the Supervisory Board of (The Netherlands) Elsevier NV (1999 to date); Chairman of the Van de Sande Bakhuyzenstraat 4 Supervisory Board, Aegon Verzekeringen N.V.; 1061 AG, Amsterdam Member of the Supervisory Board, TNT Post Group; The Netherlands Chairman and Chief Executive Officer, Unilever NV (1994 to 1999); Chairman, European Round Table of Industrialists (ERT) DAVID WEBSTER*............................... Non-executive director, Reed International P.L.C. (1992 to date) and Reed Elsevier plc (1993 to date); (British) Member of the Supervisory Board, Elsevier NV (1999 6 Millington Road to date); Chairman, Safeway plc Hayes, Middlesex U834AY United Kingdom
I-13 60 Manually signed facsimile copies of the Letter of Transmittal, properly completed and duly executed, will be accepted. The Letter of Transmittal, certificates for Shares and any other required documents should be sent or delivered by each stockholder of the Company or such stockholder's broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of the addresses set forth below: THE DEPOSITARY FOR THE OFFER IS: CITIBANK, N.A. BY MAIL: BY COURIER: BY HAND: P.O. Box 685 915 Broadway, 5th Floor Corporate Trust Window Old Chelsea Station New York, NY 10010 111 Wall Street, 5th Floor New York, NY 10113 New York, NY 10043 BY FACSIMILE TRANSMISSION: (FOR ELIGIBLE INSTITUTIONS ONLY) (212) 505-2248 CONFIRM FACSIMILE BY TELEPHONE: (800) 270-0808 (For Confirmation Only)
Questions or requests for assistance may be directed to the Information Agent or the Dealer Manager, at the addresses and telephone numbers set forth below. Additional copies of this Offer to Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and related materials may be obtained from the Information Agent as set forth below and will be furnished promptly at Purchaser's expense. Stockholders may also contact their broker, dealer, commercial bank, trust company or other nominee for assistance concerning the Offer. THE INFORMATION AGENT FOR THE OFFER IS: [MacKenzie Partners, Inc. Logo] 156 FIFTH AVENUE NEW YORK, NY 10010 (212) 929-5500 OR CALL TOLL FREE: (800) 322-2885 THE DEALER MANAGER FOR THE OFFER IS: MORGAN STANLEY DEAN WITTER Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 (212) 761-4834 EX-99.A.2 3 y42082ex99-a_2.txt LETTER OF TRANSMITTAL 1 Exhibit (a)(2) LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK AND SHARES OF SERIES A CUMULATIVE CONVERTIBLE STOCK OF HARCOURT GENERAL, INC. Pursuant to the Offer to Purchase dated November 8, 2000 by REH MERGERSUB INC. a wholly owned subsidiary of REED ELSEVIER INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, DECEMBER 7, 2000, UNLESS THE OFFER IS EXTENDED. THE DEPOSITARY FOR THE OFFER IS: CITIBANK, N.A. BY MAIL: BY OVERNIGHT COURIER: BY HAND: Citibank, N.A. Citibank, N.A. Citibank, N.A. P.O. Box 685 915 Broadway, 5th Floor Corporate Trust Window Old Chelsea Station New York, NY 10010 111 Wall Street, 5th Floor New York, NY 10113 New York, NY 10043
BY FACSIMILE TRANSMISSION: (FOR ELIGIBLE INSTITUTIONS ONLY) (212)505-2248 CONFIRM FACSIMILE BY TELEPHONE: (800) 270-0808 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OR FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. YOU MUST SIGN THIS LETTER OF TRANSMITTAL IN THE APPROPRIATE SPACE THEREFOR PROVIDED BELOW. THE INSTRUCTIONS CONTAINED WITHIN THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. 2 The names and addresses of the registered holders of the tendered Shares (as defined below) should be printed, if not already printed above, exactly as they appear on the Share Certificates (as defined below) tendered hereby. This Letter of Transmittal is to be used if certificates for Shares are to be forwarded herewith or, unless an Agent's Message (as defined in "The Offer -- Acceptance for Payment and Payment for Shares" in the Offer to Purchase) is utilized, if delivery of Shares is to be made by book-entry transfer to an account maintained by the Depositary at the Book-Entry Transfer Facility (as defined in "The Offer -- Acceptance for Payment and Payment for Shares" in the Offer to Purchase and pursuant to the procedures set forth in "The Offer -- Procedures for Accepting the Offer and Tendering Shares" thereof). Holders of Shares whose certificates for such Shares (the "Share Certificates") are not immediately available, or who cannot complete the procedure for book-entry transfer on a timely basis, or who cannot deliver all other required documents to the Depositary prior to the Expiration Date (as defined in the Offer to Purchase), must tender their Shares according to the guaranteed delivery procedure set forth in "The Offer -- Procedures for Accepting the Offer and Tendering Shares" in the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY WILL NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution - -------------------------------------------------------------------------------- Account Number - -------------------------------------------------------------------------------- Transaction Code Number - -------------------------------------------------------------------------------- [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) ------------------------------------------------ Window Ticket Number (if any) or DTC Participant Number ------------------------ Date of Execution of Notice of Guaranteed Delivery ----------------------------- Name of Institution that Guaranteed Delivery ----------------------------------- If delivered by book-entry transfer: Name of Tendering Institution --------------------------------------------- Account Number ------------------------------------ Transaction Code Number --------------------------- 2 3
- ------------------------------------------------------------------------------------------------------------------------ DESCRIPTION OF COMMON SHARES TENDERED - ------------------------------------------------------------------------------------------------------------------------ NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) COMMON SHARE(S) TENDERED APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY) - ------------------------------------------------------------------------------------------------------------------------ TOTAL NUMBER OF COMMON SHARES NUMBER OF CERTIFICATE REPRESENTED BY SHARE COMMON NUMBER(S)(1) CERTIFICATE(S)(2) SHARES TENDERED --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- --------------------------------------------------------------- TOTAL NUMBER OF COMMON SHARES - ------------------------------------------------------------------------------------------------------------------------ (1) NEED NOT BE COMPLETED BY BOOK-ENTRY STOCKHOLDERS. (2) UNLESS OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES REPRESENTED BY CERTIFICATES DELIVERED TO THE DEPOSITARY ARE BEING TENDERED HEREBY. SEE INSTRUCTION 4. - ------------------------------------------------------------------------------------------------------------------------ [ ] CHECK HERE IF CERTIFICATES HAVE BEEN LOST, DESTROYED OR STOLEN. SEE INSTRUCTION 11. - ------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF PREFERRED SHARES TENDERED - ----------------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) PREFERRED SHARE(S) TENDERED APPEAR(S) ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST IF NECESSARY) - ----------------------------------------------------------------------------------------------------------------------- TOTAL NUMBER OF PREFERRED SHARES NUMBER OF CERTIFICATE REPRESENTED BY SHARE PREFERRED NUMBER(S)(1) CERTIFICATE(S)(2) SHARES TENDERED ---------------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------- ---------------------------------------------------------- TOTAL NUMBER OF PREFERRED SHARES - --------------------------------------------------------------------------------------------------------------------- (1) NEED NOT BE COMPLETED BY BOOK-ENTRY STOCKHOLDERS. (2) UNLESS OTHERWISE INDICATED, IT WILL BE ASSUMED THAT ALL SHARES REPRESENTED BY CERTIFICATES DELIVERED TO THE DEPOSITARY ARE BEING TENDERED HEREBY. SEE INSTRUCTION 4. - --------------------------------------------------------------------------------------------------------------------- [ ] CHECK HERE IF CERTIFICATES HAVE BEEN LOST, DESTROYED OR STOLEN. SEE INSTRUCTION 11. - ---------------------------------------------------------------------------------------------------------------------
3 4 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE INSTRUCTIONS SET FORTH IN THIS LETTER OF TRANSMITTAL CAREFULLY Ladies and Gentlemen: The undersigned hereby tenders to REH Mergersub Inc., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Reed Elsevier Inc., a Massachusetts corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 8, 2000 (the "Offer to Purchase") the above-described shares of common stock, par value $1.00 per share (the "Common Shares") and/or the above-described shares of series A cumulative convertible stock, par value $1.00 per share (the "Preferred Shares", and together with the Common Shares, the "Shares"), of Harcourt General, Inc., a Delaware corporation (the "Company"), pursuant to Purchaser's Offer to Purchase all outstanding Shares, at a purchase price of $59.00 per Common Share, net to the seller in cash, without interest thereon, and $77.29 per Preferred Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase and in this Letter of Transmittal (which together with any amendments or supplements thereto or hereto, collectively constitute the "Offer"). Upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms of any such extension or amendment), and effective upon acceptance for payment of the Shares tendered herewith in accordance with the terms of the Offer, the undersigned hereby sells, assigns and transfers to or upon the order of the Purchaser all right, title and interest in and to all of the Shares that are being tendered hereby (and any and all dividend, distributions, rights, other Shares or other securities issued or issuable in respect thereof on or after the date hereof (collectively, "Distributions")) and irrevocably constitutes and appoints Citibank, N.A. (the "Depositary") the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares (and all Distributions), with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (i) deliver certificates for such Shares (and any and all Distributions) or transfer ownership of such Shares (and any and all Distributions) on the account books maintained by the Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of the Purchaser, (ii) present such Shares (and any and all Distributions) for transfer on the books of the Company, and (iii) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any and all Distributions), all in accordance with the terms of the Offer. Notwithstanding any provision of the Offer, in the event any Distributions shall be made by the Company in accordance with the terms of the Merger Agreement prior to the acceptance for payment of the Shares tendered herewith and not withdrawn, such Distributions shall be paid to the undersigned. By executing this Letter of Transmittal, the undersigned hereby irrevocably appoints Mark Armour, Paul Richardson, Henry Z. Horbaczewski and Charles P. Fontaine, in their respective capacities as officers of Purchaser, and any individual who shall thereafter succeed to any such office of Purchaser, and each of them, and any other designees of Purchaser, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution, to vote at any annual or special meeting of the Company's stockholders or any adjournment or postponement thereof or otherwise in such manner as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, to execute any written consent concerning any matter as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, and to otherwise act as each such attorney-in-fact and proxy or his or her substitute shall in his or her sole discretion deem proper with respect to, all of the Shares (and any and all Distributions) tendered hereby and accepted for payment by Purchaser. This appointment will be effective if and when, and only to the extent that, Purchaser accepts such Shares for payment pursuant to the Offer. This power of attorney and proxy are irrevocable and are granted in consideration of the acceptance for payment of such Shares in accordance with the terms of the Offer. Such acceptance for payment shall, without further action, revoke any prior powers of attorney and proxies granted by the undersigned at any time with respect to such Shares (and any and all Distributions), and no subsequent powers of attorney, proxies, consents or revocations may be given by the undersigned with respect thereto (and, if given, will not be deemed effective). Purchaser reserves the right to require that, in order for the Shares or other securities to be deemed validly tendered, immediately upon Purchaser's acceptance for payment of such Shares, Purchaser must be able to exercise full voting, consent and other rights with respect to such Shares (and any and all Distributions), including voting at any meeting of the Company's stockholders. 4 5 The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and all Distributions and that, when the same are accepted for payment by Purchaser, Purchaser will acquire good, marketable and unencumbered title thereto and to all Distributions, free and clear of all liens, restrictions, charges and encumbrances and the same will not be subject to any adverse claims. The undersigned will, upon request, execute and deliver any additional documents deemed by the Depositary or Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby and all Distributions. In addition, the undersigned shall remit and transfer promptly to the Depositary for the account of Purchaser all Distributions in respect of the Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance and transfer or appropriate assurance thereof, Purchaser shall be entitled to all rights and privileges as owner of each such Distribution and may withhold the entire purchase price of the Shares tendered hereby or deduct from such purchase price, the amount or value of such Distribution as determined by Purchaser in its sole discretion. All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned, and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, successors and assigns of the undersigned. Except as stated in the Offer, this tender is irrevocable. The undersigned understands that the valid tender of the Shares pursuant to any one of the procedures described in "The Offer -- Procedures for Accepting the Offer and Tendering Shares" in the Offer to Purchase and in the Instructions hereto will constitute a binding agreement between the undersigned and Purchaser upon the terms and subject to the conditions of the Offer (and if the Offer is extended or amended, the terms or conditions of any such extension or amendment). Without limiting the foregoing, if the price to be paid in the Offer is amended in accordance with the Merger Agreement, the price to be paid to the undersigned will be the amended price notwithstanding the fact that a different price is stated in this Letter of Transmittal. The undersigned recognizes that under certain circumstances set forth in the Offer to Purchase, Purchaser may not be required to accept for payment any of the Shares tendered hereby. Unless otherwise indicated under "Special Payment Instructions," please issue the check for the purchase price of all of the Shares purchased and/or return any certificates for the Shares not tendered or accepted for payment in the name(s) of the undersigned. Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price of all of the Shares purchased and/or return any certificates for the Shares not tendered or not accepted for payment (and any accompanying documents, as appropriate) to the undersigned at the address(es) shown below the undersigned's signature(s). In the event that the boxes entitled "Special Payment Instructions" and "Special Delivery Instructions" are both completed, please issue the check for the purchase price of all Shares purchased and/or return any certificates evidencing Shares not tendered or not accepted for payment (and any accompanying documents, as appropriate) in the name(s) of, and deliver such check and/or return any such certificates (and any accompanying documents, as appropriate) to, the person(s) so indicated. Unless otherwise indicated herein in the box entitled "Special Payment Instructions", please credit any Shares tendered herewith by book-entry transfer that are not accepted for payment by crediting the account at the Book-Entry Transfer Facility designated above. The undersigned recognizes that Purchaser has no obligation, pursuant to the "Special Payment Instructions," to transfer any Shares from the name of the registered holder thereof if Purchaser does not accept for payment any of the Shares so tendered. 5 6 SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if the check for cash payable in the Offer is to be issued in the name of someone other than the undersigned, if certificates for Shares not tendered or not accepted for payment are to be issued in the name of someone other than the undersigned or if Shares tendered hereby and delivered by book-entry transfer that are not accepted for payment are to be returned by credit to an account maintained at a Book-Entry Transfer Facility other than the account indicated above. Issue [ ] check [ ] certificate(s) to: Name ------------------------------------------------------------------- (PLEASE PRINT) ------------------------------------------------------------------- Address ------------------------------------------------------------------- ------------------------------------------------------------------- (ZIP CODE) ------------------------------------------------------------------- TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for Shares not tendered or not accepted for payment and/or the check for cash payable in the Offer is to be sent to someone other than the undersigned or to the undersigned at an address other than that shown below the undersigned's signature(s). Mail [ ] check [ ] certificate(s) to: Name -------------------------------------------------------------------- (PLEASE PRINT) ------------------------------------------------------------------- Address ------------------------------------------------------------------- ------------------------------------------------------------------- (ZIP CODE) -------------------------------------------------------------------- TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER (SEE SUBSTITUTE FORM W-9) 6 7 IMPORTANT SIGN HERE (PLEASE COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SIGNATURE(S) OF STOCKHOLDERS Dated - -------------------------------------------------------------------------------- Name(s) - -------------------------------------------------------------------------------- Capacity (Full Title) - -------------------------------------------------------------------------------- (SEE INSTRUCTION 5) Address - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number - -------------------------------------------------------------------------------- Taxpayer Identification or Social Security Number - -------------------------------------------------------------------------------- (SEE SUBSTITUTE FORM W-9) (Must be signed by registered holder(s) exactly as name(s) appear(s) on the Share certificate(s) or on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 5.) GUARANTEE OF SIGNATURE(S) (IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5) FOR USE BY FINANCIAL INSTITUTIONS ONLY. PLACE MEDALLION GUARANTEE IN SPACE BELOW. Authorized Signature(s) - -------------------------------------------------------------------------------- Name - -------------------------------------------------------------------------------- Name of Firm - -------------------------------------------------------------------------------- Address - -------------------------------------------------------------------------------- (INCLUDE ZIP CODE) Area Code and Telephone Number - -------------------------------------------------------------------------------- Dated - -------------------------------------------------------------------------------- 7 8 WHAT NUMBER TO GIVE THE DEPOSITARY The stockholder is required to give the Depositary the TIN (e.g., Social Security number or Employer Identification Number) of the record owner of the Shares. If the Shares are registered in more than one name or are not registered in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report.
- ------------------------------------------------------------------------------------------------------------------ PAYER'S NAME: REH MERGERSUB INC. - ------------------------------------------------------------------------------------------------------------------ SUBSTITUTE PART 1 -- PLEASE PROVIDE YOUR TIN IN THE BOX AT ------------------------ FORM W-9 RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Social Security Number(s) OR DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE - ---------------------------- Employer Identification Number(s) ------------------------------------------------------------------------------------ PAYER'S REQUEST FOR PART 2 -- Certification -- Under Penalties of Part 3 -- TAXPAYER IDENTIFICATION Perjury, I certify that: Awaiting TIN [ ] NUMBER ("TIN") (1) The number shown on the form is my correct ------------------------------ AND CERTIFICATIONS taxpayer identification number (or I am waiting Part 4 -- for a number to be issued to me) and Exempt from backup withholding (2) I am not subject to backup withholding [ ] because: (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding. (3) Any other information provided on this form is true, correct and complete. ------------------------------------------------------------------------------------ Certification Instructions -- You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS that you are no longer subject to backup withholding, do not cross out item (2). Name ---------------------------- Address ---------------------------- (Include zip code) Signature ---------------------------- Date ---------------------------- - ------------------------------------------------------------------------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY IMPOSED BY THE IRS AND BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9" FOR ADDITIONAL DETAILS. NOTE: YOU MUST COMPLETE THE FOLLOWING CERTIFICATION IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9 CERTIFICATION OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate IRS Center or Social Security Administration office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all reportable cash payments made to me thereafter will be withheld until I provide a taxpayer identification number to the payer 8 and that, if I do not provide my taxpayer identification number within sixty days, such retained amounts shall be remitted to the IRS as backup withholding. Signature - ------------------------------------------------------------ Date ---------- 9 9 INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. Guarantee of Signatures. No signature guarantee is required on this Letter of Transmittal (a) if this Letter of Transmittal is signed by the registered holder(s) (which term, for purposes of this Section, includes any participant in the Book-Entry Transfer Facility's systems whose name appears on a security position listing as the owner of the Shares) of Shares tendered herewith, unless such registered holder(s) has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on this Letter of Transmittal or (b) if such Shares are tendered for the account of a financial institution (including most commercial banks, savings and loan associations and brokerage houses) that is a participant in the Security Transfer Agents Medallion Program (an "Eligible Institution"). In all other cases, all signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution. See Instructions 5 and 7. 2. Requirements of Tender. This Letter of Transmittal is to be completed by stockholders if certificates are to be forwarded herewith or, unless an Agent's Message is utilized, if tenders are to be made pursuant to the procedure for tender by book-entry transfer set forth in "The Offer -- Procedures for Accepting the Offer and Tendering Shares" in the Offer to Purchase. Share Certificates evidencing tendered Shares, or timely confirmation (a "Book-Entry Confirmation") of a book-entry transfer of Shares into the Depositary's account at the Book-Entry Transfer Facility, as well as this Letter of Transmittal (or a facsimile hereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry transfer, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein prior to the Expiration Date (as defined in "The Offer -- Terms of the Offer" in the Offer to Purchase). Stockholders whose Share Certificates are not immediately available, or who cannot complete the procedure for delivery by book-entry transfer on a timely basis or who cannot deliver all other required documents to the Depositary prior to the Expiration Date, may tender their Shares by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in "The Offer -- Procedures for Accepting the Offer and Tendering Shares" in the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution; (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by Purchaser, must be received by the Depositary prior to the Expiration Date; and (iii) the Share Certificates (or a Book-Entry Confirmation) evidencing all tendered Shares, in proper form for transfer, in each case together with the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees (or, in the case of a book-entry delivery, an Agent's Message) and any other documents required by this Letter of Transmittal, must be received by the Depositary within three New York Stock Exchange trading days after the date of execution of such Notice of Guaranteed Delivery. If Share Certificates are forwarded separately to the Depositary, a properly completed and duly executed Letter of Transmittal must accompany each such delivery. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND THE RISK OF THE TENDERING STOCKHOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY (INCLUDING, IN THE CASE OF BOOK-ENTRY TRANSFER, BY BOOK-ENTRY CONFIRMATION). IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal (or a facsimile hereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. Inadequate Space. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares and any other required information should be listed on a separate signed schedule attached hereto. 4. Partial Tenders (not applicable to stockholders who tender by book-entry transfer). If fewer than all of the Shares evidenced by any Share Certificate are to be tendered, fill in the number of Shares that are to be tendered in the box entitled "Number of Shares Tendered." In this case, new Share Certificates for the Shares that were evidenced by your old Share Certificates, but were not tendered by you, will be sent to you, unless otherwise provided 9 10 in the appropriate box on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by Share Certificates delivered to the Depositary will be deemed to have been tendered unless indicated. 5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. If any of the Shares tendered hereby are held of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any of the tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations. If this Letter of Transmittal or any certificates or stock powers are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to Purchaser of the authority of such person so to act must be submitted. If this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made or certificates for Shares not tendered or not accepted for payment are to be issued in the name of a person other than the registered holder(s). Signatures on any such Share Certificates or stock powers must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered holder(s) of the certificate(s) listed and transmitted hereby, the certificate(s) must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name(s) of the registered holder(s) appear(s) on the certificate(s). Signature(s) on any such Share Certificates or stock powers must be guaranteed by an Eligible Institution. 6. Stock Transfer Taxes. Except as otherwise provided in this Instruction 6, Purchaser will pay all stock transfer taxes with respect to the transfer and sale of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or if certificate(s) for Shares not tendered or not accepted for payment are to be registered in the name of, any person other than the registered holder(s), or if tendered certificate(s) are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s) or such other person) payable on account of the transfer to such other person will be deducted from the purchase price of such Shares purchased unless evidence satisfactory to Purchaser of the payment of such taxes, or exemption therefrom, is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATE(S) EVIDENCING THE SHARES TENDERED HEREBY. 7. Special Payment and Delivery Instructions. If a check is to be issued in the name of, and/or certificates for Shares not tendered or not accepted for payment are to be issued or returned to, a person other than the signer of this Letter of Transmittal or if a check and/or such certificates are to be returned to a person other than the person(s) signing this Letter of Transmittal or to an address other than that shown in this Letter of Transmittal, the appropriate boxes on this Letter of Transmittal must be completed. 8. Substitute Form W-9. Under the federal income tax laws, the Depositary will be required to withhold 31% of the amount of any payments made to certain stockholders pursuant to the Offer. In order to avoid such backup withholding, each tendering stockholder, and, if applicable, each other payee, must provide the Depositary with such stockholder's or payee's correct taxpayer identification number and certify that such stockholder or payee is not subject to backup withholding by completing the Substitute Form W-9 set forth above. In general, if a stockholder or payee is an individual, the taxpayer identification number is the Social Security Number of such individual. If the Depositary is not provided with the correct taxpayer identification number, the stockholder or payee may be subject to a $50 penalty imposed by the Internal Revenue Service. Certain stockholders or payees (including, among others, all corporations) are not subject to these backup withholding and reporting requirements. In order to satisfy the Depositary that a stockholder or payee qualifies as an exempt recipient, such stockholder or payee must submit a statement, signed under penalties of perjury, attesting to that individual's exempt status by completing the Substitute Form W-9. For further information concerning backup withholding and instructions for completing the Substitute 11 11 Form W-9 (including how to obtain a taxpayer identification number if you do not have one, and how to complete the Substitute Form W-9 if Shares are held in more than one name), consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. Stockholders who are non-resident aliens or foreign entities not subject to backup withholding must complete a Form W-8BEN (Certificate of Foreign Status) (and not a Substitute Form W-9) and give the Depositary a completed Form W-8BEN prior to the receipt of any payments to avoid backup withholding. Such Form W-8BEN may be obtained from the Depositary. Failure to complete the Substitute Form W-9 will not, by itself, cause Shares or Share Certificates to be deemed invalidly tendered, but may require the Depositary to withhold 31% of the amount of any payments made pursuant to the Offer. Backup withholding is not an additional federal income tax. Rather, the federal income tax liability of a person subject to backup withholding may be reduced by the amount of tax withheld provided appropriate information is furnished to the Internal Revenue Service. If withholding results in an overpayment of taxes, a refund may be obtained provided that the required information is furnished to the Internal Revenue Service. NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 9. Requests for Assistance or Additional Copies. Questions and requests for assistance or additional copies of the Offer to Purchase, this Letter of Transmittal, the Notice of Guaranteed Delivery, IRS Form W-8BEN and the Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 may be directed to the Information Agent or Dealer Manager at the addresses and phone numbers set forth below, or from brokers, dealers, commercial banks or trust companies. 10. Waiver of Conditions. Subject to the terms and conditions of the Merger Agreement (as defined in the Offer to Purchase), Purchaser reserves the right, in its sole discretion, to waive, at any time or from time to time, any of the specified conditions of the Offer, in whole or in part, in the case of any Shares tendered (other than the Minimum Condition and certain other conditions). 11. Lost, Destroyed or Stolen Certificates. If any certificate representing Shares has been lost, destroyed or stolen, the stockholder should promptly notify Fleet National Bank, care of EquiServe, in its capacity as transfer agent for the Shares (telephone number: (800) 736-3001). The stockholder will then be instructed as to the steps that must be taken in order to replace the certificate. This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A MANUALLY SIGNED FACSIMILE HEREOF) TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE AND EITHER CERTIFICATES FOR TENDERED SHARES MUST BE RECEIVED BY THE DEPOSITARY OR SHARES MUST BE DELIVERED PURSUANT TO THE PROCEDURES FOR BOOK-ENTRY TRANSFER, IN EACH CASE PRIOR TO THE EXPIRATION DATE, OR THE TENDERING STOCKHOLDER MUST COMPLY WITH THE PROCEDURES FOR GUARANTEED DELIVERY. 12 12 THE INFORMATION AGENT FOR THE OFFER IS: [MACKENZIE PARTNERS LOGO] 156 Fifth Avenue New York, NY 10010 (212) 929-5500 or Call Toll Free: (800) 322-2885 THE DEALER MANAGER FOR THE OFFER IS: MORGAN STANLEY DEAN WITTER Morgan Stanley & Co. Incorporated 1585 Broadway New York, New York 10036 (212) 761-4834 EX-99.A.3 4 y42082ex99-a_3.txt NOTICE OF GUARANTEED DELIVERY 1 Exhibit (a)(3) NOTICE OF GUARANTEED DELIVERY To Tender Shares of Common Stock and Shares of Series A Cumulative Convertible Stock of HARCOURT GENERAL, INC. This Notice of Guaranteed Delivery, or a form substantially equivalent hereto, must be used to accept the Offer (as defined below) (i) if certificates evidencing Shares (as defined below) are not immediately available, (ii) if the procedure for book-entry transfer cannot be completed on a timely basis, or (iii) if time will not permit all required documents to reach Citibank, N.A. (the "Depositary") on or prior to the Expiration Date (as defined in the Offer to Purchase). This form may be delivered by hand, transmitted by facsimile transmission or mailed to the Depositary and must include a guarantee by an Eligible Institution (as defined in the Offer to Purchase) in the form set forth herein. See "The Offer -- Procedures for Accepting the Offer and Tendering Shares" in the Offer to Purchase. THE DEPOSITARY FOR THE OFFER IS: CITIBANK, N.A. BY MAIL: BY OVERNIGHT COURIER: BY HAND: Citibank, N.A. Citibank, N.A. Citibank, N.A. P.O. Box 685 915 Broadway, 5th Floor Corporate Trust Window Old Chelsea Station New York, NY 10010 111 Wall Street, 5th Floor New York, NY 10113 New York, NY 10043
BY FACSIMILE TRANSMISSION: (FOR ELIGIBLE INSTITUTIONS ONLY) (212) 505-2248 CONFIRM FACSIMILE BY TELEPHONE: (800) 270-0808 DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OR FACSIMILE NUMBER OTHER THAN ONE SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE DEPOSITARY. THIS NOTICE OF GUARANTEED DELIVERY TO THE DEPOSITARY IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEES MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE SIGNATURE BOX ON THE LETTER OF TRANSMITTAL. THE ELIGIBLE INSTITUTION THAT COMPLETES THIS FORM MUST COMMUNICATE THE GUARANTEE TO THE DEPOSITARY AND MUST DELIVER THE LETTER OF TRANSMITTAL OR AN AGENT'S MESSAGE (AS DEFINED IN THE OFFER TO PURCHASE) AND CERTIFICATES FOR SHARES TO THE DEPOSITARY WITHIN THE TIME PERIOD SHOWN HEREIN. FAILURE TO DO SO COULD RESULT IN A FINANCIAL LOSS TO SUCH ELIGIBLE INSTITUTION. THE GUARANTEE ON THE REVERSE SIDE MUST BE COMPLETED. 2 LADIES AND GENTLEMEN: The undersigned hereby tenders to REH Mergersub Inc., a Delaware corporation and a wholly owned subsidiary of Reed Elsevier Inc., a Massachusetts corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 8, 2000 (the "Offer to Purchase") and the related Letter of Transmittal (which, together with any amendments or supplements thereto, constitute the "Offer"), receipt of which is hereby acknowledged, the number of shares of common stock, par value $1.00 per share (the "Common Shares"), and/or the number of shares of series A cumulative convertible stock, par value $1.00 per share (the "Preferred Shares," and together with the Common Shares, the "Shares"), of Harcourt General, Inc., a Delaware corporation (the "Company"), set forth below, pursuant to the guaranteed delivery procedures set forth in the Offer to Purchase. Signature(s): -------------------------------------- Address(es): ------------------------------------------ Name(s) of Record Holders: ------------------------- ------------------------------------------------------- ZIP CODE - ---------------------------------------------------- Area Code and Tel. No.(s): ---------------------------- PLEASE TYPE OR PRINT Number of Common Shares: ------------------------------------ Check box if Shares will be tendered by book-entry transfer: [ ] Certificate No(s). (if available): - --------------------------------------------------- Account Number: ------------------------------------- Number of Preferred Shares: --------------------------------- Check box if Shares will be tendered by book-entry transfer: [ ] Certificate No(s). (if available): - --------------------------------------------------- Account Number: ------------------------------------- Dated: --------------------------------------------
