S-4/A 1 ds4a.htm AMENDMENT NO. 3 TO FORM S-4 Amendment No. 3 to Form S-4
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As filed with the Securities and Exchange Commission on February 11, 2004

Registration 333-110535


SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

Amendment No. 3

to

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 


 

HOCKEY MERGER CORPORATION

(Exact name of registrant as specified in its charter)

 

Delaware

(State or other jurisdiction of

incorporation or organization)

 

7372

(Primary Standard Industrial

Classification Code Number)

 

42-1607228

(I.R.S. Employer

Identification Number)

 

2444 Charleston Road

Mountain View, California 94043

(650) 934-9500

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 


 

R. Andrew Eckert, Chief Executive Officer and Kevin Oakes, President

Hockey Merger Corporation

2444 Charleston Road

Mountain View, California 94043

(650) 934-9500

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 


 

Copies to:

 

Scott Gelband

Eric DeJong

Perkins Coie LLP

1201 Third Avenue, Suite 4800

Seattle, Washington 98101-3099

(206) 359-8888

 

Steven Esau

Senior Vice President, General

Counsel and Secretary

Click2learn, Inc.

110—110th Avenue NE, Suite 700

Bellevue, Washington 98004

(425) 462-0501

 

V. Holly Albert

Vice President, General Counsel

and Secretary

Docent, Inc.

2444 Charleston Road

Mountain View, California 94043

(650) 934-9500

  Page Mailliard
Steve L. Camahort
Wilson Sonsini Goodrich & Rosati,
Professional Corporation
650 Page Mill Road
Palo Alto, California 94304-1050
(650) 493-9300

 

Approximate date of commencement of proposed sale to the public:    As soon as practicable after this Registration Statement becomes effective.

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

 

The registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

 



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The information in this joint proxy statement/prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus is not an offer to sell these securities, and we are not soliciting offers to buy these securities, in any state where the offer or sale is not permitted.

 

Subject to Completion, dated February 11, 2004

 

LOGO       LOGO

 

To the stockholders of Click2learn, Inc. and Docent, Inc.:

 

Click2learn and Docent have entered an agreement pursuant to which they have agreed to combine their respective businesses in a merger of equals. The combination will be accomplished by means of the mergers of Click2learn and Docent with wholly owned subsidiaries of Hockey Merger Corporation, which we refer to as “Newco.” We will announce a new name for Hockey Merger Corporation prior to the completion of the transaction.

 

When the transaction is completed, Click2learn common stockholders will receive 0.3188 shares of Newco common stock for each share they own and Docent common stockholders will receive 0.7327 shares of Newco common stock for each share they own. Based on these exchange ratios and the capitalization of each company as of October 20, 2003, former stockholders of Click2learn will hold approximately 52%, and former stockholders of Docent will hold approximately 48%, of the outstanding common stock of Newco. In addition, each outstanding stock option and warrant to purchase common stock issued by Click2learn and Docent will be assumed by Newco and will become a right to purchase Newco common stock, as more fully discussed in the section entitled “Click2learn and Docent options, warrants and purchase rights” on page 73. Newco has applied to list its common stock on The Nasdaq National Market under the symbol “HCKY.” We will apply for a new symbol corresponding to the new name of the combined company when we announce the new name.

 

In connection with the transaction, Click2learn and Docent also propose that their stockholders approve the Hockey Merger Corporation 2004 Equity Incentive Plan (or the Newco 2004 Plan) to enable the grant of stock options and other awards to employees and other service providers of Newco after the transaction. Completion of the transaction, however, is not conditioned upon the approval of this proposal.

 

The attached joint proxy statement/prospectus provides you with detailed information concerning Click2learn, Docent, Newco, the transaction and the Newco 2004 Plan. Please give all the information contained in the joint proxy statement/prospectus your careful attention.

 

In particular, you should carefully consider the discussion in the section entitled “ RISK FACTORS” beginning on page 21 of the joint proxy statement/prospectus.

 

Sincerely,

  Sincerely,

LOGO

  LOGO

R. Andrew Eckert

  Kevin Oakes

President, Chief Executive Officer and Director

  Chief Executive Officer and Chairman of the Board

Docent, Inc.

  Click2learn, Inc.

 

This joint proxy statement/prospectus is dated February 13, 2004

and was first mailed to stockholders on or about February 14, 2004.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities to be issued in connection with the transaction or determined if this joint proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.


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WHERE YOU CAN FIND MORE INFORMATION

 

This joint proxy statement/prospectus incorporates important business and financial information about Click2learn and Docent from other documents that are not included in or delivered with the joint proxy statement/prospectus. We will provide a copy of this information to you, without charge, upon your written or oral request.

 

You should make any request for documents by March 11, 2004 to ensure timely delivery of the documents.

 

Requests for documents relating to Click2learn should be directed to:   Requests for documents relating to Docent should be directed to:
     

Click2learn, Inc.

  Docent, Inc.

Investor Relations

  Investor Relations

110 – 110th Avenue NE, Suite 700

  2444 Charleston Road

Bellevue, WA 98004

  Mountain View, CA 94043

Phone: (425) 462-0501

  Phone: (650) 934-9500

 


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LOGO

 


 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held on March 18, 2004

 

To Our Stockholders:

 

A special meeting of stockholders of Click2learn, Inc. will be held on March 18, 2004, at 10:00 a.m., Pacific time, at the offices of Click2learn, 110-110th Avenue NE, Bellevue, Washington, 98004, for the following purposes:

 

1.    To consider and vote on a proposal to approve and adopt the merger agreement dated as of October 20, 2003, as amended on November 13, 2003 and January 26, 2004, among Click2learn, Inc., Docent, Inc., Hockey Merger Corporation (or Newco), Canuck Acquisition Corp., and Devil Acquisition Corp.

 

2.    To consider and vote on a proposal to approve the Hockey Merger Corporation 2004 Equity Incentive Plan (or Newco 2004 Plan) by Newco, effective upon the consummation of the transaction.

 

3.    To transact any other business that properly comes before the special meeting or any adjournments or postponements thereof.

 

The accompanying joint proxy statement/prospectus describes the proposed transaction in more detail. We encourage you to read the entire document carefully.

 

We have fixed the close of business on January 22, 2004 as the record date for the determination of our stockholders entitled to vote at this meeting.

 

By Order of the Board of Directors of Click2learn, Inc.

 

LOGO

Kevin Oakes

Chief Executive Officer and Chairman of the Board

Click2learn, Inc.

 

Bellevue, Washington

February 14, 2004

 

Your vote is very important. To ensure that your shares are represented at the meeting, please complete, date and sign the enclosed proxy and mail it promptly in the postage-paid envelope provided, whether or not you plan to attend the meeting. You can revoke your proxy at any time before it is voted. Returning the proxy does not prevent you from attending the meeting and voting your shares in person. If your shares are held in an account at a brokerage firm or a bank, you must instruct the firm or bank how to vote your shares. If you do not vote or do not instruct your broker or bank how to vote, it will have the same effect as voting against approval and adoption of the merger agreement, and will not be counted with respect to the proposal to

approve the Newco 2004 Plan.


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LOGO

 


 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

To Be Held on March 18, 2004

 

To Our Stockholders:

 

A special meeting of stockholders of Docent, Inc. will be held on March 18, 2004 at 10:00 a.m. at the offices of Docent, 2410 Charleston Road, Mountain View, California, 94043, for the following purposes:

 

1.    To consider and vote on a proposal to approve and adopt the merger agreement dated as of October 20, 2003, as amended on November 13, 2003 and January 26, 2004, among Docent, Inc., Click2learn, Inc., Hockey Merger Corporation (or Newco), Devil Acquisition Corp. and Canuck Acquisition Corp.

 

2.    To consider and vote on a proposal to approve the Hockey Merger Corporation 2004 Equity Incentive Plan (or Newco 2004 Plan) by Newco, effective upon the consummation of the transaction.

 

3.    To transact any other business that properly comes before the special meeting or any adjournments or postponements thereof.

 

The accompanying joint proxy statement/prospectus describes the proposed transaction in more detail. We encourage you to read the entire document carefully.

 

We have fixed the close of business on January 22, 2004 as the record date for the determination of our stockholders entitled to vote at this meeting.

 

By Order of the Board of Directors of Docent, Inc.

 

LOGO

R. Andrew Eckert

President, Chief Executive Officer and Director

Docent, Inc.

 

Mountain View, California

February 14, 2004

 

Your vote is very important. To ensure that your shares are represented at the meeting, please complete, date and sign the enclosed proxy and mail it promptly in the postage-paid envelope provided, whether or not you plan to attend the meeting. You can revoke your proxy at any time before it is voted. Returning the proxy does not prevent you from attending the meeting and voting your shares in person. If your shares are held in an account at a brokerage firm or a bank, you must instruct the firm or bank how to vote your shares. If you do not vote or do not instruct your broker or bank how to vote, it will have the same effect as voting against approval and adoption of the merger agreement, and will not be counted with respect to the

proposal to approve the Newco 2004 Plan.


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TABLE OF CONTENTS

 

     PAGE

SUMMARY OF THE JOINT PROXY STATEMENT/PROSPECTUS

   1

The companies

   1

We are proposing a merger of equals between Click2learn and Docent

   2

Our reasons for proposing the merger of Click2learn and Docent

   5

Steps for you to take

   7

Other matters to consider

   8

SELECTED HISTORICAL AND SELECTED UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA

   12

Click2learn Selected Historical Financial Data

   13

Docent Selected Historical Financial Data

   14

Selected Unaudited Pro Forma Condensed Combined Consolidated Financial Data

   15

Comparative Historical and Unaudited Pro Forma Per Share Data

   17

Market Price and Dividend Information

   19

Recent Developments

   20

RISK FACTORS

   21

Risks related to the proposed transaction

   21

Risks related to the combined company’s business

   24

STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

   36

THE CLICK2LEARN SPECIAL MEETING

   38

Date, time and place of Click2learn’s special meeting

   38

Purpose of special meeting

   38

Record date and outstanding shares

   38

Vote and quorum required

   38

Effect of abstentions and broker non-votes

   39

Expenses of proxy solicitation

   39

Proxies

   39

Recommendation of the board of directors

   40

THE DOCENT SPECIAL MEETING

   41

Date, time and place of Docent’s special meeting

   41

Purpose of special meeting

   41

Record date and outstanding shares

   41

Vote and quorum required

   41

Effect of abstentions and broker non-votes

   42

Expenses of proxy solicitation

   42

Proxies

   42

Recommendation of the board of directors

   43

THE TRANSACTION

   44

Background of the transaction and related agreements

   44

Click2learn’s reasons for the transaction

   49

Recommendation of Click2learn’s board of directors

   52

Docent’s reasons for the transaction

   52

Recommendation of Docent’s board of directors

   55

Opinion of Click2learn’s financial advisor

   55

Opinion of Docent’s financial advisor

   62

Interests of Click2learn directors, officers and affiliates in the transaction

   70

Interests of Docent directors, officers and affiliates in the transaction

   71

 

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     PAGE

Completion and effectiveness of the transaction

   72

Structure of the transaction and conversion of stock and options

   73

Exchange of Click2learn and Docent stock certificates for Newco stock and fractional shares

   74

No dividends

   74

Docent Rights Plan

   74

Appraisal rights

   75

Material United States federal income tax considerations of the transaction

   75

Accounting treatment of the transaction

   76

Regulatory matters related to the transaction

   76

Click2learn Credit Facility

   76

Restrictions on sales of shares by affiliates

   77

Delisting and deregistration of Click2learn and Docent common stock after the transaction and listing of Newco common stock

   77

THE MERGER AGREEMENT

   78

Representations and warranties

   78

Conduct of business before completion of the transaction

   79

No other negotiations; no solicitation; other restrictions on Click2learn and Docent

   80

Conversion of Click2learn and Docent common stock

   82

Treatment of stock options

   82

Fees and expenses

   83

Indemnification of directors and officers; third-party beneficiaries

   84

Governance

   84

Non-survival of representations and warranties

   84

Conditions to completion of the transaction

   85

Termination of the merger agreement

   85

Payment of termination fees

   87

Extension, waiver and amendment of the merger agreement

   87

AGREEMENTS RELATED TO THE TRANSACTION

   88

Stockholders’ voting agreements

   88

Affiliate agreements

   88

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL STATEMENTS

   89

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2003

   90

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003

   91

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2002

   92

PRO FORMA ADJUSTMENTS

   93

THE HOCKEY MERGER CORPORATION 2004 EQUITY INCENTIVE PLAN

   96

Summary of the Newco 2004 Plan

   96

Awards to be granted to certain individuals and groups

   99

Federal tax aspects

   100

NEWCO EQUITY COMPENSATION PLAN INFORMATION

   102

Nonstockholder approved plans

   102

Assumed Click2learn ESPP

   103

 

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     PAGE

COMPARISON OF RIGHTS OF HOLDERS OF NEWCO COMMON STOCK, CLICK2LEARN COMMON STOCK AND DOCENT COMMON STOCK

   104

BENEFICIAL OWNERSHIP INFORMATION

   111

Security ownership of certain beneficial owners and management of Click2learn

   111

Security ownership of certain beneficial owners and management of Docent

   113

Security ownership of certain beneficial owners and management of Newco following the transaction

   115

MANAGEMENT OF NEWCO

   117

Executive officers and directors

   117

Classified board

   119

Audit committee

   120

Compensation committee

   120

Corporate governance committee

   120

Director compensation

   120

Limitation on directors’ liability and indemnification

   121

DESCRIPTION OF NEWCO CAPITAL STOCK FOLLOWING THE TRANSACTION

   122

Authorized capital stock

   122

Capital stock

   122

Transfer agent and registrar

   123

Listing

   123

Anti-takeover effects of provisions of Delaware law and Newco’s certificate of incorporation
and bylaws

   123

PROPOSALS TO CLICK2LEARN, INC. STOCKHOLDERS TO BE VOTED ON AT THE CLICK2LEARN, INC. SPECIAL MEETING

   125

Proposal one: approval and adoption of the merger agreement

   125

Proposal two: adoption of the Hockey Merger Corporation 2004 Equity Incentive Plan

   125

PROPOSALS TO DOCENT, INC. STOCKHOLDERS TO BE VOTED ON AT THE DOCENT, INC. SPECIAL MEETING

   126

Proposal one: approval and adoption of the merger agreement

   126

Proposal two: adoption of the Hockey Merger Corporation 2004 Equity Incentive Plan

   126

LEGAL MATTERS

   127

EXPERTS

   127

STOCKHOLDER PROPOSALS

   127

DOCUMENTS INCORPORATED BY REFERENCE

   129

ANNEX A Agreement and Plan of Reorganization, as amended

   A-1

ANNEX B Opinion of Click2learn, Inc.’s Financial Advisor

   B-1

ANNEX C Opinion of Docent, Inc.’s Financial Advisor

   C-1

ANNEX D Form of Amended and Restated Certificate of Incorporation of Hockey Merger Corp.

   D-1

ANNEX E Form of Amended and Restated Bylaws of Hockey Merger Corp.

   E-1

ANNEX F The Hockey Merger Corporation 2004 Equity Incentive Plan

   F-1

 

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SUMMARY OF THE JOINT PROXY STATEMENT/PROSPECTUS

 

This summary highlights, in a question-and-answer format, selected information that is more fully discussed elsewhere in this joint proxy statement/prospectus and may not contain all the information that is important to you. You should carefully read this entire document and the other documents referenced in it.

 

THE COMPANIES

 

LOGO

 

Click2learn, Inc.

110 – 110th Avenue NE, Suite 700

Bellevue, WA 98004

Phone: (425) 462-0501

www.click2learn.com

 

Click2learn is a leader in enterprise productivity solutions for Global 2000 organizations and governmental agencies seeking to improve business performance and workforce productivity. Using Click2learn’s Aspen Enterprise Productivity Suite and ToolBook Simulation and Authoring Solution, many of the world’s best-known corporations improve sales force readiness, achieve and demonstrate regulatory compliance, improve speed and quality of customer service, and educate customers and partners, while at the same time realizing significant cost savings. Headquartered in Bellevue, Washington, with offices throughout the United States, Click2learn also is represented in Europe, Australia, Japan and India.

 

LOGO

 

Docent, Inc.

2444 Charleston Road

Mountain View, CA 94043

Phone: (650) 934-9500

www.docent.com

 

Docent is a leading provider of integrated software solutions proven to directly drive business performance through learning. Docent solutions for sales performance, product launch, channel effectiveness, customer education, compliance, enterprise resource planning/customer relationship management system implementations, and other business priorities are enabled by the industry’s most comprehensive suite of business performance management applications, industry-specific content and world-class services. Solutions are tailored to address the unique requirements of vertical markets, including government, life sciences, energy, high tech, telecommunications, financial services, retail and manufacturing. Docent is headquartered in Mountain View, California, with other offices throughout the United States, Europe and Asia Pacific.

 

Newco is headquartered at 2444 Charleston Road, Mountain View, CA 94043, (650) 934-9500. Newco is a new corporation formed to facilitate the combination of the businesses of Click2learn and Docent. Newco has not, to date, conducted any activities other than those relating to its formation, the matters contemplated by the merger agreement and the preparation of this joint proxy statement/prospectus. Upon completion of the transaction, the business of Newco will be the combined businesses currently conducted by Click2learn and Docent.

 

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WE ARE PROPOSING A MERGER OF EQUALS BETWEEN CLICK2LEARN AND DOCENT

 

Q: Why am I receiving this joint proxy statement/prospectus? (see page 44)

 

A: Docent, Inc. and Click2learn, Inc. have agreed to combine their two businesses in a merger of equals under the terms of a merger agreement that is described in this joint proxy statement/prospectus. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A.

 

In order to complete the transactions described in the merger agreement, the stockholders of both Docent and Click2learn must vote to approve and adopt the merger agreement. In connection with the transaction, the stockholders of Click2learn and Docent are also being asked to approve the Hockey Merger Corporation 2004 Equity Incentive Plan (or the Newco 2004 Plan). This joint proxy statement is also a prospectus provided by Hockey Merger Corporation (or Newco) in connection with Newco’s offer of its common stock to be issued upon completion of the transaction.

 

Q: How will the transaction be accomplished? (see page 73)

 

A: The transaction will include two separate mergers that will happen simultaneously. A new, wholly owned subsidiary of Newco will merge with and into Docent resulting in Docent becoming a wholly owned subsidiary of Newco. We refer to this merger as the “Docent merger.” Simultaneously, a new, wholly owned subsidiary of Newco will merge with and into Click2learn resulting in Click2learn becoming a wholly owned subsidiary of Newco. We refer to this as the “Click2learn merger.” We refer to the Docent merger and the Click2learn merger collectively as “the transaction.”

 

Q: What will stockholders receive in the transaction? (see page 73)

 

A: Stockholders of Click2learn and Docent will receive the following as a result of the transaction:

 

  holders of Click2learn common stock will receive 0.3188 shares of Newco common stock in exchange for each share of Click2learn common stock;

 

  holders of Docent common stock will receive 0.7327 shares of Newco common stock in exchange for each share of Docent common stock; and

 

  no fractional shares of Newco common stock will be issued. Instead of fractional shares, Click2learn and Docent stockholders will receive an amount of cash equal to such fraction multiplied by the closing price of Newco common stock on the trading day immediately succeeding the effective date of the transaction.

 

Q: What will option and warrant holders receive in the transaction? (see page 73)

 

A: Option and warrant holders of Docent and Click2learn will receive the following as a result of the transaction:

 

  each option and warrant to purchase Click2learn common stock that is outstanding immediately prior to the transaction will be assumed by Newco and will represent the right to purchase a number of shares of Newco common stock equal to the product of the number of shares of Click2learn common stock that were purchasable before the transaction multiplied by 0.3188; the exercise price per share of Newco common stock will be proportionately increased; and each purchase right outstanding under the Click2learn employee stock purchase plan will be assumed by Newco and will represent a right to purchase 0.3188 shares of Newco common stock at a purchase price determined based on the fair market value of Newco common stock on the applicable purchase date as compared to the fair market value of Click2learn common stock at the beginning of the applicable offering period in effect as of the effective time of the transaction divided by 0.3188; and

 

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  each option and warrant to purchase Docent common stock that is outstanding immediately prior to the transaction will be assumed by Newco and will represent the right to purchase a number of shares of Newco common stock equal to the product of the number of shares of Docent common stock that were purchasable before the transaction multiplied by 0.7327; the exercise price per share of Newco common stock will be proportionately increased; the Docent employee stock purchase plan will terminate immediately prior to the effective time of the transaction and all funds that have been withheld from wages of Docent employees for the purchase of Docent common stock as of that time will be applied to a final purchase of Docent common stock and each share of Docent common stock purchased in the final purchase will represent the right to receive 0.7327 shares of Newco common stock.

 

Q: What percentage of Newco will be owned by the former Click2learn stockholders and former Docent stockholders immediately following the transaction? (see page 74)

 

A: Based on the number of shares of outstanding common stock of each company as of October 20, 2003, the former stockholders of Click2learn and Docent will have approximately the following aggregate ownership interests:

 

     Newco Percentage
Ownership


 

Click2learn stockholders

   52 %

Docent stockholders

   48 %

 

Q: Who will be the directors of Newco? (see page 117)

 

A: Following the transaction, the board of directors of Newco will consist of eight members:

 

  four designees from Click2learn’s board of directors: Kevin Oakes, Click2learn’s Chief Executive Officer and Chairman of the board and John Coné, Sally Narodick, and Vijay Vashee, current members of Click2learn’s board of directors, and

 

  four designees from Docent’s board of directors: R. Andrew Eckert, Docent’s President, Chief Executive Officer and a member of Docent’s board of directors, and Jack L. Acosta, Donald E. Fowler and Ali R. Kutay, current members of Docent’s board of directors.

 

The Newco board of directors will consist of three classes of directors. At each annual meeting of stockholders, one of the classes will be elected. Directors in Class I will serve until the first annual meeting after the transaction, directors in Class II will serve until the second annual meeting after the transaction, and directors in Class III will serve until the third annual meeting after the transaction. Directors elected at each annual meeting after the transaction will be elected to serve for a three year term.

 

Class I


 

Class II


 

Class III


Jack L. Acosta

Vijay Vashee

 

John Coné

Ali R. Kutay

Donald E. Fowler

 

R. Andrew Eckert

Kevin Oakes

Sally Narodick

 

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Q: Who will be the executive officers of Newco? (see page 116)

 

A: Following the transaction, the executive management team of Newco is expected to be made up members of Click2learn and Docent’s executive management teams and include:

 

Name


  

Newco Position


  

Click2learn or Docent Position


R. Andrew Eckert

   Chief Executive Officer and Director    President, Chief Executive Officer and Director, Docent

Kevin Oakes

   President and Director    Chief Executive Officer, Chairman of the board of directors, Click2learn

Neil J. Laird

   Senior Vice President and Chief Financial Officer    Senior Vice President and Chief Financial Officer, Docent

Srinivasan Chandrasekar

   Senior Vice President, Products    Chief Technology Officer, Click2learn

David Crussell

   Senior Vice President, Professional Services and Operations    Senior Vice President, World Wide Operations, Docent

Sudheer Koneru

   Senior Vice President, International Operations    Chief Strategy Officer, Click2learn

Sanjay P. Dholakia

   Senior Vice President, Marketing and Alliances    Vice President, Marketing and Business Development, Docent

 

Q: Are there risks involved in undertaking the transaction?

 

A: Yes. In evaluating the transaction, you should carefully consider the factors discussed in the section entitled “RISK FACTORS” beginning on page 21.

 

Q: What stockholder approvals are needed to complete the transaction? (see pages 38 and 41)

 

A: For Click2learn, the affirmative vote of the holders of a majority of the outstanding shares of Click2learn’s common stock is required to approve and adopt the merger agreement. For Docent, the affirmative vote of the holders of a majority of the outstanding shares of Docent’s common stock is required to approve and adopt the merger agreement.

 

Q: Are there any stockholders already committed to voting in favor of the mergers? (see page 88)

 

A: Yes. Certain of Click2learn and Docent’s officers and directors have entered into voting agreements requiring them to vote all the shares of common stock of their respective companies beneficially held by them in favor of adoption of the merger agreement and to vote against other potential acquisition proposals. The following table reflects the number of shares of and percentage of outstanding shares subject to such voting agreements held by the officers and directors of the respective companies as of January 22, 2004.

 

     Number of
shares held


   Percentage of
outstanding
shares


    Number of shares
beneficially
owned*


   Percentage of
shares beneficially
owned*


 

Click2learn Officers and Directors

   975,710    3.0 %   2,582,135    7.5 %

Docent Officers and Directors

   342,896    2.6 %   1,057,039    7.6 %

* Includes 1,606,425 and 714,143 shares of common stock subject to options exercisable within 60 days of January 22, 2004, for Click2learn and Docent, respectively.

 

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Q: When do you expect the transaction to be completed? (see page 72)

 

A: Click2learn and Docent are working toward completing the transaction as quickly as possible. We hope to complete the transaction during the first calendar quarter of 2004.

 

Q: Whom should I call with questions about the transaction?

 

A: Click2learn stockholders should call Click2learn Investor Relations, (425) 462-0501. Docent stockholders should call Docent Investor Relations, (650) 934-9500. Stockholders of either company can call Mellon Investor Services LLC at (888) 867-6003.

 

Q: Can I get additional information about Click2learn and Docent?

 

A: Yes. We incorporate important business and financial information about Click2learn and Docent into this joint proxy statement/prospectus by reference. Enclosed with this joint proxy statement/prospectus are Click2learn’s and Docent’s most recent annual report on Form 10-K/A and quarterly report on Form 10-Q/A. In addition, you may obtain the information incorporated by reference without charge by following the instructions in the section entitled “DOCUMENTS INCORPORATED BY REFERENCE” beginning on page 129.

 

OUR REASONS FOR PROPOSING THE MERGER OF CLICK2LEARN AND DOCENT

 

Q: Why are Click2learn and Docent proposing the transaction? (see pages 49 and 52)

 

A: Click2learn’s and Docent’s reasons for proposing the transaction include:

 

  the potential strategic benefits of the transaction including:

 

  the belief that the combined company can be a strong, viable leader in the business performance and learning management software industry,

 

  the belief that the combined company can better serve its customers,

 

  the belief that the combined company can provide the market with the most comprehensive set of innovative technologies,

 

  the belief that the complementary product and service offerings of the two companies will allow the combined company to better address customer demand, which will yield additional revenue opportunities,

 

  the potential for a more expansive customer base and broader market reach,

 

  the potential for an enhanced network of strategic partners and the benefits such a network would provide to the combined company’s customers,

 

  the potential of combining two leading research and development, services and customer support teams, and

 

  the increased financial strength and operational efficiencies that the combined company can potentially deliver; and

 

  the opportunity for Click2learn’s and Docent’s stockholders to participate in the potential for growth of the combined company after the completion of the transaction.

 

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Q: Do the boards of directors of Click2learn and Docent recommend voting in favor of the transaction? (see pages 52 and 55)

 

A: Yes.

 

  After careful consideration, Click2learn’s board of directors recommends that Click2learn stockholders vote in favor of approval and adoption of the merger agreement.

 

  After careful consideration, Docent’s board of directors recommends that Docent stockholders vote in favor of approval and adoption of the merger agreement.

