XXXX XXXXX & SONS LOGO
November 12, 1996
Board of Directors
Edmark Corporation
0000 000xx Xxxxxx XX
Xxxxxxx, XX 00000
Dear Members of the Board of Directors:
Edmark Corporation ("Edmark" or the "Company"), International Business
Machines Corporation ("IBM") and Indigo Acquisition Corp., a Washington
Corporation and a wholly-owned subsidiary of IBM (the "Merger Sub"), propose
to enter into an Agreement and Plan of Merger dated as of November 12, 1996
(the "Agreement"). Pursuant to the Agreement, the Merger Sub will commence a
tender offer (the "Tender Offer") to purchase all outstanding shares of the
common stock, no par value per share (the "Common Stock"), of Edmark at a
price of $15.50 per share, net to the seller in cash. The Agreement also
provides that following such tender offer, Merger Sub will be merged with and
into Edmark (the "Merger"), and that each then outstanding share of Common
Stock, other than shares held by IBM or the Company, will be converted into the
right to receive $15.50 in cash. You have requested our opinion as to
whether the cash consideration to be received by the holders of the Common
Stock in the Tender Offer and Merger is fair, from a financial point of view,
to such shareholders.
Xxxx. Xxxxx & Sons Incorporated ("Xxxx. Xxxxx"), as a customary part of
its investment banking business, is engaged in the valuation of businesses
and their securities in connection with mergers and acquisitions, negotiated
underwritings, private placements and valuations for estate, corporate and
other purposes. We have acted as financial advisor to the Board of Directors
of Edmark in connection with the transaction described above and will receive
a fee for our services, a portion of which is contingent upon the
consummation of the Tender Offer and a portion of which becomes payable upon
the delivery of this opinion. Xxxx. Xxxxx served as the lead-managing
underwriter to Edmark in its follow-on offering of Common Stock in August
1995. Xxxx. Xxxxx maintains a market in the Common Stock of Edmark and
regularly publishes research reports regarding the consumer software industry
and the businesses and securities of Edmark and other publicly traded
companies in the consumer software industry. In the ordinary course of
business, Xxxx. Xxxxx may actively trade the securities of Edmark for our own
account and the account of our customers and, accordingly, may at any time
hold a long or short position in such securities.
XXXX XXXXX LOGO
Board of Directors
Edmark Corporation
November 12, 1996
Page Two
In connection with this opinion, we have reviewed certain publicly
available financial information and other information concerning Edmark and
certain internal analyses and other information furnished to us by Xxxxxx.
We have also held discussions with the members of the senior management of
Edmark regarding the businesses and prospects of the Company. In addition,
we have (i) reviewed the reported price and trading activity for the Common
Stock of Edmark, (ii) compared certain financial and stock market information
for Edmark with similar information for certain companies whose securities
are publicly traded, (iii) reviewed the financial terms of certain recent
business combinations which we deemed comparable in whole or in part, (iv)
reviewed the terms of the Agreement and certain related documents and (v)
performed such other studies and analyses and considered such other factors
as we deemed appropriate.
We have not independently verified the information described above and
for purposes of this opinion have assumed the accuracy, completeness and
fairness thereof. With respect to the information relating to the prospects
of Edmark, we have assumed that such information reflects the best currently
available judgments and estimates of the management of Edmark as to the
likely future financial performance of Edmark. In addition, we have not made
nor been provided with an independent evaluation or appraisal of the assets
or liabilities of Edmark, nor have we been furnished with any such
evaluations or appraisals, nor have we made any physical inspection of the
properties or assets of Edmark. Our opinion is based on market, economic and
other conditions as they exist and can be evaluated as of the date of this
letter.
Our opinion expressed herein was prepared for the use of the Board of
Directors of the Company and does not constitute a recommendation to any
shareholder as to whether such shareholder should tender its Common Stock
pursuant to the Tender Offer. We hereby consent to the inclusion of this
opinion in its entirety as an exhibit to any filing made with the Securities
and Exchange Commission with respect to the Tender Offer and the Merger.
Based upon, and subject to the foregoing, it is our opinion that, as of
the date of this letter, the cash consideration to be received by the holders
of the Common Stock in the Tender Offer and Merger is fair, from a financial
point of view, to such shareholders.
Very truly yours,
/s/ Xxxx. Xxxxx & Sons, Incorporated
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Xxxx. Xxxxx & Sons, Incorporated