2 3 THE GUARANTEE SET FORTH BELOW MUST BE COMPLETED GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program, (a) represents that the above named person(s) "own(s)" the Shares tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended ("Rule 14e-4"), (b) represents that such tender of Shares complies with Rule 14e-4 and (c) guarantees to deliver to the Depositary either the certificates evidencing all tendered Shares, in proper form for transfer, or to deliver Shares pursuant to the procedure for book-entry transfer into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility"), in either case together with the Letter of Transmittal (or a facsimile thereof) properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) in the case of a book-entry delivery, and any other required documents, all within three New York Stock Exchange trading days after the date hereof. Name of Firm: ------------------------- Authorized Signature: --------------- Address: ------------------------------ Name: ------------------------------- PLEASE PRINT - --------------------------------------- Title: ------------------------------ ZIP CODE Area Code and Tel No.: ---------------- Dated: ------------------------ NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED DELIVERY. CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. 3 EX-99.A.4 5 y42082ex99-a_4.txt BROKER DEALER LETTER 1 Exhibit (a)(4) MORGAN STANLEY & CO. INCORPORATED 1585 BROADWAY NEW YORK, NEW YORK 10036 OFFER TO PURCHASE FOR CASH All Outstanding Shares of Common Stock AND All Outstanding Shares of Series A Cumulative Convertible Stock OF HARCOURT GENERAL, INC. AT $59.00 NET PER SHARE FOR EACH SHARE OF COMMON STOCK AND $77.29 NET PER SHARE FOR EACH SHARE OF SERIES A CUMULATIVE CONVERTIBLE STOCK BY REH MERGERSUB INC. a wholly owned subsidiary of REED ELSEVIER INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, DECEMBER 7, 2000, UNLESS THE OFFER IS EXTENDED November 8, 2000 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by REH Mergersub Inc., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Reed Elsevier Inc., a Massachusetts corporation ("Parent"), to act as Dealer Manager in connection with Purchaser's offer to purchase all outstanding shares of common stock, par value $1.00 per share (the "Common Shares"), and all outstanding shares of series A cumulative convertible stock, par value $1.00 per share (the "Preferred Shares," and together with the Common Shares, the "Shares"), of Harcourt General, Inc., a Delaware corporation (the "Company"), at a purchase price of $59.00 per Common Share, net to the seller in cash, without interest thereon, and $77.29 per Preferred Share, net to the seller in cash, without interest thereon, in each case upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 8, 2000 (the "Offer to Purchase") and the related Letter of Transmittal enclosed herewith (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). 2 The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn prior to the expiration of the Offer a number of shares of Common Shares which, together with any Shares owned, directly or indirectly, by Parent or Purchaser, or any subsidiary or controlled affiliate, represent on the date of purchase, at least a majority in voting power of the then outstanding shares of Common Shares (on a fully diluted basis) and (ii) any approvals, clearances or waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other requisite or advisable approvals, clearances or waiting periods under any other material antitrust laws applicable to the Offer, the Merger or the subsequent transaction between Parent and The Thomson Corporation (as described in the Offer to Purchase) having been obtained, expired or been terminated. The Offer is also subject to other conditions. For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents: 1. Offer to Purchase; 2. Letter of Transmittal for your use in accepting the Offer and tendering Shares and for the information of your clients; 3. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 providing information relating to backup federal income tax withholding; 4. Notice of Guaranteed Delivery to be used to accept the Offer if certificates for Shares are not immediately available or if such certificates and all other required documents cannot be delivered to Citibank, N.A. (the "Depositary"), or if the procedures for book-entry transfer cannot be completed on a timely basis; 5. A form of letter that may be sent to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 6. Return envelope addressed to the Depositary; and 7. The Company's Solicitation/Recommendation Statement on Schedule 14D-9. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, DECEMBER 7, 2000, UNLESS THE OFFER IS EXTENDED. Purchaser will not pay any fees or commissions to any broker or dealer or other person (other than the Depositary, the Information Agent and the Dealer Manager as described in the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer. Purchaser will, however, upon request, reimburse you for customary mailing and handling costs incurred by you in forwarding the enclosed materials to your customers. Purchaser will pay or cause to be paid all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, except as otherwise provided in Instruction 6 of the Letter of Transmittal. In order to accept the Offer, a duly executed and properly completed Letter of Transmittal (or a facsimile thereof) and any required signature guarantees or, in the case of a book-entry transfer of Shares, an Agent's Message (as defined in the Offer to Purchase) in lieu of the Letter of Transmittal, and any other required documents, should be sent to the Depositary by 12:00 midnight, New York City time, on Thursday, December 7, 2000. Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained from, the Information Agent or the undersigned at the addresses and telephone numbers set forth on the back cover of the Offer to Purchase. Very truly yours, Morgan Stanley & Co. Incorporated NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON AS AN AGENT OF PARENT, PURCHASER, THE COMPANY, THE DEALER MANAGER, THE INFORMATION AGENT, THE DEPOSITARY OR ANY AFFILIATE OF ANY OF THE FOREGOING OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE DOCUMENTS ENCLOSED HEREWITH AND THE STATEMENTS CONTAINED THEREIN. 2 EX-99.A.5 6 y42082ex99-a_5.txt CLIENT LETTER 1 Exhibit (a)(5) OFFER TO PURCHASE FOR CASH All Outstanding Shares of Common Stock AND All Outstanding Shares of Series A Cumulative Convertible Stock OF HARCOURT GENERAL, INC. AT $59.00 NET PER SHARE FOR EACH SHARE OF COMMON STOCK AND $77.29 NET PER SHARE FOR EACH SHARE OF SERIES A CUMULATIVE CONVERTIBLE STOCK BY REH MERGERSUB INC. a wholly owned subsidiary of REED ELSEVIER INC. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, DECEMBER 7, 2000, UNLESS THE OFFER IS EXTENDED November 8, 2000 To Our Clients: Enclosed for your consideration are the Offer to Purchase dated November 8, 2000 (the "Offer to Purchase") and the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer") in connection with the offer by REH Mergersub Inc., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Reed Elsevier Inc., a Massachusetts corporation ("Parent"), to purchase all outstanding shares of common stock, par value $1.00 per share (the "Common Shares"), and all outstanding shares of series A cumulative convertible stock, par value $1.00 per share (the "Preferred Shares," and together with the Common Shares, the "Shares"), of Harcourt General, Inc., a Delaware corporation (the "Company"), at a purchase price of $59.00 per Common Share, net to the seller in cash, without interest thereon, and $77.29 per Preferred Share, net to the seller in cash, without interest thereon, in each case upon the terms and subject to the conditions set forth in the Offer to Purchase and in the Letter of Transmittal enclosed herewith. WE ARE THE HOLDER OF RECORD OF SHARES FOR YOUR ACCOUNT. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE ENCLOSED LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. 2 We request instructions as to whether you wish us to tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer to Purchase. Your attention is invited to the following: 1. The offer price is $59.00 per Common Share, net to you in cash, without interest. 2. The offer price is $77.29 per Preferred Share, net to you in cash, without interest. 3. The Offer is being made for all of the outstanding Shares. 4. The Offer and withdrawal rights expire at 12:00 midnight, New York City time, on Thursday, December 7, 2000, unless the Offer is extended. 5. The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of October 27, 2000 (the "Merger Agreement"), among Parent, Purchaser and the Company. The Merger Agreement provides, among other things, that, after the Offer is consummated, Purchaser will be merged into the Company (the "Merger") following the satisfaction or waiver of each of the conditions to the Merger set forth in the Merger Agreement. 6. The Board of Directors of the Company has unanimously determined that the Offer and the Merger are fair to, and in the best interests of, the stockholders of the Company and recommends that the Company's stockholders accept the Offer and tender their Shares. 7. The Offer is conditioned upon, among other things, (i) there being validly tendered and not withdrawn prior to the expiration of the Offer a number of shares of Common Shares which, together with any Shares owned, directly or indirectly, by Parent or Purchaser, or any subsidiary or controlled affiliate, represent on the date of purchase, at least a majority in voting power of the then outstanding shares of Common Shares (on a fully diluted basis) and (ii) any approvals, clearances or waiting periods under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and other requisite or advisable approvals, clearances or waiting periods under any other material antitrust laws applicable to the Offer, the Merger or the subsequent transaction between Parent and The Thomson Corporation having been obtained, expired or been terminated. The Offer is also subject to other conditions (as described in the Offer to Purchase). 8. Tendering stockholders who are record owners of their Shares and tender directly to the Depositary (as defined below) will not be obligated to pay brokerage fees or commissions. Any stock transfer taxes applicable to the sale of Shares to Purchaser pursuant to the Offer will be paid by Purchaser, except as otherwise provided in Instruction 6 of the Letter of Transmittal. If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing and returning to us the instruction form set forth on the reverse side of this letter. An envelope to return your instructions to us is also enclosed. If you authorize the tender of your Shares, all such Shares will be tendered unless otherwise specified on the reverse side of this letter. YOUR INSTRUCTIONS SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT A TENDER ON YOUR BEHALF PRIOR TO THE EXPIRATION OF THE OFFER. The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction. Payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by Citibank, N.A. (the "Depositary") of (a) certificates evidencing such Shares or confirmation of the book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility"), pursuant to the procedures set forth in the Offer to Purchase under "Procedures for Accepting the Offer and Tendering Shares", (b) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) in lieu of the Letter of Transmittal, and (c) any other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering stockholders at the same time depending upon when certificates for or confirmations of book-entry transfer of such Shares into the Depositary's account at the Book-Entry Transfer Facility are actually received by the Depositary. 2 3 INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH ALL OUTSTANDING SHARES OF COMMON SHARES AND ALL OUTSTANDING SHARES OF SERIES A CUMULATIVE CONVERTIBLE STOCK OF HARCOURT GENERAL, INC. BY REH MERGERSUB INC. A WHOLLY OWNED SUBSIDIARY OF REED ELSEVIER INC. The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase dated November 8, 2000 and the related Letter of Transmittal, in connection with the offer by REH Mergersub Inc., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Reed Elsevier Inc., a Massachusetts corporation, to purchase all outstanding shares of common stock, par value $1.00 per share (the "Common Shares"), and all outstanding shares of series A cumulative convertible stock, par value $1.00 per share (the "Preferred Shares," and together with the Common Shares, the "Shares"), of Harcourt General, Inc., a Delaware corporation (the "Company"), at a purchase price of $59.00 per Common Share, net to the seller in cash, without interest thereon, and $77.29 per Preferred Share, net to the seller in cash, without interest thereon, in each case upon the terms and subject to the conditions set forth in the Offer to Purchase and in the Letter of Transmittal enclosed herewith. This will instruct you to tender to Purchaser the number of Shares indicated below (or, if no number is indicated below, all Shares) that are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer to Purchase and the related Letter of Transmittal. - ------------------------------------------------------ Number of Shares to Be Tendered:* - ------------------------------ Common Shares - ------------------------------ Preferred Shares Account No.: - ------------------------------------------------------ Dated: - ------------------------------------------------------ - ------------------------------------------------------ - ------------------------------------------------------ SIGN HERE --------------------------------------------------- SIGNATURE(S) --------------------------------------------------- PRINT NAME(S) --------------------------------------------------- ADDRESS(ES) --------------------------------------------------- AREA CODE AND TELEPHONE NUMBER --------------------------------------------------- TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER - ----------------------------------------------------------------- * Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered. 3 EX-99.A.6 7 y42082ex99-a_6.txt W-9 GUIDELINES 1 Exhibit (a)(6) GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 HOW TO OBTAIN A TAXPAYER IDENTIFICATION NUMBER. -- If you do not have a taxpayer identification number, apply for one immediately. To apply, obtain FORM SS-5, Application for a Social Security Card (for individuals), from your local office of the Social Security Administration (or, in the case of resident aliens who do not have and are not eligible for Social Security numbers, Form W-7, Application for Individual Taxpayer Identification Number), or FORM SS-4, Application for Employer Identification Number (for businesses and all other entities), from your local IRS office. PAYEES AND PAYMENTS EXEMPT FROM BACKUP WITHHOLDING. -- Payees specifically exempted from backup withholding include the following: (1) A corporation. (2) An organization exempt from tax under Internal Revenue Code Section 501(a), or an IRA, or a custodial account under Section 403(b)(7) if the custodial account satisfies the requirements of Section 401(f)(2). (3) The United States or any of its agencies or instrumentalities. (4) A state, the District of Columbia, a possession of the United States, or any of their political subdivisions or instrumentalities. (5) A foreign government or any of it political subdivisions, agencies or instrumentalities. (6) An international organization or any of its wholly owned agencies or instrumentalities. (7) A foreign central bank of issue. (8) A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. (9) A real estate investment trust. (10) An entity registered at all times during the tax year under the Investment Company Act of 1940. (11) A common trust fund operated by a bank under Section 584(a). (12) A financial institution. Exempt payees described above should complete the Substitute Form W-9 to avoid possible erroneous backup withholding. FILE THAT FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER IN PART 1 OF THE SUBSTITUTE FORM W-9, CHECK THE BOX IN PART 4 OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER. PENALTIES FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER. -- If you fail to furnish your correct taxpayer identification number to a requester, you may become subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. -- If you make a false statement with no reasonable basis that results in no backup withholding, you may become subject to a $500 penalty. CRIMINAL PENALTY FOR FALSIFYING INFORMATION. -- Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. PRIVACY ACT NOTICE. -- Section 6109 of the Internal Revenue Code requires most recipients of dividends, interest, or certain other payments to furnish their correct taxpayer identification number to persons who must file information returns with the IRS. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. You must provide your taxpayer identification number whether or not you are required to file a tax return. Payers must generally withhold 31% of such payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. FOR ADDITIONAL INFORMATION CONTACT YOUR OWN TAX ADVISOR. 2 WHAT NAME AND NUMBER TO GIVE THE PAYER:
- ------------------------------------------------------------ GIVE THE NAME AND SOCIAL SECURITY NUMBER OR OTHER TAXPAYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF: - ------------------------------------------------------------ 1. Individual The individual 2. Two or more individuals (joint The actual owner of account) the account or, if combined funds, the first individual on the account(1) 3. Custodian account of a minor The minor(2) (Uniform Gift to Minors Act) 4. a. The usual revocable savings The grantor- trust (grantor is also trustee) trustee(1) b. So-called trust account that is The actual owner(1) not a legal or valid trust under state law 5. Sole proprietorship The owner(3) 6. A valid trust, estate or pension Legal entity(4) trust - ------------------------------------------------------------
- ------------------------------------------------------------ GIVE THE NAME AND EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF: - ------------------------------------------------------------ FOR THIS TYPE OF ACCOUNT: NUMBER OF: - ------------------------------------------------------------ 7. Corporate The corporation 8. Association, club, religious, The organization charitable, educational, or other tax-exempt organization 9. Partnership The partnership 10. A broker or registered nominee The broker or nominee 11. Account with the Department of The public entity Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agriculture program payment - ------------------------------------------------------------
1. List first and circle the name of the person whose number you furnish. 2. Circle the minor's name and furnish the minor's social security number. 3. You must show your individual name, but you may also enter your business or "doing business as" name. You may use either your social security number or employer identification number. 4. List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the taxpayer identification number of the personal representative or trustee unless the legal entity itself is not designated in the account title.) NOTE: IF NO NAME IS CIRCLED WHEN THERE IS MORE THAN ONE NAME, THE NUMBER WILL BE CONSIDERED TO BE THAT OF THE FIRST NAME LISTED. EX-99.A.7 8 y42082ex99-a_7.txt SUMMARY ADVERTISEMENT 1 Exhibit (a)(7) This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made only by the Offer to Purchase, dated November 8, 2000, and the related Letter of Transmittal and any amendments or supplements thereto and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer will be deemed to be made on behalf of Purchaser by the Dealer Manager or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH ALL OF THE OUTSTANDING SHARES OF COMMON STOCK AND ALL OF THE OUTSTANDING SHARES OF SERIES A CUMULATIVE CONVERTIBLE STOCK OF HARCOURT GENERAL, INC. AT $59.00 NET PER SHARE FOR EACH SHARE OF COMMON STOCK AND $77.29 NET PER SHARE FOR EACH SHARE OF SERIES A CUMULATIVE CONVERTIBLE STOCK BY REH MERGERSUB INC. A WHOLLY OWNED SUBSIDIARY OF REED ELSEVIER INC. REH Mergersub Inc., a Delaware corporation ("Purchaser") and a wholly owned subsidiary of Reed Elsevier Inc., a Massachusetts corporation ("Parent"), is offering to purchase all outstanding shares of Common Stock, par value $1.00 per share (the "Common Shares") and all outstanding shares of Series A Cumulative Convertible Stock, par value $1.00 per share (the "Preferred Shares," and together with the Common Shares, the "Shares"), of Harcourt General, Inc., a Delaware corporation (the "Company"), at a purchase price of $59.00 per Common Share, net to the seller in cash, without interest (the "Common Offer Price") and $77.29 per Preferred Share, net to the seller in cash, without interest (the "Preferred Offer 2 Price") in each case upon the terms and subject to the conditions set forth in the Offer to Purchase dated November 8, 2000 (the "Offer to Purchase") and in the related Letter of Transmittal (which, together with any amendments or supplements thereto, collectively constitute the "Offer"). THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, DECEMBER 7, 2000, UNLESS THE OFFER IS EXTENDED. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER A NUMBER OF COMMON SHARES WHICH, TOGETHER WITH ANY SHARES OWNED, DIRECTLY OR INDIRECTLY, BY PARENT OR PURCHASER, OR ANY SUBSIDIARY OR CONTROLLED AFFILIATE, REPRESENT ON THE DATE OF PURCHASE, AT LEAST A MAJORITY IN VOTING POWER OF COMMON SHARES (DETERMINED ON A FULLY DILUTED BASIS) AND (ii) ANY APPROVALS, CLEARANCES OR WAITING PERIODS UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976 AND OTHER REQUISITE OR ADVISABLE APPROVALS, CLEARANCES OR WAITING PERIODS UNDER ANY OTHER MATERIAL ANTITRUST LAWS APPLICABLE TO THE OFFER, THE MERGER (AS DEFINED BELOW) OR THE SUBSEQUENT TRANSACTION BETWEEN PARENT AND THE THOMSON CORPORATION (AS DESCRIBED IN THE OFFER TO PURCHASE) HAVING BEEN OBTAINED, EXPIRED OR TERMINATED. THE OFFER IS ALSO SUBJECT TO OTHER CONDITIONS. The Offer is being made pursuant to the Agreement and Plan of Merger, dated as of October 27, 2000 (the "Merger Agreement"), among Parent, Purchaser and the Company. The purpose of the Offer is for Parent to acquire control of, and the entire equity interest in, the Company. The Merger Agreement provides that, among other things, Purchaser will make the Offer and that as soon as practicable after the purchase of Shares pursuant to the Offer, and the satisfaction or waiver of the other conditions set forth in the Merger Agreement, Purchaser will be merged with and into the Company, with the Company continuing as the surviving corporation (the "Merger"). At the effective of the Merger, each Common Share and each Preferred Share outstanding immediately prior to such time (other than Common Shares and Preferred Shares owned by Parent or Purchaser or the Company as treasury stock or the subsidiaries of the Company, all of which will be cancelled (other than Common Shares held by the subsidiaries of the Company), and other than Common Shares that are held by stockholders, if any, who properly exercise their appraisal rights under the Delaware General Corporation Law), will be converted into the right to receive $59.00 (or any greater per Common Share price paid in the Offer) in cash, without interest, in the case of the Common Shares or $77.29 (or any greater per Preferred Share price paid in the Offer) in cash, without interest, in the case of the Preferred Shares. 2 3 THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES. For purposes of the Offer, Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not properly withdrawn as, if and when Purchaser gives oral or written notice to Citibank, N.A. (the "Depositary") of Purchaser's acceptance for payment of such Shares pursuant to the Offer. Upon the terms and subject to the conditions of the Offer, payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the Common Offer Price or the Preferred Offer Price, as the case may be, therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payments from Purchaser and transmitting such payments to tendering stockholders whose Shares have been accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE COMMON OFFER PRICE FOR COMMON SHARES OR THE PREFERRED OFFER PRICE FOR PREFERRED SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after the timely receipt by the Depositary of (i) the certificates evidencing such Shares (the "Share Certificates") or confirmation of a book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company (the "Book-Entry Transfer Facility") pursuant to the procedures set forth in the Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase) in lieu of the Letter of Transmittal, and (iii) any other documents required by the Letter of Transmittal. Accordingly, payment may be made to tendering stockholders at different times if delivery of the Shares and other required documents occur at different times. Subject to the terms of the Merger Agreement and the applicable rules and regulations of the Securities and Exchange Commission, Purchaser expressly reserves the right, in its sole discretion, at any time and from time to time, to extend the period of time during which the Offer is open by giving oral or written notice of such extension to the Depositary. Any such extension will be publicly announced by press release issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date of the Offer. Tenders of Shares made pursuant to the Offer may be withdrawn at any time prior to the Expiration Date (as defined in the Offer to Purchase). Thereafter, such tenders are irrevocable, except that they may be withdrawn after January 6, 2001, unless theretofore accepted for payment as provided in the Offer to Purchase. For a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one 3 4 of its addresses set forth on the back cover page of the Offer to Purchase. Any such notice of withdrawal must specify the name and address of the person who tendered the Shares to be withdrawn, the class and number of Shares to be withdrawn and the name of the registered holder of such Shares, if different from that of the person who tendered the Shares. If Share Certificates evidencing Shares to be withdrawn have been delivered or otherwise identified to the Depositary, then, prior to the physical release of such Share Certificates, the serial numbers shown on such Share Certificates must be submitted to the Depositary and the signature(s) on the notice of withdrawal must be guaranteed by an Eligible Institution (as defined in the Offer to Purchase), unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer as set forth in the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at the Book-Entry Transfer Facility to be credited with the withdrawn Shares and must otherwise comply with the Book- Entry Transfer Facility's procedures. All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by Purchaser, in its sole discretion, whose determination will be final and binding. The receipt by a stockholder of the Company of cash for Shares pursuant to the Offer and the Merger will be a taxable transaction for United States federal income tax purposes and may also be a taxable transaction under applicable state, local or foreign tax laws. All stockholders are urged to consult with their own tax advisors as to the particular tax consequences to them of the Offer and the Merger. The information required to be disclosed by paragraph (d)(1) of Rule 14d-6 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended, is contained in the Offer to Purchase and is incorporated herein by reference. The Company has provided to Purchaser its list of stockholders and security position listings for the purpose of disseminating the Offer to holders of Shares. The Offer to Purchase, the related Letter of Transmittal and other related materials are being mailed to record holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the shareholder list or, if applicable, who are listed as participants in a clearing agency's security position listing, for subsequent transmittal to beneficial owners of Shares. THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION THAT SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. 4 5 Questions and requests for assistance and copies of the Offer to Purchase, the Letter of Transmittal and all other tender offer materials may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth below and will be furnished promptly at Purchaser's expense. Neither of Parent or Purchaser will pay any fees or commissions to any broker or dealer or any other person (other than to the Dealer Manager, the Depositary and the Information Agent) in connection with the solicitation of tenders of Shares pursuant to the Offer. THE INFORMATION AGENT FOR THE OFFER IS: [MACKENZIE LOGO] 156 FIFTH AVENUE NEW YORK, NY 10010 (212) 929-5500 (CALL COLLECT) E-MAIL: proxy@mackenziepartners.com OR CALL TOLL FREE: (800) 322-2885 THE DEALER MANAGER FOR THE OFFER IS: MORGAN STANLEY DEAN WITTER 1585 Broadway New York, New York 10036 (212) 761-4834 November 8, 2000 5 EX-99.B.1 9 y42082ex99-b_1.txt COMMITMENT LETTER 1 Exhibit (b)(1) Deutsche Bank AG London Morgan Stanley Dean Witter Bank Winchester House Limited 1 Great Winchester Street 25 Cabot Square London EC2N 2DB Canary Wharf London E14 4QA Morgan Stanley Senior Funding, Inc. 1585 Broadway New York, New York 10036 USA To: Reed International P.L.C. Elsevier NV 25 Victoria Street PO Box 470 London SW1H 0EX 1000 AL Amsterdam Reed Elsevier Inc. ("RE INC.") Elsevier Finance SA ("EFSA") 275 Washington Street Rue du Seyon 5 Newton 2004 Neuchatel 4 Massachussets Switzerland USA 02158 7 November, 2000 Project Hotel - Commitment Letter Dear Sirs: Reed International P.L.C. ("REED") and Elsevier NV ("ELSEVIER" and together with Reed the "PARENTS") have advised Deutsche Bank AG London ("DEUTSCHE") and Morgan Stanley Dean Witter Bank Limited ("MSDW BANK") (the "LEAD Arrangers") and Deutsche and Morgan Stanley Senior Funding, Inc. (the "UNDERWRITERS") that a subsidiary of RE Inc. proposes to acquire (the "ACQUISITION") all of the capital stock of Harcourt General, Inc. (the "Target") (as described in the Agreement and Plan for Merger dated as of 27 October, 2000 between Reed Elsevier Inc., REH Mergersub Inc. and Target (the "ACQUISITION AGREEMENT" and together with all other documents relating thereto (the "ACQUISITION DOCUMENTS")) at a purchase price of up to US$4,571,000,000 pursuant to an offer document (the "OFFER 2 DOCUMENT"). Terms defined in the Term Sheet attached hereto (the "TERM SHEET") shall bear the same meaning herein. 1. THE FACILITIES You have indicated to the Lead Arrangers that you are seeking up to US$8.5 billion in facilities (the "FACILITIES") to (i) fund the purchase price for the Acquisition, (ii) pay for related fees and expenses of the Acquisition, (iii) refinance existing financial indebtedness and (iv) finance ongoing working capital needs and general corporate requirements. The Acquisition and the related financing are herein referred to as the "TRANSACTION". The Underwriters are pleased to offer to commit to provide or to cause one or more of their respective affiliates (which in the case of Morgan Stanley Senior Funding, Inc. may include MSDW Bank) to each provide 50 per cent. of the US$8.5 billion of Facilities consisting of (a) two revolving loan facilities and (b) a term loan facility in amounts and on terms and conditions outlined herein, in the Term Sheet and in the letters of even date herewith (the "FEE LETTERS") providing for certain fees relating to the Facilities. This Commitment Letter, the Term Sheet and the Fee Letters are together referred to herein as the "COMMITMENT DOCUMENTS". Deutsche and MSDW Bank are pleased to offer to act as the Joint Lead Arrangers and Joint Bookrunners with respect to the Facilities. Deutsche shall act as Facility Agent under the Facilities. The Lead Arrangers shall be permitted to allocate to one or more Lenders the titles of arranger, co-arranger or such other title as the Lead Arrangers may determine, in consultation with you, with respect to the Facilities. It is agreed that any lending institution in the Parents' existing club facility which commits US$400 million (or such other amount as is mutually agreed among ourselves and yourselves) or more with respect to the Facilities shall be named as an arranger. Please note that those matters that are not covered or made clear in this Commitment Letter are subject to mutual agreement of the parties hereto. 2. CONDITIONALITY The obligations of the Lead Arrangers and the Underwriters under paragraph 1 are conditional upon (a) no breach by you of the terms of this Commitment Letter which continues unremedied or unwaived; (b) no written information (other than projections which shall be prepared in good faith and based upon reasonable assumptions) provided by you to the Lead Arrangers in relation to the Transaction proving to be inaccurate, incomplete or misleading in any respect which, in the reasonable opinion of the Lead Arrangers, is material; and (c) such other conditions as are specified in the Term Sheet. We and you agree to proceed promptly to negotiate the Facility Agreement (which shall be substantially on the terms contained in the Term Sheet) in good faith with a view to finalising a mutually acceptable Facility Agreement as soon as practicable and in any event by 15 December 2000. Neither the Lead Arrangers nor the Underwriters shall be liable to any of the Parents, RE Inc. or EFSA for any costs, expenses, liabilities or losses incurred by any of the Parents, RE Inc. -2- 3 or EFSA as a result of any of their respective withdrawals of their offers to arrange or underwrite the Facilities (or following acceptance of this Commitment Letter by the Parents, RE Inc. and EFSA, their agreements to do so) hereunder in accordance with the provisions set out under "Conditionality" above. The Commitment Documents shall not be used by any of the Parents, RE Inc. or EFSA for any purpose and may not be disclosed or in any way relied upon by any of the Parents, RE Inc. or EFSA unless and until it is accepted (by way of countersignature in accordance with the requirements hereof) and delivered to the Lead Arrangers and the Underwriters. 3. SYNDICATION AND INFORMATION MEMORANDUM (a) You acknowledge that the Lead Arrangers expect to syndicate the Facilities to a group of financial institutions and the commitment of the Underwriters shall be reduced to the extent such institutions commit to provide portions of the Facilities. The Lead Arrangers shall, in consultation with you, manage all aspects of the syndication, including its timing, the selection of potential Lenders, the acceptance and allocation of commitments and the amount and distribution of fees among Lenders. (b) In accordance with market practice, an information memorandum (the "INFORMATION MEMORANDUM") containing relevant information concerning the Facilities, the Parents, RE Inc., EFSA, their subsidiaries and affiliates and the Acquisition will be provided on a confidential basis to potential Lenders on your behalf. The Lead Arrangers will prepare the Information Memorandum on your behalf. You agree to co-operate, and to use your reasonable efforts to cause the management of the Target to co-operate, with the Lead Arrangers in the preparation of the Information Memorandum and in effecting the syndication of the Facilities, including, without limitation, participating in a reasonable number of Lender and potential Lender group meetings held in connection with such syndication. You also agree to use reasonable efforts to ensure that the syndication efforts benefit from the existing lending relationships of Reed Elsevier. (c) The final version of the Information Memorandum and any additional or supporting information to be provided to prospective participants in the Facilities will be approved by you prior to distribution to prospective participants in the Facilities. (d) The Parents, RE Inc. and EFSA agree to make a representation to the Lead Arrangers and the other actual and prospective participants in the Facilities (i) concerning the material accuracy and completeness of all information in relation to Reed Elsevier (prior to giving effect to the Acquisition) contained in the Information Memorandum and (ii) that all projections contained in the Information Memorandum have been or will be prepared in good faith and based on assumptions which were believed to be reasonable at the time prepared. 4. EXCLUSIVITY By your acceptance below you agree that from the date of acceptance of the offer set forth in this Commitment Letter until completion of the syndication described in the preceding paragraph (as notified to you by the Lead Arrangers): (a) the Lead Arrangers, in relation to the Facilities, will act as exclusive Joint Lead Arrangers. Further (other than as provided in this Commitment Letter) there shall be no -3- 4 appointment of any other arrangers or underwriters in relation to the Facilities without the prior agreement of the Lead Arrangers and the Underwriters as to the identity of any such arrangers/underwriters and the timing of such appointment(s); and (b) from the date hereof to the earlier of 30 April, 2001 and notification by the Lead Arrangers of completion of general syndication, the Parents, RE Inc. and EFSA will and will procure that their respective subsidiaries and affiliates will ensure that no new debt financing or offering (other than any (i) commercial paper issuances, (ii) short term bank borrowings and overdrafts not exceeding US$200 million in total at any time, (iii) rollovers of bilateral facilities and (iv) long term public debt with a maturity of not less than 4 years) shall be syndicated, issued or privately placed by or on behalf of any of them (and there shall be no announcement or discussion of, or any attempt to effect, any such syndication, issue or placement) and no mandate for any such financing or offering shall be awarded. 5. INDEMNITY By your acceptance below and in consideration of the entry into this letter by the Lead Arrangers and the Underwriters, you hereby agree with the Lead Arrangers and the Underwriters for themselves and as trustees for each of the other Indemnified Persons (as defined below): (a) to indemnify and hold harmless the Lead Arrangers, the Underwriters, each of their affiliates and each of their respective directors, officers, employees, agents, attorneys, affiliates and controlling persons (each an "INDEMNIFIED PERSON") from and against any and all losses, claims, damages, liabilities (or actions or other proceedings commenced or threatened in respect thereof) that arise out of, result from or in any way relate to the Commitment Documents, the Transaction or the other transactions contemplated hereby or the providing or syndicating of the Facilities, and to reimburse each Indemnified Person, upon its demand, for any legal and/or other expenses incurred in connection with investigating, defending or participating in any such loss, claim, damages, liability, action or other proceeding (whether or not such Indemnified Person is a party to any action or proceeding out of which such expenses arise), other than any of the foregoing claimed by any Indemnified Person to the extent finally determined by a court of competent jurisdiction (against which no appeal is or can be made) to have resulted directly and primarily from the gross negligence or wilful default of such Indemnified Person; and (b) to reimburse the Lead Arrangers, the Underwriters and each of their affiliates from time to time upon demand for its and their respective reasonable out of pocket costs and expenses (including, without limitation, legal fees and expenses, valuation, consultant and other professional fees, and printing, reproduction and document delivery costs) incurred in connection with the syndication of the Facilities and the preparation, review, negotiation, execution and delivery of the Commitment Documents, the definitive financing agreement (the "FACILITY AGREEMENT") and any other documents relating to the Transaction. You also agree that no Indemnified Person shall have any liability (whether direct or indirect, in contract or tort or otherwise) to you or any of your affiliates for or in connection with the transactions contemplated by this Commitment Letter, except, following your acceptance hereof, for breach of the terms of this Commitment Letter or the gross negligence or wilful default of such Indemnified Person. No Indemnified Person shall be responsible or liable to any other person for consequential damages. -4- 5 6. FEES As consideration for the agreements of the Lead Arrangers and the Underwriters contained in this Commitment Letter, you agree to pay the fees set out in the Fee Letters. Once paid such fees shall not be refundable under any circumstances. 7. PAYMENTS (a) All payments under this Commitment Letter and the Fee Letters shall be made without any set-off or counter-claim and free and clear of any withholding or deduction (whether on account of tax or otherwise) save as may be required by law. If you are required by law to make any deduction or withholding from any sum payable hereunder or thereunder, the sum in respect of which the deduction or withholding is required to be made shall be increased to the extent necessary to ensure that the Lead Arrangers, the Underwriters or, as the case may be, the Facility Agent (and any relevant Indemnified Person) receive and retain a net sum equal to that which they (or, as the case may be, the relevant Indemnified Person) would have received had no such deduction or withholding been required to be made. All payments to be made under this Commitment Letter and the Fee Letters shall be made in immediately available freely transferable funds and in the currency of invoice to such account with such bank in the principal financial centre of the currency of invoice as the Lead Arrangers, the Underwriters or, as the case may be, the Facility Agent, shall notify. All fees and other amounts payable under this Commitment Letter and the Fee Letters are exclusive of any value added tax. If any value added tax is payable, you agree to pay this at the same time as the relevant payment under this Commitment Letter or, as the case may be, the Fee Letters, are paid. (b) If and to the extent that you pay any additional amount under paragraph 7(a) and either of the Lead Arrangers, the Underwriters or as the case may be, the Facility Agent (in their respective opinions exercised in good faith) receive the benefit of a refund of tax or credit against tax which is identified by that Lead Arranger, that Underwriter or, as the case may be the Facility Agent, as attributable to the tax that was withheld or deducted (a "TAX CREDIT"), then that Lead Arranger, that Underwriter or, as the case may be, the Facility Agent, shall reimburse to you such amount as it shall determine so as to leave that Lead Arranger, the Underwriter or, as the case may be, the Facility Agent, after that reimbursement, in no better or worse position than they would have been in if payment of the relevant additional amount had not been required. The Lead Arrangers, the Underwriters or, as the case may be, the Facility Agent, shall not be obliged to disclose any information regarding their respective tax affairs or computations to the Parents, RE Inc. or EFSA and their respective certificates as to the amount to be reimbursed shall, in the absence of manifest error, be conclusive and shall not be questioned by any of the Parents, RE Inc. or EFSA. 8. AFFILIATES You acknowledge that the Lead Arrangers, the Underwriters or any of their affiliates may be providing debt financing, equity capital or other services (including financial advisory services) to other companies in respect of which you or your affiliates may have conflicting interests regarding the transactions described herein and otherwise. Neither the Lead Arrangers nor the Underwriters will use confidential information obtained from you or any of your affiliates by virtue of the transactions contemplated by this Commitment Letter or their other relationships with you and your affiliates in connection with the performance by the -5- 6 Lead Arrangers or the Underwriters of services for other companies, and neither the Lead Arrangers nor the Underwriters will furnish any such information to other companies. You also acknowledge that none of the Lead Arrangers or the Underwriters has any obligation to use in connection with the transactions contemplated by this Commitment Letter, or to furnish to you or any of your affiliates, confidential information obtained from other companies. 9. CONFIDENTIALITY The Commitment Documents are delivered to you on the condition that they be kept confidential and not shown to or discussed with any third party (other than on a confidential and need to know basis with your counsel or your financial advisers, and except as required by applicable law or regulation, or in order to enforce the terms of the Commitment Documents) without the prior written approval of the Lead Arrangers and the Underwriters. No public announcement in relation to the Facilities shall be made by any of the Parents, RE Inc. or EFSA or their respective affiliates without the prior written consent of the Lead Arrangers and the Underwriters. 10. GOVERNING LAW This letter shall be governed by, and construed in accordance with English law. The parties hereto submit to the non-exclusive jurisdiction of the English courts. 11. COUNTERPARTS This Commitment Letter and the Fee Letters may be executed in any number of counterparts, each of which shall be an original and all of which, when taken together with the Term Sheet, shall constitute one agreement. Delivery of an executed signature page to this Commitment Letter or the Fee Letters by fax shall be as effective as delivery of a manually executed document. 12. ASSIGNMENT AND AMENDMENTS The Commitment Documents and your rights thereunder may not be assigned by you without the prior written consent of the Lead Arrangers and the Underwriters and may not be amended or any provision hereof or thereof waived or modified except by an instrument in writing signed by each of the parties hereto. 13. PARTIAL INVALIDITY If any provision of the Commitment Documents is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions hereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby. 14. THIRD PARTY RIGHTS It is agreed that: -6- 7 (a) no provision of this Commitment Letter other than paragraphs 5 and 7 shall be enforceable by a person who is not a party hereto (a "THIRD PARTY"); (b) each third party referred to in paragraphs 5 and 7 shall have the right to enforce those provisions; and (c) this Commitment Letter may be rescinded or amended without the consent of any such third party as is referred to in paragraph 5 or 7. 15. NO FRONT RUNNING Each of the Lead Arrangers agrees with, and acknowledges and confirms to the other Lead Arranger as follows: (a) until the close of primary syndication, it will not, and it will procure that none of its affiliates will, engage in any Prohibited Activity; (b) neither it nor any of its affiliates has engaged in any Prohibited Activity; and (c) if it or any of its affiliates engages in any Prohibited Activity before the close of primary syndication the other Joint Arranger may suffer loss or damage and its position in future financing with the other Joint Arranger and Reed Elsevier may be prejudiced. In this paragraph 15: "CLOSE OF PRIMARY SYNDICATION" means the date on which the Joint Bookrunners notify each participant as to the allocations of commitments relating to the Facilities; "FACILITY INTEREST" means a legal, beneficial or economic interest acquired or to be acquired in or in relation to the Facilities, whether as initial Lender or by way of assignment, transfer, novation, sub-participation (whether disclosed, undisclosed, risk or funded) or any other similar method; and "PROHIBITED ACTIVITY" means each of the following: (a) entering into or continuing any discussion or other communication with any person which is intended to or is reasonably likely to: (i) discourage any person from taking a Facility Interest as a Lender of record in primary syndication; or (ii) encourage any person to take a Facility Interest except as a Lender of record in primary syndication; or (b) making a bid or offer price (whether firm or indicative) with a view to buying or selling a Facility Interest; or (c) entering into any agreement, option or other arrangement, whether legally binding or not, in relation to the acquisition of any Facility Interest (whether on an indicative basis, a "when and if issued" basis or otherwise), -7- 8 but excludes any communication, offer or arrangement made with an affiliate of the relevant Lead Arranger. 