 

Q: Have Click2learn and Docent received favorable opinions from their financial advisors concerning the transaction? (see pages 55 and 62)

 

A: In deciding to approve the transaction and adopt the merger agreement, Click2learn’s board of directors considered the opinion from its financial advisor, Craig-Hallum Capital Group LLC, that the Click2learn exchange ratio was fair to the Click2learn stockholders from a financial point of view as of October 20, 2003, the date of such opinion. In deciding to approve the transaction and adopt the merger agreement, Docent’s board of directors considered the opinion from its financial advisor, C.E. Unterberg, Towbin, that the Docent exchange ratio was fair to the Docent stockholders from a financial point of view as of October 20, 2003, the date of such opinion. The full text of the written opinions of the financial advisors are attached to this joint proxy statement/prospectus as Annex B and Annex C. You should read these opinions carefully and completely for a description of the assumptions made, matters considered and the limitations of the review the advisors conducted. Craig-Hallum’s opinion is directed to the Click2learn board, and C.E. Unterberg, Towbin’s opinion is directed to the Docent board. These opinions do not address the prices at which Newco’s common stock will trade after the transaction and are not recommendations as to how to vote on any matter relating to the transaction. Click2learn paid Craig-Hallum a fee of $475,000 in connection with its opinion in the transaction. Since January 1, 2002, Click2learn has paid Craig-Hallum an aggregate of $702,392 for its services, not including the fee paid for its opinion in this transaction or the Nasdaq valuation analysis, and issued Craig-Hallum warrants to purchase 373,032 shares of Click2learn common stock with an exercise price of $1.90. Docent has paid C.E. Unterberg, Towbin a fee of $500,000 in connection with its opinion in the transaction, which will be credited against a transaction fee based on the value of Docent common stock payable upon the closing of the transaction. At the time the transaction was announced the transaction fee would have equaled approximately $1.1 million and if the closing had closed on January 23, 2004, the transaction fee would have equaled approximately $1.47 million. Other than the fee paid for its opinion in this transaction, Docent has never paid C.E. Unterberg, Towbin any fees for its services. Newco agreed to pay a fee of $50,000 to Craig-Hallum in connection with a price-per-share valuation analysis for Newco’s common stock required for Newco’s application for listing on the Nasdaq National Market.

 

Q: Do persons involved in the transaction have interests that may conflict with mine? (see pages 70 and 71)

 

A: Yes. When considering the recommendations of Click2learn’s and Docent’s boards of directors, you should be aware that some Click2learn and Docent directors, officers and stockholders have interests in the transaction that are different from, or are in addition to, your interests. These interests include:

 

  Several directors and officers of Click2learn and Docent including R. Andrew Eckert, Kevin Oakes, Neil J. Laird, Srinivasan Chandrasekar, David Crussell, Sudheer Koneru, Sanjay P. Dholakia, Donald E. Fowler, Jack L. Acosta, Sally Narodick, John Coné, Ali R. Kutay and Vijay Vashee are anticipated to have positions in the combined company following the transaction.

 

  Click2learn’s directors and some of its executive officers hold options that will fully accelerate upon completion of the transaction.

 

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  Some of Click2learn’s other officers and some of Docent’s officers will be entitled to severance payments and accelerated vesting of options if such officers are terminated without cause, are constructively terminated, or terminate their employment with good reason within a certain number of months after the consummation of the transaction.

 

  In addition to accelerated vesting of options, Docent has agreements with David Mandelkern that provide for additional severance benefits including continued salary, health benefits and the forgiveness of certain outstanding debt upon his involuntary termination.

 

  Newco had entered into a retention agreement with John Atherly that, assuming completion of transaction, provides that Mr. Atherly will be employed by Newco through August 1, 2004, and be paid a lump sum retention bonus equal to his current annual salary in lieu of the cash severance component of the Click2learn Change of Control Executive Severance Plan and a cash bonus based on savings achieved or identified, and subject to certain minimum savings thresholds, for Newco during the transition period on an annualized basis.

 

  Provisions in the merger agreement provide that Newco’s and the surviving corporations’ charter documents will contain exculpation and indemnification provisions at least as favorable to the directors and officers of the respective companies as those contained in such company’s charter documents as in effect on October 20, 2003; such provisions will not be amended, repealed or otherwise modified for six years following the transaction in any manner adversely affecting the rights of parties indemnified by such provisions; subject to certain limitations, Newco will maintain directors’ and officers’ liability insurance for six years following the transaction covering those persons who are covered by the respective companies’ directors’ and officers’ liability insurance policies as of October 20, 2003, and the directors and officers of the respective companies will be third-party beneficiaries for purposes of the indemnification provisions of the merger agreement.

 

STEPS FOR YOU TO TAKE

 

Q: What do I need to do now? (see pages 39 and 42)

 

A: After carefully reading and considering the information contained in this joint proxy statement/prospectus, please mail your signed Click2learn or Docent proxy card in the enclosed return envelope or follow the instructions for voting by telephone and internet printed on the proxy card as soon as possible so that your shares may be represented at your meeting. Alternatively, you may vote in person at the special meeting. Your vote is very important, regardless of the number of shares you own.

 

Q: Should I send in my stock certificates now? (see pages 40 and 43)

 

A: No. After the transaction is completed, Newco will send you written instructions for exchanging your Click2learn and Docent stock certificates for Newco stock.

 

Q: If my shares are held in “street name” by my broker, will my broker vote my shares for me? (see pages 39 and 42)

 

A: Your broker will vote your shares only if you provide instructions on how to vote by following the information provided to you by your broker. If you do not provide your broker instructions on how to vote, your broker will not be able to vote the shares, which will have the same effect as a vote against the adoption of the merger agreement and will not be counted with respect to the proposal to adopt the Newco 2004 Plan.

 

Q: What do I do if I want to change my vote? (see pages 39 and 42)

 

A: You can change your vote at any time before your proxy is voted at your special meeting. There are three ways for you to do this:

 

  send notice to the secretary of Click2learn or Docent (as appropriate) that you wish to revoke your proxy;

 

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  send notice to the secretary of Click2learn or Docent (as appropriate) that you wish to change your proxy; or

 

  attend the stockholders’ meeting and vote in person.

 

If your shares are held in an account at a brokerage firm or bank, you should contact the brokerage firm or bank to change your vote.

 

Q: What if I don’t vote? (see pages 39 and 42)

 

A: If you fail to vote, it will have the same effect as a vote against approval and adoption of the merger agreement, but will not affect the proposal to approve the Newco 2004 Plan.

 

  If you return your signed proxy and do not indicate how you want to vote, your proxy will be counted as a vote to approve and adopt the merger agreement and to approve the Newco 2004 Plan.

 

  If you respond and abstain from voting, your proxy will have the same effect as a vote against approval and adoption of the merger agreement and against the proposal to approve Newco 2004 Plan.

 

Q: Am I entitled to assert appraisal rights? (see page 75)

 

A: No, under Delaware law, neither Click2learn stockholders nor Docent stockholders will have the right to assert appraisal rights relating to the transaction.

 

OTHER MATTERS TO CONSIDER

 

Q: How do the market prices of Click2learn and Docent common stock compare? (see page 19)

 

A: Shares of Click2learn common stock and Docent common stock are listed on the Nasdaq National Market. Click2learn’s trading symbol is “CLKS.” Docent’s trading symbol is “DCNT.” The following table sets forth the last reported sale prices of Click2learn’s common stock and of Docent’s common stock on October 20, 2003, the last full trading day prior to the public announcement of the proposed transaction, on January 22, 2004, the record date, and on February 10, 2004, the last trading day before the printing of this joint proxy/statement prospectus:

 

     Click2learn

   Docent

October 20, 2003

   $ 1.68    $ 4.24

January 22, 2004

   $ 2.22    $ 5.22

February 10, 2004

   $ 2.32    $ 5.45

 

Click2learn, Docent and Newco urge you to obtain current market quotations. See page 19 for a comparison of Click2learn’s and Docent’s common stock market prices and the pro forma equivalent of Newco’s per share value.

 

Q: Where will my shares of Newco common stock be listed? (see page 123)

 

A: We have applied to list the Newco common stock on The Nasdaq National Market under the symbol “HCKY.” We will apply for a new symbol corresponding to Newco’s new name when we announce the new name.

 

Q: Will I recognize an income tax gain or loss on the transaction? (see page 75)

 

A: For both Click2learn stockholders and Docent stockholders, it is expected that you will not recognize gain or loss for United States federal income tax purposes in connection with the transactions contemplated by the merger agreement, except with respect to cash received for fractional shares. However, all Click2learn and Docent stockholders are urged to consult their own tax advisors to determine their particular tax consequences.

 

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Q: What is the intended accounting treatment of the transaction? (see page 76)

 

A: Newco will account for the transaction as a purchase of Docent by Click2learn, using the purchase method of accounting.

 

Q: Are there any regulatory consents or approvals that are required to complete the transaction? (see page 85)

 

A: None of Click2learn, Docent or Newco is aware of the need to obtain any regulatory approvals in order to consummate the transaction other than the following:

 

  effectiveness of the registration statement of which this joint proxy statement/prospectus is a part; and

 

  approval to list the shares of Newco common stock to be issued in connection with the transaction on The Nasdaq National Market.

 

Click2learn, Docent and Newco intend to obtain these approvals and any additional regulatory approvals that may be required. However, none of the parties can assure you that all of the approvals will be obtained.

 

Q: Are there contractual conditions to completion of the transaction? (see page 85)

 

A: Yes. Click2learn’s and Docent’s obligations to complete the transaction are subject to the satisfaction or waiver of closing conditions. The conditions that must be satisfied or waived before the completion of the transaction include the following, subject to certain exceptions and qualifications:

 

  Click2learn stockholder approval and Docent stockholder approval;

 

  declaration by the SEC of the effectiveness of this joint proxy statement/prospectus and the absence of any stop order suspending such effectiveness;

 

  absence of any order by any governmental agency that would have the effect of making the transaction illegal;

 

  issuance of tax opinions by Perkins Coie LLP and Wilson Sonsini Goodrich & Rosati, Professional Corporation, counsel to Click2learn and Docent, respectively, that the transaction will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code and/or qualify as a tax-free exchange under Section 351 of the Internal Revenue Code;

 

  listing of the shares of Newco common stock on The Nasdaq National Market; and

 

  the continued validity at the closing of the representations and warranties given by the respective companies as of October 20, 2003, the date of execution of the merger agreement.

 

Q: Does the merger agreement permit termination of the transaction? (see page 85)

 

A: Yes. The merger agreement may be terminated prior to the effectiveness of the transaction under the following conditions, subject to certain exceptions and qualifications:

 

  by mutual written consent of both parties;

 

  by either party if the transaction has not been consummated by April 20, 2004;

 

  by either party if a governmental agency has taken any final and nonappealable action that has the effect of prohibiting the transaction;

 

  by either party if the requisite stockholder approvals are not obtained;

 

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  by either party if any representation, warranty, covenant or agreement of the other party set forth in the merger agreement is or becomes untrue and is not curable within 30 days after written notice;

 

  by Click2learn if a Click2learn Triggering Event occurs, as more fully discussed in the section entitled “Termination of the merger agreement” beginning on page 85; and

 

  by Docent if a Docent Triggering Event occurs, as more fully discussed in the section entitled “Termination of the merger agreement” beginning on page 85.

 

Q: Could payment of termination fees be required? (see page 87)

 

A: Yes. If the merger agreement is terminated upon certain occurrences, Click2learn may be required to pay to Docent a termination fee of $2.5 million, or Docent may be required to pay to Click2learn a termination fee of $2.5 million.

 

Q: May Click2learn or Docent negotiate with other parties? (see page 80)

 

A: The merger agreement contains provisions prohibiting Click2learn and Docent and other covered persons from seeking an alternative transaction to the transaction. These “no solicitation” provisions apply to each of Click2learn and Docent and their subsidiaries, the officers, directors, affiliates or employees of each of Click2learn and Docent and their subsidiaries as well as any investment banker, attorney or other advisor or representative retained by any of them. Under these provisions, covered persons may not, directly or indirectly:

 

  solicit, initiate, encourage or induce the making of an acquisition proposal;

 

  participate in discussions or negotiations regarding, or furnish to any person any information with respect to, or take any other action to facilitate any inquiries or the making of any proposal that constitutes or may reasonably be expected to lead to, any acquisition proposal;

 

  engage in discussions with any person with respect to any acquisition proposal (except the existence of these “no solicitation” provisions);

 

  approve, endorse or recommend any acquisition proposal; or

 

  enter into any letter of intent or similar document or any contract contemplating or otherwise relating to any acquisition proposal or any transaction contemplated thereby.

 

However, there are certain circumstances under which Docent and Click2learn can nevertheless take certain of the preceding prohibited actions in response to an unsolicited bona fide written acquisition proposal from a third party that its board of directors in good faith concludes (after consultation with its outside legal counsel and financial advisor) is a superior offer. In addition, there are certain circumstances under which the Docent board or the Click2learn board can withhold, withdraw, amend or modify its recommendation in favor of the transactions contemplated by the merger agreement or approve or recommend a superior offer.

 

Q: Are there other proposals that I should consider? (see page 96)

 

A: Yes, in connection with the transaction, Click2learn and Docent are also asking you to consider and vote on a proposal to approve the Hockey Merger Corporation 2004 Equity Incentive Plan (or Newco 2004 Plan) by Newco, to be effective upon the consummation of the transaction, to enable Newco to grant stock options and other awards to its employees and other service providers after the transaction.

 

Each of Click2learn, Docent and Newco believe that the approval of the Newco 2004 Plan is essential to Newco’s future success. Newco’s employees will be its most valuable asset. Stock options and other awards such

 

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as those provided under the Newco 2004 Plan will be vital to Newco’s ability to attract and retain outstanding and highly skilled individuals in the extremely competitive labor markets in which Newco will be required to compete. Such awards are also crucial to Newco’s ability to motivate employees and other service providers to achieve Newco’s goals.

 

Q: What happens if the stockholders of Click2learn and Docent do not approve the Newco 2004 Plan? (see page 96)

 

A: If the Newco 2004 Plan is not approved, in addition to assuming all outstanding awards under the Click2learn and Docent option plans as contemplated by the merger agreement, Newco will also assume the shares available for issuance immediately prior to the transaction under the Click2learn 1998 Equity Incentive Plan and the Docent 2000 Omnibus Equity Incentive Plan so that Newco will be able to grant equity awards under the Click2learn 1998 Plan and the Docent 2000 Plan after the transaction. If the Newco 2004 Plan is approved, Newco will assume only outstanding awards under the Click2learn and Docent option plans and will terminate the Click2learn and Docent option plans for purposes of new awards.

 

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SELECTED HISTORICAL AND SELECTED UNAUDITED PRO FORMA CONDENSED

COMBINED FINANCIAL DATA

 

We are providing the following selected financial information to assist you in analyzing the financial aspects of the transaction. The selected Click2learn and Docent financial data set forth below, including the accompanying notes, are qualified in their entirety by, and should be read in conjunction with, the historical consolidated financial statements and related notes contained in the annual, quarterly and other reports filed by Click2learn and Docent with the SEC, which we have incorporated by reference into this joint proxy statement/prospectus. See “DOCUMENTS INCORPORATED BY REFERENCE” beginning on page 129.

 

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Click2learn Selected Historical Financial Data

 

The selected historical financial data of Click2learn have been derived from the audited historical consolidated financial statements and related notes of Click2learn for each of the years in the five-year period ended December 31, 2002 and from the unaudited historical consolidated financial statements as of September 30, 2003 and for the nine months ended September 30, 2002 and 2003.

 

     Years Ended December 31,

    Nine Months Ended
September 30,


 
     1998(a)

    1999

    2000

    2001

    2002

    2002

    2003

 
     (in thousands, except per share data)  

Statement of Operations Data:

                                                        

Revenue:

                                                        

Platforms

   $ 2,549     $ 5,643     $ 12,494     $ 21,046     $ 23,345     $ 16,231     $ 19,866  

Tools

     17,914       15,312       8,602       6,983       4,290       3,402       2,230  

Content services

     1,464       2,736       4,399       3,180       2,842       2,218       1,547  
    


 


 


 


 


 


 


Total revenue

     21,927       23,691       25,495       31,209       30,477       21,851       23,643  
    


 


 


 


 


 


 


Cost of revenue:

                                                        

Platforms

     623       1,258       1,903       3,536       6,017       4,593       5,332  

Tools

     2,934       3,646       1,821       1,546       1,083       950       398  

Content services

     1,829       2,259       3,888       2,879       2,472       1,884       1,401  
    


 


 


 


 


 


 


Total cost of revenue

     5,386       7,163       7,612       7,961       9,572       7,427       7,131  
    


 


 


 


 


 


 


Gross margin

     16,541       16,528       17,883       23,248       20,905       14,424       16,512  
    


 


 


 


 


 


 


Operating expenses:

                                                        

Research and development

     6,113       7,425       9,535       8,869       8,152       6,376       4,658  

Sales and marketing

     14,149       15,977       20,530       18,536       16,595       12,952       10,485  

General and administrative

     5,767       5,227       6,623       6,457       5,997       4,221       4,217  

Amortization of goodwill

     —         —         —         433       —         —         —    

Employee severance

     —         —         —         —         485       485       —    
    


 


 


 


 


 


 


Total operating expenses

     26,029       28,629       36,688       34,295       31,229       24,034       19,360  
    


 


 


 


 


 


 


Operating loss from continuing operations

     (9,488 )     (12,101 )     (18,805 )     (11,047 )     (10,324 )     (9,610 )     (2,848 )

Other income (expense)

     2,760       856       475       (200 )     (190 )     (147 )     (176 )
    


 


 


 


 


 


 


Loss from continuing operations before income taxes

     (6,728 )     (11,245 )     (18,330 )     (11,247 )     (10,514 )     (9,757 )     (3,024 )

Provision for income taxes

     —         —         —         —         —         —         26  
    


 


 


 


 


 


 


Loss from continuing operations(b)

     (6,728 )     (11,245 )     (18,330 )     (11,247 )     (10,514 )     (9,757 )     (3,050 )

Income (loss) from discontinued operations(b)

     1,569       1,240       1,544       (8,334 )     (7,600 )     (7,599 )     —    
    


 


 


 


 


 


 


Net loss

     (5,159 )     (10,005 )     (16,786 )     (19,581 )     (18,114 )     (17,356 )     (3,050 )

Accretion of redemption value of redeemable common stock

     (1,370 )     —         —         —         —         —         —    

Non cash dividend associated with preferred stock

     —         (2,754 )     —         —         —         —         —    
    


 


 


 


 


 


 


Net loss attributable to common stockholders

   $ (6,529 )   $ (12,759 )   $ (16,786 )   $ (19,581 )   $ (18,114 )   $ (17,356 )   $ (3,050 )
    


 


 


 


 


 


 


Amounts per share, basic and diluted:

                                                        

Loss from continuing operations

     (0.63 )     (0.77 )     (1.08 )     (0.57 )     (0.43 )     (0.40 )     (0.11 )

Income (loss) from discontinued operations

     0.15       0.08       0.09       (0.42 )     (0.31 )     (0.31 )     —    
    


 


 


 


 


 


 


Net loss

     (0.49 )     (0.68 )     (0.99 )     (0.99 )     (0.74 )     (0.71 )     (0.11 )

Accretion of redemption value of redeemable common stock

     (0.13 )     —         —         —         —         —         —    

Non cash dividend associated with preferred stock

     —         (0.19 )     —         —         —         —         —    
    


 


 


 


 


 


 


Net loss per share attributable to common stockholders

   $ (0.62 )   $ (0.87 )   $ (0.99 )   $ (0.99 )   $ (0.74 )   $ (0.71 )   $ (0.11 )
    


 


 


 


 


 


 


Weighted average common shares outstanding

     10,599       14,626       16,956       19,748       24,393       24,321       27,721  
    


 


 


 


 


 


 


     As of December 31,

   

As of

September 30, 2003


 
     1998

    1999

    2000

    2001

    2002

   
     (in thousands)  

Consolidated Balance Sheet Data:

                                                

Cash and cash equivalents

   $ 21,713     $ 19,481     $ 15,321     $ 9,553     $ 3,586       $14,909    

Working capital

     24,913       27,818       21,801       20,877       2,900         13,527    

Total assets

     43,622       49,406       44,880       39,354       25,473         33,475    

Long-term obligations

     268       92       4       417       —                —      

Stockholders’ equity

     37,010       41,355       35,053       29,560       12,226         21,540    

(a) Historical information was restated to reflect the combination of Click2learn and Meliora in 1998, accounted for as a pooling-of interests.
(b) Historical information was restated to reflect the accounting for discontinued operations.
(c) Certain amounts have been reclassified to conform with the most recent presentation.

 

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Docent Selected Historical Financial Data

 

The selected historical financial data of Docent have been derived from the audited historical consolidated financial statements and related notes of Docent for each of the years in the five-year period ended December 31, 2002 and from the unaudited historical consolidated financial statements as of September 30, 2003 and for the nine months ended September 30, 2002 and 2003.

 

     Years Ended December 31,

    Nine Months
Ended
September 30,


 
     1998

    1999

    2000

    2001

    2002

    2002

    2003

 
     (in thousands, except per share data)  

Consolidated Statement of Operations Data:

                                                        

Revenue:

                                                        

License

   $ 297     $ 141     $ 5,062     $ 15,331     $ 13,286     $ 9,602     $ 9,657  

Services and maintenance

     244       651       5,889       13,680       14,506       11,105       12,117  
    


 


 


 


 


 


 


Total revenue

     541       792       10,951       29,011       27,792       20,707       21,774  
    


 


 


 


 


 


 


Cost of revenue:

                                                        

Cost of license

     23       29       40       480       1,706       1,277       1,019  

Cost of services and maintenance

     750       1,279       9,160       13,873       8,763       6,934       6,144  
    


 


 


 


 


 


 


Total cost of revenue

     773       1,308       9,200       14,353       10,469       8,211       7,163  
    


 


 


 


 


 


 


Gross profit (loss):

                                                        

License gross profit

     274       112       5,022       14,851       11,580       8,325       8,638  

Service and maintenance gross profit (loss)

     (506 )     (628 )     (3,271 )     (193 )     5,743       4,171       5,973  
    


 


 


 


 


 


 


Total gross profit (loss)

     (232 )     (516 )     1,751       14,658       17,323       12,496       14,611  
    


 


 


 


 


 


 


Operating expenses:

                                                        

Research and development

     2,245       2,999       6,561       11,648       11,126       8,699       7,369  

Sales and marketing

     2,513       11,920       50,963       47,242       21,489       17,222       12,162  

General and administrative

     1,473       3,230       11,117       12,991       5,936       4,351       3,623  

Restructuring charge

     —         —         —         6,129       3,193       3,193       (327 )

In-process research and development

     —         —         —         707       —         —         —    
    


 


 


 


 


 


 


Total operating expenses

     6,231       18,149       68,641       78,717       41,744       33,465       22,827  
    


 


 


 


 


 


 


Operating loss from operations

     (6,463 )     (18,665 )     (66,890 )     (64,059 )     (24,421 )     (20,969 )     (8,216 )

Interest and other expense, net

     (22 )     (327 )     (564 )     (724 )     (210 )     (281 )     (107 )

Interest income

     51       279       2,827       3,926       990       823       291  
    


 


 


 


 


 


 


Loss before provision for income taxes

     (6,434 )     (18,713 )     (64,627 )     (60,857 )     (23,641 )     (20,427 )     (8,032 )

Provision for income taxes

     —         —         63       72       152       149       196  
    


 


 


 


 


 


 


Net loss

     (6,434 )     (18,713 )     (64,690 )     (60,929 )     (23,793 )     (20,576 )     (8,228 )

Dividend accretion and deemed dividend on convertible preferred stock

     —         (1,354 )     (19,069 )     —         —         —         —    
    


 


 


 


 


 


 


Net loss attributable to common stockholders

   $ (6,434 )   $ (20,067 )   $ (83,759 )   $ (60,929 )   $ (23,793 )   $ (20,576 )   $ (8,228 )
    


 


 


 


 


 


 


Net loss per share attributable to common stockholders—basic and diluted (1)

   $ (6.73 )   $ (15.57 )   $ (19.04 )   $ (4.47 )   $ (1.72 )   $ (1.47 )   $ (0.63 )
    


 


 


 


 


 


 


Weighted average common shares outstanding (1)

     956       1,289       4,398       13,620       13,852       14,029       13,044  
    


 


 


 


 


 


 


     As of December 31,

   

As of

September 30,
2003


 
     1998

    1999

    2000

    2001

    2002

   
     (in thousands)  

Consolidated Balance Sheet Data:

                                                

Cash and cash equivalents

   $ 2,968     $ 12,773     $ 92,818     $ 28,460     $ 36,968       $30,890    

Short term investments

     —         —         4,029       33,840       3,974           1,999    

Working capital

     1,862       9,938       90,522       56,730       34,277         27,633    

Long term investments

     —         —         18,450       —         —                —      

Total assets

     4,183       15,302       127,816       84,547       54,242         45,167    

Notes payable and capital lease obligations, noncurrent

     162       1,117       516       143       45              —      

Convertible preferred stock

     10,615       33,288       —         —         —                —      

Total stockholders’ equity (deficit)

     (8,024 )     (23,330 )     112,596       64,651       39,008         31,515    

(1) Share and per share amounts for all periods presented have been adjusted to reflect the October 2002 one-for-three reverse stock split.

 

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Table of Contents

Selected Unaudited Pro Forma Condensed Combined Consolidated Financial Data

 

The selected unaudited pro forma condensed combined consolidated financial data of Newco are derived from the unaudited pro forma condensed combined consolidated financial information, which gives effect to the transaction using the purchase method of accounting, and should be read in conjunction with the unaudited pro forma condensed combined financial statements and related notes, which are included elsewhere in this joint proxy statement/prospectus. The unaudited pro forma condensed combined consolidated financial information for Newco gives effect to the transaction, based on a preliminary allocation of the total purchase cost. The historical financial information has been derived from the respective historical financial statements of Click2learn and Docent, and should be read in conjunction with these financial statements and the related notes incorporated by reference in this joint proxy statement/prospectus.

 

Newco will account for the transaction as a purchase of Docent by Click2learn using the purchase method of accounting. Newco will record the fair value of the consideration given for Docent common stock and for options to purchase Docent common stock assumed by Newco, plus the amount of acquisition related costs.

 

The total estimated purchase cost of the transaction has been allocated on a preliminary basis to Docent’s assets and liabilities based on management’s best estimates of their fair value with the excess costs over the net assets acquired allocated to goodwill. This allocation is subject to change pending a final analysis of the total purchase cost and the fair value of the assets acquired and liabilities assumed. The impact of such changes could be material.

 

The unaudited pro forma condensed combined consolidated financial data is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the transaction had been consummated at the times indicated, nor is it necessarily indicative of future operating results or financial condition of Newco.

 

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Table of Contents

Condensed Consolidated Statement of Operations Data:

 

     Pro Forma Combined

 
    

Twelve Months Ended
December 31, 2002

(unaudited)


   

Nine Months Ended
September 30, 2003

(unaudited)


 
     (in thousands, except per share data)  

Revenue:

                

License

   $ 25,393     $ 17,226  

Service and maintenance

     32,876       28,191  
    


 


Total revenue

     58,269       45,417  
    


 


Cost of revenue:

                

License

     3,044       2,935  

Service and maintenance

     17,321       11,961  
    


 


Total cost of revenue

     20,365       14,896  
    


 


Gross margin

     37,904       30,521  
    


 


Operating expenses:

                

Research and development

     19,472       12,016  

Sales and marketing

     38,651       22,792  

General and administrative

     12,566       8,046  

Restructuring cost

     3,193       (327 )

Employee severance

     485       —    
    


 


Total operating expenses

     74,367       42,527  
    


 


Operating loss from continuing operations

     (36,463 )     (12,006 )

Other income (expense), net

     (210 )     (208 )

Interest income, net

     1,000       291  

Equity in losses of affiliate

     (200 )     (75 )
    


 


Loss from continuing operations before provision for income taxes

     (35,873 )     (11,998 )

Provision for income taxes

     152       222  
    


 


Loss from continuing operations

     (36,025 )     (12,220 )

Loss from discontinued operations

     (7,600 )     —    
    


 


Net loss

   $ (43,625 )   $ (12,220 )
    


 


Amounts per share, basic and diluted:

                

Loss from continuing operations

   $ (2.01 )   $ (0.66 )

Loss from discontinued operations

     (0.42 )     —    
    


 


Net loss

   $ (2.43 )   $ (0.66 )
    


 


Weighted average common shares outstanding, basic and diluted

     17,926       18,395  
    


 


 

Condensed Consolidated Balance Sheet Data (in thousands):

 

    

As of
September 30, 2003

(unaudited)


Cash, cash equivalents and short term investments

   $ 47,799

Working capital

     42,102

Total stockholders’ equity

     82,473

 

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Table of Contents

Comparative Historical and Unaudited Pro Forma Per Share Data

 

The following table sets forth:

 

  historical book value per share and historical net income per share data of Click2learn and Docent;

 

  unaudited pro forma condensed combined book value per share and unaudited pro forma condensed combined net loss per share data of Newco after giving effect to the transaction; and

 

  unaudited pro forma equivalent condensed combined book value per share and unaudited pro forma equivalent condensed combined net loss per share data of Click2learn and Docent based on the exchange ratio of 0.3188 shares of Newco common stock for each share of Click2learn common stock and on the exchange ratio of 0.7327 shares of Newco common stock for each share of Docent common stock.