16. ACCEPTANCE The offer of the Lead Arrangers and the Underwriters set forth in this Commitment Letter will terminate at 5.00 p.m. (London time) on Tuesday 8 November, 2000 unless you accept this Commitment Letter at or prior to that time by signing and returning to the Lead Arrangers and the Underwriters counterparts of this Commitment Letter, together with the Fee Letters. The Lead Arrangers and the Underwriters reserve the right to terminate such offer at any time prior to your acceptance of this Commitment Letter as described above. The commitment of the Underwriters under this Commitment Letter, if accepted by you, will in any event terminate at 5.00 p.m. (London time) on 15 December, 2000 if the Facility Agreement shall not have been signed by yourselves and ourselves on or prior to such date. Your obligations under the sections headed "Exclusivity", "Indemnity" and "Confidentiality" of this Commitment Letter shall survive any such termination and if incorporated in the Facility Agreement will be on substantially the terms of the Commitment Letter. If you are in agreement with the foregoing, please sign and return to the undersigned one copy of this Commitment Letter. Yours faithfully, DEUTSCHE BANK AG LONDON as Lead Arranger By: /s/ John Burgess _____________________ Name: John Burgess Title: Director MORGAN STANLEY DEAN WITTER BANK LIMITED as Lead Arranger By: /s/ Kevin Adeson _____________________ Name: Kevin Adeson Title: Executive Director DEUTSCHE BANK AG LONDON as Underwriter By: /s/ Sean Malone _____________________ Name: Sean Malone Title: Director -8- 9 MORGAN STANLEY SENIOR FUNDING, INC. as Underwriter By: /s/ John S. Wotowicz _____________________ Name: John S. Wotowicz Title: Managing Director Accepted and agreed this 7th day of November, 2000 REED INTERNATIONAL P.L.C. By: /s/ Mark H. Armour _____________________ Name: Mark H. Armour Title: Director and Chief Financial Officer ELSEVIER NV By: /s/ Erik Ekker _____________________ Name: Erik Ekker Title: Company Secretary REED ELSEVIER INC. By: /s/ Paul Richardson _____________________ Name: Paul Richardson Title: Senior Vice President and Treasurer ELSEVIER FINANCE SA By: /s/ Jacques Billy _____________________ Name: Jacques Billy Title: Managing Director -9- 10 PROJECT HOTEL Summary terms and conditions for credit facilities in a maximum aggregate amount of US$8.5 billion to be made available in connection with the Acquisition (as defined in the Commitment Letter dated 7 November, 2000 signed by Deutsche Bank AG London ("DEUTSCHE"), Morgan Stanley Dean Witter Bank Limited ("MSDW Bank"), Morgan Stanley Senior Funding, Inc., Reed International P.L.C., Elsevier NV, Reed Elsevier Inc. and Elsevier Finance SA to which this Term Sheet is attached (the "COMMITMENT LETTER" )) Terms defined in the Commitment Letter shall, unless otherwise defined or the context requires otherwise, bear the same meaning in this Term Sheet. JOINT LEAD ARRANGERS: Deutsche and MSDW Bank. BORROWERS: A Facility and B Facility: Reed Elsevier Inc., Elsevier Finance SA and such other wholly- owned subsidiaries of the Borrowers as agreed to by the Lenders. C Facility: Reed Elsevier Inc. GUARANTORS: A Facility and B Facility: Reed International P.L.C. and Elsevier NV. C Facility: None at signing of the Facility Agreement. If the C Facility is drawn but the On Sale Transaction is not consummated promptly thereafter, then a guarantee of the C Facility from the Parents will be required within 7 business days after receiving shareholder approval to enable the Parents 11 to give such guarantee. In the event of failure to deliver such guarantee on or before 25 April 2001, Reed Elsevier plc and Elsevier Finance SA shall grant guarantees of the A, B and C Facilities. Such guarantees shall terminate automatically upon the repayment and cancellation in full of the C Facility. PARENTS: Reed International P.L.C. and Elsevier NV. BORROWERS' AGENT: Reed Elsevier plc. REED ELSEVIER: The Parents, Reed Elsevier plc, Elsevier Reed Finance BV and their respective subsidiaries from time to time. OBLIGORS: The Borrowers and the Guarantors from time to time. MATERIAL SUBSIDIARIES: Reed Elsevier plc, Elsevier Reed Finance BV and other members of Reed Elsevier whose adjusted net profits, net assets or net revenues represent at least 10% of the combined adjusted net profits, net assets or net revenues of Reed Elsevier and all of whose adjusted net profits, net assets or net revenues taken as a whole represent at least 80% of the combined adjusted net profits, net assets or net revenues of Reed Elsevier. UNDERWRITERS: Deutsche and Morgan Stanley Senior Funding, Inc. FACILITY AGENT: Deutsche. JOINT BOOK RUNNERS: Deutsche and MSDW Bank. DOCUMENTATION AGENTS: Deutsche and MSDW Bank. LENDERS: The Underwriters and a group of banks or financial institutions selected by the Lead Arrangers in consultation with the Obligors. DOLLAR SWINGLINE AGENT: Deutsche Bank AG, New York Branch. -2- 12 EURO SWINGLINE AGENT: Deutsche. FACILITIES AND AMOUNTS: US$8.5 billion comprising of: (a) a 364 day revolving loan facility (subject to exercise of the Term-Out Option referred to below) in an aggregate maximum amount of up to US$4.0 billion (the "A FACILITY"); (b) a 3 year revolving loan facility in an aggregate maximum amount of up to US$2.5 billion (the "B FACILITY") incorporating a US$ Swingline loan facility in an aggregate maximum amount of up to US$750 million (the " DOLLAR SWINGLINE FACILITY") and a Euro Swingline loan facility in an aggregate maximum amount equal to the Euro equivalent of up to US$250 million (the "EURO SWINGLINE FACILITY" and together with the Dollar Swingline Facility, the "SWINGLINE FACILITIES"); and (c) a 364 day multiple-draw term loan facility in an aggregate maximum amount of US$2.0 billion (the "C FACILITY"). CURRENCY: The Facilities will be denominated in US Dollars and advances ("ADVANCES") made under the Facilities may be made available in US Dollars, Euros, Sterling and such other currencies freely available and convertible into US Dollars as the Lenders shall agree. PURPOSE: (a) The proceeds of the A Facility will be applied in or towards: (i) payment of cash consideration for the acquisition of capital stock of the Target and refinancing existing indebtedness of the Target and its subsidiaries (the "TARGET GROUP"); and (ii) fees and other expenses incurred in connection with the Acquisition. (b) The proceeds of the B Facility will be applied in or towards: -3- 13 (i) refinancing of existing indebtedness of the Borrowers; and (ii) working capital and other general corporate purposes of Reed Elsevier. (c) The proceeds of the C Facility will be applied in or towards: (i) payment of cash consideration for the acquisition of capital stock of the Target, whether for the purchase of shares or the payment of merger consideration, and refinancing existing indebtedness of the Target Group; (ii) fees and other expenses incurred in connection with the Acquisition and the On Sale Transaction; and (iii) working capital and other general corporate purposes of the Target Group. AVAILABILITY: The Facilities (following satisfaction of all conditions precedent and subject to all representations and warranties being correct in all material respects and no Event of Default or Potential Event of Default having occurred which remains unremedied or unwaived), will be available for drawing by way of cash advances and in minimum amounts of US$50 million and integral multiples of US$10 million: (a) A Facility: from the date of the Facility Agreement to one month before the A Facility Maturity Date; and (b) B Facility: from the date of the Facility Agreement to one month before the B Facility Maturity Date; and (c) C Facility: from the date the A Facility is drawndown in full until 31 July, 2001. There shall be no more than 10 Advances outstanding under each Facility at any time. -4- 14 The notice periods for Advances shall be: US Dollars and other currencies - 3 business days and Sterling - 2 business days, provided that the initial Advances under the A and B Facilities may be requested upon 1 business days notice subject to indemnification by the Borrowers of the Lenders' breakage costs (if any). The initial Advance under the C Facility and Advances under the Swingline Facilities will be available on a same day basis. TERM-OUT OPTION: The Borrowers' Agent may, by giving written notice to the Facility Agent not less than one month prior to the A Facility Maturity Date, exercise the Term-Out Option. If the Term-Out Option is exercised, then on the A Facility Maturity Date, (a) all Advances outstanding under the A Facility shall be consolidated into a single term loan; (b) any available commitment under the A Facility shall be cancelled; and (c) the A Facility Maturity Date shall be extended to the Extended A Facility Maturity Date. TERM FACILITIES: The C Facility and, if the Term Out Option is exercised, the A Facility. REVOLVING FACILITIES: The B Facility, and prior to exercise of the Term Out Option, the A Facility. TERM-OUT OPTION FEE: If the Term-Out Option is exercised, the Borrowers shall, on the dates the revolving loans are converted to term loans, pay a fee calculated at the rate of 0.05% flat on the amount of the A Facility consolidated into the term loan pursuant to the Term-Out Option. FINAL MATURITY DATES: (a) A Facility: the date which is 364 days after the date of the Facility Agreement ("A FACILITY MATURITY DATE") or, if the Term-Out Option is exercised, the date which is 12 months after the A Facility Maturity Date (the, "EXTENDED A FACILITY MATURITY DATE"). (b) B Facility: 3 years after the date of the Facility Agreement. (c) C Facility: 364 days after the date of the Facility Agreement. REPAYMENT: All outstandings under each Term Facility shall be repaid by a single payment on the Final Maturity Date for the relevant Facility. Each Advance under the Revolving Facilities shall be outstanding for a single period (its -5- 15 "TERM") and shall be repaid on the last day of its Term. INTEREST PERIODS AND TERMS: In respect of Advances (not being Advances under the Swingline Facilities or the initial Advance under the C Facility), one, two, three or six months at the option of the relevant Borrower or such other period as the Lenders may agree provided that, until the end of the general syndication of the Facilities, Interest Periods and Terms will be limited to periods of one month or such shorter periods as the Lead Arrangers shall require in consultation with the Borrowers' Agent. In respect of Advances under the Swingline Facilities a period of up to 5 business days. In respect of the initial Advance under the C Facility, such period as the Borrowers' Agent and the Lenders under the C Facility shall agree. No Interest Period or Term shall end after the relevant Final Maturity Date for a Facility. INTEREST RATES: 1. In relation to Advances (other than Advances under the Swingline Facilities and the initial Advance under the C Facility), the sum of: (a) the relevant Margin; (b) LIBOR (for Advances in US Dollars, Sterling and other currencies (other than Euro)) or EURIBOR (for Advances in Euro) in each case for the relevant currency and Interest Period or Term; and (c) mandatory and reserve asset costs (if any) including the cost of compliance with the requirements of the European Central Bank and the cost of compliance with the requirements of the Bank of England and/or the Financial Services Authority ("MANDATORY COSTS"). "LIBOR" means the London Interbank Offered Rate and "EURIBOR" means the European Interbank Offered Rate, in each case as appearing on the applicable Telerate Screen at or about 11 a.m. (London time, or Brussels time in the case of EURIBOR) on the applicable rate fixing day or, if not available, as quoted by the Reference Banks (selected by the Facility Agent in consultation with the Borrowers' Agent) to leading banks for the relevant currency and Interest Period or Term. 2. In relation to Advances under the Dollar Swingline -6- 16 Facility the higher of: (a) the prime rate of the Swingline Agent; and (b) the federal funds rate plus 0.50%. 3. In relation to Advances under the Euro Swingline Facility: (a) the rate referenced "EONIA" displayed on Reuters screen "EONIA" on the relevant rate fixing day; or (b) if not available the sum of (i) the rate which is the arithmetic mean of the rates quoted by the Reference Banks (selected by the Euro Swingline Agent in consultation with the Borrowers' Agent) as their respective overnight interest rates for Euro deposits on that day in the European interbank market and (ii) 0.10% above the then relevant Margin for the B Facility. 4. In relation to Advances under the C Facility the sum of: (a) the relevant Margin; (b) (i) for the initial Advance requested on a same day basis, the cost to each relevant Lender of funding its participation in such Advance from such funding sources as it may reasonably select for the relevant currency and Interest Period and (ii) for all other Advances, LIBOR or EURIBOR in each case for the relevant currency and Interest Period; and (c) Mandatory Costs. Interest to be payable at the end of each Interest Period and Term and in the case of an Interest Period or Term greater than six months, at the end of each six month period and shall be calculated on the basis of the actual number of days elapsed over a 365/360 day year (or according to market practice for the relevant currency). Interest will be charged on overdue sums at the rate otherwise applicable plus 1%. -7- 17 MARGIN: The Margin for each Facility shall be as set out in the Annex. COMMITMENT COMMISSION: Commitment Commission shall be payable from and after the signing of the Facility Agreement, quarterly in arrears and on the date of any cancellation of any Facility, for each Facility as set out in the Annex and calculated on the aggregate undrawn commitments under the Facilities. UTILISATION FEE: If on any day (i) the total commitments under the Facilities exceed US$2.5 billion and (ii) the total aggregate amount of outstandings under the Facilities equals or exceeds 50 per cent of the total commitments under the Facilities, then a Utilisation Fee shall be payable as set out in the Annex. Accrued Utilisation Fees shall be payable quarterly in arrears and on the date of any cancellation of any Facility. AGENCY FEE: In amounts and at the times set out in the Agency Fee Letter. VOLUNTARY PREPAYMENT: At any time in whole or in part (but if in part in a minimum amounts of US$50 million and an integral multiple of US$10 million) on 5 business days' notice in respect of any Advance without penalty, but subject to payment of broken funding costs if the prepayment is not made on the last day of an Interest Period or Term. Amounts prepaid under Term Facilities may not be reborrowed. MANDATORY PREPAYMENT: Prepayment (with corresponding reductions to and cancellation of commitments) will be mandatory, in full or in part, as the case may be, in the following circumstances:- (a) in full on a Change of Control or sale of substantially all of the business/assets of the Parents and/or any Material Subsidiaries. "Change of Control" shall be defined as (i) any person or any group (other than a Parent) acting in concert acquiring more than 50% of the voting stock of either Parent or (ii) failure of the Parents to own, directly or indirectly, or together with the other Parent, the whole of the capital stock of any other Obligors (other than a Parent); (b) upon the disposal of the Higher Education Group and/or Corporate and Professional Services Group businesses of the Target to The Thomson -8- 18 Corporation or otherwise (the "ON SALE TRANSACTION") the outstandings under the C Facility shall be repaid in full; (c) from 100% of the proceeds of disposal of assets by any members of Reed Elsevier (net of costs and expenses of disposal and tax incurred in connection with the disposal) in excess of US$250 million in aggregate per annum or the equivalent thereof in any other currency, subject to customary rights of reinvestment within 6 months; (d) from 100% of the net proceeds of any debt capital market transaction (howsoever described) effected by any member of Reed Elsevier with a value of more than US$50 million; and (e) from 100% of the net proceeds of any sale or issuance of additional equity or capital contribution or other raising of equity funds by any member of Reed Elsevier in the national or international equity markets. The Mandatory Prepayment requirements in relation to the circumstances set out in paragraphs (c), (d) and (e) shall only apply at such times as the aggregate total of commitments under the Facilities exceeds US$2.5 billion. Such repayments may be applied against the different Facilities at the discretion of the Borrowers' Agent, provided that, other than in relation to paragraph (b) above, there shall not be any prepayment application against the C Facility until such time as the A and B Facilities have been repaid and cancelled in full. VOLUNTARY CANCELLATION: The A Facility and the B Facility may be voluntarily cancelled in whole or in part (but if in part in a minimum amount of US$50 million and an integral multiple of US$10 million) on 2 business days notice without penalty. MANDATORY COMMITMENT The commitments under the A Facility shall be REDUCTIONS: reduced and cancelled by an amount equal to the principal amount of public debt of the Target and/or of the existing club facility of Reed Elsevier which shall remain outstanding on and after the date of the consummation of the Acquisition after -9- 19 giving effect thereto (except to the extent that the commitments under the A Facility have already been reduced prior to that date in anticipation of such debt remaining outstanding), provided that the Borrowers' Agent may request that up to US$850 million of the commitments under the A Facility shall not be cancelled until the date which is seven days after the initial Advance under the Facility Agreement if a like amount of public debt of the Target remains outstanding, so long as such amount of commitment under the A Facility is blocked and may only be drawn to repay such public debt. CONDITIONS PRECEDENT: No Advance shall be made under any Facility until the Facility Agent has received or waived the following conditions precedent in form and substance reasonably satisfactory to it: (i) execution of the Facility Agreement (including all required guarantees) together with all other documents relating to the Facilities (the "FINANCING DOCUMENTS")); (ii) certified copies of the constitutional documents, corporate authorities and specimen signatures for each Obligor; (iii) satisfactory legal opinions from (a) White & Case, English counsel to the Lenders, (b) White & Case, US counsel to the Lenders (c) Dutch counsel to the Lenders, (d) Swiss counsel to the Lenders and (e) local counsel to the Lenders and/or the Obligors in the jurisdiction of incorporation of each of the Obligors to the extent not covered by the legal opinions referred to above; (iv) a certified copy of a structure document showing funds flow and confirming the material structure of Reed Elsevier; (v) certified copies of all the Acquisition Documents, completion of the Acquisition on or before 31 July, 2001 and a certificate from the Parents to the Facility Agent -10- 20 stating that: (a) all US Hart Scott Rodino waiting periods relating to the Acquisition have expired or relevant clearances have been obtained, and all other material antitrust requirements relating to the Acquisition or the On Sale Transaction have either been satisfied in all material respects, or will be complied with in all material respects following the Acquisition; (b) no other condition to the Acquisition has failed to be satisfied in any respect which the Parents believe would make it inadvisable to proceed with the Acquisition; (c) the "Minimum Condition" set forth in the Offer Document has been satisfied; and (d) the Acquisition has been consummated in accordance with the Acquisition Documents in all material respects. (vi) written acceptance by agents for service of process in England (in respect of Obligors not incorporated under the laws of England and Wales) and New York; (vii) written confirmation of cancellation of the US$ 1 billion loan agreement dated 24 October, 2000 and made between (1) Reed Elsevier (UK) Limited and Reed Elsevier Inc. (as Original Borrowers), (2) Reed International P.L.C. and Elsevier NV (as Guarantors) and (3) Morgan Stanley Senior Funding Inc. (as Bank); (viii) all necessary consents, approvals, authorisations, licences, exemptions, filings, notarisations, registrations in connection with the Financing Documents; -11- 21 and (ix) payment of all fees, expenses and other costs payable under the Commitment Documents. REPRESENTATIONS AND Representation and warranties usual for WARRANTIES: facilities of this type (subject to customary exceptions and qualifications to be agreed) including: (a) in relation to the Obligors, due incorporation, power and authority to perform, all consents obtained and compliance with laws, and obligations legal, valid and binding in relation to the Acquisition Documents and the Financing Documents, (together the "TRANSACTION DOCUMENTS"); (b) in relation to the Obligors and all Material Subsidiaries, no material litigation, no winding-up or insolvency proceedings, no material defaults, no material unpaid taxes or overdue filings; (c) accuracy and completeness in all material respects of the Information Memorandum, and all written information/reports provided, accuracy and basis of preparation of accounts to be delivered after the date of the Facility Agreement and disclosure of all material borrowings; (d) execution and delivery of the Transaction Documents do not violate or conflict with any law, constitutional documents or agreements applicable to any member of Reed Elsevier; (e) accuracy of most recently provided financial statements and that such financial statements give a true and fair view of the financial position of Reed Elsevier; (f) all obligations of the Obligors under the Facility Agreement rank at least pari passu with their other unsecured and unsubordinated obligations; (g) as at the date of signing of the Facility Agreement, no withholding or deduction required from payments to Qualifying Lenders (to be defined), save for -12- 22 withholdings required by applicable law; (h) subject to applicable reservations and qualifications in the legal opinions, all things necessary to be done in order for the obligations of Obligors under the Transaction Documents to be legal, valid and binding and to make them admissible in evidence, have been done; (i) subject to applicable reservations and qualifications in the legal opinions, choice of English law as governing law of the Financing Documents and judgments obtained in England will be recognised and enforced; (j) the corporate structure and shareholdings as set out in the group structure chart for Reed Elsevier (as updated from time to time) is accurate and complete in all material respects; (k) compliance in all respects with ERISA and no liabilities under, or claims outstanding with respect to, any ERISA employee plan, in each case where non-compliance would have a Material Adverse Effect on Reed Elsevier as a whole; and (l) no Event of Default or Potential Event of Default has occurred and is continuing. Deemed repetition of the representations and warranties on the date of each utilisation of the Facilities save for those referred to in paragraphs (b), (c), (d), (f), (g), (h), (k) and (l). NEGATIVE UNDERTAKINGS: Undertakings usual for facilities of this type (subject to customary exceptions and qualifications to be agreed) including: (a) No encumbrances to be granted over Reed Elsevier assets other than agreed permitted encumbrances or where the aggregate principal amount of the indebtedness thereby secured does not exceed US$250 million; (b) Restriction on changes from core businesses; (c) No sale, transfer, leasing or other disposal of assets except for (i) stock in trade, (ii) obsolete assets no longer required for the purpose of the businesses, -13- 23 (iii) disposals for fair market value on an arms' length basis and (iv) disposals between members of Reed Elsevier; (d) Not to use any Advance to purchase, carry or refinance any margin stock in violation of Regulation U of the Board of Governors of the Federal Reserve System; and (e) Not to take any action to terminate, or repudiate its obligations under, the On Sale Agreement. POSITIVE UNDERTAKINGS: Undertakings usual for facilities of this type (subject to customary exceptions and qualifications to be agreed) including: (a) Promptly obtain and renew all necessary consents, filings and authorisations; (b) Pari passu ranking of payment obligations under the Facilities with other unsecured and unsubordinated debt obligations; and (c) Maintenance of corporate existence, compliance with all laws and directives applicable to the relevant business. FINANCIAL COVENANTS: As set out below, to be tested on a semi-annual basis (definitions to be agreed based on the valuation model used in the Information Memorandum): (a) Minimum Net Total Interest Coverage Ratio (EBITDA (adjusted to exclude exceptional items) to Net Total Interest) as follows: 30 June 2001 - not less than 2.75:1 31 December 2001 - not less than 3:1 30 June 2002 - not less than 3:1 31 December 2002 and thereafter - not less than 3.25:1. (b) Maximum Leverage Ratio (Total Net Debt to EBITDA (adjusted to exclude exceptional items) as follows:- 30 June 2001 - not more than 4.50:1 -14- 24 31 December 2001 - not more than 3.75:1 30 June 2002 - not more than 3.50:1 31 December 2002 and thereafter - not more than 3:1. If on 30 June 2001 the On Sale Transaction has not occurred but the On Sale Agreement remains in full force and effect and neither party thereto has sought to terminate it or repudiate its obligations thereunder, the calculation of both covenants for such date shall be made as if the On Sale Transaction has been completed on such date giving pro forma effect to the anticipated results thereof. REPORTING REQUIREMENTS: Usual for this type of transaction in respect of the Obligors and Reed Elsevier and to include, but not limited to:- (a) As soon as they become available (and in any event within 180 days of the end of the Parents' financial years) copies of the Parents' audited consolidated financial statements for that period and the combined financial statements of Reed Elsevier; (b) As soon as they become available (and in any event within 180 days of the end of each half year) copies of the Parents' unaudited semi-annual consolidated financial statements and the unaudited semi-annual combined financial statements of Reed Elsevier; (c) As soon as they become available copies of unaudited or, where audited financial statements are produced by such Obligor, the audited annual financial statements of any Obligor not providing financial statements pursuant to clauses (a) or (b) above; (d) Other financial information as the Facility Agent may reasonably request from time to time; (e) Each of the financial statements delivered to the Facility Agent to be accompanied by a financial covenant compliance certificate signed by the finance director and another director; and (f) Provision to the Facility Agent of details of: -15- 25 (i) any litigation or proceedings which might be expected to have a Material Adverse Effect; (ii) any Event of Default or Potential Event of Default; (iii) information and documentation sent to shareholders (in their capacity as such) and creditors generally; and (iv) any material breach of the provisions of any of the Acquisition Documents. EVENTS OF DEFAULT: Events of Default usual for facilities of this type (subject to customary exceptions and qualifications) including: (a) Payment default subject to 3 business days' grace period where the failure to pay is caused by administrative or technical errors; (b) breach of other obligations subject, in certain cases, where the breach is capable of remedy to a remedy period of 30 days from occurrence; (c) representations or warranties prove to be incorrect or misleading in any material respect; (d) any financial indebtedness of any Obligor or any Material Subsidiary: (i) is not paid when due or within any applicable grace period; or (ii) is declared to be or becomes due or capable of being declared due (and remains so) before its stated maturity by reason of any default, event of default or mandatory prepayment howsoever described; and the aggregate amount of all such financial indebtedness exceeds US$50,000,000 (or its equivalent in other currencies); -16- 26 (e) occurrence of insolvency events in relation to any Obligor or Material Subsidiary including an order made or resolution passed for its winding-up, the presentation of a winding-up petition (if not withdrawn or discharged within 21 days thereafter), the application for an administration order, distress levied against any part of its assets or an encumbrancer taking possession of any part of its assets where the value of such assets exceed US$50 million, cessation of business or any analogous event occurs in any applicable jurisdiction (except for a winding-up for the purpose of a reconstruction or amalgamation, whilst solvent, (and, in relation to an Obligor only, on terms which have previously been approved in writing by the Majority Lenders); (f) illegality or invalidity of obligations of the Obligors under any of the Transaction Documents; (g) repudiation by any Obligor of any Financing Documents to which it is a party; or (h) following the date of the initial Advance(s) under the Facility Agreement (and after giving effect to the Advance(s) made on such dates), any event or circumstance occurs which the Majority Lenders reasonably determine has or is reasonably likely to have a Material Adverse Effect. MATERIAL ADVERSE EFFECT: A material adverse change in, or a material adverse effect on the financial condition, assets or business of Reed Elsevier taken as a whole. POTENTIAL EVENT OF DEFAULT: Means any event or circumstance which would (but for the expiry of a grace period, the giving of notice or the making of any determination as specified in the relevant provision in the Facility Agreement, or any combination of the foregoing) be an Event of Default. OTHER PROVISIONS: In addition to the above terms, the Financing Documents will contain other detailed provisions commonly found in similar transactions including indemnities protecting the Lenders for broken funding and enforcement costs, withholding and other taxes, for liabilities incurred due to -17- 27 the default by the Obligors and relating to illegality, increased costs and other terms and an amendment and waiver provision allowing amendments and waivers to be effected with the approval of the Majority Lenders save for certain entrenched provisions which will require the consent of all the Lenders. ASSIGNMENTS/TRANSFERS: No assignment or transfer by the Obligors. Lenders to be free to assign/transfer or sub-participate participations in the Facilities subject, in the case of transfers prior to the initial Advance(s) under the Facilities, to the transferees meeting certain quality criteria and, in all cases, so long as no additional taxes or increased costs arise as a result of such transfer at the time thereof. After general syndication no assignment, transfer or sub-participation may be made to any institution (other than an existing Lender) which is not an authorised bank under applicable law in its jurisdiction of incorporation. MAJORITY LENDERS: Lenders having aggregate commitments and/or outstandings (as appropriate) in excess of 66 2/3%. SYNDICATION/INFORMATION The Parents to assist the Lead Arrangers in MEMORANDUM: syndication generally and in preparing an information memorandum. EXPENSES: All reasonable costs and out of pocket expenses (including legal fees) incurred by the Lead Arrangers, Underwriters and the Facility Agent shall be reimbursed by the Borrowers. LAW AND JURISDICTION: English law with Obligors to submit to non-exclusive jurisdiction of the courts of England and New York. -18- EX-99.D.1 10 y42082ex99-d_1.txt AGREEMENT AND PLAN OF MERGER 1 Exhibit (d)(1) ---------------------------------------------------------- AGREEMENT AND PLAN OF MERGER Among REED ELSEVIER INC., REH MERGERSUB INC. and HARCOURT GENERAL, INC. Dated as of October 27, 2000 ---------------------------------------------------------- 2 TABLE OF CONTENTS
Page ARTICLE I THE OFFER ...........................................................................................2 SECTION 1.1 The Offer..................................................................................2 SECTION 1.2 Company Action.............................................................................3 ARTICLE II THE MERGER ...........................................................................................4 SECTION 2.1 The Merger.................................................................................4 SECTION 2.2 Closing; Effective Time....................................................................4 SECTION 2.3 Effects of the Merger......................................................................4 SECTION 2.4 Certificate of Incorporation; By-Laws......................................................5 SECTION 2.5 Directors and Officers.....................................................................5 SECTION 2.6 Conversion of Securities...................................................................5 SECTION 2.7 Treatment of Employee Options and Restricted Stock.........................................6 SECTION 2.8 Appraisal Rights...........................................................................6 SECTION 2.9 Surrender of Shares........................................................................7 ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY.........................................................8 SECTION 3.1 Organization and Qualification; Subsidiaries...............................................8 SECTION 3.2 Certificate of Incorporation and By-laws...................................................9 SECTION 3.3 Capitalization.............................................................................9 SECTION 3.4 Authority Relative to This Agreement......................................................10 SECTION 3.5 No Conflict; Required Filings and Consents................................................11 SECTION 3.6 Compliance................................................................................12 SECTION 3.7 SEC Filings; Financial Statements.........................................................12 SECTION 3.8 Absence of Certain Changes or Events......................................................13 SECTION 3.9 Absence of Litigation.....................................................................14 SECTION 3.10 Employee Benefit Plans...................................................................14 SECTION 3.11 Tax Matters..............................................................................16 SECTION 3.12 Offer Documents; Proxy Statement.........................................................16 SECTION 3.13 Brokers..................................................................................17 SECTION 3.14 Takeover Statutes; Rights Plans..........................................................17 SECTION 3.15 Intellectual Property....................................................................17 SECTION 3.16 Environmental Matters....................................................................18 SECTION 3.17 Contracts................................................................................18 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER................................................20 SECTION 4.1 Corporate Organization....................................................................20 SECTION 4.2 Authority Relative to This Agreement......................................................20 SECTION 4.3 No Conflict; Required Filings and Consents................................................20
-i- 3 Page SECTION 4.4 Offer Documents; Proxy Statement..........................................................21 SECTION 4.5 Brokers...................................................................................21 SECTION 4.6 Financing.................................................................................22 SECTION 4.7 Operations of Purchaser...................................................................22 SECTION 4.8 Ownership of Shares.......................................................................22 SECTION 4.9 Vote/Approval Required....................................................................22 SECTION 4.10 Subsequent Transaction...................................................................22 ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER.................................................................23 SECTION 5.1 Conduct of Business of the Company Pending the Merger.....................................23 ARTICLE VI ADDITIONAL AGREEMENTS.................................................................................26 SECTION 6.1 Stockholders Meeting......................................................................26 SECTION 6.2 Proxy Statement...........................................................................26 SECTION 6.3 Company Board Representation; Section 14(f)...............................................27 SECTION 6.4 Access to Information; Confidentiality....................................................27 SECTION 6.5 Acquisition Proposals.....................................................................29 SECTION 6.6 Employment and Employee Benefits Matters..................................................31 SECTION 6.7 Directors' and Officers' Indemnification and Insurance....................................33 SECTION 6.8 Further Action; Reasonable Best Efforts...................................................35 SECTION 6.9 Third Party Standstill Agreements.........................................................37 SECTION 6.10 Notification of Certain Matters..........................................................37 SECTION 6.11 Integration Committee....................................................................37 SECTION 6.12 Public Announcements.....................................................................37 ARTICLE VII CONDITIONS OF MERGER.................................................................................38 SECTION 7.1 Conditions to Obligation of Each Party to Effect the Merger...............................38 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER...................................................................38 SECTION 8.1 Termination...............................................................................38 SECTION 8.2 Effect of Termination.....................................................................39 SECTION 8.3 Expenses..................................................................................40 SECTION 8.4 Amendment.................................................................................40 SECTION 8.5 Waiver....................................................................................40 ARTICLE IX GENERAL PROVISIONS....................................................................................40 SECTION 9.1 Non-Survival of Representations, Warranties and Agreements................................40 SECTION 9.2 Notices...................................................................................41 SECTION 9.3 Certain Definitions.......................................................................41 SECTION 9.4 Severability..............................................................................42 SECTION 9.5 Entire Agreement; Assignment..............................................................43 SECTION 9.6 Parties in Interest.......................................................................43 SECTION 9.7 Governing Law.............................................................................43 SECTION 9.8 Headings..................................................................................43 SECTION 9.9 Counterparts..............................................................................43 SECTION 9.10 Specific Performance; Jurisdiction.......................................................43
-ii- 4 Page SECTION 9.11 Performance..............................................................................44 SECTION 9.12 Interpretation...........................................................................44 SECTION 9.13 WAIVER OF JURY TRIAL.....................................................................44 Annex A - Offer Conditions Exhibit A - Restated Certificate of Incorporation of the Company Exhibit B - By-laws of the Company
-iii- 5 INDEX OF PRINCIPAL TERMS Acquisition Proposal.............................................................................................30 Adverse Recommendation Change....................................................................................31 Affected Employees...............................................................................................33 affiliate........................................................................................................43 Agreement.........................................................................................................2 Antitrust Law....................................................................................................37 beneficial owner.................................................................................................43 beneficially owned...............................................................................................43 Book-Entry Shares.................................................................................................7 business day.....................................................................................................44 By-Laws..........................................................................................................10 Certificate of Merger.............................................................................................5 Certificates......................................................................................................7 Class C Stock....................................................................................................10 Closing...........................................................................................................4 Closing Date......................................................................................................4 Common Stock Merger Consideration.................................................................................5 Company.......................................................................................................2, 44 Company Common Stock..............................................................................................2 Company Plans....................................................................................................15 Company Preferred Stock..........................................................................................10 Company Representatives..........................................................................................30 Company Requisite Vote...........................................................................................11 Company Securities...............................................................................................11 control..........................................................................................................44 controlled.......................................................................................................44 controlled by....................................................................................................44 Costs............................................................................................................34 DGCL..............................................................................................................2 Disclosure Schedule...............................................................................................9 Dissenting Shares.................................................................................................7 DOJ .............................................................................................................37 Effective Time....................................................................................................5 Elsevier.........................................................................................................43 employee benefit plan............................................................................................15 Employee Option...................................................................................................6 Employment Agreements............................................................................................15 Environmental Laws...............................................................................................19 Environmental Permits............................................................................................19 ERISA............................................................................................................15 Exchange Act......................................................................................................2 Financial Advisor.................................................................................................3 Financing Representatives........................................................................................29 FTC .............................................................................................................37 GCX .............................................................................................................26 generally accepted accounting principles.........................................................................44
-1- 6 Page HSR Act..........................................................................................................12 Indemnified Parties..............................................................................................34 Intellectual Property............................................................................................18 knowledge........................................................................................................44 Material Adverse Effect...........................................................................................9 Materials of Environmental Concern...............................................................................19 Merger............................................................................................................2 Merger Agreement..................................................................................................1 Merger Consideration..............................................................................................6 Minimum Condition.................................................................................................1 NMG .............................................................................................................17 Offer.............................................................................................................2 Offer Conditions..................................................................................................2 Offer Documents...................................................................................................3 Outside Date......................................................................................................2 Parent........................................................................................................2, 44 Parent Plans.....................................................................................................33 Paying Agent......................................................................................................7 person...........................................................................................................44 Proxy Statement..................................................................................................17 Purchaser.....................................................................................................2, 44 Reed ............................................................................................................43 Reimbursement Agreement..........................................................................................26 Representatives..................................................................................................29 Restated Certificate..............................................................................................5 Restrictive Covenant.............................................................................................20 Schedule 14D-9....................................................................................................3 Schedule TO.......................................................................................................2 SEC ..............................................................................................................2 SEC Reports......................................................................................................13 Securities Act...................................................................................................13 Series A Stock....................................................................................................2 Series A Stock Merger Consideration...............................................................................6 Severance Plans..................................................................................................15 Shares............................................................................................................2 Stockholders Meeting.............................................................................................27 Subsequent Transaction...........................................................................................29 subsidiaries.....................................................................................................44 subsidiary.......................................................................................................44 Surviving Corporation.............................................................................................4 Tax Return.......................................................................................................17 Taxes............................................................................................................17 Termination Fee..................................................................................................41 TP Representatives...............................................................................................29 under common control with........................................................................................44
7 AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of October 27, 2000 (this "Agreement"), among REED ELSEVIER INC., a Massachusetts corporation ("Parent"), REH MERGERSUB INC., a Delaware corporation and a wholly-owned subsidiary of Parent ("Purchaser"), and HARCOURT GENERAL, INC., a Delaware corporation (the "Company"). WHEREAS, as promptly as practicable (but in no event later than five business days after the date hereof), the Purchaser shall commence (within the meaning of Rule 14d-2 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) an offer (the "Offer") to purchase for cash all of the issued and outstanding shares of (i) Common Stock, par value $1.00 per share (the "Company Common Stock"), of the Company at a price of $59.00 per share, and (ii) Series A Cumulative Convertible Stock (the "Series A Stock" and, together with the Company Common Stock, the "Shares") at a price of $77.29 per share, in the case of each of clauses (i) and (ii), net to the seller in cash, subject to the conditions set forth in Annex A hereto; WHEREAS, the Board of Directors of the Company has (i) determined that it is in the best interests of the Company and the stockholders of the Company and declared it advisable to enter into this Agreement with Parent and Purchaser providing for the merger (the "Merger") of Purchaser with and into the Company in accordance with the General Corporation Law of the State of Delaware (the "DGCL"), upon the terms and subject to the conditions set forth herein, and (ii) resolved to recommend acceptance of the Offer and adoption of this Agreement by the stockholders of the Company; and WHEREAS, the Board of Directors of the Company, Parent and Purchaser have each approved this Agreement pursuant to which Purchaser will merge with and into the Company in accordance with the DGCL upon the terms and subject to the conditions set forth herein; and WHEREAS, as a condition and inducement to Parent entering this Agreement, concurrently with the execution and delivery of this Agreement, Parent and certain significant stockholders of the Company are entering into a Stockholder Agreement (the "Stockholder Agreement"), pursuant to which, among other things, such stockholders have agreed to tender their Shares (including Shares issuable upon conversion of the Class B Stock, par value $1.00 per share, of the Company (the "Class B Stock")) in the Offer; NOW, THEREFORE, in consideration of the foregoing and the representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Purchaser and the Company hereby agree as follows: 8 2 ARTICLE I THE OFFER SECTION 1.1 The Offer. (a) Provided that this Agreement shall not have been terminated in accordance with Section 8.1 and no event shall have occurred and no circumstance shall exist which would result in a failure to satisfy the condition set forth in clause (ii)(a) of Annex A hereto, Purchaser shall commence the Offer as soon as practicable after the date hereof, and in any event within eight business days from the date hereof. The obligation of Purchaser to accept for payment and pay for Shares validly tendered and not withdrawn shall be subject only to the satisfaction or waiver by Purchaser of the conditions or events set forth in Annex A hereto (the "Offer Conditions"). Purchaser expressly reserves the right, in its sole discretion, to waive any such condition and make any other changes in the terms and conditions of the Offer; provided that, unless previously approved by the Company in writing, (i) Purchaser may not waive the Minimum Condition (as defined in Annex A) or any of clauses (ii)(a), (e) or (f) of the Offer Conditions, (ii) Purchaser may not extend the expiration date of the Offer beyond the initial expiration date of the Offer except (A) as required by applicable law, (B) that if any condition to the Offer has not been satisfied or waived (other than as a result of the failure by Parent or Purchaser to perform any of its obligations under this Agreement), Purchaser may, in its sole discretion, extend the expiration date of the Offer for one or more periods (not in excess of 10 business days each) but in no event later than the Outside Date (as defined below) or (C) as provided hereafter in this Section 1.1(a), (iii) no change may be made which decreases the price per Share payable in the Offer, (iv) there shall be no change to the form of consideration payable in the Offer (other than by adding consideration), (v) there shall be no reduction in the maximum number of Shares to be purchased in the Offer and (vi) there shall be no imposition of any condition to the Offer in addition to those set forth herein, there shall be no modification or amendment to the Offer Conditions and the Offer shall not be otherwise modified or amended, in each case, in a manner which is adverse to holders of the Shares. On the terms and subject to the prior satisfaction or waiver of the Offer Conditions, Parent shall provide funds to Purchaser and Purchaser shall accept for payment and pay for Shares as soon as it is permitted to do so under applicable law; provided that (i) at each scheduled expiration date of the Offer, if any of the Offer Conditions shall not be satisfied or waived, Purchaser shall, at the request of the Company, extend the expiration date of the Offer for one or more periods (not in excess of 10 business days each) but in no event later than the Outside Date and (ii) Purchaser shall extend the Offer for any period required by any rule, regulation, interpretation or position of the Securities and Exchange Commission ("the SEC") or the staff thereof applicable to the Offer. The initial expiration date of the Offer shall be 20 business days from the commencement of the Offer in accordance with applicable law. As used herein, "Outside Date" shall mean the date which is 270 days from the date hereof. (b) As soon as reasonably practicable after the date hereof, and in any event within eight business days from the date hereof, Purchaser and Parent shall file their Tender Offer Statement on Schedule TO (the "Schedule TO") with respect to the Offer with the SEC. The Schedule TO shall contain an Offer to Purchase and a related letter of transmittal and other documents (which Schedule TO, Offer to Purchase and other documents, together with any supplements or amendments thereto, are referred to herein collectively as the "Offer 9 3 Documents"). Parent, Purchaser and the Company each agrees promptly to correct any information provided by it for use in the Offer Documents that shall have become false or misleading in any material respect and Parent and Purchaser further agree to take all steps necessary to cause the Schedule TO as so corrected to be filed with the SEC and the other Offer Documents as so corrected to be disseminated to the stockholders of the Company, in each case as and to the extent required by applicable federal securities laws. The Company and its counsel shall be given a reasonable opportunity to review and comment on the Offer Documents prior to their filing with the SEC. Parent and Purchaser agree to provide the Company with any comments that may be received from the SEC or its staff with respect to the Offer Documents promptly after receipt thereof. (c) Notwithstanding any other provision contained herein, the Offer shall terminate upon termination of this Agreement pursuant to Section 8.1. (d) In connection with the Offer, the Purchaser shall include in the Offer to Purchase any information required by Sections Fourth(B)(4)(b)(vii) and (4)(c) of the Restated Certificate (as defined in Section 2.4). SECTION 1.2 Company Action. (a) The Company hereby approves of and consents to the Offer and represents and warrants that subject to Section 6.5(b) hereof (i) its Board of Directors at a meeting duly called and held has unanimously (A) determined that this Agreement and the transactions contemplated hereby, including each of the Offer and the Merger, are advisable and fair to and in the best interests of the holders of Shares, (B) approved this Agreement and the transactions contemplated hereby, including each of the Offer and the Merger, and (C) resolved to recommend that the stockholders of the Company accept the Offer, tender their Shares to Purchaser thereunder and adopt this Agreement; and (ii) Goldman, Sachs & Co. (the "Financial Advisor") has delivered to the Board of Directors of the Company its written opinion (or oral opinion to be confirmed in writing), dated as of the date hereof, that the consideration to be received by holders of shares of Company Common Stock (other than members of the Smith Family Group) pursuant to each of the Offer and the Merger is fair to such holders from a financial point of view. The Company has been authorized by the Financial Advisor to permit, subject to prior review and consent by such Financial Advisor, the inclusion of such fairness opinion (or a reference thereto) in the Offer Documents and in the Schedule 14D-9 referred to below and the Proxy Statement referred to in Section 3.12. The Company hereby consents to the inclusion in the Offer Documents of the recommendations of the Company's Board of Directors described in this Section 1.2(a). (b) The Company shall file with the SEC, contemporaneously with the filing of the Schedule TO pursuant to Section 1.1, a Solicitation/Recommendation Statement on Schedule 14D-9 (together with all amendments and supplements thereto, the "Schedule 14D-9"), containing the recommendations of the Company's Board of Directors described in Section 1.2(a)(i) and shall promptly mail the Schedule 14D-9 to the stockholders of the Company; provided that the Company shall not be required to make such filing with such recommendations or make such mailing if the Company's Board of Directors shall have determined in good faith, after consultation with outside counsel to the Company, that refraining from taking such action is reasonably necessary for the Board of Directors to comply with its fiduciary duties under applicable law. The Schedule 14D-9 and all amendments thereto shall comply in all material respects with the Exchange Act and the rules and regulations promulgated thereunder. The Company, Parent and Purchaser each agrees promptly to correct any information provided by it for use in the Schedule 14D-9 that shall have become false or misleading in any material respect 10 4 and the Company further agrees to take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to the stockholders of the Company, in each case as and to the extent required by applicable federal securities laws. (c) In connection with the Offer, if requested in writing by Purchaser, the Company shall as soon as reasonably practicable furnish Purchaser with mailing labels, security position listings, any non-objecting beneficial owner lists and any available listings or computer files containing the names and addresses of the record holders of Shares, each as of a recent date, and shall as soon as reasonably practicable furnish Purchaser with such additional information (including but not limited to updated lists of stockholders, mailing labels, security position listings and non-objecting beneficial owner lists) and such other assistance as Parent, Purchaser or their agents may reasonably require in communicating the Offer to the record and beneficial holders of Shares. Subject to the requirements of law, and except for such steps as are necessary to disseminate the Offer Documents and any other documents necessary to consummate the Offer and the Merger, Parent and Purchaser and each of their respective affiliates and representatives shall hold in confidence the information contained in any of such lists, labels or additional information, will use such information only in connection with the Offer and the Merger and, if this Agreement is terminated, shall promptly deliver to the Company all copies of such information. The Company agrees to use reasonable best efforts to cooperate to enable the timely conversion of the Class B Stock into Company Common Stock prior to the expiration of the Offer, including without limitation, causing the Company's transfer agent to take all actions necessary to facilitate such conversion as promptly as practicable. ARTICLE II THE MERGER SECTION 2.1 The Merger. Upon the terms and subject to the conditions of this Agreement and in accordance with the DGCL, at the Effective Time (as defined in Section 2.2), Purchaser shall be merged with and into the Company. As a result of the Merger, the separate corporate existence of Purchaser shall cease and the Company shall continue as the surviving corporation of the Merger (the "Surviving Corporation"). SECTION 2.2 Closing; Effective Time. Subject to the provisions of Article VII, the closing of the Merger (the "Closing") shall take place in New York City at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York, as soon as practicable, but in no event later than the first business day after the satisfaction or waiver of the conditions set forth in Article VII, or at such other place or at such other date as Parent and the Company may mutually agree. The date on which the Closing actually occurs is hereinafter referred to as the "Closing Date". At the Closing, the parties hereto shall cause the Merger to be consummated by filing this Agreement or a certificate of merger or a certificate of ownership and merger (the "Certificate of Merger") with the Secretary of State of the State of Delaware, in such form as required by and executed in accordance with the relevant provisions of the DGCL (the date and time of the filing of the Certificate of Merger with the Secretary of State of the State of Delaware, or such later time as is specified in the Certificate of Merger and as is agreed to by the parties hereto, being the "Effective Time") and shall make all other filings or recordings required under the DGCL in connection with the Merger. 11 5 SECTION 2.3 Effects of the Merger. The Merger shall have the effects set forth in Section 259 of the DGCL. SECTION 2.4 Certificate of Incorporation; By-Laws. (a) At the Effective Time and without any further action on the part of the Company and Purchaser, the Restated Certificate of Incorporation of the Company (as amended, the "Restated Certificate") as in effect immediately prior to the Effective Time shall be amended so as to read in its entirety in the form set forth in Exhibit A hereto and, as so amended, shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided therein and under the DGCL. (b) At the Effective Time and without any further action on the part of the Company and Purchaser, the by-laws of the Company as in effect immediately prior to the Effective Time shall be amended so as to read in their entirety in the form set forth in Exhibit B hereto and, as so amended, shall be the by-laws of the Surviving Corporation until thereafter amended in accordance with their terms or the Certificate of Incorporation of the Surviving Corporation and as provided by applicable law. SECTION 2.5 Directors and Officers. The directors of the Company immediately prior to the Effective Time shall submit their resignations to be effective as of the Effective Time. The directors of Purchaser immediately prior to the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office in accordance with the Certificate of Incorporation and by-laws of the Surviving Corporation, and the officers of the Company immediately prior to the Effective Time shall be the initial officers of the Surviving Corporation, in each case until the earlier of their resignation or removal or their respective successors are duly elected or appointed (as the case may be) and qualified. SECTION 2.6 Conversion of Securities. At the Effective Time, by virtue of the Merger and without any action on the part of Purchaser, the Company or the holders of any of the following securities: (a) each share of Company Common Stock issued and outstanding immediately prior to the Effective Time (other than any shares to be canceled pursuant to Section 2.6(c), shares described in Section 2.6(e), or any Dissenting Shares (as defined in Section 2.8(a))) shall be converted into the right to receive $59.00 in cash or any higher price that may be paid pursuant to the Offer (the "Common Stock Merger Consideration") payable to the holder thereof, without interest, upon surrender of the certificate formerly representing such share in the manner provided in Section 2.9, less any required withholding taxes; (b) each share of Series A Stock issued and outstanding immediately prior to the Effective Time (other than any shares to be canceled pursuant to Section 2.6(c), or any Dissenting Shares) shall be converted into the right to receive $77.29 in cash or any higher price that may be paid pursuant to the Offer (the "Series A Stock Merger Consideration", and together with the Common Stock Merger Consideration, the "Merger Consideration") payable to the holder thereof, without interest, upon surrender of the certificate formerly representing such share in the manner provided in Section 2.9, less any required withholding taxes; (c) each Share held in the treasury of the Company or owned by Parent or Purchaser immediately prior to the Effective Time, shall automatically be canceled and retired without any conversion thereof and shall cease to exist and no payment or distribution shall be made with respect thereto; 12 6 (d) each share of common stock of Purchaser issued and outstanding immediately prior to the Effective Time shall be converted into and become one validly issued, fully paid and nonassessable share of common stock of the Surviving Corporation; and (e) each share of Company Common Stock held by the subsidiaries of the Company shall not be canceled pursuant to Section 2.6(c) and shall remain issued. SECTION 2.7 Treatment of Employee Options and Restricted Stock (a) The Company shall take all action necessary so that, immediately prior to the Effective Time, each outstanding employee stock option that is, or shall become, vested and exercisable as of the Effective Time (an "Employee Option"), shall be canceled and the holder thereof shall be entitled to receive at the Effective Time from the Company or as soon as practicable thereafter (but in no event later than 10 days after the Effective Time) from the Surviving Corporation in consideration for such cancellation an amount in cash equal to the product of (A) the number of Shares previously subject to such Employee Option and (B) the excess, if any, of the Common Stock Merger Consideration over the exercise price per Share previously subject to such Employee Option, less any required withholding taxes. If requested by Parent or deemed necessary by the Company, the Company shall use its reasonable best efforts to obtain the consent of the holders of Employee Options to the cancellation of such Employee Options as provided in this Section 2.7; provided, however, that notwithstanding anything in this Section 2.7, the failure of any holder of an Employee Option to so consent shall not in any way affect the obligation of the parties to effect the Merger as provided herein. (b) Each restricted share of Company Common Stock granted pursuant to the Company Plans which is outstanding immediately prior to the Effective Time shall vest and become free of restrictions as of the Effective Time to the extent provided by the terms thereof and the holder thereof shall be entitled to receive at the Effective Time the Common Stock Merger Consideration with respect to each such share, less any required withholding taxes. SECTION 2.8 Appraisal Rights. (a) Notwithstanding anything in this Agreement to the contrary, Shares that are issued and outstanding immediately prior to the Effective Time and which are held by stockholders of the Company who have not voted in favor of or consented to the Merger and who are entitled to demand appraisal of such Shares pursuant to, and have delivered a written demand for appraisal of such Shares in the time and manner provided in, Section 262 of the DGCL (the "Dissenting Shares") shall not be converted into the right to receive the Merger Consideration, but the holders thereof shall be entitled to receive the consideration as shall be determined pursuant to Section 262 of the DGCL; provided, however, that if any such stockholder of the Company shall fail to perfect or shall effectively waive, withdraw or lose the right to appraisal and payment under the DGCL or a court of competent jurisdiction shall determine that such holder is not entitled to the relief provided by Section 262 of the DGCL, then the right of such holder to receive the consideration as determined pursuant to Section 262 of the DGCL shall cease and such holder's Shares shall thereupon be deemed to have been converted, at the Effective Time, into the right to receive the Common Stock Merger Consideration or the Series A Stock Merger Consideration, as set forth in Section 2.6 of this Agreement, without any interest thereon. (b) The Company shall give Parent (i) prompt notice of any demands for appraisal of any Shares pursuant to Section 262 of the DGCL received by the Company, withdrawals of such demands and any other instruments served pursuant to the DGCL and received by the Company and (ii) the opportunity to participate in and direct all negotiations and 13 7 proceedings with respect to demands for appraisal under the DGCL. The Company shall not, except with the prior written consent of Parent or as otherwise required by applicable law, make any payment with respect to any such demands for appraisal or offer to settle or settle any such demands. SECTION 2.9 Surrender of Shares. (a) Prior to the Effective Time, Purchaser shall appoint a bank or trust company reasonably acceptable to the Company (the "Paying Agent") to receive the Merger Consideration to which the stockholders of the Company shall become entitled pursuant to Section 2.6. When and as needed, Parent or Purchaser will make available to the Paying Agent sufficient funds to make all payments pursuant to Section 2.9(b). Such funds shall be invested by the Paying Agent as directed by Purchaser or, after the Effective Time, the Surviving Corporation; provided that such investments shall be in obligations of or guaranteed by the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard & Poor's Corporation, respectively, or in certificates of deposit, bank repurchase agreements or banker's acceptances of commercial banks with capital exceeding $500 million. Any net profit resulting from, or interest or income produced by, such investments will be payable to the Surviving Corporation or Parent, as Parent directs. (b) As soon as reasonably practicable after the Effective Time, the Surviving Corporation shall cause the Paying Agent to mail to each record holder, as of the Effective Time, of (i) an outstanding certificate or certificates which immediately prior to the Effective Time represented Shares (the "Certificates") or (ii) Shares represented by book-entry ("Book-Entry Shares"), a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Paying Agent or, in the case of Book-Entry Shares, upon adherence to the procedures set forth in the letter of transmittal) and instructions for use in effecting the surrender of the Certificates or, in the case of Book-Entry Shares, the surrender of such Shares for payment of the Merger Consideration therefor. Upon surrender to the Paying Agent of a Certificate or of Book-Entry Shares, together with such letter of transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate or Book-Entry Shares shall be entitled to receive in exchange therefor the Merger Consideration for each Share formerly represented by such Certificate or Book-Entry Shares and such Certificate or book-entry shall then be canceled. No interest shall be paid or accrued for the benefit of holders of the Certificates or Book-Entry Shares on the Merger Consideration payable upon the surrender of the Certificates or Book-Entry Shares. If payment of the Merger Consideration is to be made to a person other than the person in whose name the surrendered Certificate is registered, it shall be a condition of payment that the Certificate so surrendered shall be properly endorsed or shall be otherwise in proper form for transfer and that the person requesting such payment shall have paid any transfer and other taxes required by reason of the payment of the Merger Consideration to a person other than the registered holder of the Certificate surrendered or shall have established to the satisfaction of the Surviving Corporation that such tax either has been paid or is not applicable. (c) All cash paid upon the surrender of a Certificate or of Book-Entry Shares in accordance with the terms of this Article II shall be deemed to have been paid in full satisfaction of all rights pertaining to the Shares formerly represented by such Certificate, or Book-Entry Shares, as the case may be. At the close of business on the day on which the Effective Time occurs, the stock transfer books of the Company shall be closed and there shall be no further 14 8 registration of transfers on the stock transfer books of the Surviving Corporation of the Shares that were outstanding immediately prior to the Effective Time. If, after the Effective Time, Certificates or Book-Entry Shares are presented to the Surviving Corporation or the Paying Agent for transfer or any other reason, they shall be cancelled and exchanged as provided in this Article II. (d) None of Parent, Purchaser, the Company or the Paying Agent shall be liable to any person in respect of any cash delivered to a public official pursuant to any applicable abandoned property, escheat or similar law. If any Certificates or Book-Entry Shares shall not have been surrendered prior to twelve months after the Effective Time (or immediately prior to such earlier date on which any Merger Consideration would otherwise escheat to or become the property of any Governmental Authority), any such Merger Consideration in respect thereof shall, to the extent permitted by applicable law, become the property of the Surviving Corporation, free and clear of all claims or interest of any person previously entitled thereto. (e) If any Certificate shall have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming such Certificate to be lost, stolen or destroyed and, if required by the Surviving Corporation, the posting by such person of a bond in such reasonable amount as the Surviving Corporation may direct as indemnity against any claim that may be made against it with respect to such Certificate, the Paying Agent shall pay in respect of such lost, stolen or destroyed Certificate the Merger Consideration. (f) Parent, the Surviving Corporation or the Paying Agent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant to this Agreement to any holder of Shares such amounts as Parent, the Surviving Corporation or the Paying Agent is required to deduct and withhold with respect to the making of such payment under the Internal Revenue Code of 1986, as amended (the "Code") or any provision of state, local or foreign tax law. To the extent that amounts are so withheld and paid over to the appropriate taxing authority by Parent, the Surviving Corporation or the Paying Agent, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to the holder of the Shares in respect of which such deduction and withholding was made by Parent, the Surviving Corporation or the Paying Agent. ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY The Company hereby represents and warrants to Parent and Purchaser that, except as set forth on the Disclosure Schedule delivered by the Company to the Parent and Purchaser prior to the execution of this Agreement (the "Disclosure Schedule") and except as disclosed in the SEC Reports filed prior to the date of this Agreement (the "Filed SEC Reports"): SECTION 3.1 Organization and Qualification; Subsidiaries. (a) The Company and each of its subsidiaries (i) is duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization and (ii) has the requisite corporate power and authority to own, lease and operate its properties and to carry on its business as it is now being conducted, except (other than in the case of clause (i) with respect to the Company) where any such failure to be so organized, existing or in good standing or to have such power or authority would not 15 9 have a Material Adverse Effect (as defined below). The Company and each of its subsidiaries is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of its properties owned, leased or operated by it or the nature of its business or activities makes such qualification or licensing necessary, except for any such failure to be so qualified or licensed or in good standing which would not have a Material Adverse Effect. When used in connection with the Company or any of its subsidiaries, the term "Material Adverse Effect" means any change or effect that would be materially adverse to the business, financial condition, assets or results of operations of the Company and its subsidiaries taken as a whole, other than any change or effect resulting from (i) changes in general economic conditions, (ii) the announcement and performance of this Agreement and the transactions contemplated hereby and compliance with the covenants set forth herein, (iii) general changes or developments in the industries in which the Company and its subsidiaries operate or (iv) changes in any tax laws or regulations or applicable accounting regulations or principles. (b) All material subsidiaries of the Company and their respective jurisdictions of incorporation are identified in the SEC Reports. All of the outstanding capital stock of, or other voting securities or ownership interests in, each subsidiary of the Company, is owned by the Company, directly or indirectly, free and clear of all pledges, claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever (collectively, "Liens"), and free of any other limitation or restriction (including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other voting securities or ownership interests), and are duly authorized, validly issued, fully paid and nonassessable. There are no outstanding (i) securities of the Company or any of its subsidiaries convertible into or exchangeable for shares of capital stock or other voting securities or ownership interests in any subsidiary of the Company or (ii) options or other rights to acquire from the Company or any of its subsidiaries, or other obligations of the Company or any of its subsidiaries to issue, any capital stock or other voting securities or ownership interests in, or any securities convertible into or exchangeable for any capital stock or other voting securities or ownership interests in, any subsidiary of the Company (the items in clauses (i) and (ii) being referred to collectively as the "Company Subsidiary Securities"). There are no outstanding obligations of the Company or any of its subsidiaries to repurchase, redeem or otherwise acquire any of the Company Subsidiary Securities. SECTION 3.2 Certificate of Incorporation and By-laws. The Company has heretofore furnished to Parent a complete and correct copy of the Restated Certificate and the Amended and Restated By-Laws (the "By-Laws") of the Company as currently in effect. The Restated Certificate and By-Laws are in full force and effect and no other organizational documents are applicable to or binding upon the Company. The Company is not in violation of any provisions of the Restated Certificate or By-Laws in any material respect. SECTION 3.3 Capitalization. The authorized capital stock of the Company consists of (i) 150,000,000 shares of Company Common Stock, (ii) 80,000,000 shares of Class B Stock, (iii) 100,000,000 shares of Class C Stock, par value $1.00 per share (the "Class C Stock") and (iv) 40,000,000 shares of Preferred Stock, par value $1.00 per share (the "Company Preferred Stock"), of which 10,000,000 shares are designated as Series A Stock. As of October 26, 2000, (i) 55,049,531 shares of Company Common Stock (excluding shares held in the treasury 16 10 of the Company) and 18,111,768 shares of Class B Stock were issued and outstanding, all of which were validly issued, fully paid and nonassessable and were issued free of preemptive rights, (ii) 2,276,750 shares of Company Common Stock were held in the treasury of the Company, (iii) 775,713 shares of Series A Stock were issued and outstanding, (iv) 3,289,353 shares of Company Common Stock were reserved for issuance and issuable upon or otherwise deliverable in connection with the exercise of outstanding Employee Options issued pursuant to the Company Plans (as defined in Section 3.10), (v) 18,111,768 shares of Company Common Stock were reserved for issuance upon the conversion of the Class B Stock and (vi) 1,016,184 shares of Company Common Stock were reserved for issuance upon the conversion of the Series A Stock. There are no outstanding stock appreciation rights or other rights that are linked to the price of Company Common Stock granted under any Company Plan that were not granted in tandem with a related Employee Option. No shares of Company Common Stock are owned by any subsidiary of the Company. The Company has delivered to Parent a true and complete list, as of the close of business on October 23, 2000, of all Employee Options and all other rights to purchase or receive Company Common Stock (collectively, the "Company Stock Issuance Rights") granted under the Company Plans, the number of shares subject to each such Employee Option or Company Stock Issuance Right, the grant dates and exercise prices of each such Employee Option or, as applicable, Company Stock Issuance Right and the names of the holder thereof. Except as set forth above, as of the close of business on October 26, 2000, no shares of capital stock of, or other equity or voting interests in, the Company, or, to the extent issued or granted by the Company, options, warrants or other rights to acquire any such stock or securities were issued, reserved for issuance or outstanding. Since October 26, 2000, no options, warrants, or other rights to purchase shares of Company Common Stock or Company Preferred Stock or other equity or voting interests in the Company have been granted and no shares of Company Common Stock or Company Preferred Stock or other equity or voting interests in the Company have been issued, except (i) for shares issued pursuant to the exercise of Employee Options outstanding on the date of this Agreement, or (ii) for the conversion of shares of Series A Stock or Class B Stock into shares of Company Common Stock. There are no bonds, debentures, notes or other indebtedness of the Company or any of its subsidiaries, and, except as set forth above, no securities or other instruments or obligations of the Company or any of its subsidiaries, the value of which is based upon or derived from any capital or voting stock of the Company having the right to (or convertible into, or exchangeable for, securities having the right to vote) vote on any matters on which stockholders of the Company or any of its subsidiaries may vote. Except (i) as set forth above, (ii) as a result of the exercise of Employee Options, (iii) as a result of or in connection with the conversion of Series A Stock into Company Common Stock as provided for in the Restated Certificate or (iv) as a result of or in connection with the conversion of Class B Stock into Company Common Stock as provided for in the Restated Certificate, (A) there are not outstanding or authorized any (I) shares of capital stock or other voting securities of the Company, (II) securities of the Company convertible into or exchangeable for shares of capital stock or voting securities of the Company or (III) options, warrants or other rights to acquire from the Company, and no obligation of the Company to issue, any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company (collectively, "Company Securities"), (B) there are no outstanding obligations of the Company to repurchase, redeem or otherwise acquire any Company Securities and (C) there are no other options, calls, warrants or other rights, agreements, arrangements or commitments of any character relating to the issued or unissued capital stock of the Company or any of its subsidiaries to which the Company or any of its subsidiaries is a party. SECTION 3.4 Authority Relative to This Agreement. The Company has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, 17 11 delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action and no other corporate proceedings on the part of the Company are necessary to authorize this Agreement or to consummate the transactions so contemplated (other than, with respect to the Merger, the adoption of this Agreement by the holders of a majority in voting power of the outstanding shares of each of the Company Common Stock and the Class B Stock each voting separately as a class, if and to the extent required by applicable law (the "Company Requisite Vote"), and the filing with the Secretary of State of the State of Delaware of the Certificate of Merger as required by the DGCL). This Agreement has been duly and validly executed and delivered by the Company and, assuming the due authorization, execution and delivery hereof by Parent and Purchaser, constitutes a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. The Board of Directors of the Company at a meeting duly called and held at which all directors of the Company were present, duly and unanimously has approved this Agreement and the transactions contemplated hereby and approved, if and to the extent such approval is required to effect a conversion of all of the Class B Stock pursuant to the Stockholders Agreement, the conversion of all of the Class B Stock into Company Common Stock pursuant to Article Fourth, Section A.III(e) of the Restated Certificate. Subject to the applicability of Section 253 of the DGCL, the only vote of the stockholders of the Company required to adopt this Agreement is the Company Requisite Vote. SECTION 3.5 No Conflict; Required Filings and Consents. (a) The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby and compliance with the provisions hereof by the Company do not and will not (i) conflict with or violate the Restated Certificate or By-Laws of the Company, (ii) assuming that all consents, approvals and authorizations contemplated by clauses (i), (ii), (iii) and (iv) of subsection (b) below have been obtained and all filings described in such clauses have been made, conflict with or violate any statute, law, rule, regulation, ordinance, order, judgment or decree applicable to the Company or any of its subsidiaries or by which its or any of their respective properties or assets are bound or (iii) conflict with, or result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both would become a default) or result in the loss of a benefit under, or give rise to any right of termination, cancellation, amendment or acceleration of, or result in the creation of any Lien in or upon any of the properties or assets of the Company or any of its subsidiaries under, or give rise to any increased, additional, accelerated or guaranteed rights or entitlements under any provision of any agreement or other instrument binding upon the Company or any of its subsidiaries or any license, franchise, permit, certificate, approval or other similar authorization affecting, or relating to the assets or business of the Company and its subsidiaries, except, in the case of clauses (ii) and (iii), for any such conflict, violation, breach, default or other occurrence which would not be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect. (b) The execution, delivery and performance of this Agreement by the Company and the consummation of the transactions contemplated hereby by the Company do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any governmental or regulatory authority, domestic, foreign, or supranational except for (i) applicable requirements, if any, of the Exchange Act and the rules and regulations promulgated 18 12 thereunder, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and state securities, takeover and Blue Sky laws, (ii) the applicable requirements of the New York Stock Exchange, (iii) the filing with the Secretary of State of the