 

The unaudited pro forma condensed combined consolidated financial data is not necessarily indicative of the net loss per share or book value per share that would have been achieved had the transaction been consummated as of the beginning of the periods presented and should not be construed as representative of these amounts for any future dates or periods.

 

The information in the table is only a summary and you should read it in conjunction with the “Unaudited Pro Forma Condensed Combined Consolidated Financial Statements” beginning on page 88 and the respective audited and unaudited consolidated financial statements of Click2learn and Docent, including the notes thereto, incorporated by reference in this joint proxy statement/prospectus.

 

Historical book value per share is computed by dividing shareholders’ equity by the number of shares of common stock outstanding.

 

The Click2learn pro forma condensed combined per equivalent share amounts are calculated by multiplying the Newco pro forma per share amounts by the fixed exchange ratio of one Click2learn share for 0.3188 Newco share.

 

The Docent pro forma condensed combined per equivalent share amounts are calculated by multiplying the Newco pro forma per share amounts by the fixed exchange ratio of one Docent share for 0.7327 Newco share.

 

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Table of Contents
    

As of and for the

Twelve Months Ended

December 31, 2002

(unaudited)


   

As of and for the

Nine Months Ended

September 30, 2003

(unaudited)


 

Historical Click2learn

                

Basic and diluted net loss per share from continuing operations

   $ (0.43 )   $ (0.11 )

Basic and diluted net loss per share from discontinued operations

   $ (0.31 )   $  

Basic and diluted net loss per share

   $ (0.74 )   $ (0.11 )

Book value per common share

   $ 1.23     $ 0.66  

Historical Docent

                

Basic and diluted net loss per share

   $ (1.72 )   $ (0.63 )

Book value per common share

   $ 2.98     $ 2.41  

Pro Forma Condensed Combined per Share

                

Basic and diluted net loss per share from continuing operations

   $ (2.01 )   $ (0.66 )

Basic and diluted net loss per share from discontinued operations

   $ (0.42 )   $  

Basic and diluted net loss per share

   $ (2.43 )   $ (0.66 )

Book value per common share

           $ 4.12  

Pro Forma Condensed Combined per Equivalent Share

                

Click2learn:

                

Basic and diluted net loss per share from continuing operations

   $ (0.64 )   $ (0.21 )

Basic and diluted net loss per share from discontinued operations

   $ (0.14 )   $  

Basic and diluted net loss per share

   $ (0.77 )   $ (0.21 )

Book value per common share

           $ 1.31  

Docent:

                

Basic and diluted net loss per share from continuing operations

   $ (1.48 )   $ (0.49 )

Basic and diluted net loss per share from discontinued operations

   $ (0.31 )   $  

Basic and diluted net loss per share

   $ (1.78 )   $ (0.49 )

Book value per common share

           $ 3.02  

 

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Table of Contents

MARKET PRICE AND DIVIDEND INFORMATION

 

Historical Market Prices

 

Shares of Click2learn common stock are traded on The Nasdaq National Market under the symbol “CLKS.” Shares of Docent common stock are traded on The Nasdaq National Market under the symbol “DCNT.” There currently is no established trading market for Newco common stock, although Newco has applied to list its common stock on The Nasdaq National Market under the symbol “HCKY.” We will apply for a new symbol corresponding to the new name when we announce the new name.

 

The following table sets forth the high and low sale prices for a share of Click2learn common stock and for a share of Docent common stock, rounded to the nearest cent, for the periods indicated. The prices below are as quoted on The Nasdaq National Market, based on published financial sources and reflect Docent’s 1-for-3 stock split completed on October 28, 2002.

 

     Click2learn
Common Stock


   Docent
Common Stock


     High

   Low

   High

   Low

Year ending December 31, 2004

                           

First Quarter (through February 10, 2004)

   $ 2.49    $ 1.93    $ 6.00    $ 4.52

Year ended December 31, 2003

                           

Fourth Quarter

     2.75      1.65      6.23      3.66

Third Quarter

     2.41      1.50      4.15      3.30

Second Quarter

     2.15      1.08      3.80      2.50

First Quarter

     1.55      .72      3.12      2.27

Year ended December 31, 2002

                           

Fourth Quarter

     1.30      .52      3.14      1.80

Third Quarter

     1.89      .23      3.84      1.47

Second Quarter

     4.90      1.55      6.96      3.09

First Quarter

     5.05      2.40      12.66      5.04

 

Recent Market Prices

 

The table below presents:

 

  the per share closing prices of Click2learn and Docent common stock on The Nasdaq National Market as of October 20, 2003, the last trading day before we announced the transaction, January 22, 2004, the record date, and February 10, 2004, the last trading day before the printing of this joint proxy statement/prospectus, and

 

  the pro forma equivalent per share value of Newco common stock as of such dates.

 

The pro forma equivalent per share value is determined by taking the average of: (i) the quotient obtained by dividing the per share market price of Click2learn common stock by the Click2learn exchange ratio of 0.3188 and (ii) the quotient obtained by dividing the per share market price of Docent common stock by the Docent exchange ratio of 0.7327.

 

     Click2learn
Common Stock


   Docent
Common Stock


   Pro Forma
Equivalent Per
Share Value
of Newco
Common Stock


October 20, 2003

   $ 1.68    $ 4.24    $ 5.53

January 22, 2004

   $ 2.22    $ 5.22    $ 7.04

February 10, 2004

   $ 2.32    $ 5.45    $ 7.36

 

 

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Click2learn and Docent stockholders are advised to obtain current market quotations for Click2learn common stock and Docent common stock. No assurance can be given as to the market prices of Click2learn common stock or Docent common stock at any time before the completion of the transaction or as to the market price of Newco common stock at any time after the completion of the transaction. Because the exchange ratios are fixed, the exchange ratios will not be adjusted to compensate Click2learn stockholders for any decreases in the market price of Docent common stock, which could occur before the transaction is completed. Similarly, the exchange ratios will not be adjusted to compensate Docent stockholders for any decreases in the market price of Click2learn common stock, which could occur before the transaction is completed.

 

Dividend Policy

 

Neither Click2learn nor Docent has ever paid any cash dividends on shares of Click2learn common stock or Docent common stock, respectively. Click2learn and Docent currently anticipate that they will retain all of their future earnings available for distribution to the holders of Click2learn common stock and Docent common stock for use in the expansion and operation of their respective businesses, and do not anticipate paying any cash dividends on shares of Click2learn common stock and Docent common stock in the foreseeable future.

 

Recent Developments

 

Docent

 

On January 12, 2004, Docent announced its preliminary operating results for the three months and year ended December 31, 2003. Docent’s fourth quarter 2003 revenue was approximately $8.5 million, compared to $7.1 million in the fourth quarter of 2002. License revenue was approximately $3.7 million and service revenue was approximately $4.8 million. For fiscal 2003, revenue was approximately $30.2 million compared to $27.8 million in 2002. Net loss for the fourth quarter on was approximately $2.5 million or 19 cents per share. This compares to a net loss of $3.2 million or 24 cents per share in the fourth quarter of 2002. For the total year the net loss was approximately $10.7 million or 82 cents per share compared to $23.8 million or $1.72 per share in 2002.

 

Click2learn

 

On January 12, 2004, Click2learn announced its preliminary operating results for the three months and year ended December 31, 2003. Click2learn’s fourth quarter 2003 revenue was approximately $5.5 million to 5.8 million, compared to $8.6 million in the fourth quarter of 2002. Platform revenue was approximately $4.4 million to $4.7 million as compared to $7.2 million in the fourth quarter of 2002. For fiscal 2003, revenue was approximately $29.1 million to $29.4 million compared to $30.5 million in 2002. Net loss for the fourth quarter on was approximately $3.0 million to $3.4 million or 10 cents to 11 cents per share. This compares to a net loss of $757,000 or 3 cents per share in the fourth quarter of 2002. For the total year the net loss was approximately $6.0 million to $6.4 million as compared to a loss of $18.1 million in 2002, which included $7.6 million of loss from discontinued operations.

 

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Table of Contents

RISK FACTORS

 

The transaction involves a high degree of risk. By voting in favor of the approval and adoption of the merger agreement, you will be choosing to invest in Newco common stock. An investment in Newco common stock involves a high degree of risk. In addition to the other information contained in this joint proxy/statement prospectus and the documents incorporated by reference, you should carefully consider the following risk factors in deciding whether to vote to approve and adopt the merger agreement.

 

Risks related to the proposed transaction

 

The combined company may not achieve the benefits expected from the transaction, which may have a material adverse effect on the combined company’s business and could result in loss of key personnel.

 

Achieving the benefits of the transaction will depend in part on the successful integration of technology, operations and personnel of Click2learn and Docent. The integration of Click2learn and Docent will be a complex, time-consuming and expensive process and may disrupt both companies’ businesses if not completed in a timely and efficient manner. The challenges involved in this integration include the following:

 

  retaining existing customers and strategic partners of each company;

 

  retaining and integrating management and other key employees of both Click2learn and Docent;

 

  coordinating functions between the combined company’s separate primary offices located in Mountain View, California, and Bellevue, Washington;

 

  bringing together the companies’ marketing efforts so that the industry receives useful information about the transaction;

 

  identifying and streamlining redundant operations and assets;

 

  coordinating research and development activities to integrate existing technologies and enhance introduction of new products and technologies;

 

  integrating purchasing and procurement operations in multiple locations;

 

  combining product offerings and product lines effectively and quickly;

 

  integrating sales efforts so that customers can do business easily with the combined company;

 

  transitioning all facilities to a common information technology system;

 

  persuading employees that the business cultures of Click2learn and Docent are compatible;

 

  offering products and services of Click2learn and Docent to each other’s customers; and

 

  developing and maintaining uniform standards, controls, procedures and policies.

 

It is not certain that Click2learn and Docent can be successfully integrated in a timely manner or that all or any of the anticipated benefits will be realized. Risks to the successful integration of the companies include:

 

  the impairment of relationships with employees, customers, distributors, strategic partners and suppliers as a result of integration of management and other key personnel;

 

  the potential disruption of the combined company’s ongoing business and distraction of its management;

 

  the difficulty of incorporating acquired technology and rights into the product offerings of the combined company;

 

  not achieving expected synergies; and

 

  unanticipated expenses related to integration of the two companies.

 

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The combined company may not succeed in addressing these risks or any other problems encountered in connection with the transaction. Further, neither Click2learn nor Docent can assure you that the growth rate of the combined company will equal the historical growth rates experienced by Click2learn or Docent.

 

No market currently exists for Newco common stock, and the market value of Newco common stock after the transaction could be less than the market value of Click2learn and Docent common stock before the transaction.

 

The market value of the shares of Newco common stock that you will receive in exchange for shares of Click2learn common stock or shares of Docent common stock in the transaction will not be known at the time Click2learn stockholders and Docent stockholders vote on approval and adoption of the merger agreement because the shares of Newco common stock will not trade publicly until the completion of the transaction. Shares of Click2learn common stock and shares of Docent common stock may have a greater market value than the shares of Newco common stock for which they are exchanged.

 

You will receive a fixed number of shares of Newco common stock despite changes in the market values of Click2learn common stock or Docent common stock.

 

There will be no adjustment to the number of shares of Newco common stock to be exchanged for each share of Click2learn common stock and each share of Docent common stock due to changes in the market price of either Click2learn common stock or Docent common stock. In addition, neither Click2learn nor Docent may terminate the merger agreement or “walk away” from the transaction solely because of changes in the market price of either company’s common stock. Therefore, if the market value of Click2learn common stock or Docent common stock changes relative to the market value of the other, there will be no change in what you receive in the transaction to reflect this. The share prices of Click2learn common stock and Docent common stock are subject to the general price fluctuations in the market for publicly traded equity securities and have experienced significant volatility. You should obtain recent market quotations for Click2learn common stock and Docent common stock. We cannot predict or give any assurances as to the market prices of Click2learn or Docent common stock before the transaction or of Newco common stock at any time after the completion of the transaction.

 

The transaction may be completed even though material adverse changes may result from the announcement of the transaction, industry-wide changes and other causes.

 

In general, each party can refuse to complete the transaction if there is a material adverse change affecting Docent or Click2learn between the date of signing of the merger agreement, October 20, 2003, and the closing of the transaction. However, certain types of changes will not prevent the transaction from going forward, even if they would have a material adverse effect on Docent or Click2learn, including:

 

  in and of itself, a decrease in either company’s stock price or the failure to meet or exceed Wall Street research analysts’ earnings or other estimates or projections;

 

  any change, event, violation, inaccuracy, circumstance or effect that results from the public announcement or pendency of the transactions contemplated by the merger agreement;

 

  changes affecting the software industry generally; or

 

  changes affecting the United States economy generally.

 

If adverse changes occur but Docent and Click2learn must still complete the transaction, the combined company may suffer.

 

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Table of Contents

Charges to earnings resulting from the application of the purchase method of accounting may adversely affect the market value of Newco’s common stock following the transaction.

 

In accordance with United States generally accepted accounting principles, the combined company will account for the transaction using the purchase method of accounting. The combined company will allocate the total estimated purchase price to Docent’s net tangible assets, and identifiable intangible assets based on their fair values as of the date of completion of the transaction, and record the excess of the purchase price over those fair values as goodwill. The portion of the estimated purchase price allocated to in-process research and development, which is expected to be approximately $1.0 million, will be expensed by the combined company in the quarter in which the transaction is completed. The combined company will incur additional amortization expense over the estimated useful lives of certain of the identifiable intangible assets acquired in connection with the transaction, which is expected to be approximately $10.2 million over six years. The combined company will amortize deferred stock-based compensation, which is expected to be approximately $3.5 million, the intrinsic value of the Docent common stock options assumed in the merger, on an accelerated basis over the remaining vesting periods of such assumed options of one to four years. In addition, to the extent the value of goodwill becomes impaired, the combined company may be required to incur material charges relating to the impairment of those assets. If the benefits of the transaction are not achieved, the combined company’s financial results, including earnings per share, could be adversely affected.

 

The transaction could adversely affect combined financial results.

 

Click2learn and Docent expect to incur direct transaction costs of approximately $4.5 million in connection with the transaction. If the benefits of the transaction do not exceed the costs associated with the transaction, including any dilution to Click2learn or Docent stockholders resulting from the issuance of shares in connection with the transaction, the combined company’s financial results, including earnings per share, could be adversely affected.

 

Directors and officers of Click2learn and Docent have conflicts of interest that may influence them to support or approve the transaction.

 

Several directors and officers of Click2learn and Docent including R. Andrew Eckert, Kevin Oakes, Neil J. Laird, Srinivasan Chandrasekar, David Crussell, Sudheer Koneru, Sanjay P. Dholakia, Donald E. Fowler, Jack L. Acosta, Sally Narodick, John Coné, Ali R. Kutay and Vijay Vashee are anticipated to have positions in the combined company following the transaction. In addition, John Atherly will be retained as an employee with the combined company for a limited time following the transaction.

 

Click2learn’s directors and some of its executive officers hold options that will fully accelerate upon completion of the transaction. Some of Click2learn’s other officers and some of Docent’s officers will be entitled to severance payments and accelerated vesting of options if such officers are terminated without cause, are constructively terminated, or terminate their employment with good reason within a certain number of months after the consummation of the transaction. In addition, Docent has agreements with David Mandelkern that provide for additional severance benefits including continued salary, health benefits and the forgiveness of certain outstanding debt.

 

Provisions in the merger agreement provide that Newco’s and the surviving corporations’ charter documents will contain exculpation and indemnification provisions at least as favorable to the directors and officers of the respective companies as those contained in such company’s charter documents as in effect on October 20, 2003; such provisions will not be amended, repealed or otherwise modified for six years following the transaction in any manner adversely affecting the rights of parties indemnified by such provisions; subject to certain limitations, Newco will maintain directors’ and officers’ liability insurance for six years following the transaction covering those persons who are covered by the respective companies’ directors’ and officers’ liability insurance policies as of October 20, 2003, and the directors and officers of the respective companies will be third party beneficiaries for purposes of the indemnification provisions of the merger agreement.

 

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Table of Contents

Click2learn and Docent stockholders should consider whether these interests may have influenced these directors and officers to support or recommend the transaction.

 

Failure to complete the transaction could have a negative impact on Click2learn’s and/or Docent’s future business and operations, financial results or stock price.

 

If the transaction is not completed for any reason, Click2learn and Docent may be subject to a number of consequences that may adversely affect such company’s business, results of operations and stock price, including the following:

 

  the individual companies would not realize the benefits expected from becoming part of a combined company, including the potentially enhanced financial and competitive position;

 

  Click2learn may be required to pay Docent, or Docent may be required to pay Click2learn, a termination fee of $2.5 million;

 

  the price of Click2learn and/or Docent common stock may decline to the extent that the relevant current market price reflects a market assumption that the transaction will be completed;

 

  some costs related to the transaction, such as legal, accounting, financial advisor and financial printing fees, must be paid even if the transaction is not completed;

 

  activities relating to the transaction and related uncertainties may divert Click2learn and Docent managements’ attention from day-to-day business and cause substantial disruptions among each company’s employees and relationships with customers and business partners, thus detracting from Click2learn’s and Docent’s ability to grow revenue and minimize costs and possibly leading to a loss of revenue and market position that Click2learn and Docent may not be able to regain if the transaction does not occur;

 

  Click2learn and Docent may not be able to continue their present levels of operations and may have to scale back their respective businesses and consider additional reductions in force; and

 

  provisions in the merger agreement include certain operating restrictions and prevent Click2learn and Docent from activities, discussions and negotiations with third parties regarding transactions that would involve a transfer of control of such company which may prevent Click2learn or Docent from being able to take advantage of alternative business opportunities or effectively respond to competitive pressures.

In addition, in response to the announcement of the transaction, customers or suppliers of Click2learn and Docent may delay or defer product purchase or other decisions. Any delay or deferral in product purchase or other decisions by customers or suppliers could have a material adverse effect on the business of the relevant company, regardless of whether the transaction is ultimately completed. Similarly, current and prospective Click2learn and/or Docent employees may experience uncertainty about their future roles with Newco until the transaction is completed and Newco’s strategies with regard to the integration of operations of Click2learn and Docent are announced or executed. This may adversely affect Click2learn’s and/or Docent’s ability to attract and retain key management, sales, marketing and technical personnel.

 

Risks related to the combined company’s business

 

The quarterly operating results of the combined company are uncertain and may fluctuate significantly, which could negatively affect Newco’s common stock price.

 

Click2learn’s and Docent’s operating results have varied significantly from quarter to quarter. The operating results of the combined company are difficult to predict accurately and are likely to fluctuate as a result of a variety of factors, many of which will not be in the control of the combined company. Factors that may adversely affect the quarterly operating results of the combined company include:

 

  the size and timing of product orders and the timing and execution of professional services engagements;

 

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  the mix of revenue from products and services;

 

  the mix of products sold;

 

  the ability to meet client project milestones;

 

  the market acceptance of the products and services of the combined company;

 

  the ability to develop and market new or enhanced products and services in a timely manner and the market acceptance of these products and services;

 

  the ability to maximize cross-selling opportunities;

 

  the timing of revenue and expense recognition; and

 

  recognition of impairment of existing assets.

 

The combined company will have a limited operating history with its business performance and learning management solutions which, together with the rapidly evolving nature of the business performance and learning management market, makes prediction of future revenue and expenses difficult. Expense levels are based, in part, on expectations as to future revenue and largely are fixed in the short term. If the combined company is unable to predict future revenue accurately, it may be unable to adjust spending in a timely manner to compensate for any unexpected revenue shortfall. A resulting negative effect on earnings could have a negative effect on the combined company’s stock price.

 

The revenue of the combined company may grow more slowly than the revenues of Click2learn and Docent have in the past.

 

Although Click2learn’s and Docent’s revenues have grown in recent years, revenue of the combined company may not grow at the same rate in the future, and its revenue could decline. Click2learn’s total revenue from continuing operations has grown from $25.5 million in fiscal 2000, to $31.2 million in fiscal 2001, while declining to $30.5 million in fiscal 2002. Docent’s total revenue has grown from $11.0 million in fiscal 2000, to $29.0 million in fiscal 2001, while declining to $27.8 million in fiscal 2002. If the combined company’s revenue does not increase at or above the rate equity research analysts expect, the trading price for Newco’s common stock may decline. The future growth rates for Newco will depend on the combined company’s ability to expand sales of Click2learn’s and Docent’s existing products, which will require significant expenses that the combined company may not have sufficient resources to undertake.

 

Revenues of Click2learn and Docent declined in 2002 due in part to weak general economic conditions, softness in technology and enterprise software spending and other factors; revenues of the combined company may continue to be impacted by these factors.

 

Revenues of Click2learn and Docent declined from $31.2 million and $29.0 million, respectively, in 2001 to $30.5 million and $27.8 million, respectively, in 2002. The decline in revenues of Click2learn and Docent were due in significant part to weak general economic conditions and softness in spending in the technology and enterprise software sectors, as companies and government agencies reduced their expenditures for enterprise software applications. The decline in Click2learn’s 2002 revenues also resulted from lower revenues in its Tools and Content services segments, reflecting Click2learn’s lessening strategic emphasis on these two segments. Although revenues of Click2learn and Docent for the nine-month period ended September 30, 2003 increased compared to their revenues for the comparable period in 2002, Click2learn and Docent continued to experience downward pressure on their revenues during 2003 due to the same factors, and the results of operations of the combined company may continue to be subject to these factors after the transaction is consummated.

 

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Sales cycles are lengthy, requiring considerable additional investment with no assurance of the combined company generating revenue from its efforts.

 

The period between the combined company’s initial contact with a potential customer and that customer’s purchase of its products and services is expected to be lengthy and may extend over several fiscal quarters. To sell the combined company’s products and services successfully, the combined company generally must educate its potential customers regarding the use and benefits of its products and services, which can require significant time, capital and other resources. The delay or failure to complete sales in a particular quarter could reduce the combined company’s revenue in that quarter, as well as subsequent quarters over which revenue for the sale would likely be recognized. If the sales cycle unexpectedly lengthens in general or for one or more large orders, it would negatively affect the timing of the combined company’s revenue and its revenue growth would be harmed.

 

Although the combined company must expend and allocate resources prior to completing a sales transaction, it may never generate any revenue from these activities. In addition, many of the combined company’s potential customers are large enterprises that generally take longer than smaller organizations to make significant business decisions.

 

Any failure to meet investor expectations for a given quarter as a result of delayed customer decisions or failed sales efforts would likely cause the price of the combined company common stock to decline.

 

The business of the combined company may not generate the cash needed to finance its operations, and for that and other reasons it may need additional financing in the future, which it may be unable to obtain.

 

The combined company will require substantial working capital to fund its business operations. The combined company expects to incur operating losses and negative cash flow from operations for at least two quarters following consummation of the transaction. That period may be extended if the combined company fails to achieve the cost savings anticipated from expected synergies and integration activities. If the business of the combined company does not generate the cash needed to finance its operations, it may need to obtain additional financing or take steps to restrict its operations in order to conserve existing cash. In addition, poor financial results or unanticipated expenses could give rise to additional financing requirements. If additional funds are raised through the issuance of equity or convertible debt securities, the percentage ownership of the stockholders of the combined company will be reduced, such stockholders may experience additional dilution and these newly issued securities may have rights, preferences or privileges senior to those of existing stockholders. Additional financing may not be available on favorable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the ability of the combined company to fund its operations, take advantage of unanticipated opportunities, develop or enhance its products and services or otherwise respond to competitive pressures could be significantly limited.

 

The combined company will have a history of pro forma losses and may have continued losses in the future.

 

The pro forma net loss of the combined company was approximately $12.2 million for the nine months ended September 30, 2003. As of September 30, 2003, the pro forma accumulated deficit of the combined company was $234.1 million. The combined company expects to incur losses in the near future, and may not become profitable. Even if the combined company does achieve profitability, it may be unable to sustain or increase profitability on a quarterly or annual basis.

 

Click2learn and Docent have limited operating histories with certain of their product offerings, which makes predicting the combined company’s future performance difficult.

 

Click2learn and Docent have limited operating histories with the Aspen suite and the Docent Enterprise suite, which account for a significant majority of the current revenues of the respective companies. The limited

 

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operating history with these products makes it difficult to predict the combined company’s future performance and may not provide investors with a meaningful basis for evaluating an investment in its common stock.

 

The business performance and learning management software market may not grow to a sufficient size or at a sufficient rate to sustain the business of the combined company.

 

The business performance and learning management software market may not grow to a sufficient size or at a sufficient rate for the business of the combined company to succeed. Corporate training and performance support historically have been conducted primarily through classroom instruction and physical documents. Although technology-based training applications have been available for many years, they currently account for only a small portion of the business performance and learning management market. Accordingly, the success of the combined company will depend on the extent to which companies implement business performance and learning management software solutions to address their corporate learning needs.

 

Many companies that have already invested substantial resources in traditional training and performance support methods may be reluctant to adopt a new strategy that may limit or compete with their existing investments. Even if companies implement business performance and learning management software solutions, they may still choose to develop such solutions internally. If the use of such software does not become widespread or if companies choose to develop such software internally rather than acquiring it from third parties, then the products of the combined company may not be commercially successful.

 

The combined company faces risks encountered in rapidly evolving markets and if it is unsuccessful in addressing these risks, it may be unable to remain competitive.

 

The combined company faces risks frequently encountered in rapidly evolving markets. Specific risks relate to the demand for and market acceptance of its business performance and learning management solutions. The combined company may fail to adequately address these risks, and therefore its business may suffer. To address these risks, the combined company must:

 

  effectively market its business performance and learning management software to new and existing customers;

 

  continue to enhance the technology on which its business performance and learning management software is based;

 

  successfully implement its products for its customers and generate continuing revenue from those customers; and

 

  address and establish new technologies and technology standards.

 

Since the market for business performance and learning management software is rapidly evolving, the operating history of the combined company will be less relevant to future performance than the operating history of a company in an industry that is not subject to rapid change. It may be more difficult for the combined company to anticipate the need for new products as the market for business performance and learning management software changes, thus increasing its vulnerability to competition. As a result, the combined company may either fail to increase or suffer a decrease in market share, resulting in a decrease in its revenue.

 

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The combined company will face intense competition from other business performance and learning management software providers, including Saba, Plateau Systems, THINQ Learning Solutions and Pathlore Software as well as enterprise software vendors such as SAP and Peoplesoft, and may be unable to compete successfully.

 

The business performance and learning management software market is highly fragmented and competitive, with no single firm accounting for a dominant market share. The competitors of the combined company vary in size, scope and the breadth of products and services offered. The combined company will face competition from:

 

  other developers of business performance and learning management systems;

 

  providers of other enterprise software solutions;

 

  large professional consulting firms and in-house information technology departments; and

 

  developers of web authoring tools.