State of Delaware of the Certificate of Merger as required by the DGCL, (iv) the applicable requirements of any applicable Antitrust Law (as defined below) and (v) any such consent, approval, authorization, permit, action, filing or notification the failure of which to make or obtain would not (A) reasonably be expected to materially delay the Company from performing its obligations under this Agreement or (B) be reasonably expected to have a Material Adverse Effect. SECTION 3.6 Compliance. (a) Neither the Company nor any of its subsidiaries is, nor since January 1, 1999 has been, in violation of any law, rule, regulation, statute, order, judgment or decree applicable to the Company or any of its subsidiaries or by which its or any of their respective properties or assets are bound, except for any such violation which would not reasonably be likely to have a Material Adverse Effect, (b) the Company and its subsidiaries have all permits, licenses, authorizations, exemptions, orders, consents, approvals and franchises from governmental and regulatory agencies required to conduct their respective businesses as now being conducted, and there has occurred no violation of, default under or event giving to others the right of termination, amendment or cancellation of any such permits, licenses, authorizations, exemptions, orders, consents, approvals and franchises, except for any such permit, license, authorization, exemption, order, consent, approval or franchise, the absence of which would not reasonably be likely to have a Material Adverse Effect and (c) none of the Company or any of its subsidiaries has received, since January 1, 1997, a notice or other written communication alleging or identifying a possible violation of any statute, law, ordinance, rule, regulation, judgment, order or decree of any governmental entity applicable to its business or operations, except for any such notices, communications or violations which would not reasonably be expected to have a Material Adverse Effect. SECTION 3.7 SEC Filings; Financial Statements. (a) The Company has filed all forms, reports, statements, schedules and other documents required to be filed with the SEC (collectively, the "SEC Reports") since October 31, 1997, each of which, when filed, and as finally amended, complied as to form in all material respects with the applicable requirements of the Securities Act of 1933, as amended (the "Securities Act") and the rules and regulations promulgated thereunder, or the Exchange Act and the rules and regulations promulgated thereunder, each as in effect on the date so filed or amended, as the case may be. None of the SEC Reports contained, when filed (or, if amended or superseded by a filing prior to the date hereof, on the date of such filing), and each such SEC Report filed subsequent to the date hereof will not contain, when filed, any untrue statement of a material fact or omitted or will omit, when filed, to state a material fact required to be stated or incorporated by reference therein, necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. No subsidiary of the Company is required to file any forms, reports, statements, schedules or other documents with the SEC. (b) The audited consolidated financial statements of the Company (including any related notes thereto) for the fiscal years ended October 31, 1998 and October 31, 1999 included in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 1999 filed with the SEC have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its subsidiaries at the respective dates thereof and the consolidated statements of 19 13 operations, cash flows and changes in stockholders' equity for the periods indicated. The unaudited consolidated financial statements of the Company (including any related notes thereto) for the nine months ended July 31, 2000 included in the Company's quarterly report on Form 10-Q for the nine months ended July 31, 2000 filed with the SEC have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly present in all material respects the consolidated financial position of the Company and its subsidiaries as of the date thereof and the consolidated statements of operations and cash flows for the periods indicated (subject to normal year-end audit adjustments). (c) There are no liabilities or obligations of the Company or any of its subsidiaries required to be disclosed on a balance sheet prepared in accordance with generally accepted accounting principles, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances that would reasonably be expected to result in such a liability other than: (i) liabilities or obligations disclosed and provided for in the SEC Reports filed prior to the date hereof, (ii) liabilities or obligations that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect and (iii) liabilities and obligations under this Agreement. SECTION 3.8 Absence of Certain Changes or Events. Since July 31, 2000, except as contemplated by this Agreement, the Company and its subsidiaries have conducted their business in the ordinary course consistent with past practice and, since such date, there has not been (i) any change, event or occurrence which has had or would reasonably be expected to have a Material Adverse Effect, (ii) prior to the date of this Agreement, any declaration, setting aside or payment of any dividend on, or other distribution (whether in cash, stock or property) in respect of, any of the Company's or any of its subsidiaries' capital stock, except for dividends by a wholly owned subsidiary of the Company to its parent, (iii) prior to the date of this Agreement, any purchase, redemption or other acquisition of any shares of capital stock or any other securities of the Company or any of its subsidiaries or any options, warrants, calls or rights to acquire such shares or other securities, (iv) prior to the date of this Agreement, any split, combination or reclassification of any of the Company's or any of its subsidiaries' capital stock or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock or other securities of the Company or any of its subsidiaries, (v) (x) any granting by the Company or any of its subsidiaries to any current or former director, officer, employee or consultant (other than third party consultants) of any increase in compensation, bonus or other benefits or any such granting of any type of compensation or benefits to any current or former director, officer, employee or consultant (other than third party consultants) not previously receiving or entitled to receive such type of compensation or benefit, except for increases of cash compensation and other immaterial changes in benefits (except for changes in benefits provided to officers other than as the result of immaterial changes made to Company Plans that are generally applicable to the employees of the Company or any of its subsidiaries, which changes are not specifically directed at or do not disproportionately affect such officers) in each case (1) in the ordinary course of business consistent with past practice or (2) required under any agreement or benefit plan in effect as of December 31, 1999, (y) any granting to any current or former director, officer, employee or consultant (other than third party consultants) of the right to receive any severance or termination pay, or increases therein, or (z) any entry by the Company or any of its subsidiaries into, or any amendment of, any Severance Plan, Company Plan or Employment Agreement (each as defined below), (vi) any payment of any benefit or the grant or amendment of any award (including in 20 14 respect of stock options, stock appreciation rights, performance units, restricted stock or other stock-based or stock-related awards or the removal or modification of any restrictions in any Severance Plan, Company Plan or Employment Agreement or awards made thereunder) except as required to comply with any applicable law or any Severance Plan, Company Plan or Employment Agreement existing on such date, (vii) any damage or destruction, whether or not covered by insurance, that individually or in the aggregate would reasonably be expected to result in a Material Adverse Effect, (viii) any material change in financial accounting principles by the Company or any of its subsidiaries, except insofar as may have been required by a change in generally accepted accounting principles or SEC accounting regulations or guidelines or applicable law, (ix) on or prior to the date of this Agreement, any material election with respect to taxes by the Company or any of its subsidiaries or any settlement or compromise of any material tax liability or refund of the Company or any of its subsidiaries (x) on or prior to the date of this Agreement, any material change in tax accounting principles by the Company or any of its subsidiaries, except insofar as may have been required by a change in generally accepted accounting principles, SEC accounting regulations or guidelines or applicable law, or (xi) any material write-off or write-down by the Company or any of its subsidiaries of any of the material assets of the Company or any of its subsidiaries. SECTION 3.9 Absence of Litigation. There are no suits, claims, actions, proceedings or investigations pending or, to the knowledge of the Company, threatened against or affecting the Company or any of its subsidiaries or any of their respective properties that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. As of the date hereof, neither the Company nor any of its subsidiaries nor any of their respective properties is or are subject to any order, writ, judgment, injunction, decree or award of any governmental entity or arbitrator, or to the knowledge of the Company, investigation, proceeding, notice of violation, order of forfeiture or complaint by any governmental entity involving the Company or any of its subsidiaries that individually or in the aggregate would reasonably be likely to have a Material Adverse Effect. SECTION 3.10 Employee Benefit Plans. Except as would not, individually or in the aggregate, have a Material Adverse Effect: (a) Section 3.10 of the Disclosure Schedule contains a true and complete list of each "employee benefit plan" (within the meaning of section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")), and each other employee plan, program, agreement or arrangement (including, without limitation, all director benefit plans, and all severance guidelines, plans, policies, programs and practices ("Severance Plans")), and each other plan or program providing benefits in the event of termination of employment or a change in control or providing retention or "stay" bonuses, and each plan or program providing for the issuance of stock options or restricted shares to employees or directors or for employees or directors to acquire any stock, and including any other plan or program providing for equity-based compensation or providing for any bonuses to employees or directors and each vacation or sick pay policy, and fringe benefit plan, including any such plan which provides medical, life insurance or other benefits to any former employees or to any beneficiary or dependent of any such former employee (collectively, including the Severance Plans, the "Company Plans"), and each compensation, severance, employment, change in control, retention bonus or similar agreement (collectively, the "Employment Agreements") in existence as of the date hereof for any employees (and former employees) and directors (and former directors) of the Company and its subsidiaries. 21 15 (b) With respect to each Company Plan, the Company has made available to Parent a current, accurate and complete copy thereof and, to the extent applicable, (i) any related trust agreement or other funding instrument, (ii) the most recent determination letter, (iii) any summary plan description or other written communications by the Company or any of its subsidiaries to their employees concerning the extent of the benefits provided under a Company Plan and (iv) for the most recent year (A) the Form 5500 and attached schedules, (B) audited financial statements and (C) actuarial valuation reports. (c) (i) Each Company Plan has been established and administered in all respects in accordance with its terms and in compliance with the applicable provisions of ERISA, the Code, and other applicable laws, rules and regulations, (ii) each Company Plan which is intended to be qualified within the meaning of Code section 401(a) has received a favorable determination letter as to its qualification and nothing has occurred, whether by action or failure to act, that would cause the loss of such qualification (iii) no plan which is subject to Title IV of ERISA which is a Company Plan or a plan of any entity treated as a single employer with the Company pursuant to Code section 414(b) or (c) (a "Common Control Entity") has been terminated within the five year period prior to the date hereof, (iv) no "reportable event" (as such term is defined in ERISA Section 4043) with respect to which notice has not been waived, "prohibited transaction" (as such term is defined in ERISA section 406 and Code section 4975) that is not exempt or "accumulated funding deficiency" (as such term is defined in ERISA section 302 and Code section 412 (whether or not waived)) has occurred with respect to any Company Plan and (v) other than the Company Plans, there is no "employee benefit plan" (within the meaning of section 3(3) of ERISA) of any other entity for which the Company or any Common Control Entity is reasonably likely to have any liability. (d) Neither the Company nor any Common Control Entity participates in or has any liability to any multiemployer plan (within the meaning of ERISA section 4001(a)(3)) and neither the Company nor any Common Control Entity has incurred any withdrawal liability under Title IV of ERISA. (e) With respect to each Company Plan, no actions, suits or claims (other than routine claims for benefits in the ordinary course) are pending or, to the knowledge of the Company, threatened. (f) Schedule 3.10(f) contains a true and complete list of each collective bargaining agreement to which the Company or any of its subsidiaries is a party. Except as set forth on Schedule 3.10(f), none of the employees or former employees of the Company or any of its subsidiaries is represented by any collective bargaining agent or worker collective. Schedule 3.10(f) indicates the date, if any, as of which any agreement with any collective bargaining representative or worker collective expires. (g) Except as set forth on Schedule 3.10(g)(i), the consummation of the transactions contemplated by this Agreement will not, either alone or upon the occurrence of any additional or subsequent events, result in any payment or benefit under any Company Plan or Employment Agreement which would be an "excess parachute payment" within the meaning of Section 280G(b)(1) of the Code. Except as set forth on Schedule 3.10(g)(ii), no Company Plan or Employment Agreement provides for the payment of any amount intended to make any employee whole for any excise tax imposed under Code Section 4999(a). 22 16 (h) The Company has delivered to Parent a schedule setting forth a list of each stock option outstanding as of October 23, 2000 and each restricted share for which restrictions have not, as of October 23, 2000, lapsed. SECTION 3.11 Tax Matters. Except for matters which would not individually or in the aggregate have a Material Adverse Effect, the Company and each of its subsidiaries, and any consolidated, combined, unitary or aggregate group for tax purposes of which the Company or any of its subsidiaries is or has been a member, has timely filed all Tax Returns (as defined below) required to be filed by it in the manner provided by law, has paid all Taxes (as defined below) shown thereon to be due and has provided adequate reserves in its financial statements for any Taxes that have not been paid, whether or not shown as being due on any Tax Returns. There is no claim, audit, action, suit, proceeding, or investigation now pending or threatened against or with respect to the Company or any of its subsidiaries in respect of Taxes, except for matters which would not individually or in the aggregate have a Material Adverse Effect. No adjustment that would increase the Tax liability, or reduce any Tax asset, of the Company or any of its subsidiaries in a manner that would have a Material Adverse Effect has been made, proposed or threatened in writing by a taxing authority (whether in connection with an audit or otherwise). The Company and each of its subsidiaries have complied with all applicable laws with respect to the withholding of Tax, including without limitation requirements relating to the submission of withheld amounts to appropriate taxing authorities, except to the extent such noncompliance would not individually or in the aggregate have a Material Adverse Effect. The Company and its subsidiaries have no liability for any Taxes imposed on any other persons as a result of being party to any agreement or having any obligation to indemnify other persons except for liabilities which would not individually or in the aggregate have a Material Adverse Effect. The representations set forth in the private letter ruling issued by the Internal Revenue Service to the Company with respect to the Company's distribution to its stockholders of substantially all of its stock of The Neiman Marcus Group, Inc. ("NMG") and the representations made by the Company in its request (and any supplements thereto) for such private letter ruling, were true, correct and complete in all material respects as of October 22, 1999. For purposes of this Agreement, "Taxes" shall mean any taxes of any kind, including but not limited to those on or measured by or referred to as income, gross receipts, capital, sales, use, ad valorem, franchise, profits, license, withholding, payroll, employment, excise, severance, stamp, occupation, premium, value added, property or windfall profits taxes, customs, duties or similar fees, assessments or charges of any kind whatsoever, together with any interest and any penalties, additions to tax or additional amounts imposed by any governmental authority, domestic or foreign. For purposes of this Agreement, "Tax Return" shall mean any return, report or statement required to be filed with any governmental authority with respect to Taxes, including any schedule or attachment thereto or amendment thereof. SECTION 3.12 Offer Documents; Proxy Statement. Neither the Schedule 14D-9, nor any of the information specifically supplied in writing by the Company for inclusion in the Offer Documents, shall, at the respective times such Schedule 14D-9, the Offer Documents or any amendments or supplements thereto are filed with the SEC, first published, sent or given to the stockholders of the Company and at the time Shares are purchased pursuant to the Offer, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. Neither the proxy statement to be sent to the stockholders of the Company in connection with the Stockholders Meeting (as defined in Section 6.1) nor the information statement to be sent to such stockholders, as appropriate 23 17 (such proxy statement or information statement, as amended or supplemented, is herein referred to as the "Proxy Statement"), shall, at the date the Proxy Statement (or any amendment thereof or supplement thereto) is first mailed to such stockholders, at the time of the Stockholders Meeting, if any, and at the Effective Time, be false or misleading with respect to any material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they are made, not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Stockholders Meeting which has become false or misleading. Notwithstanding the foregoing, the Company makes no representation or warranty with respect to any information supplied by Parent or Purchaser or any of their respective representatives which is contained in or incorporated by reference in the Schedule 14D-9 or the Proxy Statement. The Schedule 14D-9, as amended or supplemented, and the Proxy Statement will comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations promulgated thereunder. SECTION 3.13 Brokers. No broker, finder, investment banker or other intermediary (other than the Financial Advisor, a copy of whose engagement agreement has been provided to Parent) is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement from the Company or any of its affiliates in connection with the transactions contemplated by this Agreement. SECTION 3.14 Takeover Statutes; Rights Plans. No "fair price", "moratorium", "control share acquisition" or other similar antitakeover statute or regulation enacted under state or federal laws in the United States (with the exception of Section 203 of the DGCL) applicable to the Company is applicable to the Offer or the Merger or the other transactions contemplated hereby. As of the date of this Agreement, the Company does not have any stockholder rights plan in effect. Assuming the accuracy of the representations and warranties of Parent and Purchaser set forth in Section 4.8, the action of the Board of Directors of the Company in approving the Offer, the Merger and this Agreement (and the transactions provided for herein) is sufficient to render inapplicable to the Offer, the Merger and this Agreement (and the transactions provided for herein) the restrictions on "business combinations" (as defined in Section 203 of the DGCL) set forth in Section 203 of the DGCL. SECTION 3.15 Intellectual Property. (a) Except as would not have a Material Adverse Effect, (i) the Company and its subsidiaries own, or are validly licensed or otherwise have the right to use all patents, inventions, copyrights, software, trademarks, service marks, domain names, trade dress, trade secrets and all other intellectual property rights of any kind or nature ("Intellectual Property") used in their business as currently conducted, (ii) such Intellectual Property does not infringe, misappropriate or otherwise violate the Intellectual Property of any third party; (iii) none of the Company or any of its subsidiaries has received any written charge, complaint, claim, demand or notice alleging any such infringement, misappropriation or other violation (including any claim that the Company or any of its subsidiaries must license or refrain from using any Intellectual Property of any third party), and (iv) to the Company's knowledge no other third party has infringed upon, misappropriated or otherwise violated any Intellectual Property of the Company or any of its subsidiaries. The Company and its subsidiaries make reasonable best efforts to protect and maintain their material Intellectual Property. (b) Except as would not have a Material Adverse Effect, the Company and its subsidiaries own, lease, or are validly licensed or otherwise have the right to use all hardware 24 18 and software and any other necessary components which make up the information technology systems (the "IT Systems") which the Company and its subsidiaries use as of the date hereof to carry out their respective businesses as currently conducted. Except as would not have a Material Adverse Effect, (i) to the knowledge of the Company, neither the IT Systems nor any component of the IT Systems, infringes, misappropriates or otherwise violates the Intellectual Property of any third party, and (ii) the IT Systems have sufficient capacity to satisfy the needs of the business of the Company as currently conducted. SECTION 3.16 Environmental Matters. (a) Except as would not reasonably be likely to have a Material Adverse Effect: (i) the Company and each of its subsidiaries comply with all applicable Environmental Laws (as defined below), and possess and comply with all applicable Environmental Permits (as defined below) required under such laws to operate as it presently operates; (ii) there are no Materials of Environmental Concern (as defined below) or other facts, events, conditions or set of circumstances at any property currently or previously owned, leased or operated by the Company or any of its subsidiaries that are reasonably likely to result in liability of the Company or any subsidiary under any applicable Environmental Law; and (iii) neither the Company nor any of its subsidiaries has received any written notification alleging that it is liable for, or request for information pursuant to section 104(e) of the Comprehensive Environmental Response, Compensation and Liability Act or similar state statute, concerning any release or threatened release of Materials of Environmental Concern at any location. (b) For purposes of this Agreement, the following terms shall have the meanings assigned below: "Environmental Laws" shall mean all foreign, Federal, state, or local laws (including common law), statutes, regulations, rules, judgments, orders, ordinances, codes, or decrees relating to the protection of the environment, including, without limitation, the quality of the ambient air, soil, surface water or groundwater, in effect as of the date of this Agreement. "Environmental Permits" shall mean all permits, licenses, registrations, and other authorizations required under applicable Environmental Laws. "Materials of Environmental Concern" shall mean any hazardous, acutely hazardous, or toxic substance or waste or any other words of similar import defined and regulated as such under Environmental Laws, including without limitation the federal Comprehensive Environmental Response, Compensation and Liability Act and the federal Resource Conservation and Recovery Act. (c) Neither the Company nor any of its subsidiaries own, lease or operate any properties located in New Jersey or Connecticut. SECTION 3.17 Contracts. (a) Except for any loan or credit agreement, bond, debenture, note, mortgage, indenture, guarantee, lease or other contract, commitment, agreement, instrument, arrangement, understanding, obligation, undertaking, permit, concession, franchise or license (each, including all amendments thereto, a "Contract") filed as exhibits to the SEC Reports, as of the date hereof there are no Contracts that are required to be filed as an exhibit to any SEC Reports under the Exchange Act and the rules and regulations promulgated thereunder. 25 19 Except for Contracts filed in unredacted form as exhibits to the Filed SEC Reports, Section 3.17 of the Disclosure Schedule sets forth a true and complete list of: (i) all Contracts to which the Company or any of its affiliates is a party, or that purport to be binding upon the Company or any of its affiliates that contain a covenant (a "Restrictive Covenant") materially restricting the ability of the Company or any of its subsidiaries (or which, following the consummation of the Merger, could materially restrict the ability of Parent or any of its subsidiaries, including the Company and its subsidiaries) to compete in any business that is material to the Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, or with any person or in any geographic area, except for any such Contract that may be canceled without penalty by the Company or any of its subsidiaries upon notice of 60 days or less; (ii) all material joint venture and partnership agreements (excluding information technology contracts); and (iii) as of the date hereof, all loan agreements, credit agreements, notes, debentures, bonds, mortgages, indentures and other Contracts pursuant to which any indebtedness of the Company or any of its subsidiaries is outstanding or may be incurred and all guarantees of or by the Company or any of its subsidiaries of any indebtedness of another person (except for such indebtedness or guarantees of indebtedness the aggregate principal amount of which does not exceed $5 million). None of the Company or any of its subsidiaries is in violation of or default (with or without notice or lapse of time or both) under, or has waived or failed to enforce any rights or benefits under, any Contract to which it is a party or by which it or any of its properties or assets is bound, and, to the knowledge of the Company or such subsidiary, no other party to any of its Contracts is in violation or default (with or without notice or lapse of time or both) under, or has waived or failed to enforce any rights or benefits under, and there has occurred no event giving to others any right of termination, amendment or cancellation of, with or without notice or lapse of time or both, any such Contract except, in each case, for violations, defaults, waivers or failures to enforce benefits that individually or in the aggregate would not be expected to result in a Material Adverse Effect. Except as identified in writing by the Company to Parent prior to the date of this Agreement, the Company has delivered or made available to Parent or its representatives true and complete copies of all Contracts listed on Section 3.17 of the Company Disclosure Schedule. (b) The Company is and has been in substantial compliance since November 1, 1999, with the Amended and Restated Intercompany Services Agreement dated November 1, 1999 between the Company and NMG (the "Intercompany Services Agreement") and, as of the date hereof, there are no suits or claims pending, or to the knowledge of the Company threatened against it, by NMG arising out the Intercompany Services Agreement. (c) The Lease Resolution Agreement dated as of October 27, 2000 among the Company, Richard A. Smith and Nancy Lurie Marks (the "Family Agreement") has been duly 26 20 and validly authorized, executed and delivered by the Company and constitutes and will constitute, as at the date of the expiration of the Offer and the Effective Time a legal, valid and binding obligation of the parties thereto and is enforceable and will be enforceable, as of the date of the expiration of the Offer and the Effective Time, against the parties thereto in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER Parent and Purchaser hereby, jointly and severally, represent and warrant to the Company that: SECTION 4.1 Corporate Organization. Each of Parent and Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated and has the requisite corporate power and authority to own, operate or lease its properties and to carry on its business as it is now being conducted, except where the failure to be so organized, existing or in good standing or to have such power or authority would not prevent or materially delay the consummation of the transactions contemplated hereby. Parent beneficially owns all of the outstanding capital stock of Purchaser. SECTION 4.2 Authority Relative to This Agreement. Each of Parent and Purchaser has all necessary corporate power and authority to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement by each of Parent and Purchaser and the consummation by each of Parent and Purchaser of the transactions contemplated hereby have been duly and validly authorized by all necessary corporate action (including by the Boards of Directors of Parent and Purchaser and, prior to the Effective Time, by Parent as the sole stockholder of Purchaser) and no other corporate proceedings on the part of Parent or Purchaser (including shareholder actions) are necessary to authorize this Agreement or to consummate the transactions so contemplated (other than the filing with the Secretary of State of the State of Delaware of the Certificate of Merger as required by the DGCL). This Agreement has been duly executed and delivered by Parent and Purchaser and, assuming due authorization, execution and delivery hereof by the Company, constitutes a legal, valid and binding obligation of each such corporation enforceable against such corporation in accordance with its terms, subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing. SECTION 4.3 No Conflict; Required Filings and Consents. (a) The execution, delivery and performance of this Agreement by Parent and Purchaser do not and will not (i) conflict with or violate the respective certificates or articles of incorporation or by-laws of Parent or Purchaser, (ii) assuming that all consents, approvals and authorizations contemplated by clauses (i), (ii) and (iii) of subsection (b) below have been obtained and all filings described in 27 21 such clauses have been made, conflict with or violate any law, rule, regulation, order, judgment or decree applicable to Parent or Purchaser or by which either of them or their respective properties are bound or (iii) result in any breach or violation of or constitute a default (or an event which with notice or lapse of time or both would become a default) or result in the loss of a material benefit under, or give rise to any right of termination, cancellation, material amendment or material acceleration of, any note, bond, mortgage, indenture, contract, agreement, lease, license, permit or other instrument or obligation to which Parent or Purchaser is a party or by which Parent or Purchaser or any of their respective properties are bound, except, in the case of clauses (ii) and (iii), for any such conflict, violation, breach, default or other occurrence which would not prevent or materially delay the consummation of the transactions contemplated hereby. (b) The execution, delivery and performance of this Agreement by Parent and Purchaser and the consummation of the Offer and the Merger by Purchaser do not and will not require any consent, approval, authorization or permit of, action by, filing with or notification to, any governmental or regulatory authority, except (i) for applicable requirements, if any, of the Exchange Act and the rules and regulations promulgated thereunder, the HSR Act and state securities, takeover and Blue Sky laws, (ii) the applicable requirements of the New York Stock Exchange, London Stock Exchange and Amsterdam Stock Exchange, (iii) the filing with the Secretary of State of the State of Delaware of the Certificate of Merger as required by the DGCL, (iv) the applicable requirements of any applicable Antitrust Law or investment laws relating to foreign ownership and (v) any such consent, approval, authorization, permit, action, filing or notification the failure of which to make or obtain would not prevent or materially delay the consummation of the transactions contemplated hereby. SECTION 4.4 Offer Documents; Proxy Statement. The Offer Documents, as filed pursuant to Section 1.1, will not, at the time such Offer Documents (or any amendments or supplements thereto) are filed with the SEC or are first published, sent or given to the stockholders of the Company and at the time Shares are purchased pursuant to the Offer contain any untrue statement of a material fact or omit to state any material fact required to be stated or incorporated by reference therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The information specifically supplied in writing by Parent for inclusion in the Proxy Statement shall not, on the date the Proxy Statement (or any amendments or supplements thereto) is first mailed to the stockholders of the Company, at the time of the Stockholders Meeting, if any, and at the Effective Time, contain any statement which is false or misleading with respect to any material fact, or omit to state any material fact required to be stated therein or necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not false or misleading or necessary to correct any statement in any earlier communication with respect to the solicitation of proxies for the Stockholders Meeting which has become false or misleading. Notwithstanding the foregoing, Parent and Purchaser make no representation or warranty with respect to any information supplied by the Company or any of its representatives which is contained in or incorporated by reference in any of the Offer Documents or Proxy Statement. The Offer shall comply in all material respects with the Exchange Act and the rules and regulations promulgated thereunder. The Offer Documents, as amended and supplemented, will comply in all material respects as to form with the requirements of the Exchange Act and the rules and regulations promulgated thereunder. 28 22 SECTION 4.5 Brokers. No broker, finder or investment banker (other than Morgan Stanley Dean Witter, ABN Amro and Cazenove is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by and on behalf of Parent or Purchaser. SECTION 4.6 Financing. Parent and Purchaser will have available to them, upon consummation of the Offer and at the Effective Time, immediately available funds necessary to consummate the transactions contemplated by this Agreement and to pay all related fees and expenses. SECTION 4.7 Operations of Purchaser. Purchaser has been formed solely for the purpose of engaging in the transactions contemplated hereby and prior to the Effective Time will have engaged in no other business activities and will have incurred no liabilities or obligations other than as contemplated herein. SECTION 4.8 Ownership of Shares. As of the date of this Agreement, Parent, Purchaser or their respective affiliates do not own (directly or indirectly, beneficially or of record) any Shares and none of Parent, Purchaser or their respective affiliates hold any rights to acquire any Shares except pursuant to this Agreement. SECTION 4.9 Vote/Approval Required. No vote of the holders of any class or series of capital stock of Reed International P.L.C., Elsevier NV, Parent, Purchaser or any of their affiliates is necessary to approve this Agreement, the Merger or the Offer or the financing thereof (including under the rules of any stock exchange on which their shares are listed). None of Reed International P.L.C., Elsevier NV, Parent, Purchaser nor any of their affiliates is required to obtain the advice of any works council or workers council or similar body in connection with this Agreement, the Merger or the Offer or the transactions contemplated hereby or the financing thereof. SECTION 4.10 Subsequent Transaction. Parent has furnished the Company with true and correct copies of all agreements, understandings and interpretations relating to the Subsequent Transaction (collectively, the "Subsequent Transaction Agreements"). 29 23 ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.1 Conduct of Business of the Company Pending the Merger. The Company covenants and agrees that, during the period from the date hereof until the Effective Time, except as contemplated by this Agreement, as disclosed in the SEC Reports filed prior to the date of this Agreement or in Section 5.1 of the Disclosure Schedule or as required by law, or unless Purchaser shall otherwise agree in writing, the business of the Company and its subsidiaries shall be conducted in its ordinary course of business consistent with past practice and the Company and its subsidiaries shall use their reasonable best efforts to comply with all applicable laws, rules and regulations and, to the extent consistent therewith, use their reasonable best efforts to preserve substantially intact their business organizations, and to preserve their present relationships with customers, suppliers, employees, licensors, licensees, distributors, authors and other content providers and other persons with which they have business relations. Without limiting the generality of the foregoing, between the date of this Agreement and the Effective Time, except as otherwise contemplated by this Agreement, as set forth in Section 5.1 of the Disclosure Schedule or as required by law, neither the Company nor any of its subsidiaries shall without the prior written consent of Parent (it being understood that Parent will determine whether or not to give such consent based on its reasonable business judgment): (a) amend or otherwise change the certificate of incorporation or by-laws or equivalent organizational documents of the Company and its subsidiaries; (b) issue, deliver, sell, pledge, dispose of or encumber any shares of capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of capital stock, or any other ownership interest (including but not limited to stock appreciation rights or phantom stock), of the Company or any of its subsidiaries (except (A) for the issuance of shares of Common Stock issuable in accordance with the terms of Employee Options issued and outstanding as of the date hereof, (B) for the conversion of shares of Series A Stock or Class B Stock into shares of Common Stock, (C) for the grant of Employee Options (and issuances of Common Stock pursuant thereto) in the ordinary course of business in order to attract new employees or (D) in connection with the dividend reinvestment plan of the Company existing on the date hereof); (c) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock (except for (i)any dividend or distribution by a wholly-owned subsidiary of the Company, (ii) regular quarterly dividends of the Company in an amount not to exceed $0.21 per share of Common Stock and regular quarterly dividends of the Company in an amount not to exceed $0.189 per share of Class B Stock or (iii) quarterly dividends on the Series A Stock as provided for in the Restated Certificate); (d) (i) purchase, redeem or otherwise acquire any shares of its capital stock or any other securities of the Company or any of its subsidiaries or any options, warrants, calls or rights to acquire any such shares or other securities (other than in connection with the dividend reinvestment plan of the Company existing on the date hereof in accordance with past practice) or (ii) reclassify, combine, split or subdivide any capital stock or other 30 24 securities of the Company or any of its subsidiaries (except in connection with the conversion of shares of Class B Stock or Series A Stock into shares of Common Stock); (e) (i) directly or indirectly, acquire or agree to acquire (by merger, consolidation or acquisition of stock or assets or otherwise) (A) any interest in a corporation, partnership or other business organization or division thereof or any assets constituting a business, including assets related to individual works, or (B) except in the ordinary course of business consistent with past practice, any other assets, (ii) directly or indirectly sell, lease, license, sell and leaseback, mortgage, encumber or otherwise dispose of, (a) any of its individual works or assets related thereto, (b) any other assets (other than assets intended for sale to customers in the ordinary course of business or consumed in the ordinary course of business), having an aggregate fair market value in excess of $5 million; other than in the case of clauses (a) and (b) pursuant to existing contracts or commitments, (iii) other than in the ordinary course of business consistent with past practice, enter into, renew, amend or terminate any contract or agreement which is or would be material to the Company and its subsidiaries taken as a whole or (iv) issue or authorize any material new capital expenditures other than in accordance with the capital expenditure schedule set forth as Section 5.1(e) of the Disclosure Schedule; (f) (i) repurchase, prepay or incur any indebtedness or guarantee any indebtedness of another Person or issue or sell any debt securities or options, warrants, calls or other rights to acquire any debt securities of the Company or any of its subsidiaries, guarantee any debt securities of another Person, enter into any "keep well" or other agreement to maintain any financial statement condition of another Person or enter into any arrangement having the economic effect of any of the foregoing, other than under existing debt facilities in the ordinary course of business consistent with past practice for working capital purposes or other purposes permitted under this Section 5.1, or (ii) make any loans, advances or capital contributions to, or investments in, any other Person, other than those (A) set forth in Section 5.1(f) of the Disclosure Schedule or (B) made to or in the Company or any direct or indirect wholly owned subsidiary of the Company; (g) except as required by law, (i) pay, discharge, settle or satisfy any material claims (including claims of stockholders), liabilities or obligations (whether absolute, accrued, asserted or unasserted, contingent or otherwise), except (A) in the ordinary course of business consistent with past practice or (B) as required by their terms as in effect on the date of this Agreement, (ii) waive, release, grant or transfer any right of material value other than in the ordinary course of business consistent with past practice or (iii) waive any material benefits of, or agree to modify in any respect materially adverse to the Company, or fail to enforce, or consent to any matter with respect to which its consent is required under, any material confidentiality agreement (other than standstill provisions) to which the Company or any of its subsidiaries is a party; (h) except as contemplated by Section 6.6 or except to the extent provided under any Company Plan or Employment Agreement, increase the compensation or fringe benefits of any of its directors, officers or employees, except for increases for employees of the Company or its subsidiaries (other than directors and officers except as provided in Schedule 5.1(h)) in the ordinary course of business consistent with past practice, or grant any severance or termination pay not provided for under any Company Plan or Employment Agreement or enter into any employment, consulting or severance 31 25 agreement or arrangement with any present or former director, officer or other employee of the Company or any of its subsidiaries, or establish, adopt, enter into or amend in any material respect or terminate any collective bargaining, bonus, profit sharing, thrift, compensation, stock option, restricted stock, pension, retirement, deferred compensation, employment, termination, severance or other plan, agreement, trust, fund, policy, guideline, arrangement or practice for the benefit of any directors, officers or employees, except as required by applicable law; (i) enter into any agreement containing any provision or covenant materially limiting in any respect the ability of the Company or any of its subsidiaries or, assuming the consummation of the transactions contemplated herein, Parent or any of its affiliates, to (i) sell any products or services of or to any other Person, (ii) engage in any line of business or (iii) compete with any Person; (j) make any significant change in any accounting principles, except as may be appropriate to conform to changes in statutory or regulatory accounting rules or generally accepted accounting principles or regulatory requirements with respect thereto; (k) accelerate the payment, right to payment or vesting of any bonus, severance, profit sharing, retirement, deferred compensation, stock option, insurance or other compensation or benefits; (l) other than in the ordinary course of business consistent with past practice, make any tax election or enter into settlement or compromise of any tax liability that in either case is material to the business of the Company and its subsidiaries as a whole; (m) (a) agree to any modification, amendment, or waiver of any provision of (i) the Amended and Restated Reimbursement and Security Agreement (the "Reimbursement Agreement") dated as of January 26, 1999 between the Company and GC Companies, Inc. ("GCX") or (ii) the Intercreditor Agreement dated as of January 26, 1999 among BankBoston, N.A., the Company and GCX, without Parent's consent, which consent shall not be unreasonably withheld; or (B) settle or compromise any claim made by GCX, or any other person, or any liability or obligation of the Company or its subsidiaries relating to GCX, any of its properties or relating to any other matter arising in any reorganization, recapitalization liquidation or bankruptcy proceeding of GCX, without Parent's consent, which consent shall not be unreasonably withheld (provided that the Company may directly or indirectly make payments to any third party (which in the aggregate will not exceed $1 million), or take any emergency or temporary action, in order to preserve the assets or operations associated with any GCX obligations for which the Company is liable). Further, the Company agrees to assert and defend, consistent with advice of counsel, all rights it may have with respect to any matter affecting GCX, and use its reasonable best efforts, consistent with advice of counsel, to mitigate any losses, obligations or claims relating to GCX or its properties including any guarantee of leases or any other obligations of GCX; provided, however, that Parent consents to the implementation of the Company's agreement dated October 13, 2000 with DJM Asset Management and W/S Discount Acquisition II, LLC. In addition, the Company shall promptly notify Parent (but in no event later than 48 hours) of any material development or change with respect to any matters related to GCX after the date hereof and shall thereafter keep Parent informed in all respects as to the status of any such material developments or changes. 