 

There are relatively low barriers to entry in the business performance and learning management market, and new competitors may enter this market in the future. Increased competition may result in price reductions, reduced gross margins or loss of market share. For example, Docent’s decrease in license revenue from 2001 to 2002 was primarily due to a decrease in new customer business referred from Docent’s reseller partners. The overall decrease in Docent’s license revenue from 2001 to 2002 comprised a decrease in average price per seat, which was partially offset by an increase in the number of seats sold. The change in pricing for Docent was the result of customers expecting Docent to provide additional functionality, products, and licenses within fixed budgets. Click2learn has also reduced prices in from time to time in response to competition for a customer’s business.

 

The combined company’s principal competitors are Saba Software, Inc., Plateau Systems, Ltd., THINQ Learning Solutions, Inc., Pathlore Software Corporation, SAP AG, Peoplesoft, Inc., KnowledgePlanet.com, Inc. and International Business Machines Corporation.

 

The combined company may not be able to contend effectively with increased competition. In particular, vendors of other enterprise software applications such as enterprise resource planning, human resource management or customer relationship management have begun to offer learning delivery and management functionality to extend their current product lines. Although these vendors’ offerings may not offer the same functionality as the combined company’s products, bundling these offerings with the remainder of their solutions could diminish the combined company’s ability to sell its products and services to their customers or other prospects. Announcements by these companies of future products could delay purchasing decisions by their customers and the combined company’s prospects. Either diminished sales or delayed purchases could adversely affect the combined company’s business.

 

Certain of the combined company’s existing and potential competitors have longer operating histories and significantly greater financial, technical, marketing and other resources and therefore may be able to respond more quickly to new or changing opportunities, technologies, standards and customer requirements or to compete more aggressively on pricing. Price competition would likely result in reduced gross margins and may prevent the combined company’s products from yielding results sufficient for its business to succeed.

 

Strategic relationships are important in expanding the distribution reach of companies in the business performance and learning management market. If competitors were to establish strategic relationships to resell or distribute their products through their strategic partners, the combined company’s ability to market and sell products and services successfully may be substantially diminished. In addition, the existence or announcement of strategic relationships involving competitors could adversely affect the combined company’s ability to attract and retain customers.

 

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If the combined company is unable to establish and build a recognized brand, it may be unable to grow the business.

 

Click2learn and Docent have each invested significant efforts in building brand recognition and customer acceptance of their respective brand names. The management of the combined company believes that transferring market acceptance for the Click2learn and Docent brands to the combined company, and establishing and maintaining a recognized brand for Newco will be critical to the success of the combined company’s strategy. The management of the combined company expects that the importance of recognition and acceptance of the combined company brand will increase as the market for business performance and learning management software grows. In the near term, the combined company may face some disruption in the marketplace due to a lack of recognition for Newco’s new brand, especially compared with the brands of certain existing competitors. The adoption of a new corporate name may prevent the combined company from taking advantage of certain goodwill of existing customers and strategic partners of Docent and Click2learn. Furthermore, in order to promote the Newco brand in response to competitive pressures, the combined company may find it necessary to increase its marketing expenditures or otherwise increase its financial commitment to creating and maintaining brand loyalty and awareness among existing and potential clients. If the combined company fails to promote, maintain and protect its brand, or incurs excessive expenses in an attempt to promote and maintain its brand, the combined company’s business, financial condition, results of operations and prospects will be materially adversely affected.

 

The loss of the services of the senior executives or key personnel of the combined company would likely cause its business to suffer.

 

The combined company’s success depends to a significant degree on the performance of the senior management team and other key employees. The loss of any of these individuals could harm its business. The combined company will not have employment agreements with several of its executives or with any other key employees, and will not maintain key person life insurance for any officers or key employees.

 

The combined company’s success also depends on its ability to attract, integrate, motivate and retain highly skilled technical, sales and marketing and professional services personnel. Competition for qualified personnel in the software industry is intense. To the extent the combined company is unable to attract and retain skilled personnel its business will suffer.

 

Failure to integrate the combined company’s two primary offices may cause its business to suffer.

 

The combined company intends to maintain primary offices in Mountain View, California, and Bellevue, Washington. If the combined company fails to integrate management, sales, operations, research and development or support functions efficiently between the primary offices, its business could suffer.

 

International operations may impose substantial burdens on the combined company’s resources, divert management’s attention or otherwise harm its business.

 

A substantial portion of Click2learn’s and Docent’s revenues are international revenues. For example, in 2002, international revenues made up approximately 15% of Click2learn’s total revenues and 24% of Docent’s total revenues, and in the nine months ended September 30, 2003, international revenues made up approximately 9% of Click2learn’s total revenues and 28% of Docent’s total revenues. The combined company intends to expand its international presence and to utilize third parties in foreign countries to help conduct its international operations and sales and marketing efforts. The success of the combined company in international markets will depend to a large degree on the success of these international partners, over which the combined company will have little control.

 

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The combined company intends to continue to utilize operations in Hyderabad, India to enable it to complete customer implementation projects and new releases of the combined company’s products that may include the Aspen suite, the Docent Enterprise suite and successor products. Should the combined company’s operations in Hyderabad be disrupted for any significant period of time, it could prevent the combined company from completing customer implementations or new releases of its products in a timely manner, which could cause its business to suffer.

 

The combined company might not successfully develop, market, sell or distribute its products and services internationally. The combined company’s international operations, and consequently, its business and future growth are subject to a number of risks inherent in such operations, including:

 

  diversion of management attention;

 

  difficulties and costs of staffing and managing foreign offices;

 

  different learning styles and cultures;

 

  delay in supporting non-English language products;

 

  numerous and potentially conflicting regulatory requirements;

 

  export controls, import tariffs and other barriers to trade;

 

  changes in laws or governmental policies;

 

  reduced protection of intellectual property rights;

 

  regional political and economic instability; and

 

  fluctuations in currency exchange rates.

 

If the combined company’s relationships with resellers, systems integrators and business outsource providers change or such third parties fail to successfully implement the combined company’s initiatives, the business of the combined company will be harmed.

 

The combined company intends to derive additional revenue through its resellers, systems integrators and business outsource providers. The combined company will need to devote a substantial number of its personnel, as well as its financial resources, to developing and maintaining relationships with these third parties. If one or more of these relationships terminates, the combined company could suffer a significant decrease in revenue.

 

The combined company’s success depends on the acceptance and successful integration by customers of its products. The combined company intends to utilize third-party resellers and systems integrators to assist with implementation of its products. If resellers and systems integrators fail to continue to support the combined company’s products or commit resources to it, if any of the combined company’s customers are not able to successfully integrate the combined company’s products or if the combined company is unable to adequately train its resellers and its systems integrators, the combined company’s business, operating results and financial condition could suffer. In addition, the combined company cannot control the level and quality of service provided by its current and future resellers, third-party systems integrators and business outsource providers, and the combined company could be harmed by their nonperformance or inadequate performance.

 

Acquisitions or investments may drain capital and equity resources, divert management’s attention or otherwise harm the combined company’s business.

 

The combined company may acquire or make investments in other businesses, products or technologies. If it does acquire businesses, products or technologies, or forms alliances with companies requiring technology investments or revenue commitments, the combined company will face a number of risks to its business. These risks include the potential for unknown liabilities of the acquired or combined business, potentially dilutive

 

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issuances of equity securities and the incurrence of debt. In addition, the combined company may face difficulty in assimilating the acquired operations and employees, managing product co-development activities with its alliance partners, retaining the key employees of the acquired business, successfully integrating the acquired technology and operations into its business and maintaining uniform standards, controls, policies and procedures. The combined company may also lack the experience to enter into the new product or technology markets made available by new acquisitions or alliances. Failure to manage these alliance activities effectively and to integrate entities or assets that the combined company acquires could adversely affect its operating results or financial condition.

 

Under Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“SFAS 142”), the goodwill of the combined company will not be amortized but will be instead reviewed at least annually for impairment. The combined company will test goodwill for impairment using the two-step process prescribed in SFAS 142. The first step is a screen for potential impairment, while the second step measures the amount of impairment, if any. If the above-stated risks should occur or if general macroeconomic conditions deteriorate, affecting the combined company’s business and operating results over the long term, the combined company could be required to record impairment charges related to goodwill, which could adversely affect its financial results.

 

The combined company’s lack of product diversification means that any decline in price or demand for its products and services would seriously harm its business.

 

The combined company’s Aspen suite, Docent Enterprise suite and successor products and related services are expected to account for a significant majority of the combined company’s revenue for the foreseeable future. Consequently, a decline in the price of, or demand for, the Aspen suite, the Docent Enterprise suite and successor products or services, or their failure to achieve broad market acceptance, would seriously harm the combined company’s business.

 

The combined company faces the risk of liability for failures to meet unique customer requirements.

 

The failure or inability to meet a customer’s unique expectations or requirements for its products or in the performance of services could impair the combined company’s reputation or result in a claim for damages, regardless of its responsibility for the failure. Contractual protections limiting contractual liability for damages arising from product defects and mistakes in rendering professional services are not always obtained and may not be enforced or otherwise may not protect the combined company from liability. Insurance that the combined company may obtain may not be sufficient to cover such claims. In addition, professional services projects may be performed on a fixed-price basis rather than on a time-and-materials basis and if the combined company is unable to accurately estimate the costs related to its fixed-price projects, its operating results could suffer.

 

The combined company’s intellectual property may become subject to legal challenges, unauthorized use or infringement, any of which could diminish the value of the combined company’s products and services.

 

The combined company’s success depends in large part on its proprietary technology. The combined company will rely on a combination of patents, copyrights, trademarks, trade secret laws, contractual restrictions, restrictions on disclosure and other methods to protect its proprietary technology. These legal protections afford only limited protection for its technology. The combined company will hold only two issued patents underlying the products developed by Docent prior to the transaction and will not hold patents for any of the technology underlying its Aspen products. If the combined company fails to successfully enforce its intellectual property rights, the value of these rights, and consequently the value of its products and services to its customers, could diminish substantially. It may be possible for third parties to copy or otherwise obtain and use the combined company’s intellectual property or trade secrets without its authorization, and it may be possible for third parties to independently develop substantially equivalent intellectual property.

 

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Litigation may be necessary in the future to enforce the combined company’s intellectual property rights, to protect trade secrets or to determine the validity and scope of the proprietary rights of others. Effective protection of intellectual property rights is unavailable or limited in some foreign countries. The combined company’s protection of its intellectual property rights may not provide it with any legal remedy should its competitors independently develop similar technology, duplicate its products and services, or design around any intellectual property rights held by the combined company.

 

Third parties alleging that Docent, prior to the transaction, infringed their patents have brought two patent infringement cases. The first complaint, filed in May 2002 by IP Learn, LLC against Docent and several other major developers of online learning software, alleges five patent infringement claims related to online learning and seeks unspecified damages. The second complaint, filed in December 2002 by IP Innovation against Docent and seven other defendants, alleges infringement of a patent covering the use of HTML (hypertext markup language) in graphics software used in a computer system and seeks unspecified damages. After investigating and analyzing the claims, Docent believes that its products do not infringe the patents that are the subject of these two lawsuits, and does not believe that it has significant exposure as a result of these claims. Neither of these patent cases has stated any specific demands for monetary damages. In addition, in May 1996, Richard B. Grant filed a complaint against Click2learn alleging that Click2learn’s ToolBook and Multimedia ToolBook products infringe a patent owned by him and seeking unspecified damages. After investigating and analyzing the claims, Click2learn believes that these products do not infringe Mr. Grant’s patent and believes that the patent is invalid, and does not believe that it has significant exposure as a result of this claim. However, the patent infringement claims against Docent and Click2learn could be expensive to defend and divert management attention from operating the combined company. In the event it is in fact determined that Docent or Click2learn were infringing the patents that are the subject of these claims or other third party patents, the combined company may be required to pay damages or it may be required to license technology on terms that may not be favorable to it or may be forced to alter the combined company’s technology, website or software products, any of which may adversely affect its revenue.

 

In addition, from time to time Click2learn and Docent have received, and the combined company may in the future receive, notice of claims of infringement of other parties’ proprietary rights. Such claims could result in costly litigation and could divert management and technical resources. They could also delay product shipment or require the combined company to develop noninfringing technology or enter into royalty or licensing agreements, which agreements may not be available on reasonable terms, or at all.

 

The products of the combined company may contain defects or otherwise perform improperly.

 

Complex enterprise software products frequently contain errors or failures, especially when first introduced or when new versions are released. Because the products of the combined company are complex software packages with new features and functionality being added and new versions being released on a regular basis, there is a greater likelihood that they may contain such errors. In addition, since the combined company’s products are targeted at enterprise customers with large numbers of users, customers and potential customers may have a greater sensitivity to product defects or product integration than buyers of software products generally. Click2learn and Docent have historically experienced errors in their products, in particular when new versions or functionalities are first released, although such errors have not had a material impact on their business and generally have been corrected shortly after discovery. Serious product errors could result in loss of revenue or delay in market acceptance, diversion of development resources, damage to the combined company’s reputation, or increased service and warranty costs.

 

The combined company may not be able to adapt to rapidly changing technology and evolving industry standards.

 

The business performance and learning management software market is characterized by rapidly changing technologies, frequent new product and service introductions, short development cycles and evolving industry

 

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standards. The introduction of new products and services embodying new technologies and the emergence of new industry standards may render the combined company’s products and services obsolete. The combined company’s success depends on its ability to adapt to a rapidly changing landscape and to offer new products and services that address its customers’ changing demands. The combined company may experience difficulties that delay or prevent the successful design, development, introduction or marketing of its products and services. To the extent the combined company in fact experiences such delays, it may experience difficulty in attracting new customers and may lose existing customers.

 

Security and privacy breaches could subject the combined company to litigation and liability.

 

The combined company will host certain of its customers’ business performance and learning management software implementations and provide access to that software using the Internet. Computer viruses could be introduced into the combined company’s systems or those of its customers, which could disrupt the operation of the combined company’s hosting systems or make them inaccessible to users. The combined company will depend on Internet service providers and telecommunications companies and the efficient operation of their computer networks and other computer equipment to enable customers to access and use hosted software implementations. Each of these partners has experienced significant outages in the past and could experience outages, delays and other difficulties due to system failures unrelated to the combined company’s systems, which could cause the combined company’s customers to believe it was at fault and withhold payments due to it.

 

The combined company could become subject to litigation and liability if third parties penetrate security for its hosting systems or otherwise misappropriate its users’ confidential information or if customers are unable to access and use hosted software implementations. Advances in computer capabilities, new discoveries in the field of cryptography or other technological events or developments could result in compromises or breaches of the combined company’s security systems. Anyone who circumvents its security measures could misappropriate proprietary information or cause interruptions in its services or operations. The combined company may be required to expend significant capital and other resources to protect against the threat of security breaches or service interruptions or to alleviate problems caused by breaches or service interruptions.

 

The combined company may become subject to government regulation that could result in liability or increase the cost of doing business, thereby adversely affecting its financial results.

 

The combined company is not currently subject to direct regulation by any domestic or foreign governmental agency, other than regulations applicable to businesses generally, such as export control laws. However, the Federal Trade Commission, the European Union and certain state and local authorities have been investigating companies regarding their use of personal information. The combined company could incur additional expenses if new regulations regarding the use of personal information or other government regulation applicable to the combined company’s business are introduced or if these authorities choose to investigate the combined company’s privacy or other business practices.

 

The combined company does not expect to include redundant back-up computer systems in its disaster recovery plan, and a disaster could severely damage its operations.

 

The combined company does not expect to include redundant back-up computer systems at an alternate site in its disaster recovery plan. A disaster could severely harm the combined company’s business because its computer systems could be interrupted for an indeterminate length of time. The combined company’s operations will depend upon its ability to maintain and protect the computer systems needed for its day-to-day operations. A number of these computer systems are located on or near known earthquake fault zones. Although these systems are designed to be fault tolerant, they are vulnerable to damage from fire, floods, earthquakes, power loss, telecommunications failures and other events. Any damage to its facilities could lead to interruptions in the services the combined company provides to customers and loss of customer information, and could substantially if not totally impair its ability to operate its business. The insurance the combined company maintains may not be adequate to cover losses resulting from disasters or other business interruptions.

 

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The combined company’s products include third-party technology; the loss of this technology or errors in this technology could materially harm the combined company’s business.

 

The combined company will use some licensed third-party technology components in its products. Future licenses to this technology may not be available to the combined company on commercially reasonable terms, or at all. The loss of or inability to obtain or maintain any of these technology licenses could result in delays in the introduction of new products or could force the combined company to discontinue offering portions of its business performance and learning management solutions until equivalent technology, if available, is identified, licensed and integrated. In addition, the operation of the combined company’s products would be impaired if errors occur in the third-party technology that is incorporated, and the combined company may incur additional costs to repair or replace the defective software. It may be difficult for the combined company to correct any errors in third-party technology because the technology is not within its control. Accordingly, the combined company’s revenue could decrease and its costs could increase in the event of any errors in this technology. Furthermore, the combined company may become subject to legal claims related to licensed technology based on product liability, infringement of intellectual property or other legal theories.

 

The combined company’s stock price will likely be volatile.

 

The trading price of the combined company’s common stock is likely to be highly volatile. The combined company’s common stock price will be subject to fluctuations in response to a number of factors, including:

 

  actual or anticipated variations in quarterly operating results;

 

  changes in financial estimates or recommendations by securities analysts;

 

  conditions or trends in the business performance and learning management software markets;

 

  announcements by the combined company or its competitors of significant customer wins, technological innovations, new products or services;

 

  announcements by the combined company or its competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

 

  additions or departures of key personnel;

 

  sales of the combined company’s common stock; and

 

  general market conditions.

 

The stock market in general, and the market for enterprise software and technology companies in particular, recently has experienced extreme price and volume fluctuations that have been unrelated or disproportionate to the operating performance of many of the affected companies. These broad market and industry factors may depress the combined company’s stock price, regardless of its operating performance.

 

In the past, companies that have experienced volatility in the market price of their stock have been subject to securities class action litigation. The combined company may be the target of this type of litigation in the future. Securities litigation against the combined company could result in substantial costs and divert management attention, which could seriously harm its business.

 

Antitakeover provisions could make the sale of the combined company more difficult.

 

The certificate of incorporation and bylaws of the combined company will contain provisions that could make it harder for a third party to acquire it without the consent of the combined company’s board of directors. For example, no potential acquirer would be able to call a special meeting of stockholders to remove the board of directors of the combined company. A potential acquirer would also not be able to act by written consent without a meeting. In addition, the board of directors will have staggered terms that make it difficult to remove all

 

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directors at once. The acquirer would also be required to provide advance notice of its proposal to remove directors at an annual meeting. The acquirer would not be able to cumulate votes at a meeting, which would require the acquirer to hold more shares to gain representation on the Board of Directors than if cumulative voting were permitted.

 

Subject to its fiduciary duties, the combined company’s board intends to adopt a stockholder rights plan. If the board adopts a stockholder rights plan, it may discourage a merger or tender offer involving the combined company’s securities that is not approved by the combined company’s board by increasing the cost of effecting any such transaction and, accordingly, could have an adverse impact on stockholders who may want to vote in favor of such merger or participate in such tender offer.

 

In addition, Section 203 of the Delaware General Corporation Law limits business combination transactions with 15% stockholders that have not been approved by the issuer’s board of directors. These provisions and other similar provisions make it more difficult or impossible for a third party to acquire the combined company without negotiation. These provisions may apply even if the offer may be considered beneficial by some stockholders.

 

The board of directors of the combined company could choose not to negotiate with an acquirer that it did not feel was in the combined company’s strategic interests. If the acquirer were discouraged from offering to acquire the combined company or prevented from successfully completing a hostile acquisition by the antitakeover measures described above, the combined company’s stockholders could lose the opportunity to sell their shares at a favorable price.

 

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STATEMENTS REGARDING FORWARD-LOOKING INFORMATION

 

The Securities and Exchange Commission encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This joint proxy statement/prospectus contains such “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be made directly in this joint proxy statement/prospectus referring to Click2learn, Docent and Newco, and they may also be made a part of this joint proxy statement/prospectus by reference to other documents filed with the Securities and Exchange Commission by Click2learn and Docent, which is known as “incorporation by reference.” You should note that the discussion of Click2learn and Docent boards’ reasons for the transaction and the descriptions of their respective financial advisors’ opinions contain many forward-looking statements that describe beliefs, assumptions and estimates as of the indicated dates of those forward-looking statements and those forward-looking expectations may have changed as of the date of this proxy statement/prospectus. Forward-looking statements made in this joint proxy statement/prospectus include, but are not limited to, statements concerning:

 

  the benefits anticipated to result from the proposed transaction;

 

  integration and other costs estimated to be incurred in connection with the transaction;

 

  anticipated future performance;

 

  the ability of Newco to achieve the benefits of the transaction;

 

  the development of a market for Newco common stock;

 

  the financial results of Newco;

 

  the ability of Newco to successfully sell, market and distribute its products and services, both domestically and internationally;

 

  the ability of Newco to achieve operating efficiencies;

 

  the ability of Newco to increase profitability;

 

  the availability of financing, on acceptable terms, or at all;

 

  competitive developments affecting Newco’s products;

 

  the extent of implementation of business performance and learning management solutions for corporate learning needs;

 

  the ability of Newco to address risks associated with rapidly evolving markets;

 

  Newco’s ability to protect its intellectual property;

 

  the ability to attract and retain key employees;

 

  the ability of Newco to establish and build a recognized brand;

 

  exposure to product liability and other types of lawsuits and regulatory proceedings;

 

  the ability of Newco to generate revenues;

 

  the ability of Newco to obtain or maintain third party licensing relationships; and

 

  the completion of the transaction.

 

Furthermore, words such as “may,” “will,” “should,” “predict,” “continue,” “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” or the negative of these terms and words and terms of similar substance used in connection with any discussion of future operating or financial performance, or the transactions of Click2learn and Docent, identify forward-looking statements. All forward-looking statements are management’s present expectations of future events and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements.

 

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You are cautioned not to place undue reliance on the forward-looking statements, which speak only as of the date of this joint proxy statement/prospectus or the date of the document incorporated by reference in this joint proxy statement/prospectus. None of Click2learn, Docent or Newco is under any obligation, and each expressly disclaims any obligation, to update or alter any forward-looking statements, whether as a result of new information, future events or otherwise. Neither Click2learn, Docent nor Newco can guarantee the accuracy of the forward-looking statements, and you should be aware that results and events could differ materially and adversely from those contained in the forward-looking statements due to a number of factors. You should consider carefully the statements set forth in the section entitled “RISK FACTORS” beginning on page 21 and other sections of this joint proxy statement/prospectus and in the other documents we have filed with the Securities and Exchange Commission and that are incorporated by reference in this joint proxy statement/prospectus, which address these and additional factors that could cause results or events to differ from those set forth in the forward-looking statements. These factors include the relative value of Click2learn and Docent common stock, the market’s difficulties in valuing Newco’s business following the transaction, the failure to realize anticipated benefits of the transaction and conflicts of interest of directors recommending the transaction.

 

For additional information about factors that could cause actual results to differ materially from those described in the forward-looking statements, please see Click2learn’s and Docent’s quarterly reports on Form 10-Q/A and the annual reports on Form 10-K/A incorporated by reference with this joint proxy statement/prospectus and filed with the Securities and Exchange Commission.

 

All subsequent forward-looking statements attributable to Click2learn and Docent or Newco or any person acting on their behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section.

 

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THE CLICK2LEARN SPECIAL MEETING

 

This joint proxy statement/prospectus is being furnished to you in connection with the solicitation of proxies by Click2learn’s board of directors in connection with the proposed merger of equals of Click2learn with Docent that will result in a new combined company referred to as Newco.

 

Date, time and place of Click2learn’s special meeting

 

The special meeting of stockholders of Click2learn will be held on March 18, 2004, at 10:00 a.m., Pacific time, at the offices of Click2learn, 110-110th Avenue NE, Bellevue, Washington, 98004.

 

Purpose of special meeting

 

The special meeting is being held so that the Click2learn stockholders may consider and vote on the following proposals:

 

1. to approve and adopt the merger agreement entered into among Click2learn, Docent, Canuck Acquisition Corp., Devil Acquisition Corp. and Newco, dated as of October 20, 2003, as amended November 13, 2003 and January 26, 2004,

 

2. to approve the Hockey Merger Corporation 2004 Equity Incentive Plan (or Newco 2004 Plan) by Newco, effective upon the consummation of the transaction,

 

and to conduct such other business as may properly come before the special meeting. The Click2learn board does not expect any other business to come before the meeting. The merger agreement is included as Annex A to this joint proxy statement/prospectus. If the transaction is completed, among other things, each outstanding share of Click2learn common stock will be automatically converted into 0.3188 shares of Newco common stock at the effective time of the merger.

 

Record date and outstanding shares

 

Click2learn’s board of directors has fixed the close of business on January 22, 2004 as the record date for the special meeting. Only holders of record of Click2learn common stock at the close of business on the record date are entitled to notice of and to vote at the meeting. As of the close of business on January 22, 2004, there were 32,817,028 shares of Click2learn common stock outstanding and entitled to vote, held of record by approximately 223 stockholders.

 

Vote and quorum required

 

Holders of Click2learn’s common stock are entitled to one vote for each share held as of the record date. Approval and adoption of the merger agreement requires the affirmative vote of a majority of the total voting power of the outstanding common stock of Click2learn. If a quorum exists for each of the Click2learn and Docent special meetings, to comply with Nasdaq rules, approval of the Newco 2004 Plan requires the affirmative vote of a majority of shares of Click2learn and Docent common stock cast on the proposal at the Click2learn and Docent special meetings, calculated on an aggregate basis after taking the respective exchange ratios into account. A majority of the outstanding shares of common stock of Click2learn must be represented, either in person or by proxy, to constitute a quorum at the Click2learn special meeting. On January 22, 2004, directors, executive officers and affiliates of Click2learn as a group beneficially owned 9,510,351 shares of Click2learn common stock. Several stockholders of Click2learn have entered into stockholder voting agreements with Docent that obligate them to vote a total of approximately 2.5% of Click2learn’s common stock outstanding as of January 22, 2004 in favor of approval and adoption of the merger agreement.

 

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Effect of abstentions and broker non-votes

 

Because both the proposal to approve and adopt the merger agreement and the proposal to approve the Newco 2004 Plan are “non-discretionary” proposals under applicable Nasdaq rules, brokers, banks, custodians and nominees who are the record holders of shares of Click2learn common stock beneficially owned by other persons may vote or grant a proxy to vote those shares only if and to the extent they have received instructions from the beneficial owners. If the beneficial owner of shares held of record by a broker, bank, custodian or nominee has not provided instructions as to how those shares are to be voted, they are referred to as “broker non-votes.”

 

Both abstentions and broker non-votes will be counted for the purpose of determining the presence of a quorum at the Click2learn special meeting. Because approval and adoption of the merger agreement requires the affirmative vote of a majority of the outstanding voting power of the Click2learn common stock, abstentions and broker non-votes will have the same effect as votes cast against the proposal to approve and adopt the merger agreement. Abstentions are deemed to be present or represented by proxy and entitled to vote with respect to the proposal to approve the 2004 Newco Plan, and consequently will have the same effect as votes cast against the proposal to approve the 2004 Newco Plan. Broker non-votes are considered present or represented by proxy and entitled to vote with respect to the proposal to approve the 2004 Newco Plan, and consequently will have no effect on the outcome of the vote on the 2004 Newco Plan.