32 26 (n) authorize or agree to take any of the actions described in Sections 5.1(a) through 5.1(m). ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.1 Stockholders Meeting. (a) As soon as reasonably practicable following consummation of the Offer, the Company, acting through its Board of Directors, shall, if required in accordance with applicable law and the Company's Restated Certificate and By-Laws, (i) duly call, give notice of, convene and hold a meeting of its stockholders for the purpose of adopting this Agreement (the "Stockholders Meeting") and (ii) use its reasonable best efforts to obtain the necessary adoption of this Agreement by the stockholders of the Company. At the Stockholders Meeting, Parent and Purchaser shall cause all Shares then beneficially owned by them and their subsidiaries and controlled affiliates to be voted in favor of adoption of this Agreement. (b) Notwithstanding the foregoing, in the event that Purchaser shall acquire at least 90% of the outstanding shares of each of the Company Common Stock and the Class B Stock (if any shares thereof are then outstanding), Parent and Purchaser agree, subject to Article VII, to take all necessary and appropriate action to cause the Merger to become effective as soon as reasonably practicable after such acquisition, without a meeting of the stockholders of the Company, in accordance with Section 253 of the DGCL. (c) Notwithstanding anything to the contrary contained in this Agreement, the Company shall not be required to hold the Stockholders Meeting if the Offer is not consummated. SECTION 6.2 Proxy Statement. If required by applicable law, as soon as reasonably practicable following Parent's request, the Company shall file with the SEC under the Exchange Act and the rules and regulations promulgated thereunder, and shall use its reasonable best efforts to have cleared by the SEC, the Proxy Statement with respect to the Stockholders Meeting. Parent, Purchaser and the Company will cooperate with each other in the preparation of the Proxy Statement. Without limiting the generality of the foregoing, each of Parent and Purchaser will furnish to the Company the information relating to it required by the Exchange Act and the rules and regulations promulgated thereunder to be set forth in the Proxy Statement. The Company agrees to use its reasonable best efforts to respond as soon as reasonably practicable to any comments made by the SEC with respect to the Proxy Statement and any preliminary version thereof filed by it and cause such Proxy Statement to be mailed to the stockholders of the Company as soon as reasonably practicable. 33 27 SECTION 6.3 Company Board Representation; Section 14(f). (a) If requested by Parent, the Company shall, as soon as reasonably practicable following payment for the purchase of Shares pursuant to the Offer, and from time to time thereafter, use its best efforts to cause a majority of directors of the Company to consist of persons designated or elected by Parent (such actions to include increasing the size of the Board of Directors or securing the resignations of incumbent directors or both). At such times, if requested by Parent, the Company will use its best efforts to cause persons designated by Purchaser to constitute a majority of the members of (i) each committee of the Board of Directors of the Company, (ii) each board of directors of each domestic subsidiary of the Company and (iii) each committee of each such board, in each case only to the extent permitted by law and as specifically designated by Parent. (b) The Company's obligations to cause Parent's designees to be elected or appointed to its Board of Directors shall be subject to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder. The Company shall as soon as reasonably practicable (subject to the provision of information by Parent and Purchaser) take all actions required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this Section 6.3 and shall include in the Schedule 14D-9 or a separate Rule 14f-1 information statement provided to the stockholders of the Company such information with respect to the Company and its officers and directors as is required under Section 14(f) and Rule 14f-1 to fulfill its obligations under this Section 6.3. Parent or Purchaser will supply to the Company as soon as reasonably practicable and be solely responsible for any information with respect to either of them and their nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1. (c) In addition to any vote of the Board of Directors of the Company required by law or the Restated Certificate or the By-Laws, following the election or appointment of Purchaser's designees pursuant to this Section 6.3 and prior to the Effective Time, any amendment of this Agreement or the Restated Certificate or By-Laws, any termination of this Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or Purchaser hereunder, any extension or alteration of the Effective Time or any waiver or assertion of any of the Company's rights hereunder or any term or condition of this Agreement or the Restated Certificate or By-Laws or any action by the Company hereunder which adversely affects holders of Shares other than Parent or Purchaser, and any other consent or action by the Board of Directors of the Company with respect to this Agreement, will require the concurrence of a majority of the directors of the Company then in office who are directors as of the date of this Agreement and who voted to approve this Agreement or are designated by a majority of the directors of the Company who are directors on the date of this Agreement and who voted to approve this Agreement; provided that, notwithstanding Section 6.3(a), the number of such directors shall be not less than three; provided, further, that, if the number of such directors shall be reduced below three for any reason, such remaining directors shall be entitled to designate persons to fill such vacancies so that there will continue to be three such directors and such persons shall be deemed for purposes of this Section 6.3(c) to have been directors as of the date of this Agreement. SECTION 6.4 Access to Information; Confidentiality. (a) From the date hereof to the Effective Time, upon reasonable prior written notice, and subject to applicable law, the Company (i) shall, and shall cause its subsidiaries, officers, directors and employees to, afford the officers, employees, counsel, accountants, financial representatives and other authorized representatives (the "Representatives") of Parent and representatives of the financial institutions providing financing and their counsel, accountants and other representatives (collectively, the 34 28 "Financing Representatives") and Representatives of any Person which has entered into an agreement with Parent with respect to purchasing certain assets and subsidiaries of the Company from Parent after consummation of the Merger (such Representatives, the "TP Representatives" and the transaction contemplated by such agreement, the "Subsequent Transaction") reasonable access, during normal business hours, to their respective properties, books, contracts and records and, during such period, shall furnish promptly to Parent all information concerning their respective businesses, properties and personnel as may reasonably be requested in connection with the transactions contemplated by this Agreement, including the financing and the Subsequent Transactions; (ii) subject to applicable law relating to the exchange of information, furnish and cause its subsidiaries to furnish, to Parent, Parent's Representatives, the Financing Representatives and the TP Representatives such financial and operating data and other information relating to the Company or any of its subsidiaries as such persons may reasonably request; and (iii) instruct the employees, counsel and financial advisors of the Company and its subsidiaries to cooperate with Parent, Parent's Representatives, the Financing Representatives and the TP Representatives in connection with the foregoing; provided that the foregoing shall not require any such entity to permit any inspection, or to disclose any information, that in its reasonable judgment would result in the disclosure of any trade secrets of third parties or violate any such entity's obligations with respect to confidentiality if such entity shall have attempted to obtain the consent of such third party to such inspection or disclosure. Any investigation pursuant to this Section shall be conducted in such manner as to not unreasonably interfere with the conduct of the business of the Company or its subsidiaries. No investigation pursuant to this Section 6.4 shall affect or be deemed to modify any representation or warranty made by the Company. All requests for information made pursuant to this Section 6.4 shall be directed to an executive officer of the Company or such Person as may be designated by such officers. (b) The Company acknowledges that Parent may need to cause an information memoranda to be prepared and used in connection with consummation of certain financing transactions, and agrees to use its reasonable best efforts to furnish Parent with reasonable access to, and to cause the cooperation of, all personnel reasonably requested by Parent to assist in arranging, consummating and obtaining any such financing, and using its reasonable best efforts to cause its management to participate in such meetings with third parties as Parent may reasonably request; provided that Parent shall provide the Company with drafts of any such information memoranda reasonably in advance of any proposed circulation thereof. In addition, the Company agrees to (i) request its accountants, at Parent's request and expense, to consent to the inclusion of their report or reports in, and to issue a comfort letter on customary terms in connection with, any information memoranda relating to such financing and (ii) at the reasonable request of Parent, (A) enter into such agreements and use reasonable best efforts to deliver such officers certificates and opinions as are customary in such a financing and as are, in the good faith determination of the persons executing such certificates or opinions, accurate and (B) pledge, grant security interests in and otherwise grant liens on its assets pursuant to such agreements; provided that no obligation of the Company under any such agreement, pledge or grant shall be effective until the Effective Time. (c) Each of Parent and Purchaser will hold and treat and will cause its officers, employees, auditors and other authorized representatives to hold and treat in confidence all documents and information concerning the Company and its subsidiaries furnished to Parent or Purchaser in connection with the transactions contemplated in this Agreement in accordance with the Confidentiality Agreement, dated June 28, 2000, between the Company and Reed Elsevier 35 29 PLC, which Confidentiality Agreement shall remain in full force and effect in accordance with its terms. SECTION 6.5 Acquisition Proposals. (a) The Company agrees that (i) it and its officers, directors and employees shall not, (ii) its subsidiaries and its subsidiaries' officers and directors shall not and (iii) it shall use reasonable best efforts to ensure that its and its subsidiaries' agents and representatives ("Company Representatives") shall not, (A) directly or indirectly, initiate, solicit or knowingly encourage or facilitate any inquiries or the making of any proposal or offer with respect to (i) any tender offer or exchange offer, (ii) merger, consolidation, share exchange, business combination, sale of substantially all of the assets, reorganization, recapitalization, liquidation, dissolution or other similar transaction involving the Company or any of its subsidiaries whose assets, individually or in the aggregate, constitute more than 20% of the consolidated assets or the earning power of the Company or (iii) any acquisition or purchase, direct or indirect, of more than 20% of the consolidated assets of the Company and its subsidiaries or more than 20% of any class of equity or voting securities of the Company or any of its subsidiaries whose assets, individually or in the aggregate, constitute more than 20% of the consolidated assets or earning power of the Company (other than the transactions contemplated by this Agreement) (any such proposal or offer being hereinafter referred to as an "Acquisition Proposal") or (B) directly or indirectly, continue, enter into or engage in any negotiations or discussions concerning, any Acquisition Proposal, furnish any information relating to the Company or any of its subsidiaries or provide access to the properties, books and records or any confidential information or data of the Company or any of its subsidiaries to, any Person relating to an Acquisition Proposal. Notwithstanding the foregoing, nothing contained in this Agreement shall prevent the Company or its Board of Directors from (i) taking and disclosing to its stockholders a position contemplated by Rule 14d-9 and Rule 14e-2(a) promulgated under the Exchange Act (or any similar communication to stockholders in connection with the making or amendment of a tender offer or exchange offer) or from making any legally required disclosure to stockholders with regard to an Acquisition Proposal, (ii) prior to the purchase of any Shares pursuant to the Offer, providing access to properties, books and records and providing information or data in response to a request therefor by a Person who has made an unsolicited bona fide written Acquisition Proposal if the Board of Directors receives from the Person so requesting such information an executed confidentiality agreement on terms substantially similar to those contained in the Confidentiality Agreement (except for such changes specifically necessary in order for the Company to be able to comply with its obligations under this Agreement and it being understood that the Company may enter into a confidentiality agreement without a standstill provision or with a standstill provision less favorable to the Company if it waives or similarly modifies the standstill provision in the Confidentiality Agreement) (provided that all such written information is also provided on a prior or substantially concurrent basis to Parent), or (iii) prior to the purchase of any Shares pursuant to the Offer, engaging in any negotiations or discussions with any Person who has made an unsolicited bona fide written Acquisition Proposal; if and only to the extent that in connection with the foregoing clauses (ii) and (iii), (1) the Board of Directors of the Company shall have determined in good faith, after consultation with its legal counsel and financial advisors, that such actions would reasonably be expected to lead to a Superior Proposal (as defined below), and (2) the Board of Directors of the Company determines in good faith after consultation with outside legal counsel that such action is necessary in order for the directors to comply with their fiduciary duties under applicable law. The Company agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any Persons conducted heretofore with respect to any Acquisition Proposal and will use its reasonable best efforts to cause any such Person (or its 36 Exhibit (d)(1) 30 agents or advisors) in possession of confidential information about the Company or any of its subsidiaries that was furnished by or on behalf of the Company to return or destroy all such information. The Company shall also notify Parent promptly (but in no event later than 24 hours) after receipt of any Acquisition Proposal or any indication of interest in making an Acquisition Proposal after the date hereof, which notice shall include the identity of the Person making such Acquisition Proposal or indication and the material terms and conditions of such Acquisition Proposal or indication (including any subsequent material amendment or modification to such terms and conditions). The Company shall keep Parent informed in all material respects of the status and details of any such Acquisition Proposal. (b) Neither the Board of Directors of the Company nor any committee thereof shall (i) withdraw (or modify in a manner adverse to Parent or Purchaser) or propose publicly to withdraw (or modify in a manner adverse to Parent or Purchaser) the recommendation or declaration of advisability by the Board of Directors or any such committee of this Agreement, the Offer or the Merger, or recommend, or propose publicly to recommend, the approval or adoption of any Acquisition Proposal (other than an Acquisition Proposal made by Parent), (each such action being referred to herein as an "Adverse Recommendation Change") (it being understood and agreed that a communication by the Board of Directors of the Company to the stockholders of the Company pursuant to Rule 14d-9(e)(3) of the Exchange Act (or any similar communication to the stockholders of the Company in connection with the commencement of a tender offer or exchange offer containing the substance of the communication pursuant to such Rule 14d-9(e)(3) shall not be deemed to constitute an Adverse Recommendation Change), unless the Board of Directors or a committee thereof determines in good faith, based on such matters as it deems appropriate, after consulting with legal counsel, that such action is necessary for the Board of Directors to comply with its fiduciary duties under applicable law, (ii) adopt or approve, or propose publicly to adopt or approve, any Acquisition Proposal, (iii) cause or permit the Company to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement, option agreement, joint venture agreement, partnership agreement or similar agreement which is intended to, or is reasonably likely to lead to, any Acquisition Proposal (other than a confidentiality agreement referred to in Section 6.5(a)) or (iv) agree or resolve to take any of the actions prohibited by clauses (i), (ii) or (iii) of this sentence. Notwithstanding anything in this Section 6.5 to the contrary, if, at any time prior to the purchase of any Shares pursuant to the Offer, the Company's Board of Directors determines in good faith, after consultation with its financial advisors and outside counsel, in response to an Acquisition Proposal that was unsolicited and that did not otherwise result from a breach of Section 6.5(a), that such proposal is a Superior Proposal, the Company or its Board of Directors may terminate this Agreement pursuant to Section 8.1(d)(iii) hereof; provided, however, that the Company shall not terminate this Agreement pursuant to Section 8.1(d)(iii) hereof, and any purported termination pursuant to Section 8.1(d)(iii) hereof shall be void and of no force or effect, unless (i) the Company prior to or concurrently with such termination pays to Parent the fee payable pursuant to Section 8.2(b) and enters into a definitive agreement concerning the Superior Proposal; (ii) the Company shall have complied in all material respects with this Section 6.5(a), (iii) the Company shall have given Parent at least three business days written prior notice of its intention to terminate the Agreement, attaching a description of all material terms and conditions of the Superior Proposal to such notice together with the most current draft of an agreement relating to such Superior Proposal (it being understood and agreed that any amendment to the amount or form of consideration of the Superior Proposal shall require a new notice and a new three business day period), (iv) during such three business days or greater period, the Company engages in good faith negotiations with Parent with respect to such changes 37 31 as Parent may propose to the terms of the Merger and this Agreement, and (v) Parent does not make prior to such termination of this Agreement a definitive and binding offer to enter into a definitive agreement which the Board of Directors of the Company determines, in good faith after consultation with its financial advisors, is at least as favorable to the stockholders of the Company as the Superior Proposal (it being understood that neither the delivery of a notice of a Superior Proposal in accordance with this Section 6.5(b) nor any subsequent public announcement thereof shall in of themselves constitute an Adverse Recommendation Change or a breach of clause (ii), (iii) or (iv) of the first sentence of this Section 6.5(b)). The term "Superior Proposal" means any bona fide written Acquisition Proposal not solicited by or on behalf of the Company or any of its subsidiaries made by a third party that the Board of Directors of the Company determines in its good faith judgment (after consultation with a financial advisor of nationally recognized reputation) would, if consummated, be superior from a financial point of view to the stockholders of the Company, taking into account, among other things, any changes to the terms of this Agreement proposed by Parent in response to such Superior Proposal (provided that, for purposes of this definition of "Superior Proposal," the term Acquisition Proposal shall have the meaning assigned to such term in this Section 6.5, except that the reference to "more than 20%" in the definition of "Acquisition Proposal" shall be deemed to be a reference to "a majority"). SECTION 6.6 Employment and Employee Benefits Matters. (a) As of the Effective Time, the obligations of the Company and its subsidiaries under each Company Plan and Employment Agreement shall continue as obligations of the Surviving Corporation and its subsidiaries, respectively. (b) On and after the Effective Time, Parent shall cause the Surviving Corporation and its subsidiaries to pay promptly or provide when due all compensation and benefits earned through or prior to the Effective Time as provided pursuant to the terms of any Company Plan, (and expressly assume the obligations thereunder). Parent and the Company agree that the Surviving Corporation and its subsidiaries shall pay promptly or provide when due all compensation and benefits required to be paid pursuant to the terms of any Employment Agreement (and expressly assume the obligations thereunder). (c) Without limiting any additional rights that any employee may have under any Employment Agreement or Company Plan, Parent shall cause the Surviving Corporation and each of its subsidiaries, for a period commencing at the Effective Time and ending on the first anniversary thereof (or such longer period provided for in any such Employment Agreement or Company Plan), to maintain the severance-related provisions of existing Company Plans and to provide 100% of the cash severance payments required thereunder, reduced by any severance payments otherwise required under existing severance and employment agreements or applicable law, to any Affected Employee (as defined below) terminated during that twelve-month period (or such longer period provided for in any such Employment Agreement or Company Plan) (unless no such reduction is permitted or provided for). (d) Without limiting any additional rights that any employee may have under any Employment Agreement or Company Plan, Parent shall cause the Surviving Corporation and each of its subsidiaries, for the period commencing at the Effective Time and ending on the first anniversary thereof, to maintain for any individual who is actively employed by the Company or any of its subsidiaries immediately prior to the Effective Time (the "Affected Employees") (other than employees covered by a collective bargaining agreement) (i)compensation levels 38 32 (such term to include salary, bonus opportunities and commissions) that in the aggregate are no less favorable, (ii) Company Plans that in the aggregate are no less favorable, and (iii) Severance Plans that are no less favorable, than the overall compensation levels and Company Plans, and the Severance Plans, respectively, such Affected Employees are entitled to immediately prior to the Effective Time, and employees covered by collective bargaining agreements shall be provided with such benefits as shall be required under the terms of any applicable collective bargaining agreement; provided, however, subject to the foregoing, that nothing herein shall prevent the amendment or termination of any Company Plan or interfere with the Surviving Corporation's right or obligation to make such changes as are necessary to conform with applicable law. Without limiting any additional rights that any employee may have under any Employment Agreement or Company Plan after the expiration of such one-year period, Parent shall provide Affected Employees (other than those covered by collective bargaining agreements) with employee benefits, in the aggregate, that are no less favorable in the aggregate than those employee benefits provided to similarly situated employees of the Parent or its subsidiaries; provided that, notwithstanding any of the provisions set forth above, nothing herein shall require the establishment, amendment or continuation of any stock option, restricted stock, stock purchase, employee stock ownership or any other equity-based plan or program and the value of benefits of any such program shall not be included for purposes of determining whether (i), (ii) or (iii) above in the aggregate is "no less favorable". (e) Affected Employees shall be given credit for all service with the Company and its subsidiaries, to the same extent as such service was credited for such purpose by the Company, under each employee benefit plan, program or arrangement, including the vacation policies, of Parent or its subsidiaries in which such Affected Employees are eligible to participate (the "Parent Plans") for all purposes; provided, however, that no such service shall be credited for purposes of determining benefit accruals with respect to any defined benefit pension plan except for any plan formerly maintained by the Company to the extent such service is recognized under such plan or any successor thereof. With respect to each Parent Plan that is a "welfare benefit plan" (as defined in Section 3(1) of ERISA), the Parent or its subsidiaries shall (a) cause there to be waived any pre-existing condition or eligibility limitations and (b) to the extent administratively feasible, give effect, in determining any deductible and maximum out-of-pocket limitations, to claims incurred and amounts paid by, and amounts reimbursed to, Affected Employees under similar plans maintained by the Company and its subsidiaries immediately prior to the Closing Date. (f) With respect to any accrued but unused vacation time to which any Affected Employee is entitled pursuant to the vacation policy applicable to such Affected Employee immediately prior to the Closing Date, Parent and its subsidiaries shall assume the liability for such accrued vacation and allow such Affected Employee to use such accrued vacation in accordance with the provisions of the applicable vacation policy. Notwithstanding the foregoing, such assumption and allowance for accrued but unused vacation time accrued before January 1, 2000 shall only take place if such accrued but unused vacation time has been documented in the applicable personnel files and records related to such Affected Employee. (g) The Company shall take all action necessary to provide for full vesting of the account balances of all Affected Employees after one year of service under the Harcourt Savings Plan (h) The Company will amend the Harcourt Inc. Severance Pay Plan, the Harcourt General Inc. Manager/Director Change of Control Severance Plan and the Harcourt General Inc. 39 33 Employee Change of Control Severance Plan, and any other severance plan program or policy of the Company or its subsidiaries not previously made available to Parent, if such Plan can be unilaterally amended by the Company, in such manner as may be reasonably necessary to provide that no severance or termination benefits would be payable thereunder solely as a result of the Merger or the Subsequent Transaction. SECTION 6.7 Directors' and Officers' Indemnification and Insurance. (a) Without limiting any additional rights that any employee may have under any Employment Agreement or Company Plan, from the Effective Time through the sixth anniversary of the date on which the Effective Time occurs, Parent shall, or shall cause the Surviving Corporation to, indemnify and hold harmless each present (as of the Effective Time) and former officer or director of the Company and its subsidiaries (the "Indemnified Parties"), against all claims, losses, liabilities, damages, judgments, fines and reasonable fees, costs and expenses, including, without limitation, attorneys' fees and disbursements (collectively, "Costs"), incurred in connection with any claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative, arising out of or pertaining to (i) the fact that the Indemnified Party is or was an officer or director of the Company or any of its subsidiaries and (ii) acts or omissions occurring at or prior to the Effective Time (including, without limitation, this Agreement and the transactions and actions contemplated hereby), whether asserted or claimed prior to, at or after the Effective Time, provided that such indemnifications shall be subject to any limitation imposed from time to time under applicable law. Each Indemnified Party will be entitled to advancement of reasonable expenses incurred in the defense of any claim, action, suit, proceeding or investigation from Parent or the Surviving Corporation within ten business days of receipt by Parent from the Indemnified Party of a request therefor; provided that any person to whom expenses are advanced provides an undertaking, if and only to the extent required by the DGCL, to repay such advances if it is ultimately determined that such person is not entitled to indemnification. (b) Any Indemnified Party wishing to claim indemnification under paragraph (a) of this Section 6.7, upon learning of any such claim, action, suit, proceeding or investigation, shall promptly notify the Surviving Corporation thereof; provided, however, that any Indemnified Party's failure to promptly notify the Surviving Corporation upon learning of any such claim, action, suit, proceeding or investigation shall only reduce such Indemnified Party's rights under paragraph (a) of this Section 6.7 to the extent such failure to notify materially prejudices the Surviving Corporation's ability to defend such claim, action, suit, proceeding or investigation. In the event of any such claim, action, suit, proceeding or investigation (whether arising before or after the Effective Time), (i) the Surviving Corporation shall have the right, from and after the Effective Time, to assume the defense thereof (with counsel engaged by the Surviving Corporation to be reasonably acceptable to the relevant Indemnified Party) and the Surviving Corporation shall not be liable to such Indemnified Party for any legal expenses of other counsel or any other expenses subsequently incurred by such Indemnified Party in connection with the defense thereof, (ii) such Indemnified Party will cooperate in the defense of any such matter and (iii) the Surviving Corporation shall not be liable for any settlement effected without its prior written consent; provided that the Surviving Corporation shall not have any obligation hereunder to any Indemnified Party when and if a court of competent jurisdiction shall ultimately determine, and such determination shall have become final, that the indemnification of such Indemnified Party in the manner contemplated hereby is prohibited by applicable law. The Surviving Corporation shall not, except with the consent of any Indemnified Party, enter into any settlement that does not include as an unconditional term thereof the giving by the Person or 40 34 Persons making, asserting or conducting such claim, action suit, proceeding or investigation to such Indemnified Party an unconditional release from all liability with respect to such claim, action, suit, proceeding or investigation if such claim, action, suit, proceeding or investigation is indemnifiable pursuant to Section 6.7. Notwithstanding the right of the Surviving Corporation to assume and control the defense of such claim, action, suit, proceeding or investigation, such Indemnified Party shall have the right to employ separate counsel and to participate in the defense of such claim, action, suit, proceeding or investigation, and the Surviving Corporation shall bear the reasonable fees, costs and expenses of such separate counsel and shall pay such reasonable fees, costs and expenses promptly after receipt of an invoice from such Indemnified Party if (i) the use of counsel chosen by the Surviving Corporation to represent such Indemnified Party would present such counsel with a conflict of interest, (ii) the Indemnifying Party shall not have employed counsel reasonably acceptable to such Indemnified Party within a reasonable period of time after notice of the relevant claim, action, suit, proceeding or investigation or (iii) such Indemnified Party shall have been advised by counsel that there may be legal defenses available to it which are different from or in addition to those available to the Surviving Corporation. (c) The Certificate of Incorporation and by-laws of the Surviving Corporation shall contain provisions no less favorable with respect to indemnification, advancement of expenses and exculpation of former or present directors and officers than are presently set forth in the Certificate of Incorporation and by-laws of the Company, which provisions shall not be amended, repealed or otherwise modified for a period of six years from the Effective Time in any manner that would adversely affect the rights thereunder of any such individuals. (d) Without limiting any additional rights that any employee may have under any written Employment Agreement, Parent shall, or shall cause the Surviving Corporation to maintain, at no expense to the beneficiaries, in effect for six years from the Effective Time the current policies of the directors' and officers' liability insurance maintained by the Company (provided that Parent or the Surviving Corporation may substitute therefor policies of at least the same coverage containing terms and conditions which are not materially less advantageous to any beneficiary thereof) with respect to acts or omissions occurring at or prior to the Effective Time, provided that if the aggregate annual premium for such insurance at any time during such period shall exceed 200% of the per annum rate of premium paid by the Company as of the date hereof for such insurance, then Parent shall, or shall cause its subsidiaries to, provide only such coverage as shall then be available at any annual premium equal to 200% of such rate. (e) Notwithstanding anything herein to the contrary, if any claim, action, suit, proceeding or investigation (whether arising before, at or after the Effective Time) is made against any Indemnified Party, on or prior to the sixth anniversary of the Effective Time, the provisions of this Section 6.7 shall continue in effect until the final disposition of such claim, action, suit, proceeding or investigation. (f) This covenant is intended to be for the benefit of, and shall be enforceable by, each of the Indemnified Parties and their respective heirs and legal representatives. The indemnification provided for herein shall not be deemed exclusive of any other rights to which an Indemnified Party is entitled, whether pursuant to law, contract or otherwise. (g) In the event that the Surviving Corporation or Parent or any of their respective successors or assigns (i) consolidates with or merges into any other person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) 41 35 transfers or conveys all or a majority of its properties and assets to any person, then, and in each such case, proper provision shall be made so that the successors and assigns of the Surviving Corporation or Parent, as the case may be, shall succeed to the obligations set forth in this Section 6.7. SECTION 6.8 Further Action; Reasonable Best Efforts. (a) Subject to the terms and conditions of this Agreement, each party will use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations to consummate the Offer, the Merger, the Subsequent Transaction and the other transactions contemplated by this Agreement. In furtherance and not in limitation of the foregoing, each party hereto agrees, and Parent agrees to use its reasonable best efforts to cause any third party to the Subsequent Transaction, (i) to make an appropriate filing of a Notification and Report Form pursuant to the HSR Act and any other applicable Antitrust Law with respect to the transactions contemplated hereby, including the Subsequent Transaction, as promptly as practicable after the date hereof, (ii) to supply as promptly as practicable any additional information and documentary material that may be requested pursuant to the HSR Act and any other applicable Antitrust Law and (iii) to use, subject to Section 6.8(b) and (c), its reasonable best efforts to take all other actions necessary, proper or advisable to cause the expiration or termination of the applicable waiting periods under the HSR Act and any other applicable Antitrust Law as soon as practicable. (b) Each of Parent, Purchaser and the Company shall, in connection with the efforts referenced in Section 6.8(a) to obtain all requisite approvals and authorizations for the transactions contemplated by this Agreement including, but not limited to, the Offer, the Merger and the Subsequent Transaction under the HSR Act or any other Antitrust Law, use its reasonable best efforts to, and Parent shall use its reasonable best efforts to cause any third party to the Subsequent Transaction to, subject to applicable law, (i) cooperate in all respects with each of the other parties hereto and each of the parties to the Subsequent Transaction in connection with any filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private party (including sharing copies of any such filings or submissions reasonably in advance of the filing or submission thereof); (ii) each of the other parties hereto and each of the parties to the Subsequent Transaction informed of any communication received by such party from, or given by such party to, the Federal Trade Commission (the "FTC"), the Antitrust Division of the Department of Justice (the "DOJ") or any other U.S. or foreign governmental authority ("Governmental Authority") and of any communication received or given in connection with any proceeding by a private party, in each case regarding any of the transactions contemplated hereby, including the Subsequent Transaction; and (iii) permit each of the other parties hereto and each of the parties to the Subsequent Transaction to review in advance any communication intended to be given by it to, and consult with the other parties in advance of any meeting or conference with, the FTC, the DOJ or any such other Governmental Authority or, in connection with any proceeding by a private party, with any other person, and to the extent permitted by the FTC, the DOJ or such other applicable Governmental Authority or other person, give the other parties the opportunity to attend and participate in such meetings and conferences. For purposes of this Agreement, "Antitrust Law" means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the Federal Trade Commission Act, as amended, and all other federal, state and foreign, statutes, rules, regulations, orders, decrees, administrative and judicial doctrines and other laws that are designed or intended to prohibit, restrict or regulate actions having the purpose or effect of monopolization or restraint of trade or lessening of competition through merger or acquisition. 