 

Expenses of proxy solicitation

 

Click2learn will pay the expenses of soliciting proxies from Click2learn stockholders to be voted at the meeting. Following the original mailing of the proxies and other soliciting materials, Click2learn and its agents also may solicit proxies by mail, telephone, facsimile or in person. Following the original mailing of the proxies and other soliciting materials, Click2learn will request brokers, custodians, nominees and other record holders of Click2learn common stock to forward copies of the proxy and other soliciting materials to persons for whom they hold shares of Click2learn common stock and to request authority for the exercise of proxies. In such cases, upon the request of the record holders, Click2learn will reimburse such holders for their reasonable expenses. Click2learn and Docent have jointly retained Mellon Investor Services LLC to assist in the solicitation of proxies by Click2learn for a fee of approximately $25,000 plus reasonable out-of-pocket costs and expenses.

 

Proxies

 

The proxy accompanying this joint proxy statement/prospectus is solicited on behalf of the Click2learn board of directors for use at the meeting. Please complete, date and sign the accompanying proxy and promptly return it in the enclosed envelope or otherwise mail it to Click2learn or follow the instructions for voting by telephone or internet printed on the proxy card. All properly executed proxies that Click2learn receives prior to the vote at the meeting and that are not revoked will be voted at the meeting according to the instructions indicated on the proxies or, if no direction is indicated, will be voted FOR the approval and adoption of the merger agreement and FOR the approval of the Newco 2004 Plan. You may revoke your proxy at any time before it is exercised at the meeting by taking any of the following actions:

 

  delivering a written notice to the secretary of Click2learn by any means, including facsimile, bearing a date later than the date of the proxy, stating that the proxy is revoked;

 

  signing and delivering a proxy relating to the same shares and bearing a later date prior to the vote at the meeting; or

 

  attending the meeting and voting in person, although attendance at the meeting will not, by itself, revoke a proxy. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must bring to the meeting a letter from the broker, bank or other nominee confirming your beneficial ownership of the shares.

 

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Click2learn’s board of directors does not know of any matter that is not referred to in this joint proxy statement/prospectus to be presented for action at the meeting. If any other matters are properly brought before the meeting, the persons named in the proxies will have discretion to vote on such matters in accordance with their best judgment.

 

You should not send in any stock certificates with your proxies. A transmittal form with instructions for the surrender of stock certificates for shares of Newco will be mailed to you as soon as practicable after completion of the transaction.

 

Recommendation of the board of directors

 

The board of directors of Click2learn has unanimously determined that the terms of the merger agreement and the transaction are advisable, fair to and in the best interests of Click2learn and the Click2learn stockholders. Accordingly, the Click2learn board of directors recommends that Click2learn stockholders vote FOR the proposal to approve and adopt the merger agreement. The Click2learn board intends to approve the Newco 2004 Plan and to recommend that Click2learn stockholders vote FOR the proposal to approve the Newco 2004 Plan.

 

Your vote is very important. To ensure that your shares are represented at the meeting, please complete, date and sign the enclosed proxy and mail it promptly in the postage-paid envelope provided, whether or not you plan to attend the meeting. You may revoke your proxy at any time before it is voted. Returning your proxy does not prevent you from attending the meeting and voting your shares in person. If your shares are held in an account at a brokerage firm or bank, you must instruct the firm or bank how to vote your shares. If you do not vote or do not instruct your broker or bank how to vote, it will have the same effect as voting against approval and adoption of the merger agreement, and will not be counted with respect to the proposal to approve the Newco 2004 Plan.

 

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THE DOCENT SPECIAL MEETING

 

This joint proxy statement/prospectus is being furnished to you in connection with the solicitation of proxies by Docent’s board of directors in connection with the proposed merger of equals of Docent and Click2learn that will result in a new combined company referred to as Newco.

 

Date, time and place of Docent’s special meeting

 

The special meeting of stockholders of Docent, Inc. will be held on March 18, 2004 at 10:00 a.m. at the offices of Docent, 2410 Charleston Road, Mountain View, California, 94043.

 

Purpose of special meeting

 

The special meeting is being held so that the Docent stockholders may consider and vote on the following proposals:

 

1. to approve and adopt the merger agreement entered into among Docent, Click2learn, Devil Acquisition Corp., Canuck Acquisition Corp. and Newco, dated as of October 20, 2003, as amended November 13, 2003 and January 26, 2004,

 

2. to approve the Hockey Merger Corporation 2004 Equity Incentive Plan (or Newco 2004 Plan) by Newco, effective upon the consummation of the transaction,

 

and to conduct such other business as may properly come before the special meeting. The Docent board does not expect any other business to come before the meeting. The merger agreement is included as Annex A to this joint proxy statement/prospectus. If the transaction is completed, among other things, each outstanding share of Docent common stock will be automatically converted into 0.7327 shares of Newco common stock at the effective time of the transaction.

 

Record date and outstanding shares

 

Docent’s board of directors has fixed the close of business on January 22, 2004 as the record date for the special meeting. Only holders of record of Docent common stock at the close of business on the record date are entitled to notice of and to vote at the meeting. As of the close of business on January 22, 2004, there were 13,207,334 shares of Docent common stock outstanding and entitled to vote, held of record by approximately 163 stockholders.

 

Vote and quorum required

 

Holders of Docent’s common stock are entitled to one vote for each share held as of the record date. Approval and adoption of the merger agreement requires the affirmative vote of a majority of the total voting power of the outstanding common stock of Docent. If a quorum exists for each of the Click2learn and Docent special meetings, to comply with Nasdaq rules, approval of the Newco 2004 Plan requires the affirmative vote of a majority of shares of Click2learn and Docent common stock cast on the proposal at the Click2learn and Docent special meetings calculated on an aggregate basis after taking the respective exchange ratios into account. A majority of the outstanding shares of common stock of Docent must be represented, either in person or by proxy, to constitute a quorum at the Docent special meeting. On January 22, 2004, directors, executive officers and affiliates of Docent as a group beneficially owned 1,057,039 shares of Docent common stock. Several stockholders of Docent have entered into stockholder voting agreements with Click2learn that obligate them to vote a total of approximately 2.6% of Docent’s common stock outstanding as of January 22, 2004 in favor of approval and adoption of the merger agreement.

 

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Effect of abstentions and broker non-votes

 

Because both the proposal to approve and adopt the merger agreement and the proposal to approve the Newco 2004 Plan are “non-discretionary” proposals under applicable Nasdaq rules, brokers, banks, custodians and nominees who are the record holders of shares of Docent common stock beneficially owned by other persons may vote or grant a proxy to vote those shares only if and to the extent they have received instructions from the beneficial owners. If the beneficial owner of shares held of record by a broker, bank, custodian or nominee has not provided instructions as to how those shares are to be voted, they are referred to as “broker non-votes.”

 

Both abstentions and broker non-votes will be counted for the purpose of determining the presence of a quorum at the Docent special meeting. Because approval and adoption of the merger agreement requires the affirmative vote of a majority of the outstanding voting power of the Docent common stock, abstentions and broker non-votes will have the same effect as votes cast against the proposal to approve and adopt the merger agreement. Abstentions are deemed to be present or represented by proxy and entitled to vote with respect to the proposal to approve the 2004 Newco Plan, and consequently will have the same effect as votes cast against the proposal to approve the 2004 Newco Plan. Broker non-votes are considered present or represented by proxy and entitled to vote with respect to the proposal to approve the 2004 Newco Plan, and consequently will have no effect on the outcome of the vote on the 2004 Newco Plan.

 

Expenses of proxy solicitation

 

Docent will pay the expenses of soliciting proxies from Docent stockholders to be voted at the meeting. Following the original mailing of the proxies and other soliciting materials, Docent and its agents also may solicit proxies by mail, telephone, facsimile or in person. Following the original mailing of the proxies and other soliciting materials, Docent will request brokers, custodians, nominees and other record holders of Docent common stock to forward copies of the proxy and other soliciting materials to persons for whom they hold shares of Docent common stock and to request authority for the exercise of proxies. In such cases, upon the request of the record holders, Docent will reimburse such holders for their reasonable expenses. Docent and Click2learn have jointly retained Mellon Investor Services LLC to assist in the solicitation of proxies by Docent for a fee of approximately $25,000 plus reasonable out-of-pocket costs and expenses.

 

Proxies

 

The proxy accompanying this joint proxy statement/prospectus is solicited on behalf of the Docent board of directors for use at the meeting. Please complete, date and sign the accompanying proxy and promptly return it in the enclosed envelope or otherwise mail it to Docent or follow the instructions for voting by telephone or internet printed on the proxy card. All properly executed proxies that Docent receives prior to the vote at the meeting and that are not revoked will be voted at the meeting according to the instructions indicated on the proxies or, if no direction is indicated, will be voted FOR approval and adoption of the merger agreement and FOR the proposal to approve the Newco 2004 Plan. You may revoke your proxy at any time before it is exercised at the meeting by taking any of the following actions:

 

  delivering a written notice to the secretary of Docent by any means, including facsimile, bearing a date later than the date of the proxy, stating that the proxy is revoked;

 

  signing and delivering a proxy relating to the same shares and bearing a later date prior to the vote at the meeting; or

 

  attending the meeting and voting in person, although attendance at the meeting will not, by itself, revoke a proxy. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the meeting, you must bring to the meeting a letter from the broker, bank or other nominee confirming your beneficial ownership of the shares.

 

Docent’s board of directors does not know of any matter that is not referred to in this joint proxy statement/prospectus to be presented for action at the meeting. If any other matters are properly brought before the meeting,

 

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Docent’s board of directors does not know of any matter that is not referred to in this joint proxy statement/prospectus to be presented for action at the meeting. If any other matters are properly brought before the meeting, the persons named in the proxies will have discretion to vote on such matters in accordance with their best judgment.

 

You should not send in any stock certificates with your proxies. A transmittal form with instructions for the surrender of stock certificates for shares of Newco will be mailed to you as soon as practicable after completion of the transaction.

 

Recommendation of the board of directors

 

The board of directors of Docent has unanimously determined (with David Mandelkern abstaining due to his awareness that he would not likely continue with Newco following the consummation of the transaction resulting in certain potential benefits Mr. Mandelkern would be eligible to receive following the transaction detailed beginning on page 71) that the terms of the merger agreement and the transaction are advisable, fair to and in the best interests of Docent and the Docent stockholders. Accordingly, the Docent board of directors recommends that Docent stockholders vote FOR the proposal to approve and adopt the merger agreement. The Docent board intends to approve the Newco 2004 Plan and to recommend that the Docent stockholders vote FOR the proposal to approve the Newco 2004 Plan.

 

Your vote is very important. To ensure that your shares are represented at the meeting, please complete, date and sign the enclosed proxy and mail it promptly in the postage-paid envelope provided, whether or not you plan to attend the meeting. You may revoke your proxy at any time before it is voted. Returning your proxy does not prevent you from attending the meeting and voting your shares in person. If your shares are held in an account at a brokerage firm or bank, you must instruct the firm or bank how to vote your shares. If you do not vote or do not instruct your broker or bank how to vote, it will have the same effect as voting against approval and adoption of the merger agreement, and will not be counted with respect to the proposal to approve the Newco 2004 Plan.

 

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THE TRANSACTION

 

This section of this joint proxy statement/prospectus describes the proposed transaction. While we believe that the description covers the material terms of the merger of equals and the related transactions, this summary may not contain all the information that is important to you. You should carefully read this entire document and the other documents we referred to for a more complete understanding of the transaction. In addition, important business and financial information about Click2learn and Docent is incorporated into this joint proxy statement/prospectus by reference. You may obtain the information incorporated by reference into this joint proxy statement/prospectus without charge by following the instructions in the section entitled “DOCUMENTS INCORPORATED BY REFERENCE” beginning on page 129.

 

Background of the transaction and related agreements

 

The provisions of the merger agreement are the result of arm’s-length negotiations conducted among representatives of Click2learn and Docent and their respective legal and financial advisors. The following is a summary of the meetings, negotiations and discussions between the parties that preceded the execution of the merger agreement.

 

Click2learn and Docent have been familiar with each other’s business for several years. Senior executives of the two companies have encountered one another in a variety of business and industry settings over the years. The senior management of each company has been familiar with the other’s products and customers.

 

On July 30, 2003, R. Andrew Eckert, President, Chief Executive Officer and board member of Docent, and Neil Laird, Senior Vice President and Chief Financial Officer of Docent, met in New York with Jeff Becker of C.E. Unterberg, Towbin to discuss engaging C.E. Unterberg, Towbin for certain strategic initiatives Docent was contemplating.

 

On August 13, 2003, with the approval of the Docent board of directors, Docent engaged C.E. Unterberg, Towbin to provide financial advisory and investment banking services in connection with Docent’s exploration of strategic transactions.

 

On August 14, 2003, Jeff Becker of C.E. Unterberg, Towbin called Kevin Oakes, Chairman and Chief Executive Officer of Click2learn, on behalf of Docent to discuss a potential business combination involving the two companies. They discussed the potential benefits to each company and its stockholders, including the potential to achieve a critical mass of business size and revenues, the promise of a broader product suite, the ability to better compete in the marketplace and the ability to demonstrate aggressive leadership to customers. Messrs. Becker and Oakes agreed that the potential combination merited further discussion and that Messrs. Oakes and Eckert should arrange a meeting.

 

On September 4, 2003, Mr. Eckert met with Mr. Oakes in the Seattle airport to discuss the rationale for and the possibility of a business combination of Docent and Click2learn. During this meeting Messrs. Eckert and Oakes discussed the markets in which the two companies operate, the corporate cultures of both companies and their individual business philosophies. They concluded that there was adequate common ground to arrange a second meeting and to include others members of the management teams in this meeting. They agreed that a business combination would only make sense for both companies if it was a merger of equals rather than an acquisition of one by the other and accordingly, decided to ask their respective chief financial officers to work together to prepare a financial model of the proposed combined company.

 

On September 5, 2003, Docent presented Click2learn with a proposed mutual confidentiality agreement to allow for the exchange of information between Docent and Click2learn. This mutual confidentiality agreement was negotiated and executed on September 8, 2003.

 

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Beginning on September 9, 2003, Mr. Laird and John Atherly, Chief Financial Officer of Click2learn, began working on a financial model for the combined company and had several telephone conversations and exchanged a number of emails on this topic over the next several days. The focus of this exercise was to determine what the potential financial results for the combined company would be in light of potential revenue and cost synergies that could be achieved and whether the transaction made financial sense.

 

On September 12, 2003, a team of Docent executive officers consisting of Messrs. Eckert and Laird, David Crussell, Senior Vice President, Worldwide Operations, and Sanjay P. Dholakia, Vice President of Marketing and Business Development held a full-day meeting in Seattle with a Click2learn team consisting of Messrs. Oakes and Atherly, Sally Narodick, Lead Director, and Sudheer Koneru, Chief Strategy Officer. Each team presented an overview of their company and together reviewed potential strengths of and possible advantages presented by a combined company. Messrs. Laird and Atherly presented the preliminary results of the financial model, including the potential cost savings and also briefed the other participants on other matters including the potential impact of purchase accounting on the GAAP results of a combined company and the impact of a transaction on the companies’ unutilized tax losses. At the end of the meeting, it was agreed that representatives from each company’s research and development team would meet to review each other’s products and the chief financial officers would continue to refine the financial model. A further meeting of the executives present was scheduled for September 19, 2003.

 

On September 14, 2003, Messrs. Oakes and Eckert had a telephone conversation in which they discussed the possible structure of a combined company and agreed that the board of directors of the combined company would be made up of an equal number of representatives from each company and that Mr. Eckert would be Chief Executive Officer and Mr. Oakes would be President. On that same day, Messrs. Dholakia, Crussell, Koneru, and Srinivasan Chandrasekar, Chief Technology Officer of Click2learn, had a telephone conversation regarding planning for the product feasibility meeting to be held on September 15-16, 2003.

 

From September 15 through 17, 2003, members of Docent’s research and development team and certain other officers, directors and employees (including Ali R. Kutay, Director, David Mandelkern, Director, Executive Vice President and Chief Technology Officer, and Messrs. Dholakia and Crussell) met in Fremont, California with certain Click2learn officers including Messrs. Koneru and Chandrasekar to discuss their respective companies’ product features and strategies, the potential integration of their companies’ products and other possible synergies following the transaction.

 

On September 16, 2003, Messrs. Eckert and Oakes met in Chicago to discuss the possible make-up of the management team for the combined company.

 

Over the next several days Mr. Oakes and Ms. Narodick individually contacted members of Click2learn’s board of directors in telephone calls to advise them that the parties were discussing a possible combination and the general nature of the transaction that had been discussed.

 

On September 17, 2003, Mr. Eckert sent an update to the Docent board summarizing certain details of discussions held to that date with Click2learn representatives and Mr. Kutay also met separately with the Docent product team and management to understand the results of the product due diligence meetings.

 

On September 18, 2003, Messrs. Laird and Atherly met in Burlingame, California to discuss the financial model of the combined company.

 

On September 19, 2003, Messrs. Oakes, Atherly, Chandrasekar and Ms. Narodick held an all-day meeting with Messrs. Eckert, Laird, Crussell and Dholakia (with Mr. Chandrasekar participating by phone) in Burlingame, California. The research and development team outlined the strengths of each company’s product line and presented a proposed process as to how to evaluate each product in detail to come up with a product plan for the combined company. They concluded that there were no technology issues that would cause the two

 

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companies not to proceed. The revised financial model was discussed in detail and the participants concluded that the proposed combination would generate significant cost savings. The participants also discussed alternative legal structures for the transaction and concluded that it was desirable to set up a new company, with stockholders of each existing company to receive shares in the new company at exchange ratios resulting in approximately 50/50 ownership of the new company. After reviewing the results, all present agreed to proceed with formal negotiations to achieve a business combination of the two companies. At this point, V. Holly Albert, Vice President, General Counsel and Secretary of Docent and Steven Esau, Senior Vice President, General Counsel and Secretary of Click2learn joined by phone to discuss the steps required and possible timeline to complete an agreement and announce the transaction.

 

On September 22, 2003, the Click2learn board held a special meeting by telephone conference call at which Mr. Oakes and Ms. Narodick informed the Click2learn board of the progress of the discussions to date and reviewed other activities that Click2learn had undertaken with respect to other possible strategic combinations and in seeking potential financial advisors for this transaction. After discussion and deliberation, the board authorized Click2learn’s management to proceed with negotiations with Docent and potential financial advisors and scheduled another meeting for September 25, 2003.

 

From September 22, 2003, through the signing of the merger agreement on October 20, 2003, the parties held a conference call each weekday with each other to discuss certain due diligence items, the status of the transaction, the proposed terms of the transaction and other matters related to the transaction.

 

On September 25, 2003, Mr. Crussell had a telephone conversation with Mr. Koneru regarding possible operations cost synergies of a combined company and a separate telephone conversation with Mr. Chandrasekar regarding possible engineering cost synergies of a combined company.

 

On September 25, 2003, the Docent board held a special meeting to discuss the potential transaction with Docent’s management. Also present to advise the Docent board were representatives from C.E. Unterberg, Towbin, and Wilson Sonsini Goodrich & Rosati, Professional Corporation, outside legal counsel to Docent. Management updated the board on the discussions that had taken place and outlined the terms that it intended to present to Click2learn. After discussion and deliberation, the board authorized Docent’s management to proceed with negotiations.

 

On September 25, 2003, the Click2learn board held a special meeting to discuss the potential transaction, related legal requirements, the retention of financial advisors and establishment of a transaction committee. Also present to advise the Click2learn board were representatives from Perkins Coie LLP, outside legal counsel to Click2learn. Management updated the board on the discussions that had taken place and outlined the terms that it has discussed with Docent. After discussion and deliberation, the board authorized Click2learn’s management to proceed with negotiations and to retain Craig-Hallum Capital Group LLC as Click2learn’s financial advisor. The board also established a transaction committee consisting of Ms. Narodick, Vijay Vashee, John Coné and Ed Harris to work closely with management in structuring and negotiating the proposed transaction.

 

On September 26, 2003, Docent distributed to Click2learn a summary of certain salient terms for the transaction.

 

On September 28 and 29, 2003, Messrs. Atherly and Laird held several discussions about the proposed terms in order to clarify certain points. Mr. Atherly outlined a number of points on which Click2learn did not agree. In particular, the 50/50 pro forma ownership for the stockholders of Click2learn and Docent of the new Company was of concern.

 

On or about October 1, 2003, Wilson Sonsini distributed initial drafts of the merger agreement and related agreements.

 

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On October 2, 2003, Messrs. Eckert and Laird had conversations with Docent board members, Messrs. Fowler and Acosta, to further update them as to the progress of the transaction, the management composition and other issues related to the transaction. In particular, Mr. Eckert sought guidance on the issues that Click2learn had raised with the proposed terms.

 

On October 2, 2003, Messrs. Eckert and Oakes had a telephone discussion in which they discussed the outstanding issues relating to the proposed terms. They agreed that although the transaction was intended as a merger of equals, consideration had to be given to the relative market capitalization of each company. Since Click2learn had a higher market capitalization after excluding Docent’s treasury shares, Messrs. Eckert and Oakes agreed to recommend that the exchange ratios be set so that after the merger Click2learn stockholders would own approximately 52% of the new company and Docent stockholders approximately 48%. They acknowledged that this ownership split would result in neither company’s stockholders receiving a significant premium. They also agreed to recommend to their respective boards that the new company have a Chairman and an Audit Committee Chair selected from the independent directors designated by Docent, and Chairs of the Compensation and Governance Committees selected from the independent directors designated by Click2learn. They also agreed that the headquarters of the combined company would be in Mountain View, California at the current Docent location and that a new name would be selected for the combined company.

 

From October 6 through 9, 2003, members of Click2learn’s management and engineering teams and its legal and accounting advisors conducted due diligence on Docent at the San Jose office of Ernst & Young LLP, Docent’s accounting advisor, and at the Palo Alto offices of Wilson Sonsini. During these meetings, Mr. Laird made a presentation regarding Docent’s business and members of Docent’s management, operations and engineering teams were made available to address questions raised by the Click2learn team.

 

On October 7, 2003, Mr. Eckert sent another update on the transaction to members of the Docent board outlining the terms to which he agreed with Mr. Oakes on October 2, 2003.

 

On October 8, 2003, the Click2learn transaction committee met with members of Click2learn management, representatives of Craig-Hallum and representatives of Perkins Coie. They discussed the progress of negotiations to date, including the terms that had been agreed to on October 2, 2003, preliminary findings from the due diligence meetings, the preliminary financial analysis of Craig-Hallum, and certain terms of the draft merger agreement and related agreements.

 

On October 8, 2003, Docent’s accounting advisor began its due diligence investigation at the Seattle offices of KPMG LLP, Click2learn’s accounting advisor.

 

On October 9 and 10, 2003, members of Docent’s management and engineering teams and its legal and accounting advisors conducted due diligence on Click2learn at the Seattle offices of Perkins Coie. Messrs. Oakes and Atherly presented an overview of the Click2learn business on October 9, 2003. Members of Click2learn’s management, operations and engineering team were made available to address questions raised by the Docent team. On October 9, 2003, Messrs. Eckert and Oakes met to further discuss the management team and organizational structure of the combined company.

 

On October 9, 2003, the Click2learn board held another special meeting by telephone conference call at which the board was updated on the status of the transaction and negotiations to date, and the results of the business, legal and financial due diligence.

 

On October 10, 2003, Messrs. Eckert, Laird, Oakes and Atherly met with representatives of Craig-Hallum and C.E. Unterberg, Towbin at the offices of Perkins Coie to provide background information necessary for the preparation of the fairness opinions by the respective financial advisors.

 

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On or about October 10, 2003, Perkins Coie distributed comments to the merger agreement and other related agreements. The parties continued to negotiate the terms of the merger agreement and the related agreements through the execution of definitive documents.

 

On October 10, 2003, Messrs. Oakes, Eckert, Dholakia, Collins, Koneru, and Eric Weaver (branding consultant) met at Perkins Coie’s offices in Seattle, Washington to discuss branding and key messaging for the announcement of the execution of the definitive documents. On that same day, Messrs. Dholakia, Koneru, Chandrasekar and Collins met to discuss product messaging and to outline the customer and prospect messaging.

 

From October 14 through October 19, 2003 Messrs. Dholakia and Oakes had telephone conversations regarding the press release and other communication documents.

 

On October 14, 2003, the Click2learn transaction committee met with members of Click2learn management. They discussed the progress of negotiations to date, findings from additional due diligence activities, open issues remaining with respect to the merger agreement and related agreements and the preliminary communication plan with respect to the transaction.

 

On October 16, 2003, the Click2learn transaction committee again met with members of Click2learn management. They discussed the progress of negotiations and status of the merger agreement and related agreements, preliminary third-quarter results and the detailed communication plan with respect to the transaction.

 

On October 17, 2003, the Click2learn board held another special meeting. Representatives of Click2learn management, Craig-Hallum and Perkins Coie attended the meeting. Management reviewed with the Click2learn board the background and financial terms of the proposed transaction, the scope and results of legal and financial due diligence on Docent and the proposed management and financial model of the combined company. Mr. Esau and Perkins Coie reviewed with the Click2learn board the terms of the proposed charter documents for the combined company and the terms of the proposed definitive agreements, including the merger agreement, the voting agreements and the affiliate agreements. This review included a discussion of closing conditions, termination provisions, no-solicitation provisions and termination fee provisions. Perkins Coie reviewed the board’s fiduciary duties and the process that had been followed in connection with the transaction. Craig-Hallum then presented additional financial analyses of the transaction. The chair of the transaction committee updated the board on the transaction committee’s activities and process followed in negotiating and evaluating the transaction and recommended to the board that it approve the transaction. Management updated the board on the proposed communication plan for the transaction.

 

On October 17, 2003, the Docent board held another special meeting. Representatives of Docent management, C.E. Unterberg, Towbin and Wilson Sonsini attended the meeting. Management reviewed with the Docent board the scope and results of legal and financial due diligence on Click2learn. Wilson Sonsini reviewed with the Docent board the terms of the proposed charter documents for the combined company, and the terms of the proposed definitive agreements, including the merger agreement, the voting agreements and the affiliate agreements. This review included a discussion of closing conditions, termination provisions, no-solicitation provisions and termination fee provisions. Management reviewed with the Docent board certain governance matters and the exchange ratio that had been negotiated with Click2learn. C.E. Unterberg, Towbin then presented additional financial analyses of the transaction.

 

On October 20, 2003, the Click2learn board convened for another special meeting during which Click2learn’s management updated the Click2learn board on the status since its last meeting. Representatives of Craig-Hallum and Perkins Coie also attended the meeting. Craig-Hallum delivered to the Click2learn board its written opinion that the Click2learn exchange ratio pursuant to the merger agreement as of October 20, 2003, was fair, from a financial point of view, to the holders of Click2learn common stock. See “Opinion of Click2learn’s Financial Advisor” beginning on page 55 for further information regarding the Craig-Hallum opinion. At the conclusion of the Click2learn board meeting, after consideration of the factors described under “Click2learn’s

 

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reasons for the transaction” beginning on page 49, the Click2learn board of directors determined by a unanimous vote of the directors that the merger agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of Click2learn and its stockholders, and approved the merger agreement and the related agreements and authorized the signing thereof.

 

On October 20, 2003, the Docent board convened for another special meeting during which Docent’s management updated the Docent board on the status since its last meeting. Representatives of C.E. Unterberg, Towbin and Wilson Sonsini also attended the meeting. C.E. Unterberg, Towbin delivered to the Docent board its oral opinion, subsequently confirmed in writing on the same day, that the Docent exchange ratio pursuant to the merger agreement as of October 20, 2003, was fair, from a financial point of view, to the holders of Docent common stock. See “Opinion of Docent’s Financial Advisor” beginning on page 62 for further information regarding the C.E. Unterberg, Towbin opinion. At the conclusion of the Docent board meeting, after consideration of the factors described under “Docent’s reasons for the transaction” beginning on page 52, the Docent board of directors determined by a unanimous vote of the directors present (with David Mandelkern abstaining due to his awareness that he would likely not continue his employment with the combined company following the consummation of transaction resulting in certain potential benefits Mr. Mandelkern would be eligible to receive following the transaction detailed beginning on page 71) at the meeting that the merger agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of Docent and its stockholders, and approved the merger agreement and the related agreements and authorized the signing thereof.