42 36 (c) In furtherance and not in limitation of the covenants of the parties contained in Sections 6.8(a) and (b), if any objections are asserted with respect to the transactions contemplated hereby, including the Subsequent Transaction, under any Antitrust Law or if any suit is instituted (or threatened to be instituted) by the FTC, the DOJ or any other applicable Governmental Authority or any private party challenging any of the transactions contemplated hereby, including the Subsequent Transaction, as violative of any Antitrust Law or which would otherwise prohibit or materially impair or materially delay the consummation of the transactions contemplated hereby, including the Subsequent Transaction, each of Parent, Purchaser and the Company shall use its reasonable best efforts to resolve any such objections or suits so as to permit consummation of the transactions contemplated by this Agreement, including the Subsequent Transaction, including, without limitation, in order to resolve such objections or suits which, in any case if not resolved, could reasonably be expected to prohibit or materially impair or delay the consummation of the transactions contemplated hereby, including the Subsequent Transaction, beyond the Outside Date, selling, holding separate or otherwise disposing of or conducting its business in a manner which would resolve such objections or suits or agreeing to sell, hold separate or otherwise dispose of or conduct its business in a manner which would resolve such objections or suits or permitting the sale, holding separate or other disposition of, any of its assets or the assets of its subsidiaries or the conducting of its business in a manner which would resolve such objections or suits, provided, however, that nothing in this Agreement shall require Parent or Purchaser or any of Parent's subsidiaries to agree to or take any action or limitation referred to in this paragraph (c) which would reasonably be expected to have either (i) a Parent Material Adverse Effect or (ii) a Material Adverse Effect on the Company. When used in connection with Parent, Purchaser or any of Parent's other subsidiaries, the term "Parent Material Adverse Effect" means any change or effect that would reasonably be expected to be materially adverse to the business, financial condition, assets or results of operations of Parent, Purchaser and any of Parent's other affiliates taken as a whole. (d) Subject to the obligations under Section 6.8(c), in the event that any administrative or judicial action or proceeding is instituted (or threatened to be instituted) by a Governmental Authority or private party challenging any transaction contemplated by this Agreement, including the Subsequent Transaction, each of Parent, Purchaser and the Company shall cooperate in all respects with each other and any third party who is party to the Subsequent Transaction to the extent any such action or proceeding principally involves assets to be acquired by such third party in the Subsequent Transaction and use its respective reasonable best efforts to defend, contest and resist any such action or proceeding and to have vacated, lifted, reversed or overturned any decree, judgment, injunction or other order, whether temporary, preliminary or permanent, that is in effect and that prohibits, prevents or restricts consummation of the transactions contemplated by this Agreement. (e) Without limiting the covenants contained in Section 6.8(a), to the extent reasonably requested by Parent, the Company will use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable to facilitate the Subsequent Transaction; provided that no action or conduct that causes the Company or its subsidiaries to incur meaningful costs or liabilities will be required under this Section 6.8(e). (f) Parent shall not agree to any modification, amendment or waiver of any provision of any Subsequent Transaction Agreement in any manner adverse to the Company. Further, Parent agrees to assert and defend consistent with the advice of counsel all rights, and 43 37 perform and comply with all obligations, it may have under any Subsequent Transaction Agreement with respect to compliance with any Antitrust Law. (g) Notwithstanding the foregoing or any other provision of this Agreement, nothing in this Section 6.8 shall limit a party's right to terminate this Agreement pursuant to Section 8.1(b) so long as such party has up to then complied in all material respects with its obligations under this Section 6.8. SECTION 6.9 Third Party Standstill Agreements. During the period from the date of this Agreement until the Effective Time or earlier termination of this Agreement, the Company shall not terminate, amend, modify or waive any provision of any confidentiality or standstill agreement relating to the making of an Acquisition Proposal to which it or any of its subsidiaries is a party (other than any involving Parent or its subsidiaries), unless, in response to a Person who on an unsolicited basis has given a good faith indication of interest in making an Acquisition Proposal, the Company's Board of Directors shall have determined in good faith, after consultation with outside counsel to the Company, that such action is necessary for the Board of Directors to comply with its fiduciary duties under applicable law (in which event such termination, amendment, modification or waiver shall be made only to the extent such termination, amendment, modification or waiver enables an Acquisition Proposal to be submitted to the Company and thereafter pursued and effected). Subject to the immediately preceding sentence, during such period, the Company agrees to use reasonable efforts to enforce, to the fullest extent permitted under applicable law, the provisions of any such agreements, including seeking injunctions to prevent any breaches of such agreements and to enforce specifically the terms and provisions thereof in any court of the United States or any state thereof having jurisdiction. SECTION 6.10 Notification of Certain Matters. The Company shall give prompt notice to Parent, and Parent and Purchaser shall give prompt notice to the Company, of the occurrence, or failure to occur, of any event, which occurrence or failure to occur would be likely to cause any representation or warranty contained in this Agreement to be untrue in any material respect at any time from the date of this Agreement to the Effective Time, in either case which would reasonably be expected to cause any of the conditions set forth in paragraph (c) of Annex A hereto to fail to be satisfied. Each of the Company and Parent shall give prompt notice to the other party of any notice or other communication from any third party alleging that the consent of such third party is or may be required in connection with the transactions contemplated by this Agreement. This Section 6.10 shall not constitute a covenant or agreement for the purpose of Section 8.1(e)(i) or paragraph (d) of Annex A hereto. SECTION 6.11 Integration Committee. Promptly after the date hereof, subject to applicable law, Parent will establish an Integration Committee chaired by an officer of Parent which will be composed of such employees of Parent and the Company as selected by Parent (subject to the agreement of the relevant employee) and such committee will be responsible for proposing alternatives and recommendations to Parent regarding the matters and issues arising in connection with the integration of the two companies and their respective businesses, assets and organizations. SECTION 6.12 Public Announcements. Each of the Company, Parent and Purchaser agrees that no public release or announcement concerning the transactions contemplated hereby shall be issued by any party without the prior written consent of the Company and Parent (which consent shall not be unreasonably withheld or delayed), except as 44 38 such release or announcement may be required by law or the rules or regulations of any applicable United States or foreign securities exchange, in which case the party required to make the release or announcement shall use its reasonable best efforts to allow each other party reasonable time to comment on such release or announcement in advance of such issuance, it being understood that the final form and content of any such release or announcement, to the extent so required, shall be at the final discretion of the disclosing party. ARTICLE VII. CONDITIONS OF MERGER SECTION 7.1 Conditions to Obligation of Each Party to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the satisfaction or waiver at or prior to the Effective Time of the following conditions: (a) if required by the DGCL, this Agreement shall have been adopted by the affirmative vote of the stockholders of the Company by the requisite vote in accordance with the Company's Restated Certificate and the DGCL; (b) no statute, rule, regulation, executive order, decree, ruling, injunction or other permanent order shall have been enacted, entered, promulgated or enforced by any court of competent jurisdiction or other governmental body located or having jurisdiction within the United States, any foreign state, county, city or other provincial subdivisions which prohibits, restrains or enjoins the consummation of the Merger; provided however, that prior to invoking this condition each party agrees to comply with Section 6.8; and (c) Purchaser shall have purchased Shares pursuant to the Offer. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.1 Termination. This Agreement may be terminated and the Merger contemplated hereby may be abandoned at any time prior to the Effective Time, notwithstanding approval thereof by the stockholders of the Company: (a) prior to the purchase of any Shares pursuant to the Offer, by mutual written consent of Parent, Purchaser and the Company; (b) by Parent or the Company if any court of competent jurisdiction or other governmental body located or having jurisdiction within the United States, any foreign country or any domestic or foreign state, county, city or other provincial subdivisions (other than any such court or governmental body having jurisdiction outside the United States in a territory in which no significant assets, properties or rights of either the Company and its subsidiaries or Parent and its affiliates are located and whose statutes, rules, regulations, executive orders, decrees, rulings, injunctions or other orders would not be reasonably expected to have a Material Adverse Effect or Parent Material Adverse Effect ("Non-Material Jurisdictions")) shall have issued a final order, decree or ruling or taken any other final action restraining, enjoining or 45 39 otherwise prohibiting the Offer or the Merger and such order, decree, ruling or other action is or shall have become final and nonappealable; (c) by Parent if, due to an occurrence or circumstance which resulted in a failure to satisfy any of the Offer Conditions, Purchaser shall have (i) not purchased Shares pursuant to the Offer and the Offer shall have expired or been terminated or (ii) failed to pay for Shares pursuant to the Offer on or prior to the Outside Date; provided that the right to terminate this Agreement pursuant to this Section 8.1(c) shall not be available to Parent if the failure by Parent or Purchaser to perform any of its obligations under this Agreement (including Purchaser's failure to purchase or pay for Shares pursuant to the terms and conditions of the Offer) results in the failure of the Offer to be consummated; (d) by the Company (i) if (A) Purchaser fails to commence the Offer as provided in Section 1.1 or (B) there shall have been a breach of any representation, warranty, covenant or agreement on the part of Parent or Purchaser contained in this Agreement which materially adversely affects Parent's or Purchaser's ability to consummate (or materially delays commencement or consummation of) the Offer or the Merger, and (x) in the case of any such representation or warranty, there is no reasonable possibility that such breach can be cured prior to the Outside Date and (y) in the case of any such covenant or agreement, such breach cannot be and has not been cured prior to the earlier of (I) 10 business days following notice of such breach and (II) the expiration date of the Offer as it may be extended pursuant hereto; provided that the Company shall not have the right to terminate this Agreement pursuant to this Section 8.1(d)(i) if the Company is then in material breach of any of its covenants or agreements contained in this Agreement, (ii) if (A) Purchaser fails to pay for Shares pursuant to the Offer on or prior to the Outside Date or (B) Purchaser shall have not purchased Shares pursuant to the Offer and the Offer shall have expired or been terminated; provided that the right to terminate this Agreement pursuant to this Section 8.1(d)(ii) shall not be available to the Company if the failure by the Company to perform any of its obligations under this Agreement results in the failure of the Offer to be consummated, or (iii) prior to the purchase of any Shares pursuant to the Offer, in accordance with, and subject to the terms and conditions of, Section 6.5(b); or (e) by Parent prior to the purchase of Shares pursuant to the Offer if (i) there shall have been a breach of any representation, warranty, covenant or agreement on the part of the Company contained in this Agreement such that the conditions set forth in clause (c) or clause (d) of Annex A would not be satisfied and (x) in the case of any such representation or warranty, there is no reasonable possibility that such breach can be cured prior to the Outside Date and (y) in the case of any such covenant or agreement, such breach cannot be or has not been cured prior to the earlier of (A) 10 business days following notice of such breach and (B) the expiration date of the Offer as it may be extended pursuant hereto; provided that Parent shall not have the right to terminate this Agreement pursuant to this Section 8.1(e)(i) if Parent or Purchaser is then in material breach of any of its covenants or agreements contained in this Agreement, or (ii) in the event an Adverse Recommendation Change has occurred in accordance with Section 6.5(b). SECTION 8.2 Effect of Termination. (a) In the event of the termination of this Agreement pursuant to Section 8.1, this Agreement shall forthwith become void and there shall be no liability on the part of any party hereto, except as set forth in Section 6.4(c), this Section 8.2, Section 8.3 and Article 9; provided, however, that nothing herein shall relieve any party from liability for any breach hereof. 46 40 (b) In the event that this Agreement is terminated by the Company pursuant to Section 8.1(d)(iii) or by Parent pursuant to Section 8.1(e)(ii), then the Company shall pay $180,000,000 to Parent (the "Termination Fee"), at or prior to the time of termination in the case of a termination pursuant to Section 8.1(d)(iii) or within two business days after such termination in the case of a termination pursuant to Section 8.1(e)(ii), payable by wire transfer of same day funds. In the event that this Agreement is terminated by Parent pursuant to Section 8.1(c) (solely due to the failure to satisfy the Minimum Condition or the conditions set forth in paragraphs (c) or (d) of Annex A) and (x) after the date of this Agreement and prior to such termination, there shall have been made and publicly announced or publicly communicated to the Company's shareholders an Acquisition Proposal (which shall not have been withdrawn in good faith) and (y) concurrently with or within twelve (12) months of the date of such termination the Company enters into a definitive agreement with respect to an Acquisition Proposal (which is subsequently consummated) or an Acquisition Proposal is consummated, then the Company shall pay to Parent the Termination Fee within two business days of the consummation of the Acquisition Proposal (provided that, for purposes of this sentence, the term Acquisition Proposal shall have the meaning assigned to such term in Section 6.5, except that the reference to "more than 20%" in the definition of "Acquisition Proposal" shall be deemed to be a reference to "a majority"). SECTION 8.3 Expenses. Except as otherwise specifically provided herein, each party shall bear its own expenses in connection with this Agreement and the transactions contemplated hereby. SECTION 8.4 Amendment. Subject to Section 6.3(c), this Agreement may be amended by the parties hereto by action taken by or on behalf of their respective Boards of Directors at any time prior to the Effective Time; provided, however, that, after adoption of this Agreement by the stockholders of the Company, no amendment may be made which by law requires the further approval of the stockholders of the Company without such further approval. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 8.5 Waiver. Subject to Section 6.3(c), at any time prior to the Effective Time, any party hereto may (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties of the other parties contained herein or in any document delivered pursuant hereto and (iii) subject to the requirements of applicable law, waive compliance with any of the agreements or conditions contained herein. Any such extension or waiver shall be valid if set forth in an instrument in writing signed by the party or parties to be bound thereby. ARTICLE IX GENERAL PROVISIONS SECTION 9.1 Non-Survival of Representations, Warranties and Agreements. The representations, warranties and agreements in this Agreement shall terminate at the Effective Time or upon the termination of this Agreement pursuant to Section 8.1, as the case may be, except that the agreements set forth in Article II, Section 6.6, Section 6.7, Section 6.12 and Article IX shall survive the Effective Time and those set forth in Section 6.4(b), Section 6.12, Section 8.2, Section 8.3 and Article IX shall survive termination of this Agreement. 47 41 SECTION 9.2 Notices. All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by facsimile or by registered or certified mail (postage prepaid, return receipt requested) to the respective parties at the following addresses (or at such other address for a party as shall be specified by like notice): if to Parent or Purchaser: Reed Elsevier Inc. 275 Washington Street Newton, MA 02458 Attention: Henry Z. Horbaczewski, Esq. Facsimile: (617) 558-4649 with an additional copy to: Davis Polk & Wardwell 450 Lexington Avenue New York, NY 10017 Attention: Joseph Rinaldi, Esq. Facsimile: 212-450-4800 if to the Company: Harcourt General, Inc. 27 Boylston Street Chestnut Hill, Massachusetts 02467 Attention: Eric Geller, Esq. Facsimile: (617) 278-5567 with an additional copy to: Simpson Thacher & Bartlett 425 Lexington Avenue New York, NY 10017 Attention: John G. Finley, Esq. Facsimile: 212-455-2502 SECTION 9.3 Certain Definitions. For purposes of this Agreement, the term: (a) "affiliate" of a person means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned person; for the avoidance of confusion it is hereby stipulated that the affiliates of Parent consist of Reed International P.L.C., an English public limited company ("Reed"), Elsevier NV, a Netherlands public limited company ("Elsevier") and the affiliates of either Reed or Elsevier or of Reed and Elsevier jointly. (b) "beneficial owner" with respect to any Shares means a person who shall be deemed to be the beneficial owner of such Shares (i) which such person or any of its affiliates or associates (as defined in Rule 12b-2 under the Exchange Act) beneficially 48 42 owns, directly or indirectly, (ii) which such person or any of its affiliates or associates (as such term is defined in Rule 12b-2 of the Exchange Act) has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of consideration rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding or (iii) which are beneficially owned, directly or indirectly, by any other persons with whom such person or any of its affiliates or associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Shares (and the term "beneficially owned" shall have a corresponding meaning); (c) "business day" means any day on which the principal offices of the SEC in Washington, D.C. are open to accept filings or, in the case of determining a date when any payment is due, any day on which banks are not required or authorized to close in Amsterdam, The Netherlands; London, England; New York, New York; or Boston, Massachusetts; (d) "control" (including the terms "controlled", "controlled by" and "under common control with") means the possession, directly or indirectly or as trustee or executor, of the power to direct or cause the direction of the management policies of a person, whether through the ownership of stock, as trustee or executor, by contract or credit arrangement or otherwise; (e) "generally accepted accounting principles" shall mean the generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board, in each case, as applicable, as of the time of the relevant financial statements referred to herein; (f) "knowledge" (i) with respect to the Company means the actual knowledge of any of the persons set forth in Section 9.3(f) of the Disclosure Schedule under the heading "Company" and (ii) with respect to Parent or Purchaser means the actual knowledge of any of the persons set forth in Section 9.3(f) of the Disclosure Schedule under the headings "Parent" or "Purchaser". (g) "person" means an individual, corporation, partnership, limited liability company, association, trust, unincorporated organization, other entity or group (as defined in Section 13(d)(3) of the Exchange Act); and (h) "subsidiary" or "subsidiaries" of the Company, the Surviving Corporation, Parent or any other person means any corporation, partnership, joint venture or other legal entity of which the Company, the Surviving Corporation, Parent or such other person, as the case may be (either alone or through or together with any other subsidiary), owns, directly or indirectly, more than 50% of the stock or other equity interests the holder of which is generally entitled to vote for the election of the board of directors or other governing body of such corporation or other legal entity. SECTION 9.4 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so 49 43 long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the fullest extent possible. SECTION 9.5 Entire Agreement; Assignment. This Agreement, the Stockholder Agreement and the confidentiality agreement referred to in Section 6.4 constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof. This Agreement shall not be assignable without the consent of the other party hereto, except that Parent may transfer or assign to one or more affiliates its rights under this Agreement, but no such transfer or assignment will relieve Parent of its obligations hereunder. SECTION 9.6 Parties in Interest. This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other person any rights, benefits or remedies of any nature whatsoever under or by reason of this Agreement, other than with respect to the provisions of Section 6.7 which shall inure to the benefit of the persons or entities benefiting therefrom who are intended to be third-party beneficiaries thereof. SECTION 9.7 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware. SECTION 9.8 Headings. The descriptive headings contained in this Agreement are included for convenience of reference only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 9.9 Counterparts. This Agreement may be executed in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which taken together shall constitute one and the same agreement. SECTION 9.10 Specific Performance; Jurisdiction. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States located in the State of Delaware or in any Delaware state court, this being in addition to any other remedy to which such party is entitled at law or in equity. In addition, solely for the purpose of the transactions contemplated by this Agreement, each of the parties hereto (i) consents to submit itself to the personal jurisdiction of any Federal court located in the State of Delaware or any Delaware state court in the event any dispute arises out of this Agreement or any of the transactions contemplated by this Agreement, (ii) agrees that it will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, (iii) agrees that it will not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any court other than a Federal or state court sitting in the State of Delaware and (iv) consents to service being made through the 50 44 notice procedures set forth in Section 9.2. Solely for the purpose of the transactions contemplated by this Agreement, each of Parent and Purchaser hereto irrevocably designates and appoints The Corporation Trust Company at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801 as its duly appointed agent for service of process in the State of Delaware, for any suit or proceeding in connection with this Agreement or the transactions contemplated hereby. SECTION 9.11 Performance. Reed Elsevier PLC agrees to take all action necessary to cause Parent, Purchaser or the Surviving Corporation, as applicable, to perform all of its respective agreements, covenants and obligations under this Agreement and whenever this Agreement requires Purchaser to take any action, such requirement shall be deemed to include an undertaking of Parent and Reed Elsevier PLC to cause Purchaser to take such action. SECTION 9.12 Interpretation. When reference is made in this Agreement to a Section, such reference shall be to a Section of this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." This Agreement shall be construed without regard to any presumption or rule requiring construction or interpretation against the party drafting or causing any instrument to be drafted. SECTION 9.13 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. 51 45 IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. REED ELSEVIER INC. By: /s/ Henry Z. Horbaczewski ------------------------------------------ Name: Henry Z. Horbaczewski Title: Senior Vice President REH MERGERSUB INC. By: /s/ Henry Z. Horbaczewski ------------------------------------------ Name: Henry Z. Horbaczewski Title: Vice President HARCOURT GENERAL, INC. By: /s/ John R. Cook ------------------------------------------ Name: John R. Cook Title: SR VP & Chief Financial Officer For the purpose of Section 9.11 only: REED ELSEVIER PLC By: /s/ Henry Z. Horbaczewski ------------------------------------------ Name: Henry Z. Horbaczewski Title: Attorney-in-Fact 52 ANNEX A Offer Conditions The capitalized terms used in this Annex A have the meanings set forth in the Agreement to which this Annex A is attached, except that the term "Merger Agreement" shall be deemed to refer to the Agreement to which this Annex A is attached. Notwithstanding any other provision of the Offer, but subject to the terms and conditions of the Merger Agreement, Purchaser shall not be required to accept for payment or, subject to any applicable rules and regulations of the SEC, including Rule 14e-1(c) under the Exchange Act (relating to Purchaser's obligation to pay for or return tendered Shares promptly after termination or withdrawal of the Offer), pay for any Shares tendered pursuant to the Offer, and may postpone the acceptance for payment or, subject to the restriction referred to above, payment for any Shares tendered pursuant to the Offer (whether or not any Shares have theretofore been purchased or paid for) and may terminate or amend the Offer in accordance with the Merger Agreement if, (i) at the expiration of the Offer as it may be extended pursuant to the provisions of the Merger Agreement, a number of shares of Company Common Stock which, together with any Shares owned, directly or indirectly, by Parent or Purchaser, or any subsidiary or controlled affiliate thereof, representing (determined on a fully-diluted basis), on the date of purchase, at least a majority in voting power of the Company Common Stock shall not have been validly tendered and not properly withdrawn prior to the expiration of the Offer (the "Minimum Condition") or (ii) at any time on or after the date of the Merger Agreement and at or prior to the acceptance for payment of Shares, any of the following conditions occurs or has occurred: (a) there shall have been entered any order, preliminary or permanent injunction, decree, judgment or ruling in any action or proceeding before any court of competent jurisdiction or governmental, administrative or regulatory authority or agency, or any statute, rule or regulation, enacted, entered, enforced, promulgated, amended or issued that is applicable to Parent, Purchaser, the Company, or any third party who is party to the Subsequent Transaction or any subsidiary of Parent, such third party, or the Company or the Offer or the Merger, by any legislative body, court, government or governmental, administrative or regulatory authority or agency which (I) makes illegal or otherwise restrains or prohibits the making of the Offer in accordance with the Merger Agreement or the consummation of the Offer or the Merger, (II) prohibits or limits in any material respect the ownership or operation by (A) the Company, Parent, or any of their respective affiliates of a material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or (B) any third party who is party to the Subsequent Transaction or any of its affiliates of a material portion of the business or assets to be acquired by such third party in the Subsequent Transaction; or requires any such person to dispose of or hold separate any material portion of the business or assets of the Company and its subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a whole, as result of the Offer, to the extent any such prohibition, limitation or requirement would reasonably be expected to have either a Material Adverse Effect on the Company or a Parent Material Adverse Effect, (III) prohibits the ownership or operation of a portion of the business of the Company or its subsidiaries, taken as a whole, by Parent or Purchaser, to the extent any such prohibition would reasonably be expected to have either a Material Adverse Effect on the Company or a Parent Material Adverse Effect or (IV) other than in Non-Material Jurisdictions, imposes material limitations on the ability of Parent or Purchaser to acquire or hold or to exercise full rights of ownership of the 53 Shares, including voting rights with respect to all matters properly presented to stockholders of the Company; (b) there shall have occurred (I) any general suspension of trading in, or limitation on prices for, securities on the New York Stock Exchange (other than suspensions or limitations triggered by price fluctuations on a trading day) for a period in excess of three hours (excluding suspensions or limitations resulting solely from physical damage or interference with such exchange not related to market conditions) or (II) a declaration of a banking moratorium in the United States or any suspension of payments in respect of banks in the United States or Europe; (c) (i) any representation or warranty of the Company contained in the Agreement that is qualified as to Material Adverse Effect shall not be true and correct; (ii) any representation or warranty of the Company in the Agreement that is not so qualified shall not be true and correct in all material respects, in each case as of the date of consummation of the Offer as though made on or as of such date (other than representations and warranties that by their terms address matters only as of another specified date, which shall be true and correct only as of another specified date), except where the failure of such representations and warranties referred to in clause (ii) to be so true and correct, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect on the Company; or (iii) except to the extent disclosed in the Disclosure Schedules or the Filed SEC Reports, since the date of the Merger Agreement, any change or event shall have occurred that has had or is reasonably likely to have a Material Adverse Effect on the Company; (d) the Company shall have failed to perform in any material respect any material obligation or to comply in any material respect with any material agreement or material covenant of the Company to be performed or complied with by it under the Merger Agreement; (e) the Merger Agreement shall have been terminated in accordance with its terms or the Offer shall have been terminated with the consent of the Company; (f) any (i) approvals, clearances or waiting periods under the HSR Act applicable to the purchase of Shares pursuant to the Offer, the Merger or the Subsequent Transaction shall not have been obtained, expired or been terminated or (ii) any other requisite or advisable approvals, clearances or waiting periods under any other material Antitrust Law applicable to the purchase of Shares pursuant to the Offer, the Merger or the Subsequent Transaction shall not have been obtained, expired or been terminated; or (g) all shares of Class B Stock shall not have been converted into shares of Company Common Stock in accordance with the terms of the Stockholder Agreement. which, in the reasonable judgment of Purchaser with respect to each and every matter referred to above and regardless of the circumstances giving rise to any such condition, makes it inadvisable to proceed with the Offer or with such acceptance for payment of or payment for Shares or to proceed with the Merger. A-2 54 The foregoing conditions are for the sole benefit of Purchaser and may be asserted by Purchaser regardless of the circumstances giving rise to any such condition or may be waived by Purchaser in whole or in part at any time and from time to time in its sole discretion (subject to the terms of the Merger Agreement). The failure by Purchaser at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, the waiver of any such right with respect to particular facts and other circumstances shall not be deemed a waiver with respect to any other facts and circumstances, and each such right shall be deemed an ongoing right that may be asserted at any time and from time to time. A-3 EX-99.D.2 11 y42082ex99-d_2.txt STOCKHOLDER AGREEMENT 1 Exhibit (d)(2) STOCKHOLDER AGREEMENT AGREEMENT, dated as of October 27, 2000 among REH Mergersub Inc., a Delaware corporation ("PURCHASER"), Reed Elsevier Inc., a Massachusetts corporation ("PARENT") and each of the other parties signatory hereto (each a "STOCKHOLDER" and collectively the "STOCKHOLDERS"). WHEREAS, Parent, Purchaser and Agincourt, Inc. (the "COMPANY") have entered into an Agreement and Plan of Merger, dated as of the date hereof (the "MERGER AGREEMENT"; terms defined in the Merger Agreement and not otherwise defined herein being used herein as therein defined), pursuant to which, among other things, the Purchaser will make the Offer and, after consummation thereof, merge with and into the Company (the "MERGER") and each issued and outstanding share (other than shares cancelled pursuant to Section 2.6(c) of the Merger Agreement, Dissenting Shares and shares owned by the Company, Parent or Purchaser) of (i) Company Common Stock will be converted into the Common Stock Merger Consideration and (ii) Series A Stock will be converted into the Series A Stock Merger Consideration. WHEREAS, as of October 20, 2000 the Stockholders owned of record and beneficially 19,955,998 shares (and each Stockholder owned the number of such shares set forth beside such Stockholder's name on the signature page hereto) of Class B Stock (such Class B Stock, together with any (A) other Class B Stock acquired by any Stockholder by purchase or otherwise and (B) Company Common Stock acquired by any Stockholder by conversion of Class B Stock, in each case from October 20, 2000 through the term of this Agreement, are collectively referred to herein as the Stockholders' "SUBJECT SHARES"). WHEREAS, as a condition and inducement to Parent's and Purchaser's willingness to enter into the Merger Agreement, Parent has requested that the Stockholders agree, and each of the Stockholders has agreed, to enter into this Agreement. NOW, THEREFORE, the parties hereto agree as follows: ARTICLE 1 VOTING AGREEMENT; GRANT OF PROXY; AGREEMENT TO TENDER SECTION 1.01. Voting Agreement; Conversion of Class B Stock. (a) Each Stockholder hereby agrees to vote all Subject Shares that such Stockholder is 2 entitled to vote at the time of any vote to approve and adopt the Merger Agreement and the Merger at any meeting of the stockholders of the Company, and at any adjournment thereof, at which the Merger Agreement (or any amended version thereof) and the Merger are submitted for the consideration and vote of the stockholders of the Company. (b) Without limiting the generality of the foregoing, (i) each Stockholder hereby agrees to approve and to take all actions necessary, proper or advisable to effect (including, in the case of clause (B) below, calling and holding a special meeting of the holders of Class B Stock to the extent required under the Company's Restated Certificate, By-Laws or applicable laws) the conversion of all of the Class B Stock into Common Stock pursuant to (A) Article Fourth, Section 4(a) of the Company's Restated Certificate or (B) in the event any Stockholder fails to perform its obligations under this Agreement to effect a conversion in accordance with clause (A) before the expiration of the Offer, under Article Fourth, Section 3(e) of the Company's Restated Certificate (such conversion of all the Class B Stock pursuant to either clause (A) or (B) being referred to hereinafter as a "CLASS B CONVERSION") immediately upon request by Parent or Purchaser; provided that in no event will any Stockholder be required to effect the Class B Conversion until immediately prior to the expiration of the Offer and after Parent and Purchaser shall have delivered an irrevocable binding notice to the Stockholders and the Company that each of the Offer Conditions have been satisfied (or would be satisfied, in the case of the Minimum Condition, upon the Class B Conversion and the tender of the Subject Shares issuable upon such conversion) or waived in accordance with the Merger Agreement together with a certificate of the depositary of the Offer setting forth the number of shares of Company Common Stock validly tendered and not withdrawn in the Offer as immediately prior to such time as practicable and (ii) no Stockholder shall approve, nor take any action that would result in, a Class B Conversion except in accordance with the preceding sentence. (c) Each Stockholder hereby agrees that it shall vote its Subject Shares against the approval of (i) any Acquisition Proposal, (ii) any extraordinary dividend or distribution by the Company or any Subsidiary, (iii) any change in the capital structure of the Company or any Subsidiary (other than pursuant to the Merger Agreement) and (iv) any other action that would reasonably be expected to, in any material respect, prevent, impede, interfere with, delay, postpone, frustrate the purposes of or attempt to discourage the transactions contemplated by the Merger Agreement. (d) Each Stockholder hereby agrees that any agreements among the Stockholders or any of them which could be construed to limit their respective rights to enter into this Agreement or perform hereunder are amended to the full extent necessary to assure that entering into this Agreement and performance hereunder are permitted under each such agreement without breach thereof. 3 SECTION 1.2. Irrevocable Proxy. Each Stockholder hereby irrevocably and unconditionally revokes any and all previous proxies granted with respect to its Subject Shares. By entering into this Agreement, each Stockholder hereby irrevocably and unconditionally grants a proxy appointing Purchaser as such Stockholder's attorney-in-fact and proxy, with full power of substitution, for and in such Stockholder's name, to vote, express, consent or dissent, or otherwise to utilize such voting power in the manner contemplated by Section 1.01 as Purchaser or its proxy or substitute shall, in Purchaser's sole discretion, deem proper with respect to such Stockholder's Subject Shares. The proxy granted by such Stockholder pursuant to this Article 1 is coupled with an interest and is irrevocable and is granted in consideration of Parent and Purchaser entering into this Agreement and the Merger Agreement and incurring certain related fees and expenses. Each Stockholder shall perform such further acts and execute such further documents as may be required to vest in Purchaser the sole power to vote such Stockholder's Subject Shares. Notwithstanding the foregoing, the proxy granted by each Stockholder shall be revoked upon termination of this Agreement in accordance with its terms. SECTION 1.3. Agreement to Tender. Immediately after the Class B Conversion has occurred and prior to the expiration of the Offer, subject to Section 1.01, each Stockholder hereby agrees to validly tender and sell (or cause the record owner of such shares to validly tender and sell) and not withdraw, promptly upon the request of Parent or Purchaser, all of its Subject Shares pursuant to and in accordance with the terms of the Offer. Immediately after the Class B Conversion has occurred and prior to the expiration of the Offer, subject to Section 1.01, each Stockholder shall deliver to the depositary designated in the Offer (i) a letter of transmittal with respect to its Subject Shares complying with the terms of the Offer, (ii) certificates representing such Subject Shares and (iii) all other documents or instruments required to be delivered pursuant to the terms of the Offer. ARTICLE 2 REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS Each Stockholder, severally and not jointly, represents and warrants to Parent and Purchaser that: SECTION 2.1. Authorization. (a) If such Stockholder is not an individual, the execution, delivery and performance by such Stockholder of this Agreement and the consummation by such Stockholder of the transactions contemplated hereby are within the corporate or similar powers of Stockholder and have been 4 duly authorized by all necessary corporate or similar action. This Agreement constitutes a valid and binding Agreement of such Stockholder. (b) If such Stockholder is married and the Subject Shares set forth on the signature page hereto opposite such Stockholder's name constitute community property under applicable laws, this Agreement has been duly authorized, executed and delivered by, and constitutes the valid and binding agreement of, such Stockholder's spouse. If this Agreement is being executed in a representative or fiduciary capacity, the Person signing this Agreement has full power and authority to enter into and perform this Agreement SECTION 2.2. Non-Contravention. If such Stockholder is not an individual, the execution, delivery and performance by such Stockholder of this Agreement and the consummation by such Stockholder of the transactions contemplated hereby do not and shall not (i) violate any organizational documents of such Stockholder, (ii) violate any applicable law, rule, regulation, judgment, injunction, order or decree, (iii) require any consent or other action by any Person under, constitute a default under, or give rise to any right of termination, cancellation or acceleration or to a loss of any benefit to which such Stockholder is entitled under any provision of any agreement or other instrument binding on such Stockholder (iv) result in the imposition of any Lien on any asset of Stockholder or (v) violate any other agreement, arrangement or instrument to which such Stockholder is a party or by which such Stockholder (or any of its assets) is bound. SECTION 2.3. Ownership of Subject Shares. Such Stockholder is the record and beneficial owner of the Subject Shares, free and clear of any Lien and any other limitation or restriction (including any restriction on the right to vote or otherwise dispose of the Subject Shares) (other than (i) with respect to the Subject Shares subject to the Pledge Agreements (as defined in Exhibit A) only (the "PLEDGED SHARES"), any limitations or restrictions under such Pledge Agreements and (ii) those which would not impede in any manner such Stockholder's ability to perform this Agreement; provided that, for the avoidance of doubt, any limitation or restriction on such Stockholder's right to transfer or vote such Stockholder's Subject Shares shall be deemed to materially impede such Stockholder's ability to perform this Agreement). None of the Subject Shares is subject to any voting trust or other agreement, arrangement or instrument with respect to the voting of such shares. SECTION 2.4. Pledged Shares. If such Stockholder is a holder of Pledged Shares, that (i) there are no facts, events, conditions, situations or set of circumstances which would reasonably be expected to result in or be the basis for an event of default under the terms of either of the Pledge Agreements and (ii) to such Stockholder's knowledge, there are no facts, events, conditions, situations or set of circumstances which would reasonably be expected to result in or be the 5 basis for an event of default under the terms of the Loan Agreements (as defined in Exhibit A). SECTION 2.5. Total Subject Shares. Except for the Subject Shares set forth beside such Stockholder's name on the signature page hereto or any beneficial interest in Subject Shares that are set forth beside another Stockholder's name on the signature page hereto and except for the Company Common Stock and Options referred to in the immediately following sentence, such Stockholder does not beneficially own any (i) Subject Shares of capital stock or voting securities of the Company, (ii) securities of the Company convertible into or exchangeable for Subject Shares of capital stock or voting securities of the Company or (iii) options or other rights to acquire from the Company any capital stock, voting securities or securities convertible into or exchangeable for capital stock or voting securities of the Company. The Stockholders beneficially own a number of shares of Company Common Stock, including shares issuable upon exercise of Options, not exceeding in the aggregate one million shares (excluding any Subject Shares). SECTION 2.6. Finder's Fees. No investment banker, broker, finder or other intermediary is entitled to a fee or commission from Parent, Purchaser or the Company in respect of this Agreement based upon any arrangement or agreement made by or on behalf of such Stockholder. SECTION 2.7. Reliance by Parent and Purchaser. Such Stockholder understands and acknowledges that Parent and Purchaser is entering into the Merger Agreement in reliance upon such Stockholder's execution and delivery of this Agreement. ARTICLE 3 COVENANTS OF STOCKHOLDERS Each Stockholder hereby covenants and agrees that: SECTION 3.1. No Interference; No Transfers. Except pursuant to the terms of this Agreement, such Stockholder shall not, without the prior written consent of Parent or Purchaser, directly or indirectly, (i) grant any proxies or enter into any voting trust or other agreement or arrangement with respect to the voting of any Subject Shares in a manner inconsistent with the terms of this Agreement, (ii) voluntarily take any action that would or is reasonably likely to (A) make any representation or warranty contained herein untrue or incorrect in any material respect or (B) have the effect in any material respect of preventing such Stockholder from performing its obligations under this Agreement or (iii) voluntarily sell, assign, transfer, encumber or otherwise dispose of, or enter into any contract, option or other arrangement or understanding with respect to the direct or indirect sale, assignment, transfer, encumbrance or other disposition of, 6 any Subject Shares during the term of this Agreement except for transfers (i) to any person or entity who is subject to this Agreement or who becomes bound hereby as a Stockholder by operation of law or by becoming party to and being bound by the terms of this Agreement as a Stockholder incident to such transfer or (ii) to charitable organizations of Company Common Stock converted from Class B Stock provided such Company Common Stock constitutes, in the aggregate (including all shares so transferred to charitable organizations by all Stockholders from the date hereof), not more than 100,000 shares of the outstanding Company Common Stock. For purposes of this Section 3.01, the term "sell" or "sale" or any derivatives thereof shall include (i) a sale, transfer or disposition of record or beneficial ownership, or both and (ii) a short sale with respect to Company Common Stock or substantially identical property, entering into or acquiring an offsetting derivative contract with respect to Company Common Stock or substantially identical property, entering into or acquiring a futures or forward contract to deliver Company Common Stock or substantially identical property or entering into any transaction that has the same effect as any of the foregoing. SECTION 3.2. Other Offers. Such Stockholder shall not, directly or indirectly, (i) take any action to solicit or initiate any Acquisition Proposal or (ii) engage in negotiations with, or disclose any nonpublic information relating to the Company or any of its Subsidiaries or afford access to the properties, books or records of the Company or any of its Subsidiaries to, any Person that may be considering making, or has made, an Acquisition Proposal or has agreed to endorse an Acquisition Proposal. Such Stockholder shall promptly notify Parent and Purchaser after receipt of an Acquisition Proposal or any request for nonpublic information relating to the Company or any of its Subsidiaries or for access to the properties, books or records of the Company or any of its Subsidiaries by any Person that may be considering making, or has made, an Acquisition Proposal and shall advise Purchaser of the status and material details of any such Acquisition Proposal or request. SECTION 3.3. Appraisal Rights. Such Stockholder shall not exercise any rights (including, without limitation, under Section 262 of the General Corporation Law of the State of Delaware) to demand appraisal of any Subject Shares which may arise with respect to the Merger. SECTION 3.4. Pledged Shares. Each of the Stockholders of the Pledged Shares agrees that it will use its reasonable efforts to cause the lenders described in Exhibit A to agree to become party to this Agreement so that such lenders will be bound by the terms and conditions of this Agreement upon an event of default or upon the lenders otherwise becoming entitled to exercise their rights in respect of the Pledged Shares under either of the Pledge Agreements or the Loan Agreements; provided that such Stockholder's efforts pursuant to this Section 3.04 shall not require such Stockholder to offer or grant any financial accommodations to such lenders. 