 

On October 20, 2003, after the close of trading, representatives of Docent, Click2learn, Devil Acquisition Corp., Canuck Acquisition Corp. and Newco executed the merger agreement, affiliates of Docent signed voting agreements and affiliate agreements with Click2learn, and affiliates of Click2learn signed voting agreements and affiliate agreements with Docent. Later on the same day, Docent and Click2learn issued a joint press release announcing the execution of the merger agreement.

 

On November 13, 2003, the parties to the merger agreement executed an amendment to the merger agreement. The purpose of the amendment was to confirm that no adjustment would be made to the common shares reserved for issuance under the Click2learn 1999 Employee Stock Purchase Plan to be assumed by Newco in the merger. This amendment was negotiated and signed after Click2learn and Docent each recognized that the merger agreement did not reflect their shared intent that the shares reserved and available for issuance under the Click2learn 1999 Employee Stock Purchase Plan not be reduced by applying to the shares reserved under this plan the exchange ratio applicable to holders of Click2learn shares in the transaction.

 

On January 26, 2004, the parties to the merger agreement executed a second amendment to the merger agreement. In this amendment the Docent exchange ratio was changed to 0.9525 to 0.7327 and the Click2learn exchange ratio was changed from 0.4144 to 0.3188. These changes have no economic effect on the companies’ respective shareholders and the relative percentage ownership of Newco after the closing of the transaction and were made solely to ensure compliance with the Nasdaq National Market’s initial minimum bid price requirement for the listing of Newco common stock. In addition, this amendment contains a covenant on the part of Newco to merge Docent and Click2learn into Newco following their acquisitions, which subsequent mergers are part of the overall merger transaction and which support the anticipated tax-free nature of the transaction.

 

Click2learn’s reasons for the transaction

 

In reaching its decision to approve and adopt the merger agreement and the transaction, the Click2learn board of directors consulted with Click2learn’s management and its financial and legal advisors, and considered a number of factors. In its decision to recommend and approve the transaction, the most important benefits identified by the board of directors of Click2learn were the following:

 

  the potential strategic benefits of the transaction including:

 

  the belief that the combined company can be a strong, viable leader in the business performance and learning management software industry,

 

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  the belief that the combined company can better serve its customers,

 

  the belief that the combined company can provide the market with the most comprehensive set of innovative technologies,

 

  the belief that the complementary product and service offerings of the two companies will allow the combined company to better address customer demand, which will yield additional revenue opportunities,

 

  the potential for a more expansive customer base and broader market reach,

 

  the potential for an enhanced network of strategic partners and the benefits such a network would provide to the combined company’s customers,

 

  the potential of combining two leading research and development, services and customer support teams, and

 

  the increased financial strength and operational efficiencies that the combined company can potentially deliver;

 

  historical information concerning Click2learn’s and Docent’s respective businesses, prospects, financial performance and condition, operations, technology, management and competitive position, including public reports concerning results of operations for each company as filed with the SEC;

 

  Click2learn management’s view of the financial condition, results of operations and businesses of Click2learn and Docent before and after giving effect to the transaction including:

 

  the belief that the combined company could experience faster revenue growth and achieve positive cash flow and profitability quicker than Click2learn could on a stand-alone basis;

 

  the belief that the combined company’s balance sheet will be viewed by customers as stronger than Click2learn’s balance sheet on a stand-alone basis and that the combined company could therefore considered as more financially viable,

 

  the belief that the combined company will be able to achieve cost synergies in the areas of corporate overhead and management, and

 

  the belief that the combined company will be able to leverage the investment made by Docent in its partner and international distribution channels;
  current financial market conditions and historical market prices, volatility and trading information with respect to Click2learn’s common stock and Docent’s common stock which revealed among other things that:

 

  the common stock of each company, while volatile, had traded in similar ranges over the past twelve months and

 

  as a result of the current market conditions, both companies had comparable market capitalizations, which justified a merger of equals transaction on the terms proposed;

 

  the consideration to be received by Click2learn’s and Docent’s respective stockholders as a result of the transaction and the relationship between the current and historical market values of Click2learn common stock and Docent common stock and a comparison of comparable transactions;

 

  the opportunity for Click2learn’s stockholders to participate in the potential for growth of the combined company after the completion of the transaction;

 

  the belief that the terms of the merger agreement, including the parties’ representations, warranties and covenants, and the conditions to their respective obligations, are reasonable;

 

  the prospects of Click2learn as an independent company, including:

 

  the belief that consolidation is likely to occur in this market and it is in Click2learn’s interests to be a leader in this consolidation;

 

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  the risk that Click2learn could be lose its position in the market as other players in the business performance and learning management software industry begin to consolidate;

 

  the prospect that Click2learn would not be able to demonstrate clear leadership in the marketplace and financial stability to consistently distinguish itself on a stand-alone basis from the competition;

 

  the belief that Click2learn would have more difficulty on a stand-alone basis investing in a global support structure required by enterprise customers; and

 

  the belief that Click2learn might not be able to compete effectively on a stand-alone basis against the larger enterprise software vendors who have announced their intention to compete more aggressively in this market;

 

  the potential for other third parties to enter into strategic relationships with or to acquire Click2learn or Docent;

 

  detailed financial analysis and pro forma and other information with respect to the companies presented to the Click2learn board of directors,

 

  the presentation by representatives of Craig-Hallum Capital Group LLC, including Craig-Hallum’s opinion as of October 20, 2003, subject to the assumptions and considerations in its opinion, that the consideration to be paid to the stockholders of Click2learn pursuant to the transaction was fair from a financial point of view to Click2learn (please read Annex B carefully and see “Opinion of Click2learn’s Financial Advisor” beginning on page 55);

 

  the expectation that the transaction will be treated as a tax-free reorganization and/or a tax-free exchange for United States federal income tax purposes;

 

  the expected impact of the transaction on Click2learn’s customers, strategic partners and employees;

 

  the results of the due diligence investigation of Docent performed by Click2learn’s management, legal and financial advisors; and

 

  the interests of the officers and directors of Docent in the transaction, including the matters disclosed under “Interests of Click2learn directors, officers and affiliates in the transaction” beginning on page 70.

 

The Click2learn board of directors also identified and considered a variety of potentially negative factors in its deliberations concerning the transaction, including, but not limited to:

 

  the risk that the potential benefits sought in the transaction might not be fully realized;

 

  the possibility that the transaction might not be consummated despite the parties’ efforts even if approved by stockholders;

 

  the effect of public announcement of the transaction on:

 

  Click2learn’s ability to attract and retain key management, marketing and technical personnel, and

 

  the progress and status of certain projects and customer accounts;

 

  the significant adverse impact to the net income of the combined company that will arise as a result of the impact of purchase accounting for the transaction;

 

  the substantial costs to be incurred in connection with the transaction, including costs of integrating the businesses and transaction expenses arising from the transaction;

 

  the risk that, despite the efforts of the combined company, key technical and management personnel might not remain employed by the combined company;

 

  the challenges of integrating the businesses of Click2learn and Docent, which may be enhanced by the geographic separation of the companies;

 

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  the risk that Click2learn will not be able to pursue other potential business transactions as a result of the restrictions on the conduct of Click2learn’s business that are in effect through the closing of the transaction or the termination of the merger agreement; and

 

  other risks described in the section of this joint proxy statement/prospectus entitled “ RISK FACTORS” beginning on page 21.

 

The foregoing discussion of the information and factors considered by the Click2learn board of directors is not intended to be exhaustive but includes the material factors considered by the Click2learn board. In view of the complexity and wide variety of information and factors, both positive and negative considered by the Click2learn board, it did not find it practical to quantify, rank or otherwise assign relative or specific weights to the factors considered. In addition, the Click2learn board did not reach any specific conclusion with respect to each of the factors considered, or any aspect of any particular factor. Instead, the Click2learn board conducted an overall analysis of the factors described above, including discussions with Click2learn’s management and legal, financial and accounting advisors. In considering the factors described above, individual members of the Click2learn board may have given different weight to different factors. The Click2learn board considered all these factors as a whole and believed the factors supported its determination to approve the transaction.

 

Recommendation of Click2learn’s board of directors

 

After taking into consideration all of the factors set forth above, the Click2learn board of directors concluded that the transaction was advisable, fair to and in the best interests of, Click2learn and its stockholders, approved the transaction and the merger agreement, and recommends that Click2learn stockholders vote in favor of approval and adoption of the merger agreement. In considering the recommendation by the Click2learn board that you vote in favor of the merger agreement, you should be aware that some directors and officers of Click2learn have interests in the transaction that are different from, or are in addition to, the interests of Click2learn’s stockholders generally. Please see the section entitled “Interests of Click2learn directors, officers and affiliates in the transaction” beginning on page 70 of this joint proxy statement/prospectus.

 

Docent’s reasons for the transaction

 

In reaching its decision to approve and adopt the merger agreement and the Docent merger, the Docent board of directors consulted with Docent’s management and its financial and legal advisors, and considered a number of factors. In its decision to recommend and approve the transaction, the most important benefits identified by the board of directors of Docent were the following:

 

  the potential strategic benefits of the transaction including:

 

  the belief that the combined company can be a strong, viable leader in the business performance and learning management software industry,

 

  the belief that the combined company can better serve its customers,

 

  the belief that the combined company can provide the market with the most comprehensive set of innovative technologies,

 

  the belief that the complementary product and service offerings of the two companies will allow the combined company to better address customer demand, which will yield additional revenue opportunities,

 

  the potential for a more expansive customer base and broader market reach,

 

  the potential for an enhanced network of strategic partners and the benefits such a network would provide to the combined company’s customers,

 

  the potential of combining two leading research and development services and customer support teams, and

 

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  the increased financial strength and operational efficiencies that the combined company can potentially deliver;

 

  historical information concerning Docent’s and Click2learn’s respective businesses, prospects, financial performance and condition, operations, technology, management and competitive position, including public reports concerning results of operations for each company as filed with the SEC;

 

  Docent management’s view of the financial condition, results of operations and businesses of Docent and Click2learn before and after giving effect to the transaction including:

 

  the belief that the combined company could experience faster revenue growth and achieve positive cash flow and profitability quicker than Docent could on a stand-alone basis;

 

  the belief that the combined company’s balance sheet will be viewed by customers as stronger than Docent’s balance sheet on a stand-alone basis and that the combined company could therefore considered as more financially viable,

 

  the belief that the combined company will be able to achieve cost synergies in the areas of corporate overhead and management, and

 

  the belief that the combined company will be able to leverage the investment made by Click2learn in its research and development and support operations in India;

 

  current financial market conditions and historical market prices, volatility and trading information with respect to Docent’s common stock and Click2learn’s common stock which revealed among other things that:

 

  the common stock of each company, while volatile, had traded in similar ranges over the past twelve months and

 

  as a result of the current market conditions, both companies had comparable market capitalizations, which justified a merger of equals transaction on the terms proposed;

 

  the consideration to be received by Docent’s and Click2learn’s respective stockholders as a result of the transaction and the relationship between the current and historical market values of Docent common stock and Click2learn common stock and a comparison of comparable transactions;

 

  the opportunity for Docent’s stockholders to participate in the potential for growth of the combined company after the transaction;

 

  the belief that the terms of the merger agreement, including the parties’ representations, warranties and covenants, and the conditions to their respective obligations, are reasonable;

 

  the prospects of Docent as an independent company including:

 

  the belief that consolidation is likely to occur in this market and it is in Docent’s interests to be a leader in this consolidation;

 

  the risk that Docent could be lose its position in the market as other players in the business performance and learning management software industry begin to consolidate;

 

  the prospect that Docent would not be able to demonstrate clear leadership in the marketplace and financial stability to consistently distinguish itself on a stand-alone basis from the competition;

 

  the belief that Docent would have more difficulty on a stand-alone basis investing in a global support structure required by enterprise customers; and

 

  the belief that Docent might not be able to compete effectively on a stand-alone basis against the larger enterprise software vendors who have announced their intention to compete more aggressively in this market;

 

  the potential for other third parties to enter into strategic relationships with or to acquire Docent or Click2learn;

 

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  detailed financial analysis and pro forma and other information with respect to the companies presented to the Docent board of directors,

 

  the presentation by representatives of C.E. Unterberg, Towbin, including C.E. Unterberg, Towbin’s opinion as of October 20, 2003, subject to the assumptions and considerations in its opinion, that the consideration to be paid to the stockholders of Docent pursuant to the Docent merger was fair from a financial point of view to Docent (please read Annex C carefully and see “Opinion of Docent’s Financial Advisor” beginning on page 62);

 

  the expectation that the transaction will be treated as a tax-free reorganization and/or a tax-free exchange for United States federal income tax purposes;

 

  the expected impact of the transaction on Docent’s customers, strategic partners and employees;

 

  the results of the due diligence investigation of Click2learn performed by Docent’s management, legal and financial advisors; and

 

  the interests of the officers and directors of Docent in the transaction, including the matters disclosed under “Interests of Docent directors, officers and affiliates in the transaction” beginning on page 71.

 

The Docent board of directors also identified and considered a variety of potentially negative factors in its deliberations concerning the transaction, including, but not limited to:

 

  the risk that the potential benefits sought in the transaction might not be fully realized;

 

  the possibility that the transaction might not be consummated despite the parties’ efforts, even if approved by stockholders;

 

  the effect of public announcement of the transaction on:

 

  Docent’s ability to attract and retain key management, marketing and technical personnel, and

 

  the progress and status of certain projects and customer accounts;

 

  the significant adverse impact to the net income of the combined company that will arise as a result of the impact of purchase accounting for the transaction;

 

  the substantial costs to be incurred in connection with the transaction, including costs of integrating the businesses and transaction expenses arising from the transaction;

 

  the risk that, despite the efforts of the combined company, key technical and management personnel might not remain employed by the combined company;

 

  the challenges of integrating the businesses of Docent and Click2learn, which may be enhanced by the geographic separation of the companies;

 

  the risk that Docent will not be able to pursue other potential business transactions as a result of the restrictions on the conduct of Docent’s business that are in effect through the closing of the transaction or the termination of the merger agreement; and

 

  various other risks described in the section of this joint proxy statement/prospectus entitled “RISK FACTORS” beginning on page 21.

 

The foregoing discussion of the information and factors considered by the Docent board of directors is not intended to be exhaustive but includes the material factors considered by the Docent board. In view of the complexity and wide variety of information and factors, both positive and negative considered by the Docent board, it did not find it practical to quantify, rank or otherwise assign relative or specific weights to the factors considered. In addition, the Docent board did not reach any specific conclusion with respect to each of the factors considered, or any aspect of any particular factor. Instead, the Docent board conducted an overall analysis of the factors described above, including discussions with Docent’s management and legal, financial and accounting

 

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advisors. In considering the factors described above, individual members of the Docent board of directors may have given different weight to different factors. The Docent board considered all these factors as a whole and believed the factors supported its determination to approve the transaction.

 

Recommendation of Docent’s board of directors

 

After taking into consideration all of the factors set forth above, the Docent board of directors concluded that the transaction was advisable, fair to and in the best interests of, Docent and its stockholders, approved the transaction and the merger agreement, and recommends that Docent stockholders vote in favor of approval and adoption of the merger agreement. In considering the recommendation by the Docent board that you vote in favor of the merger agreement, you should be aware that some directors and officers of Docent have interests in the transaction that are different from, or are in addition to, the interests of Docent’s stockholders generally. Please see the section entitled “Interests of Docent directors, officers and affiliates in the transaction” beginning on page 71 of this joint proxy statement/prospectus.

 

Opinion of Click2learn’s financial advisor

 

Click2learn retained Craig-Hallum Capital Group LLC, pursuant to an engagement letter dated September 25, 2003, to render an opinion as to the fairness of the exchange ratio that will result in the Click2learn stockholders owning approximately 52% of Newco (which we refer to as the Click2learn exchange ratio), from a financial point of view, to the stockholders of Click2learn.

 

In a meeting of the board of directors of Click2learn on October 20, 2003 held to evaluate the proposed transaction, Craig-Hallum delivered its written opinion to the board of directors to the effect that as of October 20, 2003 and based on the assumptions made, matters considered and limits of its review set forth in its written opinion, the Click2learn exchange ratio was fair from a financial point of view to the holders of Click2learn common stock. The Click2learn exchange ratio was determined on the basis of negotiations between Click2learn and Docent and was approved by the Click2learn board of directors. On January 26, 2004, the parties agreed to amend the merger agreement to change the Click2learn exchange ratio from .4144 to .3188 and the Docent exchange ratio from .9525 to .7327 in order to ensure that Newco common stock will meet the minimum bid price requirement for listing on the Nasdaq National Market. As a result of this change, the number of shares of Newco to be issued in connection with the transaction was reduced on a pro forma basis from 26.0 million to 20.0 million and the relative ownership percentages remain unchanged. Since the amendments have no economic effect, the analyses performed for, and the conclusions drawn in, Craig-Hallum’s fairness opinion are unaffected.

 

The full text of Craig-Hallum’s opinion dated October 20, 2003, attached as Annex B, describes the assumptions made, general procedures followed, matters considered and limitations on the scope of review undertaken by Craig-Hallum in rendering its opinion. The Craig-Hallum opinion was prepared for the use and benefit of the Click2learn board of directors as one element in its consideration of the transactions contemplated by the parties, did not address the underlying business decision by Click2learn to engage in the transaction, and does not constitute a recommendation as to how any stockholder should vote without respect to the transaction. The following summary of Craig-Hallum’s opinion is qualified by reference to the full text of the Craig-Hallum opinion.

 

Craig-Hallum’s opinion relates to the relative values of Click2learn and Docent. Craig-Hallum did not express any opinion as to what the value of Newco shares would be when issued in the transaction or the price at which Newco shares would trade or otherwise be transferable subsequent to the transaction. Craig-Hallum was not requested to consider, and its opinion does not constitute a recommendation, of the relative merits of the transaction as compared to any alternative business strategies or transactions that might be available for Click2learn.

 

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In conducting its analysis and rendering its opinion as expressed herein, Craig-Hallum reviewed and considered such financial and other factors as it deemed appropriate under the circumstances including, among other things, the following:

 

  the merger agreement;

 

  publicly available financial statements and other information of Click2learn and Docent;

 

  certain internal financial statements and other historical financial and operating data concerning Click2learn prepared by the management of Click2learn;

 

  certain internal financial statements and other historical financial and operating data concerning Docent prepared by the management of Docent;

 

  certain financial projections prepared by the respective management of Click2learn and Docent;

 

  past and current business operations and prospects of Click2learn as provided by senior management of Click2learn;

 

  past and current business operations and prospects of Docent as provided by senior management of Docent;

 

  certain strategic, financial and operational benefits expected by the respective senior management of Docent and Click2learn to be derived from the transaction;

 

  the potential pro-forma impact of the transactions contemplated under the merger agreement on, among other things, Newco’s earnings per share, cash flow, consolidated capitalization and financial ratios;

 

  information prepared by the members of the respective senior management teams of Click2learn and Docent relating to the relative contributions of Click2learn and Docent to the combined company;

 

  the reported prices and trading activity for Click2learn’s common stock and Docent’s common stock;

 

  the financial performance, the price and trading activity for the equity securities of certain other publicly-traded companies with businesses that Craig-Hallum considered relevant to its inquiry; and

 

  the financial terms of certain business combinations to the extent publicly available involving companies with businesses that Craig-Hallum considered relevant to its inquiry.

 

For purposes of rendering its opinion, based on Click2learn’s direction and with its consent, Craig-Hallum assumed that, in all respects material to its analysis, the representations and warranties of Click2learn contained in the merger agreement were true and correct, Newco, Click2learn and Docent would each perform all of the covenants and agreements to be performed by each of them under the merger agreement, and all of the conditions to the obligations of Click2learn to consummate the transactions contemplated under the merger agreement would be satisfied without any waiver thereof.

 

Moreover, Craig-Hallum in its review and analysis and in rendering its opinion, with Click2learn’s permission, assumed and relied upon the accuracy and completeness of all information provided to Craig-Hallum by the respective managements of Click2learn and Docent, as well as publicly available information. Craig-Hallum was not engaged, and did not assume responsibility, to independently verify this information. Craig-Hallum also assumed, with Click2learn’s consent:

 

  that Click2learn and Docent were not aware of any facts that would make such information inaccurate or misleading;

 

  that with respect to financial forecasts received from the respective management of Click2learn and Docent, as well as information relating to certain strategies, financial and operational benefits anticipated from the transaction, that such forecasts and information were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of the future financial condition and performance of Click2learn, Docent, and Newco, respectively;

 

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  that the transaction would be consummated in accordance with the terms set forth in the merger agreement without material modification or waiver, including among other things that the transaction would constitute a tax-free reorganization and/or a tax-free exchange for United States federal income tax purposes; and

 

  that all legal advice given to the board of directors of Click2learn by its counsel was correct and Craig-Hallum made no independent investigations of any legal matters affecting Click2learn or Docent.

 

In accordance with Click2learn’s instructions, Craig-Hallum did not perform an independent evaluation or appraisal of any of the respective properties, assets or liabilities (contingent or otherwise) of Click2learn or Docent and was not furnished with any such valuations or appraisals. In addition, Craig-Hallum did not assume any obligation to conduct any physical inspection of the properties or facilities of Click2learn or Docent.

 

Craig-Hallum’s opinion was limited to the fairness, from a financial point of view, to the holders of Click2learn’s common stock, of the Click2learn exchange ratio pursuant to the merger agreement. According to the terms of its engagement agreement with Click2learn, although events occurring after the date hereof may materially affect the assumptions used in preparing its opinion, Craig-Hallum does not have any obligation to update, revise or reaffirm its opinion.

 

Summary of Financial Analyses Performed by Craig-Hallum Capital Group LLC

 

The following is a summary of the material financial analyses performed by Craig-Hallum in connection with rendering its opinion.

 

Implied Click2learn Transaction Multiple Calculations. Craig-Hallum calculated the implied offer price for Click2learn as a result of the transaction to be $1.79 for each share of Click2learn common stock by multiplying the ratio of the Click2learn exchange ratio to the Docent exchange ratio which is 0.4354 by Docent’s closing price per share of $4.10 on October 17, 2003. Craig-Hallum calculated the current equity value of Click2learn to be $58.7 million by multiplying the closing price per share for Click2learn’s common stock on October 17, 2003 of $1.80 by the total number of shares of outstanding Click2learn common stock, including net shares issuable upon the exercise of stock options and warrants. Craig-Hallum then calculated the current enterprise value of Click2learn as a separate entity to be $46.2 million by subtracting net cash and cash equivalents of $12.6 million from Click2learn’s current equity value as a separate entity of $58.7 million. Craig-Hallum used the implied offer price and the ratio of the Click2learn exchange ratio to the Docent exchange ratio in its Premium to Historical Stock Price and Exchange Ratio Analysis and in its Stock Trading Analysis. Craig-Hallum used the current equity value and the current enterprise value in its Comparable Public Company Analysis.

 

Premium to Historical Stock Price and Exchange Ratio. Using publicly available information, Craig-Hallum calculated the average premium to historical stock price for Click2learn common shares over certain trading periods ending on October 17, 2003. The average premium to historical stock price was calculated by comparing the actual daily stock price of Click2learn over certain periods to the implied offer price of $1.79 in the transaction and averaging them over such period. The resulting average premium to historical stock price and exchange ratio for the periods up to and including October 17, 2003, were as follows:

 

     Stock
Price


   %
Premium


 

Current

   $ 1.80    -0.8 %

10 Day Average

   $ 1.81    -1.4 %

1 Month Average

   $ 1.84    -3.0 %

3 Month Average

   $ 1.84    -3.0 %

6 Month Average

   $ 1.72    3.8 %

 

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Craig-Hallum observed that the implied offer price of Click2learn common stock in the transaction of $1.79 was within 5% of the average closing stock price during all above periods prior to October 17, 2003, and was at a premium to the average closing stock price of Click2learn common stock for the 6-month period prior to October 17, 2003.

 

The average exchange ratio for a relevant period was calculated by dividing the daily stock price of Click2learn by the daily stock price of Docent for the relevant periods and averaging them over such period. The average relative exchange ratio, as well as the range of high and low relative exchange ratios, was compared over certain periods to the relative exchange ratio in the transaction of 0.4354. The resulting comparison of relative exchange ratios for the periods up to and including October 17, 2003, were as follows:

 

     High

   Average

   Low

Current

   0.439x    0.439x    0.439x

10 Day Average

   0.482x    0.446x    0.424x

1 Month Average

   0.522x    0.468x    0.424x

3 Months Average

   0.610x    0.490x    0.413x

6 Months Average

   0.674x    0.482x    0.320x

 

Craig-Hallum observed that the proposed relative exchange ratio in the transaction of 0.4354 was within the range of high and low relative exchange ratios for the 10-day, 1 month, 3 month and 6 month periods prior to October 17, 2003. Craig-Hallum also observed that the proposed relative exchange ratio in the merger of 0.4354 was within 1% of the current relative exchange ratios as of October 17, 2003.

 

Stock Trading Analysis. Craig-Hallum reviewed the per share daily closing market prices of Click2learn and Docent for the 10-day, one-month, three-month, and six-month periods ended October 17, 2003. The high, average and low prices for shares of Click2learn and Docent during the period were as follows:

 

CLICK2LEARN

 

     High

   Average

   Low

6 Months

   $ 2.38    $ 1.72    $ 1.14

3 Months

   $ 2.24    $ 1.84    $ 1.57

1 Month

   $ 2.03    $ 1.84    $ 1.73

10 Trading Days

   $ 1.90    $ 1.81    $ 1.73

 

DOCENT

 

     High

   Average

   Low

6 Months

   $ 4.20    $ 3.56    $ 2.65

3 Months

   $ 4.20    $ 3.77    $ 3.50

1 Month

   $ 4.20    $ 3.93    $ 3.68

10 Trading Days

   $ 4.20    $ 4.07    $ 3.88

 

Craig-Hallum observed that the implied offer price for Click2learn of $1.79 was within the range of the 10-day, one, three and six month trading ranges of the Click2learn common stock.

 

Comparable Public Company Analysis. Using publicly available Wall Street research analyst forecasts, Craig-Hallum compared certain financial, operating and stock market information and ratios for Click2learn with the corresponding data of seven publicly traded companies engaged in business that Craig-Hallum judged to be reasonably comparable to Click2Learn. The selected publicly traded companies were:

 

  Centra Software, Inc.

 

  DigitalThink, Inc.

 

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  Docent, Inc.

 

  Lightspan, Inc.

 

  Plato Learning, Inc.

 

  Saba Software, Inc.

 

  Systems & Computer Technology Corp.

 

Using the equity value of $58.7 million for Click2learn as set forth above, Craig-Hallum calculated a multiple of revenue for Click2learn’s projected calendar year 2003 based on publicly available Wall Street research reports and discussions with Click2learn management. The table below summarizes the results of this analysis:

 

     Revenue

   Multiple

FY 2003

   $ 33.7    1.74x

 

Using the enterprise value of $46.2 million for Click2learn which was calculated as set forth above, Craig-Hallum calculated a multiple of revenue for Click2learn’s projected calendar year 2003 based on publicly available Wall Street research reports and discussions with Click2learn management. The table below summarizes the results of this analysis:

 

     Revenue

   Multiple

FY 2003

   $ 33.7    1.37x

 

Craig-Hallum determined the ratio of market capitalization to actual and estimated revenues for fiscal years 2002 and 2003, respectively, and the ratio of enterprise value to estimated revenue for fiscal year 2003. Estimated revenue figures for 2003 were based on published research analyst reports. The following table represents the range of multiples, as well as mean and median, used by Craig-Hallum for the above companies:

 

     Mean

   Median

   Low

   High

2002 Revenue (Actual)

   1.91x    1.94x    1.19x    2.59x

2003 Revenue (Estimate)

   1.80x    1.84x    1.18x    2.50x

Enterprise Value

   1.49x    1.69x    0.79x    2.33x

 

Craig-Hallum then compared the range of revenue multiples to Click2learn’s actual 2002 revenue to Click2learn’s market cap multiple of 1.91x as of October 17, 2003. Craig-Hallum observed Click2learn’s 2002 revenue multiple to be well within the range of comparable company multiples, and in fact, equivalent to the mean peer group multiple.