7 SECTION 3.5. Further Assurances. Parent, Purchaser and Stockholder shall each execute and deliver, or cause to be executed and delivered, all further documents and instruments and use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary, proper or advisable under applicable laws and regulations, to consummate and make effective the transactions contemplated by this Agreement. ARTICLE 4 MISCELLANEOUS SECTION 4.1. Amendments; Termination. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement or in the case of a waiver, by the party against whom the waiver is to be effective. This Agreement shall terminate on the earlier of (i) the Effective Time and (ii) the date of termination of the Merger Agreement in accordance with its terms; provided that this Article 4 shall survive any such termination. SECTION 4.2. Expenses. All costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense. SECTION 4.3. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns; provided that no party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other parties hereto, except that each of Parent and Purchaser may transfer or assign its rights and obligations to any Affiliate of Parent; provided further that no such transfer or assignment shall relieve Parent or Purchaser of its obligations hereunder. SECTION 4.4. Governing Law. This Agreement shall construed in accordance with and governed by the laws of the State of Delaware. SECTION 4.5. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received counterparts hereof signed by all of the other parties hereto. SECTION 4.6. Severability. If any term, provision or covenant of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions and 8 covenants of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated. SECTION 4.7. Interpretation. The headings contained in this Agreement are for convenience of reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include," "includes," or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." Other than Section 1.01(d), this Agreement is an agreement between each of the Stockholders, on the one hand, and the Parent and Purchaser, on the other hand, and is not an agreement among the Stockholders. SECTION 4.8. Specific Performance. The parties hereto agree that irreparable damage would occur in the event any provision of this Agreement is not performed in accordance with the terms hereof and that the parties shall be entitled to specific performance of the terms hereof in addition to any other remedy to which they are entitled at law or in equity. SECTION 4.9. Acknowledgment. Each of Parent and Purchaser acknowledges that (i) each Stockholder signs solely in its capacity as the record and/or beneficial (as applicable) owner of the Subject Shares and nothing herein shall limit or affect any actions taken by such Stockholder, or require such Stockholder to take any action, in his or her capacity as an officer or director of the Company including to disclose information acquired solely in his or her capacity as an officer or director, (ii) if the event of default referred to in Exhibit A occurs and the lenders require proxies or otherwise exercise their rights to exercise voting powers over the Pledged Shares, or sell the Pledged Shares, and as a result the Stockholders owning the Pledged Shares are unable to comply with the obligations and covenants as set forth in Article 1 of this Agreement, such noncompliance shall not constitute a breach of this Agreement and (iii) pursuant to Section 3 of the Family Agreement, certain of the Stockholders are required to sell to the Company certain of their Subject Shares and such sale shall not constitute a breach of any of the terms of this Agreement; provided that (A) such sale takes place immediately prior to the expiration of the Offer, (B) prior to such sale the Subject Shares are first converted into Company Common Stock and (C) such sale is otherwise in accordance with the terms and conditions of Section 3 of the Family Agreement. SECTION 4.10. Merger Agreement. (a) (i) The material terms of the Merger Agreement shall not be changed, by amendment or waiver, in a manner materially adverse to the Stockholders without the prior written consent of Stockholders holding a majority of the Subject Shares and (ii) the obligations of the Stockholders hereunder are subject to there not having been any change, by amendment or waiver, by any party to the Merger Agreement to the material terms of the Merger Agreement in a manner materially adverse to the Stockholders without the prior written consent of Stockholders holding a majority of the 9 Subject Shares. For purposes of this Section 4.10(a), each of the following changes, by amendment or waiver (as applicable), in the following terms and conditions of the Offer which require the Company's consent shall, without excluding other possibilities, be deemed to be a change to the material terms of the Merger Agreement in a manner materially adverse to the Stockholders: (A) a waiver by Purchaser of the Minimum Condition; (B) a change in the Outside Date; (C) a change which decreases the price per Share payable in the Offer; (D) a change to the form of consideration payable in the Offer (other than by adding consideration); (E) a reduction in the maximum number of Shares to be purchased in the Offer and (F) an imposition of any condition to the Offer in addition to those set forth in the Merger Agreement. (b) Parent and Purchaser hereby agree to pay for all shares tendered by the Stockholders in accordance with the terms of the Offer. SECTION 4.11. Performance by Parent and Purchaser. Whenever this Agreement requires Parent or Purchaser to take any action, such requirement shall be deemed to include an undertaking of Reed Elsevier plc to cause Parent and Purchaser, as applicable, to take such action. 10 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. REED ELSEVIER INC. By: /s/ Henry Z. Horbaczewski -------------------------------- Name: Henry Z. Horbaczewski Title: Senior Vice President REH MERGERSUB INC. By: /s/ Henry Z. Horbaczewski -------------------------------- Name: Henry Z. Horbaczewski Title: Vice President 11
- ------------------------------------------------------------------------------ Subject Shares Class of Stock Owned STOCKHOLDERS - ------------------------------------------------------------------------------ Class B 200,960 /s/ Richard A. Smith --------------------------------------- Richard A. Smith Class B 256,827 /s/ Susan F. Smith --------------------------------------- Susan F. Smith Class B 1,345,502 /s/ Nancy L. Marks --------------------------------------- Nancy L. Marks Class B 629,840 SMITH MANAGEMENT COMPANY LLC* SMITH MANAGEMENT COMPANY TRUST, SOLE MEMBER By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, Trustee By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, Trustee *Successor by merger to Smith Management Company; record ownership in the name of Smith Management Company
1 As of October 20, 2000, the Stockholder owned an additional 610,000 shares which were substantially converted to Common Stock and transferred to the Richard and Susan Smith Family Foundation, described below. 2 As of October 20, 2000, the Stockholder owned an additional 805,000 shares which were substantially converted to Common Stock and transferred to the Richard and Susan Smith Family Foundation, described below. 3 As of October 20, 2000, the Stockholder owned an additional 443,818 shares which were substantially converted to Common Stock and transferred to the Richard and Susan Smith Family Foundation, described below. 12 Class B 288,720 MARIAN REALTY COMPANY LLC* MARIAN REALTY COMPANY TRUST, SOLE MEMBER By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, Trustee By: /s/ Nancy L. Marks ------------------------------------- Nancy L. Marks, Trustee By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, Trustee *Successor by merger to Marian Realty Company; record ownership in the name of Marian Realty Company Class B 441,595 SUSAN F. SMITH GRANTOR RETAINED ANNUITY TRUST - 15 YEARS By: /s/ Susan F. Smith ------------------------------------- Susan F. Smith, as Trustee and not individually By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually Class B 224,189 SUSAN F. SMITH GRANTOR RETAINED ANNUITY TRUST - 7 YEARS By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually Class B 318,005 SUSAN F. SMITH GRANTOR RETAINED ANNUITY TRUST - 5 YEARS By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually
13 Class B 376,182 NANCY LURIE MARKS GRANTOR RETAINED ANNUITY TRUST By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually Class B 378,875 AMY SMITH BERYLSON GRANTOR RETAINED ANNUITY TRUST By: /s/ Amy Smith Berylson ------------------------------------- Amy Smith Berylson, as Trustee and not individually By: /s/ John G. Berylson ------------------------------------- John G. Berylson, as Trustee and not individually Class B 128,906 AMY SMITH BERYLSON 1998 GRANTOR RETAINED ANNUITY TRUST By: /s/ John G. Berylson ------------------------------------- John G. Berylson, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually Class B 400,000 AMY SMITH BERYLSON 2000 GRANTOR RETAINED ANNUITY TRUST By: /s/ John G. Berylson ------------------------------------- John G. Berylson, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually
14 Class B 10,295 J-J-E 1988 TRUST f/b/o JENNIFER L. BERYLSON U/D/T dated 11/1/88 By: /s/ John G. Berylson ------------------------------------- John G. Berylson, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually Class B 10,295 J-J-E 1988 TRUST f/b/o ELIZABETH s. BERYLSON U/D/T dated 11/1/88 By: /s/ John G. Berylson ------------------------------------- John G. Berylson, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually Class B 10,295 J-J-E 1988 TRUST f/b/o JAMES T. BERYLSON U/D/T dated 11/1/88 By: /s/ John G. Berylson ------------------------------------- John G. Berylson, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually
15 Class B 372,438 ROBERT A. SMITH GRANTOR RETAINED ANNUITY TRUST By: /s/ Robert A. Smith ------------------------------------- Robert A. Smith, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually Class B 114,966 ROBERT A. SMITH 2000 GRANTOR RETAINED ANNUITY TRUST By: /s/ Dana A. Weiss ------------------------------------- Dana A. Weiss, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually Class B 400,000 ROBERT A. SMITH 2000 GRANTOR RETAINED ANNUITY TRUST By: /s/ Dana A. Weiss ------------------------------------- Dana A. Weiss, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually Class B 8,185 ROBERT SMITH AND DANA WEISS 1994 CHILDREN'S TRUST f/b/o MADELINE W. SMITH U/D/T dated 12/1/94 By: /s/ Dana A. Weiss ------------------------------------- Dana A. Weiss, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually
16 Class B 8,185 ROBERT SMITH AND DANA WEISS 1994 CHILDREN'S TRUST f/b/o RYAN A. SMITH U/D/T dated 12/1/94 By: /s/ Dana A. Weiss ------------------------------------- Dana A. Weiss, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually Class B 260,633 DEBRA A. SMITH GRANTOR RETAINED ANNUITY TRUST By: /s/ Debra Smith ------------------------------------- Debra Smith, as Trustee and not individually By: /s/ Brian J. Knez ------------------------------------- Brian J. Knez, as Trustee and not individually
17 Class B 113,485 DEBRA SMITH KNEZ 1998 GRANTOR ANNUITY TRUST By: /s/ Brian J. Knez ------------------------------------- Brian J. Knez, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually Class B 400,000 DEBRA SMITH KNEZ 2000 GRANTOR RETAINED ANNUITY TRUST By: /s/ Brian J. Knez ------------------------------------- Brian J. Knez, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually Class B 13,025 DEBRA AND BRIAN KNEZ 1988 CHILDREN'S TRUST f/b/o JESSICA M. KNEZ U/D/T dated 11/1/88 By: /s/ Brian J. Knez ------------------------------------- Brian J. Knez, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually
18 Class B 13,025 DEBRA AND BRIAN KNEZ 1988 CHILDREN'S TRUST f/b/o ANDREW P. KNEZ U/D/T dated 11/1/88 By: /s/ Brian J. Knez ------------------------------------- Brian J. Knez, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually Class B 3,233,104 TRUST U/W/O PHILIP SMITH f/b/o RICHARD A. SMITH By: /s/ Brian J. Knez ------------------------------------- Brian J. Knez, as Trustee and not individually By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually Class B 3,233,104 TRUST U/W/O PHILIP SMITH f/b/o NANCY L. MARKS By: /s/ Nancy L. Marks ------------------------------------- Nancy L. Marks, as Trustee and not individually By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually
19 Class B 166,067 A-D-R TRUST f/b/o DEBRA SMITH KNEZ U/I/T dated 2/9/67 By: /s/ Susan F. Smith ------------------------------------- Susan F. Smith, a/k/a Susan M. Smith, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually Class B 610,000 C-J-P TRUST f/b/o CATHY LURIE U/I/T dated 12/10/73 By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually Class B 610,000 C-J-P TRUST f/b/o PETER LURIE U/I/T dated 12/10/73 By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually Class B 80,000 RICHARD A. SMITH 1976 TRUST f/b/o AMY SMITH BERYLSON U/D/T dated 12/16/76 By: /s/ Susan F. Smith ------------------------------------- Susan F. Smith a/k/a Susan M. Smith, as Trustee and not individually Class B 240,000 RICHARD A. SMITH 1976 TRUST f/b/o DEBRA SMITH KNEZ U/D/T dated 12/16/76 By: /s/ Susan F. Smith ------------------------------------- Susan F. Smith a/k/a Susan M. Smith, as Trustee and not individually
20 Class B 240,000 RICHARD A. SMITH 1976 TRUST f/b/o ROBERT A. SMITH U/D/T dated 12/16/76 By: /s/ Susan F. Smith ------------------------------------- Susan F. Smith a/k/a Susan M. Smith, as Trustee and not individually Class B 40,000 MARIAN SMITH D-R-A 1976 TRUST f/b/o DEBRA SMITH KNEZ U/D/T dated 12/16/76 By: /s/ Susan F. Smith ------------------------------------- Susan F. Smith a/k/a Susan M. Smith, as Trustee and not individually Class B 120,000 MARIAN SMITH D-R-A 1976 TRUST f/b/o DEBRA SMITH KNEZ U/D/T dated 12/16/76 By: /s/ Susan F. Smith ------------------------------------- Susan F. Smith a/k/a Susan M. Smith, as Trustee and not individually Class B 120,000 MARIAN SMITH D-R-A 1976 TRUST f/b/o ROBERT A. SMITH U/D/T dated 12/16/76 By: /s/ Susan F. Smith ------------------------------------- Susan F. Smith a/k/a Susan M. Smith, as Trustee and not individually Class B 320,000 NANCY LURIE MARKS 1976 TRUST f/b/o JEFFREY R. LURIE U/D/T dated 12/16/76 By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually By: /s/ Darline M. Lewis ------------------------------------- Darline M. Lewis, as Trustee and not individually
21 Class B 320,000 NANCY LURIE MARKS 1976 TRUST f/b/o CATHY J. LURIE U/D/T dated 12/16/76 By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually By: /s/ Darline M. Lewis ------------------------------------- Darline M. Lewis, as Trustee and not individually Class B 320,000 NANCY LURIE MARKS 1976 TRUST f/b/o PETER A. LURIE U/D/T dated 12/16/76 By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually By: /s/ Darline M. Lewis ------------------------------------- Darline M. Lewis, as Trustee and not individually Class B 160,000 MARIAN SMITH J-C-P 1976 TRUST f/b/o JEFFREY R. LURIE U/D/T dated 12/16/76 By: /s/ Nancy Lurie Marks ------------------------------------- Nancy Lurie Marks, as Trustee and not individually
22 Class B 160,000 MARIAN SMITH J-C-P 1976 TRUST f/b/o CATHY J. LURIE U/D/T dated 12/16/76 By: /s/ Nancy Lurie Marks ------------------------------------- Nancy Lurie Marks, as Trustee and not individually Class B 160,000 MARIAN SMITH J-C-P 1976 TRUST f/b/o PETER A. LURIE U/D/T dated 12/16/76 By: /s/ Nancy Lurie Marks ------------------------------------- Nancy Lurie Marks, as Trustee and not individually Class B 66,572 RICHARD A. SMITH FAMILY TRUST U/W/O MARIAN J. SMITH f/b/o ROBERT A. SMITH By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually By: /s/ Nancy L. Marks ------------------------------------- Nancy L Marks, as Trustee and not individually Class B 66,572 RICHARD A. SMITH FAMILY TRUST U/W/O MARIAN J. SMITH f/b/o DEBRA SMITH KNEZ By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually By: /s/ Nancy L. Marks ------------------------------------- Nancy L Marks, as Trustee and not individually Class B 66,570 NANCY S. LURIE FAMILY TRUST U/W/O MARIAN J. SMITH f/b/o CATHY J. LURIE By: /s/ Nancy L. Marks ------------------------------------- Nancy L. Marks, as Trustee and not individually By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually
23 Class B 99,816 PETER A. LURIE TRUST U/W/O MARIAN J. SMITH By: /s/ Nancy L. Marks ------------------------------------- Nancy L. Marks, as Trustee and not individually By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually Class B 34,480 A-D-R CHARITABLE FOUNDATION AND TRUST U/D/T dated 11/1/68 By: /s/ Susan F. Smith ------------------------------------- Susan F. Smith a/k/a Susan M. Smith, as Trustee and not individually By: /s/ Mark D. Balk Mark D. Balk, as Trustee and not ------------------------------------- individually Class B 198,040 MORRIS J. LURIE FAMILY TRUST U/I/T dated 4/15/58 f/b/o CATHY J. LURIE, ET AL. By: /s/ Nancy L. Marks ------------------------------------- Nancy L. Marks, as Trustee and not individually By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually Class B 198,040 MORRIS J. LURIE FAMILY TRUST U/I/T dated 4/15/58 f/b/o PETER A. LURIE, ET AL. By: /s/ Nancy L. Marks ------------------------------------- Nancy L. Marks, as Trustee and not individually By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually
24 Class B 160,000 AMY SMITH BERYLSON 1978 INSURANCE TRUST By: /s/ Amy Smith Berylson ------------------------------------- Amy Smith Berylson, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually Class B 70,000 ROBERT A. SMITH 1978 INSURANCE TRUST By: /s/ Robert A. Smith ------------------------------------- Robert A. Smith, as Trustee and not individually By: /s/ Mark D. Balk ------------------------------------- Mark D. Balk, as Trustee and not individually Common 1,415,000* RICHARD AND SUSAN SMITH FAMILY FOUNDATION By: /s/ Susan F. Smith ------------------------------------- Susan F. Smith, as Trustee and not individually By: /s/ Richard A. Smith ------------------------------------- Richard A. Smith, as Trustee and not individually Common 443,818* NANCY LURIE MARKS FAMILY FOUNDATION By: /s/ Nancy Lurie Marks ------------------------------------- Nancy Lurie Marks, as Trustee and not individually Class B 122,774 /s/ Amy Smith Berylson ----------------------------------- Amy Smith Berylson - ------------ * converted from Class B Stock and transferred to Stockholder on October 25, 2000.
25 Class B 22,191 /s/ Amy Smith Berylson ------------------------------------ Amy Smith Berylson, as Guardian of Elizabeth S. Berylson /s/ John G. Berylson ------------------------------------ John G. Berylson, as Guardian of Elizabeth S. Berylson Class B 22,190 /s/ Jennifer L. Berylson ------------------------------------ Jennifer L. Berylson Class B 7,666 /s/ Robert A. Smith ------------------------------------ Robert A. Smith Class B 15,205 /s/ Debra Smith Knez ------------------------------------ Debra Smith Knez Class B 1,600 /s/ Cathy J. Lurie ------------------------------------ Cathy J. Lurie Class B 122,774 /s/ Jeffrie R. Lurie ------------------------------------ Jeffrie R. Lurie, as Guardian of Julian M.J. Lurie Class B 33,285 /s/ Jeffrey R. Lurie ------------------------------------ Jeffrey R. Lurie, as Guardian of Milena C. Lurie TOTAL 19,955,998
26 For purposes of Section 4.11 only: REED ELSEVIER PLC By: /s/ Henry Z. Horbaczewski ---------------------------------- Name: Henry Z. Horbaczewski Title: Attorney-in-fact
27 EXHIBIT A 1,345,502 shares of Class B Stock owned by Nancy Lurie Marks and 1,250,000 shares of Class B Stock owned by Nancy Lurie Marks and Richard A. Smith not in their individual capacities but as Trustees under the trust established f/b/o Nancy Lurie Marks under Article VIII of the will, dated December 24, 1959 of Philip Smith, are pledged under Pledge Agreements dated May 13, 1994 (the "PLEDGE AGREEMENTS"), to secure certain loans made by certain lenders to finance, in part, the acquisition of the Philadelphia Eagles Football Team (the "PLEDGED SHARES"). If there is an event of default under the terms of the loan agreements relating to such acquisition (the "LOAN AGREEMENTS"), the lenders have the right to vote the Pledged Shares and to require proxies from the pledgers to enable the lenders to exercise voting power over the Pledged Shares. EX-99.D.3 12 y42082ex99-d_3.txt CONFIDENTIALITY AGREEMENT 1 Exhibit (d)(3) HARCOURT GENERAL, INC. 27 Boylston Street Chestnut Hill, Massachusetts 02467 June 28, 2000 Reed Elsevier PLC 25 Victoria Street London SW1H OEX United Kingdom Attn: Sybella Stanley Dear Sirs: You have expressed an interest in a possible negotiated transaction involving Harcourt General, Inc. (the "Company", which term as used herein shall include all subsidiaries of the Company). In connection with your analysis of a possible negotiated transaction with the Company (a "Transaction"), you have requested certain oral and written information concerning the Company from directors, officers, employees, representatives and/or agents of the Company and its subsidiaries (the Company's "Representatives"). All such information furnished to you or your Representatives (as defined below) by or on behalf of the Company or its subsidiaries (irrespective of the form of communication and whether such information is so furnished before, on or after the date hereof), and all analyses, compilations, data, studies, notes, translations, memoranda or other documents prepared by you or your Representatives containing or based in whole or in part on any such furnished information are collectively referred to herein as the "Information." In consideration of furnishing you with the Information, the Company requests your agreement to the following: 1. The Information will be used solely for the purpose of evaluating a Transaction and will not be used in any other way, and the Information will be kept strictly confidential and will not be disclosed by you or your Representatives, except (a) as you may be advised in writing by your outside counsel that it is required by applicable law, regulation or legal process, and only after compliance with Section 3 below, and (b) that you may disclose the Information or portions thereof to those of your officers and employees and representatives of your legal, accounting and financial advisors (the persons to whom such disclosure is permissible being collectively referred to herein as your 2 2 "Representatives") who need to know such information for the purpose of evaluating such Transaction; provided, that your Representatives are informed of the confidential and proprietary nature of the Information; and provided, further, that prospective financing sources shall not be considered "Representatives" to whom Information may be disclosed in accordance with this paragraph without the prior written consent of the Company, which consent shall not be unreasonably withheld. You agree to be responsible for any breach of this agreement by your Representatives (it being understood that such responsibility shall be in addition to and not by way of limitation of any right or remedy the Company may have against such Representatives with respect to any such breach). 2. Except as may be required by law or the applicable rules of any stock exchange on which your securities may be listed, without the prior written consent of the Company, neither you nor your Representatives will disclose to any person (except to the extent otherwise required in the written opinion of your outside counsel by applicable law, regulation or legal process, and only after compliance with Section 3 below), either the fact that any investigations, discussions or negotiations are taking place concerning a possible Transaction, or that you have received Information from the Company or Information has been made available by the Company or any of the terms, conditions or other facts with respect to any such possible Transaction, including the status thereof. The term "person" as used in this agreement will be interpreted broadly to include the media and any corporation, company, group, partnership or other entity or individual. 3. If you or any of your Representatives become legally compelled (including by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any of the Information or the information referred to in Section 2 above, you shall provide the Company with prompt prior written notice of such requirement so that the Company may seek a protective order or other appropriate remedy. If such protective order or other remedy is not obtained, you and your Representatives agree to disclose only that portion of the Information which you are advised in writing by outside counsel is legally required to be disclosed and to take all reasonable steps to preserve the confidentiality of the Information and the information referred to in Section 2 above (including by obtaining an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Information and the information referred to in Section 2 above). In addition, you and your Representatives will not oppose any action (and will, if and to the extent requested by the Company, cooperate with, assist and join with the Company, at the Company's expense, in any reasonable action) by the Company to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Information and the information referred to in Section 2 above. 4. The term "Information" does not include any information which (i) at the time of disclosure or thereafter is generally available to the public (other than as a result of a disclosure directly or indirectly by you or your Representatives in violation hereof), (ii) is or becomes available to you on a nonconfidential basis from a source other than the 3 3 Company or its advisors, provided that, to your knowledge after reasonable inquiry, such source was not prohibited from disclosing such information to you by a legal, contractual or fiduciary obligation owed to the Company, (iii) you can establish is already in your possession (other than information furnished by or on behalf of the Company), or (iv) you can establish was developed by you or others independently of, and without reference to, the Information. 5. If you determine not to pursue a Transaction, you will promptly notify the Company of your determination. At the time of such notice, or if, at any earlier time, the Company so directs (whether or not you determine to pursue a Transaction), you and your Representatives will, at your expense, promptly return to the Company or destroy, all Information and all copies, extracts or other reproductions in whole or in part thereof, as well as any analyses, compilations, studies or other documents prepared by you or for your use containing or reflecting Information. Compliance by you and your Representatives with any direction of the Company or election by you to destroy Information pursuant to this Section 5 shall be certified in writing to the Company by your authorized officer supervising such destruction. Notwithstanding the return or destruction of the Information, you and your Representatives will continue to be bound by your confidentiality and other obligations hereunder. 6. You agree that, for a period of two years from the date of this letter agreement, neither you nor any of your affiliates will, unless invited to do so (on an unsolicited basis) by the Board of Directors of the Company in writing: (i) acquire, offer or propose to acquire, or agree or seek to acquire, directly or indirectly, by purchase or otherwise, any securities or direct or indirect rights or options to acquire any securities of the Company or any subsidiary thereof, or of any successor to or person in control of the Company, or any assets of the Company or any subsidiary or division thereof or of any such successor or controlling person; (ii) enter into or agree, offer, propose or seek to enter into, or otherwise be involved in or part of, directly or indirectly, any acquisition transaction, merger or other business combination relating to all or part of the Company or any of its subsidiaries or any acquisition transaction for all or part of the assets of the Company or any subsidiary of the Company or any of their respective businesses; (iii) make, or in any way participate in, directly or indirectly, any "solicitation" of "proxies" (as such terms are defined under Regulation 14A under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) to vote, or seek to advise or influence any person or entity with respect to the voting of, any voting securities of the Company or any of its subsidiaries; (iv) form, join or in any way participate in a "group" (within the meaning of Section 13(d)(3) of the Exchange Act and the rules and regulations thereunder) with respect to any voting securities of the Company or any of its subsidiaries; (v) seek, propose or otherwise act alone or in concert with others, to influence or control the management, board of directors or policies of the Company or any of its subsidiaries; (vi) directly or indirectly enter into any discussions, negotiations, arrangements or understandings with any other person with respect to any of the foregoing activities or propose any of such activities to any other person; (vii) advise, assist, encourage, act as a financing source for or otherwise invest in any other person in connection with any of the 4 4 foregoing activities; or (viii) disclose any intention, plan or arrangement inconsistent with any of the foregoing. You will promptly advise the Company of any inquiry or proposal made to you with respect to any of the foregoing. You also agree that, during the two-year period referred to in the second preceding sentence, neither you nor any of your affiliates will: (i) request the Company or its Representatives, directly or indirectly, to (1) amend or waive any provision of this paragraph (including this sentence) or (2) otherwise consent to any action inconsistent with any provision of this paragraph (including this sentence); or (ii) take any initiative with respect to the Company or any of its subsidiaries which could require the Company to make a public announcement regarding (1) such initiative, (2) any of the activities referred to in the second preceding sentence, (3) the possibility of a Transaction or any similar transaction or (4) the possibility of you or any other person acquiring control of the Company, whether by means of a business combination or otherwise. This paragraph shall also apply with respect to any of the foregoing activities with respect to any holding company that may subsequently be formed to hold the Company and/or its assets. 7. You agree that, for a period of two years from the date of this letter agreement, without the prior written consent of the Company, you will not, directly or indirectly, solicit to hire or hire (or cause or seek to cause to leave the employ of the Company): (a) any management-level employee of the Company; or (b) any other employee of the Company or any subsidiary of the Company with whom you have had contact or who (or whose performance) became known to you in connection with the process contemplated by this agreement; provided, however, that the foregoing provision will not prevent you from hiring any such person (i) who contacts you on his or her own initiative without any direct or indirect solicitation by or encouragement from you (it being understood that a bona fide public advertisement for employment placed by you and not specifically targeted at the Company's employees shall not constitute direct or indirect solicitation or encouragement), (ii) who has been terminated by the Company or (iii) who has not been employed by the Company during the preceding six months. 8. You understand and acknowledge that neither the Company nor any of its Representatives is making any representation or warranty, express or implied, as to the accuracy or completeness of the Information, and neither the Company nor any of its Representatives will have any liability to you or any other person resulting from your use of the Information. Only those representations or warranties that are made to you in a definitive agreement executed by the Company regarding a Transaction (a "Definitive Agreement") when, as, and if it is executed, and subject to such limitations and restrictions as may be specified in such Definitive Agreement, will have any legal effect. The term "Definitive Agreement" does not include an executed letter of intent or any other preliminary written agreement, nor does it include any written or oral acceptance of any offer or bid on your part. 9. You and the Company understand and agree that no contract or agreement providing for a Transaction shall be deemed to exist unless and until a Definitive Agreement has been executed and delivered by the Company and you, and each of you hereby waives, in 5 5 advance, any claims (including breach of contract) in connection with a Transaction unless and until you shall have entered into a Definitive Agreement. You also agree that unless and until a Definitive Agreement between the Company and you with respect to a Transaction has been executed and delivered, neither the Company, you or any of its or your subsidiaries, stockholders, affiliates or Representatives has any legal obligation of any kind whatsoever with respect to such Transaction by virtue of this agreement or any other written or oral expression with respect to such Transaction except, in the case of this agreement, for the matters specifically agreed to herein. You understand that (i) the Company and its Representatives shall be free to conduct any process for any Transaction as they in their sole discretion shall determine (including negotiating with any of the prospective parties to such Transaction and entering into a Definitive Agreement without prior notice to you or any other person) and (ii) any procedures relating to such Transaction may be changed at any time without notice to you or any other person. You hereby confirm that you are not acting as a broker for or Representative of any person and are considering the Transaction only for your own account. Except as set forth in Section 16, neither this paragraph nor any other provision in this agreement can be waived, amended or assigned except by written consent of the Company, which consent shall specifically refer to this paragraph (or such other provision) and explicitly make such waiver or amendment. 10. You hereby acknowledge that you are aware, and that you will advise your affiliates and Representatives, that the United States securities laws prohibit any person who has material, non-public information concerning the matters which are the subject of this agreement from purchasing or selling securities of a company which may be a party to a transaction of the type contemplated by this agreement or from communicating such information to any other person under circumstances in which it is reasonably foreseeable that such person is likely to purchase or sell such securities. 11. You agree that money damages would not be a sufficient remedy for any breach of this agreement by you and that the Company shall be entitled to, and you shall not oppose the granting of, equitable relief, including injunction and specific performance, in the event of any such breach, in addition to all other remedies available to the Company at law or in equity. You further agree to waive, and to use your best efforts to cause your officers, employees and agents to waive, any requirement for the securing or posting of any bond in connection with such remedy. You agree to indemnify the Company for, and to hold the Company harmless against, any and all liabilities, costs, expenses, losses, damages and claims (collectively, "Costs") arising out of your or any of your Representatives' breach of this agreement. 12. The parties hereby irrevocably and unconditionally consent to submit to the exclusive jurisdiction of the courts of the Southern District of New York and of the United States of America located in the Southern District of New York for any actions, suits or proceedings arising out of or relating to this agreement and the transactions contemplated hereby (and the parties agree not to commence any action, suit or proceeding relating thereto except in such courts), and further agree that service of any process, summons, 6 6 notice or document by U.S. registered mail to the respective addresses set forth above, in your case, and to 27 Boylston Street, Chestnut Hill, Massachusetts 02467, in the case of the Company shall be effective service of process for any action, suit or proceeding brought against the parties in any such court. The parties hereby irrevocably and unconditionally waive any objection to the laying of venue of any action, suit or proceeding arising out of this agreement or the transactions contemplated hereby, in the courts of the Southern District of New York or the United States of America located in the Southern District of New York, and hereby further irrevocably and unconditionally waive and agree not to plead or claim in any such court that any such action, suit or proceeding brought in any such court has been brought in an inconvenient forum. 13. You agree that no failure or delay by the Company in exercising any right, power or privilege hereunder will operate as a waiver thereof, nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any right, power or privilege hereunder. 14. If any provision of this agreement is found to violate any statute, regulation, rule, order or decree of any governmental authority, court, agency or exchange, such invalidity shall not be deemed to affect any other provision hereof or the validity of the remainder of this agreement, and such invalid provision shall be deemed deleted herefrom to the minimum extent necessary to cure such violation. 15. You agree that all (a) contacts by you or your Representatives with the Company regarding the Information or the Transaction, (b) requests for additional Information, (c) requests for facility tours or management meetings and (d) discussions or questions regarding procedures shall be made through Goldman, Sachs & Co., or as any representative of such firm may otherwise direct. 16. This agreement is for the benefit of the Company and its directors, officers, employees, representatives and agents and their respective successors and assigns and will be governed by and construed in accordance with the laws of the State of New York. This agreement may be assigned to any person that acquires all or any portion of the Company to the extent it relates to such portion of the Company. 7 7 If you agree with the foregoing, please sign and return a copy of this letter, which will constitute our agreement with respect to the subject matter of this letter. Very truly yours, HARCOURT GENERAL, INC. By: /s/ Erik P. Geller ---------------------------- Name: Erik P. Geller Title: Senior VP and General Counsel CONFIRMED AND AGREED as of the date first above written: REED ELSEVIER PLC By: /s/ Sybella Stanley ---------------------------------------- Name: Sybella Stanley Title: Director of Corporate Finance -----END PRIVACY-ENHANCED MESSAGE-----