 

For the year 2003, Craig-Hallum compared the range of revenue multiples to Click2learn’s estimated 2003 revenue to Click2learn’s market cap multiple of 1.74 as of October 17, 2003. Craig-Hallum observed Click2learn’s estimated 2003 revenue multiple to be well within the range of comparable company multiples.

 

Craig-Hallum compared the range of enterprise value multiples to Click2learn’s enterprise value multiple of 1.37x as of October 17, 2003. Craig-Hallum observed Click2learn’s enterprise value multiple to be well within the range of comparable company multiples.

 

Comparable Acquisition Analysis. Craig-Hallum reviewed certain publicly available information relating to a total of 53 selected prior acquisition transactions occurring from March 2000 to August 2003 that Craig-Hallum deemed to be reasonably similar to the transaction. All of these transactions were specifically in the systems software industry and showed other comparable characteristics.

 

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For each of these transactions, Craig-Hallum compared the “transaction value” as a multiple of the last twelve months revenue of the target company, market capitalization of the company at the time of transaction, and enterprise value at the time of transaction, where “transaction value” is generally defined as the sum of the per share offer price for the target company multiplied by the number of company shares outstanding and the number of target company options outstanding, net of option proceeds, plus the preferred equity at liquidation, if any, the short-term debt, the long-term debt and any minority interests, less cash, marketable securities and exercisable option proceeds. The following table shows the results of these analyses:

 

     Mean

   Median

   Low

   High

Revenue

   1.56x    1.12x    0.02x    8.34x

Market Capitalization

   1.62x    1.37x    0.13x    6.24x

Enterprise Value

   2.19x    2.06x    0.35x    7.18x

 

Craig-Hallum compared the foregoing range of revenue multiples to Click2learn’s revenue multiple of 1.91x. Craig-Hallum observed that this multiple was well within the range of comparable transaction multiples, and exceeded both the mean and median multiple.

 

Craig-Hallum compared the foregoing range of market cap multiples to Click2learn’s market cap multiple of 1.00x. Craig-Hallum observed that this multiple was well within the range of comparable transaction multiples.

 

Craig-Hallum compared the foregoing range of enterprise value multiples to Click2learn’s enterprise value multiple of 1.26x. Craig-Hallum observed that this multiple was well within the range of comparable transaction multiples.

 

It should be noted that no company utilized in the comparable public company analysis above is identical to Click2learn, nor are any of the comparable merger or acquisition transactions utilized in the Comparable Acquisition Analysis above identical to the transactions contemplated by the merger agreement. In evaluating companies identified by Craig-Hallum as comparable to Click2learn or transactions identified by Craig-Hallum as comparable to the transaction, Craig-Hallum made judgments and assumptions with regard to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Click2learn, such as the impact of competition on the business of Click2learn and Docent and the industry generally, industry growth and the absence of any material change in the financial condition and prospects of Click2learn, Docent or the industry or in the financial markets in general. Accordingly, a complete analysis cannot be limited to a quantitative review of these results and involves complex considerations and judgments concerning differences in financial and operating characteristics of the comparable companies and transactions and other factors that could affect the public trading values of such comparable companies to which they are being compared; mathematical analysis (such as determining the mean or the median) is not in itself a meaningful method of using selected transaction data. In addition, various analyses performed by Craig-Hallum incorporated projections prepared by research analysts using only publicly available information. These estimates may or may not prove to be accurate.

 

Relative Contribution Analysis—Implied Ownership. Craig-Hallum analyzed the relative contributions of Click2learn and Docent to revenue and gross profit of the combined entity for the years 2001, 2002 and 2003 using actual revenue and gross profit results and published Wall Street analysts’ forecasts, respectively, and information from Click2learn and Docent management. These analyses were performed without taking into account any potential synergies resulting from the transaction.

 

Using the forecasted revenue projections, Craig-Hallum observed the range of revenue contribution of Click2learn to Newco from 2001 to 2003 to be 51.7% to 52.7% and that the proposed ownership ratio for Click2learn in the transaction of 52% was within the range of the contribution analysis to the combined entity.

 

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Using the forecasted gross profit projections, Craig-Hallum observed the range of gross profit contribution of Click2learn to Newco from 2001 to 2003 to be 54.0% to 60.7% and that the proposed ownership ratio for Click2learn in the transaction of 52% was below the range of the contribution analysis to the combined entity; however, the 52% ownership ratio in the transaction was within 5% of the low range of gross profit contribution.

 

Relative Contribution Analysis—Contribution to Growth. Using actual revenue, gross profit and net income results and projections from Wall Street analysts’ research reports and information from Click2learn and Docent, Craig-Hallum also calculated the relative contributions of Click2learn and Docent to the projected growth in revenue, gross profit and net income of the combined entity for the years 2002 and 2003. These analyses were performed without taking into account any potential synergies resulting from the transaction.

 

Using the forecasted revenue, gross profit and net income projections, Craig-Hallum observed that range of contribution of Click2learn to growth in the metrics for Newco from 2002 to 2003 to be from 32.3% to 57.1%. The proposed ownership ratio for Click2learn in the transaction of 52% is within the range of the contribution analysis to the combined entity.

 

The foregoing descriptions are intended to summarize the material financial analyses performed by Craig-Hallum for the Click2learn board, but do not purport to be a complete description of all the analyses underlying the Craig-Hallum opinion. The preparation of a fairness opinion is a complex analytical process involving various determinations as to the appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, such an opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Craig-Hallum did not attribute any particular weight to any analysis and factor. Accordingly, Craig-Hallum believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering all analyses, would create an incomplete view of the process underlying its opinion.

 

In performing its analyses, numerous assumptions were made with respect to industry performance, general business, economic, market and financial conditions and other matters, many of which are beyond the control of Craig-Hallum, Click2learn or Docent and involve the application of complex methodologies and educated judgment. Any estimates contained in the analyses performed by Craig-Hallum are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by such analyses. Additionally, estimates of the value of businesses or securities do not purport to be appraisals or to reflect the prices at which such businesses or securities might actually be sold. Accordingly, such analyses and estimates are inherently subject to substantial uncertainty. In addition, the Craig-Hallum opinion and the presentation to the Click2learn board of directors were among many factors taken into consideration by the Click2learn board in making its determination to approve, and to recommend that its stockholders approve, the merger agreement and the transaction. The terms of the transaction, including the Click2learn exchange ratio, were determined through negotiations between Click2learn and Docent and were not determined or recommended by Craig-Hallum. Consequently, the Craig-Hallum analyses should not be viewed as determinative of the decision of the Click2learn board or Click2learn management with respect to the fairness of the Click2learn exchange ratio.

 

The Click2learn board of directors selected Craig-Hallum to act as its financial advisor because of its experience in transactions similar to this transaction and because Craig-Hallum is familiar with Click2learn and its business, as well as the business performance and learning management software market. As part of Craig-Hallum’s investment banking businesses, Craig-Hallum is continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, leveraged buyouts, negotiated underwritings, secondary distributions of listed and unlisted securities and private placements.

 

Under the terms of the engagement letter between Craig-Hallum and Click2learn, Craig-Hallum provided the financial fairness opinion in connection with the transaction, and Click2learn agreed to pay Craig-Hallum a fee of $475,000, regardless of the conclusion expressed. In addition, Click2learn agreed to indemnify Craig-

 

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Hallum and its affiliates, their respective directors, officers, agents and employees and each person, if any, against certain liabilities and expenses, including certain liabilities under federal securities laws, related to or arising out of Craig-Hallum’s engagement.

 

In connection with Newco’s application for listing on the Nasdaq National Market, Newco agreed to pay Craig-Hallum a fee of $50,000 for a price-per-share valuation analysis.

 

In the past, Craig-Hallum provided financial advisory and financing services to Click2learn and may continue to do so and has received, and may receive fees for rendering of such services. Since January 1, 2002, Click2learn has paid fees to Craig-Hallum in the aggregate amount of $702,392, not including the fee for the fairness opinion in this transaction or the Nasdaq valuation analysis, and issued Craig-Hallum warrants to purchase 373,032 shares of Click2learn common stock with an exercise prize of $1.90. In rendering its fairness opinion, Craig-Hallum acted on behalf of the board of directors of Click2learn. In the ordinary course of its business, Craig-Hallum may actively trade in the securities of Click2learn and Docent, for its own account and for the accounts of its customers. Accordingly, Craig-Hallum may at any time hold a long or short position in such securities.

 

Opinion of Docent’s financial advisor

 

Pursuant to an engagement letter dated August 13, 2003, Docent engaged C.E. Unterberg, Towbin to provide financial advisory and investment banking services in connection with Docent’s exploration of strategic transactions and to render an opinion as to the fairness of the exchange ratio that will result in the Docent stockholders owning approximately 48% of Newco (which we refer to as the Docent exchange ratio), from a financial point of view, to the stockholders of Docent. In rendering this opinion, C.E. Unterberg, Towbin used the Docent exchange ratio of .9525 and the Click2learn exchange ratio of .4144. On January 26, 2004, the parties agreed to amend the merger agreement to change the Docent exchange ratio from .9525 to .7327 and the Click2learn exchange ratio from .4144 to .3188 in order to ensure that Newco common stock will meet the minimum bid price requirement for listing on the Nasdaq National Market. As a result of this change, the number of shares of Newco to be issued in connection with the transaction was reduced on a pro forma basis from approximately 26.0 million to approximately 20.0 million and the relative ownership percentages remain unchanged. Since the amendments have no economic effect, the analyses performed for, and the conclusions drawn in, C.E. Unterberg, Towbin’s fairness opinion are unaffected.

 

In a meeting of the Docent board of directors on October 20, 2003 held to evaluate the proposed transaction, C.E. Unterberg, Towbin delivered to the Docent board its oral opinion, subsequently confirmed in writing on the same day, that, as of that date and based on the assumptions made, the matters considered and the limitations on the review undertaken described orally to the Docent board and in the written opinion, the Docent exchange ratio was fair, from a financial point of view, to the stockholders of Docent. The Docent exchange ratio was determined through negotiations between the respective managements of Docent and Click2learn. C.E. Unterberg, Towbin assisted Docent management in the negotiations leading to an agreement on the principal structural terms of the transaction.

 

The full text of the C.E. Unterberg, Towbin opinion, which sets forth, among other things, assumptions made, matters considered and limitations on the review undertaken, is attached as Annex C. The summary of the C.E. Unterberg, Towbin opinion set forth in this joint proxy statement/prospectus is qualified by reference to the full text of the C.E. Unterberg, Towbin opinion. We encourage Docent stockholders and Click2learn stockholders to read the C.E. Unterberg, Towbin opinion in its entirety. The C.E. Unterberg, Towbin opinion was prepared for the benefit and use of the Docent board of directors in connection with its evaluation of the transaction and does not constitute a recommendation to stockholders of Docent or Click2learn as to how they should vote, or take any other action, with respect to the transaction.

 

The C.E. Unterberg, Towbin opinion does not address:

 

  the relative merits of the transaction and the other business strategies that the Docent board has considered or may be considering; or

 

  the underlying business decision of the Docent board to proceed with the transaction.

 

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C.E. Unterberg, Towbin did not express any opinion as to:

 

  the value of any employee agreement or other arrangement entered into in connection with the transaction;

 

  any tax or other consequences that might result from the transaction; or

 

  what the value of Newco’s common stock will be when issued to Docent’s stockholders and Click2learn’s stockholders pursuant to the transaction or the price at which the shares of Newco common stock that are issued pursuant to the transaction may be traded in the future.

 

In connection with the preparation of the C.E. Unterberg, Towbin opinion, among other things, C.E. Unterberg:

 

  reviewed certain publicly available financial statements and other business and financial information of Click2learn and Docent;

 

  reviewed certain internal financial statements, forecasts and other financial and operating data concerning Click2learn and Docent prepared by the managements of Click2learn and Docent, respectively;

 

  reviewed with the management of Click2learn certain publicly available estimates of research analysts relating to Click2learn;

 

  held discussions with the respective managements of Click2learn and Docent concerning the businesses, past and current operations, financial conditions and future prospects of both Click2learn and Docent, independently and combined, including discussions with the managements of Click2learn and Docent concerning synergies that are expected to result from the transaction as well as their views regarding the strategic rationale for the transaction;

 

  reviewed the financial terms and conditions set forth in the last draft of the merger agreement reviewed by C.E. Unterberg, Towbin;

 

  reviewed the stock price and trading history of Click2learn common stock and Docent common stock;

 

  compared the financial terms of the transaction with the financial terms, to the extent publicly available, of other transactions that C.E. Unterberg, Towbin deemed relevant;

 

  performed a pro forma merger analysis of the combined company;

 

  prepared an analysis of the relative contributions of Click2learn and Docent to Newco;

 

  prepared an analysis of the stock price performance of Click2learn common stock and Docent common stock with that of certain other publicly traded companies comparable with Click2learn and Docent, respectively, and the Nasdaq composite index;

 

  participated in discussions and negotiations among representatives of Click2learn and Docent and their financial and legal advisors; and

 

  made such other studies and inquiries, and reviewed such other data, as it deemed relevant.

 

In its review and analyses, and in arriving at its opinion, C.E. Unterberg, Towbin assumed and relied on the accuracy and completeness of the financial and other information provided to it (including information furnished to it verbally or otherwise discussed with it by the managements of Click2learn and Docent) or publicly available and neither attempted to verify nor assumed responsibility for verifying any such information. Furthermore, C.E. Unterberg, Towbin did not obtain or make, or assume any responsibility for obtaining or making, any independent evaluation or appraisal of the properties, assets or liabilities (contingent or otherwise) of Click2learn or Docent, nor was C.E. Unterberg, Towbin furnished with any such evaluation or appraisal.

 

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With respect to the financial forecasts and projections (and the assumptions and basis therefore) for each of Click2learn and Docent that C.E. Unterberg, Towbin reviewed, it assumed that such forecasts and projections:

 

  had been reasonably prepared in good faith on the basis of reasonable assumptions; and

 

  reflected the best available estimates and judgments as to the future financial condition and performance of Docent and Click2learn, respectively, at such time.

 

In addition, C.E. Unterberg, Towbin assumed that the transaction will be consummated upon the terms set forth in the merger agreement without material alteration thereof and that the transaction will be treated as a tax-free reorganization pursuant to the Internal Revenue Code of 1986, as amended.

 

C.E. Unterberg, Towbin relied as to all legal matters relevant to rendering its opinion on the advice of its counsel.

 

Although developments following the date of the C.E. Unterberg, Towbin opinion may affect the conclusion expressed in its opinion, C.E. Unterberg, Towbin assumed no obligation to update, revise or reaffirm its opinion. The C.E. Unterberg, Towbin opinion is necessarily based on market, economic and other conditions as in effect on, and information made available to C.E. Unterberg, Towbin as of, the date of the C.E. Unterberg, Towbin opinion, and C.E. Unterberg, Towbin has disclaimed any undertaking or obligation to advise any person of any change in any matter affecting the opinion which may come or be brought to its attention after the date of the opinion. The C.E. Unterberg, Towbin opinion is limited to the fairness, from a financial point of view and as of the date thereof, of the Docent exchange ratio.

 

Summary of Financial Analyses Performed by C.E. Unterberg, Towbin

 

The following is a summary of the material financial analyses performed by C.E. Unterberg, Towbin in connection with rendering the C.E. Unterberg, Towbin opinion. The summary of the financial analyses is not a complete description of all the analyses performed by C.E. Unterberg, Towbin. Certain of the information in this section is presented in a tabular form. In order to better understand the financial analyses performed by C.E. Unterberg, Towbin, these tables must be read together with the text of each summary. The C.E. Unterberg, Towbin opinion is based on the totality of the various analyses performed by C.E. Unterberg, Towbin and no particular portion of the analyses has any merit standing alone.

 

Historical Exchange Ratio Analysis. C.E. Unterberg, Towbin compared the average ratio of the closing price of Click2learn common stock to the closing price of Docent common stock over various periods ending October 17, 2003 to the ratio of Click2learn exchange ratio to the Docent exchange ratio. The following table sets forth the average ratio of the closing prices of Click2learn common stock compared to Docent common stock for the various periods ending October 17, 2003. The ratio of the Click2learn exchange ratio to the Docent exchange ratio is 2.2987. C.E. Unterberg, Towbin observed that this ratio of exchange ratios was higher than the average ratios of the closing prices of the stocks for the various periods ending October 17, 2003. C.E. Unterberg, Towbin also observed that the relative 2.2987 exchange ratio resulted in an implied value of Docent common stock of $4.12 per share and a premium of approximately .5% to the $4.10 per share closing price of Docent common stock at October 17, 2003.

 

Period Ending October 17, 2003


   Average Ratio of
Closing Price of Click2learn
common stock compared to
Docent common stock


1 Trading Day

   2.278x

10 Trading Days

   2.238x

20 Trading Days

   2.152x

30 Trading Days

   2.112x

60 Trading Days

   2.078x

90 Trading Days

   2.027x

252 Trading Days

   2.268x

 

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Comparable Companies Analysis. Using publicly available information, C.E, Unterberg, Towbin compared certain financial measures and metrics of Docent and Click2learn to those of the following publicly traded companies in the eLearning, Employee Relationship Management and Enterprise Software sectors. The financial measures and metrics included market value, enterprise value, and enterprise value as a multiple of revenue.

 

Corporate e-Learning Companies


 

Employee Relationship
Management Companies


 

Enterprise Software Companies


Centra Software, Inc.

 

Kronos, Incorporated

 

Blue Martini Software, Inc.

DigitalThink, Inc.

 

Lawson Software, Inc.

 

Interwoven, Inc.

Saba Software, Inc.

 

Oracle Corporation

 

MatrixOne, Inc.

SkillSoft plc

 

Peoplesoft, Inc.

 

SeeBeyond Technology Corporation

   

SAP AG

   
   

TALX Corporation

   

 

C.E. Unterberg, Towbin concluded that these companies trade primarily based on the individual company’s ratio of enterprise value to revenue.

 

The following table represents the means, medians and range of ratios of enterprise value as a multiple of revenue for the above companies:

 

Corporate e-Learning Companies

   Mean

   Median

   Low

   High

2002 Revenues

   3.7x    2.4x    0.7x    9.5x

2003 Estimated Revenues

   2.3x    1.9x    0.9x    4.6x

Employee Relationship Management Companies

                   

2002 Revenues

   4.0x    3.7x    1.7x    6.1x

2003 Estimated Revenues

   3.7x    3.0x    1.9x    5.8x

Enterprise Software Companies

                   

2002 Revenues

   1.2x    1.0x    0.7x    2.1x

2003 Estimated Revenues

   1.3x    1.1x    0.6x    2.5x

 

C.E. Unterberg, Towbin then compared the range of enterprise values as a multiple of revenue to the .8x multiple of Docent’s enterprise value as of October 17, 2003 as a multiple of Docent’s actual 2002 revenue. C.E. Unterberg, Towbin observed that this .8x multiple was within the range of comparable corporate e-learning company multiples and comparable enterprise software company multiples, but outside the range of comparable employee relationship management company multiples. C.E. Unterberg, Towbin also compared the range of enterprise values as a multiple of revenue to the .7x multiple of Docent’s enterprise value as of October 17, 2003 as a multiple of estimated 2003 revenue. C.E. Unterberg, Towbin observed that this .7x multiple was within the range of comparable enterprise software company multiples, but outside the range of comparable corporate e-learning company multiples and comparable employee relationship management company multiples.

 

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C.E. Unterberg, Towbin analyzed the ratio of enterprise value to revenue for the comparable companies and did not use means or medians for Docent because Docent, trading at an enterprise value as a multiple of revenue of .8x for 2002 and .7x for 2003, trades below the means and medians of the comparable companies which range from 1.2x-4.0x for the means and 1.0x to 3.7x for the medians. Based on this analysis and a review market conditions, C.E. Unterberg, Towbin applied a range of ratios of enterprise value to revenue of 0.7x to 1.0x to 2002 actual revenues for Docent and ratios of 0.6x and 1.2x to 2003 estimated revenues to reach a range of implied values for the Docent common stock, as set forth in the following table:

 

     Docent
Revenue


   Multiple
Range


   Implied Docent
Enterprise Value (1)


   Implied Docent
Equity Value


   Implied Value
Per Share (2)


2002 Revenues

   $27.8    0.7x - 1.0x    $19.5 - $27.8    $55.2 - $63.6    $3.92 - $4.51

2003 Estimated Revenues

   29.3    0.6x - 1.2x    $17.6 - $35.1    $53.4 - $70.9    $3.79 - $5.04

Notes:

(1) Enterprise value includes net debt of ($35.8) million
(2) Based on Docent’s fully diluted treasury shares of 14.1 million

 

C.E. Unterberg, Towbin observed that the implied value of Docent common stock of $4.12 per share based on the exchange ratio of .9525 was within the range of implied value per share that resulted from the application of the ratios of enterprise value to revenue.

 

No company compared in the comparable companies analysis is identical to Docent or Click2learn. Accordingly, an analysis of the results of the foregoing is not entirely mathematical and involves complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the acquisition, public trading and other values of the comparable companies or the company to which they are being compared.

 

Precedent Merger of Equals Analysis. Using publicly available information, C.E. Unterberg, Towbin analyzed the consideration offered and the implied transaction value premiums or discounts paid or proposed to be paid in selected merger of equals transactions in the technology industry, including:

 

Oplink Communications, Inc./Avanex Corporation (March 19, 2002)

 

Visionics Corporation/Identix, Inc. (February 22, 2002)

 

Proxim, Inc./Western Multiplex Corporation (January 17, 2002)

 

Virata Corporation/Globespan, Inc. (October 1, 2001)

 

Mission Critical Software, Inc./NetIQ Corporation (February 25, 2000)

 

In analyzing these “precedent transactions,” C.E. Unterberg, Towbin compared, among other things, the premiums and discounts paid to the one-day, one-week and one-month closing prices. All premiums and discounts for the precedent transactions were based on public information available at the time of the announcement.

 

The following table represents the premiums and discounts for the precedent transactions:

 

Premium and Discount Paid to


   Mean

    Median

    Low

    High

 

1 Day Prior Stock Price

   (2.4 )%   (7.3 )%   (9.0 )%   10.7 %

1 Week Prior Stock Price

   (7.8 )%   (6.9 )%   (28.1 )%   8.3 %

1 Month Prior Stock Price

   (11.4 )%   (10.3 )%   (30.8 )%   13.9 %

 

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C.E. Unterberg, Towbin observed that the discount paid to Docent’s 1 day prior stock price of $4.20 was 1.9% as of October 17, 2003, based on the implied price of $4.12, and that this discount was within the range of comparable premiums and discounts paid to the 1 day prior stock prices in the selected transactions. C.E. Unterberg, Towbin observed that the premium paid to the 1 week prior stock price of $4.05 was 1.7% as of October 17, 2003, based on the implied price of $4.12, and that this premium was within the range of comparable premiums and discounts paid to the 1 week prior stock prices in the selected transactions. C.E. Unterberg, Towbin observed that the premium paid to the 1 month prior stock price of $3.94 was 4.6% as of October 17, 2003, based on the implied price of $4.12, and that this premium was within the range of comparable premiums and discounts paid to the 1 month prior stock prices in the selected transactions.

 

Based on this information and other publicly available information, the following table illustrates the implied enterprise valuations, the implied equity valuations and the implied equity valuations per share for Docent derived from applying a range of premiums and discounts that C.E. Unterberg, Towbin derived from the precedent transactions. C.E. Unterberg, Towbin’s range of premiums paid takes into consideration the mean and median, as the range utilized encompasses both the mean and median of the premiums paid, as set forth in the following table:

 

Premium Paid to


  

Docent
Stock Price


   Premium Range

   Implied Docent
Enterprise
Value (1)


   Implied Docent
Equity Value


  

Implied Value
Per Share (2)


      Discount

      Premium

        

1 Day Prior Stock Price

   $ 4.20    (10.0)%   -   10.0%    $17.4 - $29.3    $53.2 - $65.1    $3.78 - $4.62

1 Week Prior Stock Price

   $ 4.05    (15.0)%   -   10.0%    $12.7 - $27.0    $48.5 - $62.7    $3.44 - $4.46

1 Month Prior Stock Price

   $ 3.94    (20.0)%   -   15.0%    $  8.6 - $28.0    $44.4 - $63.8    $3.15 - $4.53

Notes:

(1) Enterprise value includes net debt of ($35.8) million
(2) Based on Docent’s fully diluted treasury shares of 14.1 million

 

C.E. Unterberg, Towbin observed that the implied value of Docent common stock of $4.12 per share based on the exchange ratio of .9525 was within the range of implied value per share that resulted from applying the range of premiums and discounts derived from the precedent transactions.

 

No transaction compared in the precedent transaction analysis is identical to the transaction. Accordingly, an analysis of the results of the foregoing is not based entirely on the premium/(discount) of any one transaction or all the transactions to which they are being compared.

 

Contribution Analysis. Based on the companies’ internal forecasts and Wall Street financial analyst estimates, C.E. Unterberg, Towbin analyzed the respective contributions of Docent and Click2learn to the estimated revenues of the combined company for calendar year 2002, calendar year 2003, the third quarter of calendar year 2003 and the fourth quarter of calendar year 2003.

 

C.E. Unterberg, Towbin also compared the relative contributions of Docent and Click2learn to the pro forma revenues and gross profits of the combined company to the relative pro forma ownership interests in the combined company, as set forth in the following table. C.E. Unterberg, Towbin focused on the relative contribution of revenues and gross profit for determining the pro forma ownership percentage of Newco and the exchange ratio. C.E. Unterberg, Towbin noted that the relative ratio of contributions of operating income and cash earnings was not meaningful to the contribution analysis because they were based on negative numbers. Taken on a absolute basis, the magnitude of the negative numbers created a false impression as they implied that Docent should receive a larger ownership stake in Newco based on the larger operating and cash losses.

 

In making the determination that the operating income and cash earnings contributions were not meaningful, C.E. Unterberg, Towbin examined the relationship and trend of the operating income and cash earnings to the cash balances of Docent and Click2learn. C.E. Unterberg, Towbin noted that Docent’s cash and cash equivalents

 

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balance of $32.9 million was 2.2x larger than Click2learn’s cash and cash equivalents balance of $14.9 million as of September 30, 2003. Furthermore, C.E. Unterberg, Towbin noted that Docent’s operating and cash losses relative to Click2learn’s operating and cash loss were 2.3x and 2.0x larger on average over the time periods analyzed. C.E. Unterberg, Towbin noted that the trend of the operating and cash losses was improving proportionately for both Docent and Click2learn. C.E. Uunterberg Towbin concluded that the operating losses and negative cash earnings would not be meaningful in determining the relative pro forma ownership of Newco; however, the analysis was used to support the overall contribution considering operating losses, cash earnings, cash and cash equivalents.

 

     Docent (1)

     Click2learn (2)

     Amount

     %

     Amount

     %

Revenues

                             

Calendar year 2002

   $ 27.8      47.7%      $ 30.5      52.3%

Calendar year 2003

     29.3      48.0%        31.7      52.0%

Third Quarter 2003

     7.0      48.3%        7.5      51.7%

Fourth Quarter 2003

     7.5      48.4%        8.0      51.6%

Gross Profit

                             

Calendar year 2002

   $ 17.3      44.8%      $ 21.4      55.2%

Calendar year 2003

     20.0      46.2%        23.3      53.8%

Third Quarter 2003

     4.9      47.1%        5.5      52.9%

Fourth Quarter 2003

     5.3      47.0%        6.0      53.0%

Operating Income

                             

Calendar year 2002

   $ (24.4 )    NMF      $ (10.3 )    NMF

Calendar year 2003

     (10.6 )    NMF        (3.9 )    NMF

Third Quarter 2003

     (2.7 )    NMF        (1.3 )    NMF

Fourth Quarter 2003

     (2.0 )    NMF        (1.0 )    NMF

Cash Earnings(3)

                             

Calendar year 2002

   $ (21.8 )    NMF      $ (8.1 )    NMF

Calendar year 2003

     (9.6 )    NMF        (3.0 )    NMF

Third Quarter 2003

     0.3      NMF        (1.1 )    NMF

Fourth Quarter 2003

     (1.6 )    NMF        (0.8 )    NMF

Mean

            46.8%               53.2%

Median

            47.0%               53.0%

Market Cap (Basic)(4)

   $ 53.7      47.9%      $ 58.5      52.1%

Market Cap (Fully Diluted)(4)

   $ 57.7      48.6%      $ 61.0      51.4%

Enterprise Value(4)

   $ 22.0      31.2%      $ 48.4      68.8%
 
  (1) Figures based on public filings and management estimates.
  (2) Figures based on public filings and management estimates.
  (3) Net of amortization of intangible assets and stock-based compensation expense.
  (4) Based on Docent’s closing price of $4.10 and Click2learn’s closing price of $1.80 as of 10/17/03.

 

C.E. Unterberg, Towbin compared the respective contributions of Docent and Click2learn to the ownership of Newco that would result from the exchange ratios. C.E. Unterberg, Towbin observed that range of revenue contribution of Docent to Newco for calendar years 2002 and 2003 and the third and fourth quarters of 2003 ranged from 47.7% to 48.4% and that the proposed ownership ratio for Docent in the transaction of 48% was within this range. C.E. Unterberg, Towbin also observed that the proposed ownership ratio for Docent was slightly higher than the range of gross profit contribution for the same periods.

 

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Pro Forma Analysis. C.E. Unterberg, Towbin analyzed certain pro forma effects resulting from the transaction, including, among other things, the impact of the transaction on the projected revenues per share and earnings per share and earnings per share of the combined company for calendar year 2002 and calendar year 2003. C.E. Unterberg, Towbin observed that except for a $.01 decline in projected revenues per share in 2003, for Docent common stock the effects resulting from the transaction on revenues and earnings per share were positive.

 

Other Factors and Comparative Analysis. In rendering its opinion, C.E. Unterberg, Towbin considered:

 

  the history of trading prices and volume for Docent common stock for the period from October 17, 2002 to October 17, 2003;

 

  the history of trading prices and volume for Click2learn common stock for the period from October 17, 2002 to October 17, 2003; and

 

  selected published analysts’ reports on Click2learn.

 

The preparation of a fairness opinion is a complex process that involves various determinations as to the most appropriate and relevant methods of financial analysis and the application of these methods to the particular circumstances. Several analytical methodologies were employed and no one method of analysis should be regarded as critical to the overall conclusion reached by C.E. Unterberg, Towbin. Each analytical technique has inherent strengths and weaknesses, and the nature of the available information may further affect the value of particular techniques. The conclusions reached by C.E. Unterberg, Towbin are based on all analyses and factors taken as a whole and also on the application of C.E. Unterberg, Towbin’s experience and judgment. Such conclusions may involve significant elements of subjective judgment and qualitative analysis. C.E. Unterberg, Towbin therefore gives no opinion as to the value or merit of any one or more parts of the analysis that it performed standing alone. In performing its analyses, C.E. Unterberg, Towbin considered general economic, market and financial conditions and other matters, many of which are beyond the control of Docent and Click2learn. The analyses performed by C.E. Unterberg, Towbin are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than those suggested by such analyses.

 

The engagement letter between C.E. Unterberg, Towbin and Docent provides that, for its services, C.E. Unterberg, Towbin is entitled to receive $500,000 upon delivery of its opinion regardless of the conclusion expressed (which fee is credited against any subsequent transaction fee) and a transaction fee based on the value of Docent common stock which is payable upon the closing of a transaction. The transaction fee is comprised of $1 million plus a variable amount determined by reference to the value of the Docent common stock at closing. If the value of the Docent common stock at closing is $50 million or less the transaction fee will equal $1 million. If the value of the Docent common stock at closing exceeds $50 million, the transaction fee will be increased by the following percentages:

 

  2.0% of the value above $50 million up to and including $75 million,
  2.5% of the value above $75 million up to and including $100 million,
  3.0% of the value above $100 million.

 

At the time the transaction was announced the transaction fee would have equaled approximately $1.1 million and if the closing had occurred on January 23, 2004 the transaction fee would have equaled approximately $1.47 million. Docent has also agreed to reimburse C.E. Unterberg, Towbin for certain of its out-of-pocket expenses, including legal fees, and to indemnify and hold harmless C.E. Unterberg, Towbin and its affiliates and any director, employee or agent of C.E. Unterberg, Towbin or any of its affiliates, or any person controlling C.E. Unterberg, Towbin or its affiliates for certain losses, claims, damages, expenses and liabilities relating to or arising out of services provided by C.E. Unterberg, Towbin as financial advisor to Docent. The terms of the fee arrangement with C.E. Unterberg, Towbin, which Docent and C.E. Unterberg, Towbin believe are customary in transactions of this nature, were negotiated at arm’s length between Docent and C.E. Unterberg, Towbin, and the Docent board of directors was aware of such fee arrangements, including the fact that a significant portion of the

 

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fees payable to C.E. Unterberg, Towbin is contingent upon completion of the transaction. In the ordinary course of its business, C.E. Unterberg, Towbin may trade in Docent’s, Click2learn’s and Newco’s securities for its own account and the account of its customers and, accordingly, may at any time hold a long or short position in Docent’s, Click2learn’s and Newco’s securities. Other than the fee paid for its opinion in this transaction, Docent has never paid C.E. Unterberg, Towbin any fees.

 

C.E. Unterberg, Towbin was retained by Docent based on C.E. Unterberg, Towbin’s experience as a financial advisor in connection with mergers and acquisitions and in securities valuations generally and its industry expertise with respect to the business performance and learning management software market. C.E. Unterberg, Towbin is a nationally recognized investment banking firm. As part of its investment banking business, C.E. Unterberg, Towbin is frequently engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, secondary distributions of securities, private placements and other purposes.

 

Interests of Click2learn directors, officers and affiliates in the transaction

 

When considering the recommendation of the Click2learn board of directors, you should be aware that Click2learn’s directors and officers have interests in the transaction that are different from, or are in addition to, your interests. The Click2learn board was aware of these potential conflicts and considered them.

 

Under the terms of the merger agreement and based on subsequent discussions between Docent and Click2learn, several members of Click2learn’s executive management team and board of directors will become executive officers and/or members of the board of directors of Newco, as follows:

 

Name


 

Click2learn Position


 

Newco Position


Kevin Oakes

 

Chief Executive Officer, Chairman of the board of directors

 

President, Director

Srinivasan Chandrasekar

 

Chief Technology Officer

 

Senior Vice President, Products

Sudheer Koneru

 

Chief Strategy Officer

 

Senior Vice President,
International Operations

Sally Narodick

 

Lead Director

 

Director

John Coné

 

Director

 

Director

Vijay Vashee

 

Director

 

Director

 

Click2learn has granted options that will fully accelerate upon completion of the transaction as follows:

 

  Click2learn’s directors hold options to purchase an aggregate of 378,250 shares of Click2learn common stock granted under Click2learn’s 1998 Directors Stock Option Plan and the Click2learn 1998 Equity Incentive Plan that will accelerate upon completion of the transaction;

 

  Kevin Oakes holds options to purchase an aggregate of 573,375 shares of Click2learn common stock that accelerate according to the terms of an employment agreement; and

 

  Jonathan Morgan holds an option to purchase 10,000 shares of Click2learn common stock that accelerate according to the terms of the option grant.

 

Click2learn’s Change of Control Executive Severance Plan, applicable to Kevin Oakes, John Atherly, Steven Esau, Gary Millrood, Sudheer Koneru, Srinivasan Chandrasekar, Rick Collins, Ray Pitts, James Federico and Grant Smuts, provides that if a covered officer is terminated without cause or terminates such officer’s employment for good reason within 12 months following the completion of the transaction, such officer will be entitled to:

 

  a severance payment equal to three to 12 months of such officer’s salary, based upon the length of the officer’s employment with Click2learn; and

 

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  all options to purchase common stock held by such officer will fully vest.

 

Newco has entered into a retention agreement with Mr. Atherly dated as of December 18, 2003 that, assuming completion of the transaction, provides for a transition period of Mr. Atherly’s responsibilities. Under the terms of the agreement, Mr. Atherly will be employed by Newco through August 1, 2004. In lieu of the cash severance component of the Click2learn Change of Control Executive Severance Plan, Mr. Atherly will be entitled to receive a lump sum retention bonus equal to his current annual salary. The agreement confirms that any unvested options held by Mr. Atherly will vest according to the terms of the Click2learn Change of Control Executive Severance Plan. Mr. Atherly will also be entitled to receive a cash bonus of up to $150,000 based on savings achieved or identified, and subject to certain minimum savings thresholds, for Newco during the transition period on an annualized basis.

 

Provisions in the merger agreement provide that Newco’s and Click2learn’s charter documents will contain exculpation and indemnification provisions at least as favorable to the directors and officers of Click2learn as those contained in Click2learn’s charter documents as in effect on October 20, 2003; such provisions will not be amended, repealed or otherwise modified for six years following the transaction in any manner adversely affecting the rights of parties indemnified by such provisions; subject to certain limitations, Newco will maintain directors’ and officers’ liability insurance for six years following the transaction covering those persons who are covered by Click2learn’s directors’ and officers’ liability insurance policies as of October 20, 2003, and the directors and officers of Click2learn will be third-party beneficiaries for purposes of the indemnification provisions of the merger agreement.

 

As a result of these interests, these directors and officers of Click2learn could be more likely to vote to approve the merger agreement than if they did not hold these interests. Click2learn stockholders should consider whether these interests may have influenced these directors and officers to support or recommend the merger agreement.

 

Interests of Docent directors, officers and affiliates in the transaction

 

When considering the recommendation of the Docent board of directors, you should be aware that Docent’s directors and officers have interests in the transaction that are different from, or are in addition to, your interests. The Docent board was aware of these potential conflicts and considered them.

 

Under the terms of the merger agreement and based on subsequent discussions between Docent and Click2learn, several members of Docent’s board of directors and executive management team will become officers and/or members of the board of directors of Newco, as follows:

 

Name


 

Docent Position


 

Newco Position


R. Andrew Eckert

 

President, Chief Executive Officer and Director

 

Chief Executive Officer
and Director

Neil J. Laird

 

Senior Vice President and Chief Financial Officer, Docent

 

Senior Vice President and Chief Financial Officer

David Crussell

 

Senior Vice President, World Wide Operations, Docent

 

Senior Vice President, Professional Services and Operations

Sanjay P. Dholakia

 

Vice President, Marketing and Business Development

 

Senior Vice President, Marketing and Alliances

Donald E. Fowler

 

Director

 

Chairman of the Board of Directors

Jack L. Acosta

 

Director

 

Director

Ali R. Kutay

 

Director

 

Director

 

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Docent has entered into change in control agreements with certain of its executives including R. Andrew Eckert, Neil J. Laird, Sanjay P. Dholakia, David Crussell, David Mandelkern and V. Holly Albert. Under the terms of those agreements, in the event that such officer is terminated without cause or constructively terminated by Docent or Newco within a certain number of months after the consummation of the transaction:

 

  each of Messrs. Eckert, Laird, Crussell and Mandelkern would be eligible to receive a lump sum payment equal to 12 months of such officer’s base salary and performance compensation and the full vesting of any unvested options held by such officer;

 

  Mr. Dholakia would be eligible to receive a lump sum payment equal to six months of his base salary and performance compensation and the full vesting of any unvested options held by him; and

 

  Ms. Albert would be eligible to receive a lump sum payment equal to six months of her base salary and performance compensation and any unvested options held by her would be accelerated by one year.

 

Docent has also entered into a series of agreements with Mr. Mandelkern including three promissory notes and a June 27, 1997 severance agreement. Under the terms of the severance agreement, if Mr. Mandelkern’s employment is involuntarily terminated, Docent will, notwithstanding any additional benefits to which Mr. Mandelkern is entitled, provide severance benefits of six months of salary and health benefits. In addition, the 1997 severance letter provides that Docent shall forgive that portion of Mr. Mandelkern’s loans that were incurred for his purchase of shares of Docent stock that are vested on the date of termination, which is currently expected to be approximately $140,000. The value of Mr. Mandelkern’s in-the-money options as of March 22, 2004 that would accelerate upon his termination assuming that the per share value of Docent’s common stock remains at the February 10, 2004 closing price of $5.45, is approximately $151,200. Mr. Mandelkern’s cash severance under his change of control agreement and severance letter will be approximately $300,000. As a result of the interests outlined here, which were fully disclosed to the Docent board, and given that Mr. Mandelkern was informed that his employment would not likely continue with the combined company following the transaction, Mr. Mandelkern abstained from the Docent board actions relating to approving and adopting the merger agreement and its recommendation to the Docent stockholders.

 

Provisions in the merger agreement provide that Newco’s and Docent’s charter documents will contain exculpation and indemnification provisions at least as favorable to the directors and officers of Docent as those contained in Docent’s charter documents as in effect on October 20, 2003; such provisions will not be amended, repealed or otherwise modified for six years following the transaction in any manner adversely affecting the rights of parties indemnified by such provisions; subject to certain limitations, Newco will maintain directors’ and officers’ liability insurance for six years following the transaction covering those persons who are covered by Docent’s directors’ and officers’ liability insurance policies as of October 20, 2003, and the directors and officers of Docent will be third-party beneficiaries for purposes of the indemnification provisions of the merger agreement.

 

As a result of these interests, these directors and officers of Docent could be more likely to vote to approve and adopt the merger agreement than if they did not hold these interests. Docent’s stockholders should consider whether these interests may have influenced these directors and officers to support or recommend the Docent merger.

 

Completion and effectiveness of the transaction

 

The transaction will be completed when all the conditions to completion of the transaction are satisfied or waived, including approval and adoption of the merger agreement by the stockholders of Click2learn and the approval and adoption of the merger agreement by the stockholders of Docent. We hope to complete the transaction during the first quarter of 2004. The transaction will become effective upon the filing of certificates of merger with the State of Delaware.

 

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Structure of the transaction and conversion of stock and options

 

Newco is a newly formed corporation formed specifically for the transaction described in this joint proxy statement/prospectus. Newco has also formed two wholly owned subsidiaries, Canuck Acquisition Corp. and Devil Acquisition Corp. As provided in the merger agreement, Canuck Acquisition Corp. will merge with and into Click2learn, and Devil Acquisition Corp. will merge with and into Docent. These two mergers are collectively referred to in this joint proxy statement/prospectus as the transaction. On the effectiveness of the transaction, Click2learn and Docent will become wholly owned subsidiaries of Newco, and Click2learn stockholders and Docent stockholders will become stockholders of Newco as described in the following paragraphs.

 

Conversion of common stock

 

Upon completion of the transaction:

 

  each outstanding share of Click2learn common stock will be converted into the right to receive 0.3188 shares of Newco common stock;

 

  each outstanding share of Docent common stock will be converted into the right to receive 0.7327 shares of Newco common stock; and

 

  no fractional shares of Newco will be issued. Click2learn and Docent stockholders will receive payment in cash instead of any fractional shares of Newco common stock that would have otherwise been issuable in the transaction.

 

Click2learn and Docent options, warrants and purchase rights

 

Upon completion of the transaction, Newco will assume the option plans maintained by Click2learn and Docent and the employee stock purchase plan maintained by Click2learn.

 

Upon completion of the transaction, each outstanding stock option and warrant to purchase common stock issued by Click2learn and Docent will be assumed by Newco and will become a right to purchase Newco common stock, but will otherwise continue to have and be subject to the same terms and conditions of the plan or agreement pursuant to which it was granted. Each Click2learn option or warrant will be exercisable for whole shares of Newco common stock according to the exchange ratio for the Click2learn common stock, rounded down to the nearest whole number of shares of Newco common stock and without payment of any cash for fractional shares. Each Docent option or warrant will be exercisable for whole shares of Newco common stock according to the exchange ratio for the Docent common stock, rounded down to the nearest whole number of shares of Newco common stock and without payment of any cash for fractional shares. The per share exercise price of each option or warrant will be proportionally increased and rounded up to the nearest whole cent.

 

Each purchase right outstanding under the Click2learn employee stock purchase plan will be assumed by Newco and will represent a right to purchase Newco common stock at a purchase price determined based on the fair market value of Newco common stock on the applicable purchase date as compared to the fair market value of Click2learn common stock at the beginning of the applicable offering period in effect as of the effective time of the transaction divided by 0.3188.

 

The Docent employee stock purchase plan will terminate at the effective time of the transaction and all funds which have been withheld from wages of Docent employees for the purchase of Docent common stock as of that time will be applied to a final purchase of Docent common stock. Each share of Docent common stock purchased in the final purchase will represent the right to receive 0.7327 shares of Newco common stock.

 

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Percentage ownership of Newco after the transaction

 

Based on the number of shares of outstanding common stock of each company as of October 20, 2003, the former stockholders of Click2learn and Docent will have approximately the following aggregate ownership interests in Newco immediately following the transaction:

 

     Newco
percentage
ownership


 

Click2learn stockholders

   52 %

Docent stockholders

   48 %

 

Exchange of Click2learn and Docent stock certificates for Newco stock and fractional shares

 

When the transaction is completed, Newco’s exchange agent will mail to Click2learn and Docent stockholders a letter of transmittal and instructions for use in surrendering Click2learn and Docent stock certificates in exchange for Newco stock. When you deliver your Click2learn or Docent stock certificates to the exchange agent along with an executed letter of transmittal and any other required documents, your Click2learn or Docent stock certificates will be canceled and you will receive the number of full shares of Newco common stock to which you are entitled under the merger agreement. Newco stock will be issued in uncertificated, book entry form. This means that although you will be the holder of Newco stock, you will not be issued a physical stock certificate. You will receive payment in cash, without interest, instead of any fractional shares of Newco common stock which would have otherwise been issuable to you in the mergers.

 

Newco will only issue Newco stock or a check in lieu of a fractional share to a Click2learn or a Docent stockholder in the name in which the surrendered Click2learn or Docent stock certificate is registered. If a Click2learn or a Docent stockholder wishes to have the Newco stock issued in another name, the stockholder must present the exchange agent with all documents required to show and effect the unrecorded transfer of ownership and show that the stockholder paid any applicable stock transfer taxes.

 

Click2learn and Docent stockholders should not submit their Click2learn and Docent stock

certificates for exchange until they receive the transmittal instructions and a form of letter of transmittal

from the exchange agent.

 

No dividends

 

Click2learn and Docent stockholders are not entitled to receive any dividends or other distributions on Newco common stock until the transaction is completed and they have surrendered their Click2learn and Docent stock certificates in exchange for Newco stock. Subject to the effect of applicable laws, promptly following surrender of Click2learn and Docent stock certificates and the issuance of the corresponding Newco stock, Click2learn and Docent stockholders will be paid the amount of dividends or other distributions, if any, without interest, with a record date after the completion of the transaction that were previously paid with respect to their whole shares of Newco common stock. At the appropriate payment date, Click2learn and Docent stockholders will also receive the amount of dividends or other distributions, without interest, with a record date after the completion of the transaction and a payment date after they exchange their Click2learn and Docent stock certificates for Newco stock certificates.

 

Docent Rights Plan

 

Docent has agreed that its board of directors will take action, to the extent necessary, in order to render its rights plans inapplicable to the transaction, the voting agreements and the other transactions contemplated by the merger agreement. To that end, Docent has amended its rights plan. In addition, Docent has agreed that, from October 20, 2003, until the earlier of the termination of the merger agreement, its board will not, subject to

 

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certain exceptions more fully described in the merger agreement, without the prior written consent of the other party, amend or modify its rights plan or take any action with respect to, or make any determination under, its rights plan, in each case in order to facilitate an alternative transaction with respect to it.

 

Appraisal rights

 

Under Delaware law, Click2learn and Docent stockholders are not entitled to appraisal rights in connection with the transaction.

 

Material United States federal income tax considerations of the transaction

 

The following discussion summarizes the material United States federal income tax considerations of the transaction that are generally applicable to holders of Click2learn common stock and Docent common stock. This discussion is based on existing authorities. These authorities may change, or the Internal Revenue Service might interpret the existing authorities differently. In either case, the tax consequences of the transaction to the holders of Click2learn common stock and Docent common stock could differ from those described below. This discussion is for general information only and does not provide a complete analysis of all potential tax considerations that may be relevant to particular stockholders because of their specific circumstances or because they are subject to special rules, including:

 

  dealers in securities or foreign currencies;

 

  stockholders who are subject to the alternative minimum tax provisions of the Internal Revenue Code;

 

  tax-exempt organizations;

 

  non-United States persons or entities;

 

  financial institutions or insurance companies;

 

  stockholders who acquired their Click2learn or Docent common stock in connection with stock options or stock purchase plans or other compensatory transactions; and

 

  stockholders who hold their Click2learn or Docent common stock as part of a straddle, constructive sale, conversion transaction or other risk management transaction.

 

In addition, this discussion does not describe the federal income tax consequences of transactions other than the transaction or the tax consequences of the transaction under foreign, state, or local law or federal estate and gift tax laws. This discussion also does not address the federal income tax consequences of the transaction to holders of Click2learn stock options or Docent stock options.

 

The obligations of Click2learn and Docent to effect the transaction are conditioned on their receipt of written opinions from their respective counsel, Perkins Coie LLP for Click2learn, and Wilson Sonsini Goodrich & Rosati, Professional Corporation, for Docent, that the transaction will constitute a reorganization within the meaning of Section 368(a) of the Internal Revenue Code and/or qualify as a tax-free exchange under Section 351 of the Internal Revenue Code. The tax opinions of counsel will be subject to limitations and qualifications and will be based on representations made by officers of Click2learn, Docent, Newco, Devil Acquisition Corp. and Canuck Acquisition Corp. The tax opinions will not be binding on the IRS and will not preclude the IRS from taking a contrary position. Neither Click2learn nor Docent has requested or will request a ruling from the IRS regarding any of the federal income tax consequences of the mergers.

 

Assuming that the transaction is carried out in accordance with the terms of the merger agreement and assuming that certain representations in tax certificates to be delivered by officers of Click2learn, Docent, Newco, Devil Acquisition Corp. and Canuck Acquisition Corp. are true and correct, it is the opinion of each of Wilson Sonsini Goodrich & Rosati, Professional Corporation and Perkins Coie LLP that the transaction will

 

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constitute a reorganization under Section 368(a) and/or qualify as an exchange under Section 351, and subject to the limitations and qualifications referred to above, the material United States federal income tax consequences of the transaction can be summarized as follows:

 

  no gain or loss will be recognized by the holders of Click2learn common stock or Docent common stock upon their receipt of Newco common stock solely in exchange for their Click2learn common stock or Docent common stock in the transaction;

 

  a holder of Click2learn common stock or Docent common stock who receives cash in the transaction in lieu of a fractional share of Newco common stock will be treated as if the holder had received the fractional share and then had that share redeemed for cash. The holder will recognize gain or loss equal to the difference between the cash received and that portion of the holder’s basis in the Newco common stock attributable to the fractional share;

 

  the aggregate tax basis of the Newco common stock received by each holder of Click2learn common stock or Docent common stock in the transaction (including any fractional share that the holder will be treated as having received and then as having immediately redeemed for cash) will be the same as the aggregate tax basis of the Click2learn common stock or Docent common stock surrendered in the exchange;

 

  the holding period of the Newco common stock received by each holder of Click2learn common stock or Docent common stock in the transaction will include the holding period of the Click2learn common stock or Docent common stock surrendered in the exchange, if the holder held that Click2learn common stock or Docent common stock as a capital asset at the time of the transaction; and

 

  neither Click2learn nor Docent will recognize gain as a result of the transaction.

 

Stockholders are urged to consult their own tax advisors as to the specific tax consequences to them of the transaction, including the applicability and effect of United States federal, state and local and foreign income and other tax laws in their particular circumstances.

 

Accounting treatment of the transaction

 

Newco intends to account for the transaction as a “purchase” of Docent by Click2learn for financial reporting and accounting purposes, in accordance with accounting principles generally accepted in the United States of America.

 

Regulatory matters related to the transaction

 

None of Click2learn, Docent or Newco is aware of the need to obtain any regulatory approvals in order to consummate the transaction other than the following:

 

  effectiveness of the registration statement of which this joint proxy statement/prospectus is a part; and

 

  approval to list the shares of Newco common stock to be issued in connection with the transaction on The Nasdaq National Market.

 

Click2learn, Docent and Newco intend to obtain these approvals and any additional regulatory approvals that may be required. However, none of the parties can assure you that all of the approvals will be obtained.

 

Click2learn Credit Facility

 

Click2learn is a party to a revolving credit facility with Silicon Valley Bank which matures in December 2004. The parties have not yet determined whether Newco will attempt to extend, renegotiate or replace this credit facility after closing of the transaction. Even if extended, renegotiated or replaced, the credit facility is not

 

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expected to be a material source of liquidity for Newco, nor do the parties expect that the covenants and other obligations contained in the credit facility or in any replacement facility to impose material limitations on Newco’s conduct of its business.

 

Restrictions on sales of shares by affiliates

 

The shares of Newco common stock to be issued in the transaction will be registered under the Securities Act of 1933, as amended. These shares will be freely transferable under the Securities Act, except for shares of Newco common stock issued to any person who is an affiliate of Click2learn or Docent. Persons who may be deemed to be affiliates include individuals or entities that control, are controlled by, or are under common control of Click2learn or Docent and may include some of their respective officers and directors, as well as their respective principal stockholders. Affiliates may not sell their shares of Newco common stock acquired in the transaction except:

 

  pursuant to an effective registration statement under the Securities Act covering the resale of those shares;

 

  pursuant to an exemption under paragraph (d) of Rule 145 under the Securities Act; or

 

  if the affiliate delivers an opinion of counsel to Newco that the sale or transfer is exempt from the registration and prospectus delivery requirements of the Securities Act.

 

Delisting and deregistration of Click2learn and Docent common stock after the transaction and listing of Newco common stock

 

If the transaction is completed, Click2learn common stock and Docent common stock will be delisted from The Nasdaq National Market and will be deregistered under the Securities Exchange Act of 1934, as amended. Newco has applied to list the shares of Newco common stock to be issued in the transaction on The Nasdaq National Market under the symbol “HCKY” and will apply for a new symbol corresponding to the new name for Newco when we announce the new name. Nasdaq National Market approval is subject to official notice of issuance prior to the effectiveness of the transaction.

 

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THE MERGER AGREEMENT

 

This section of the joint proxy statement/prospectus describes the agreement and plan of reorganization, or merger agreement, among Click2learn, Docent, Canuck Acquisition Corp., Devil Acquisition Corp. and Newco, dated as of October 20, 2003, as amended November 13, 2003 and January 26, 2004. The full text of the merger agreement is attached to this joint proxy statement/prospectus as Annex A. We urge you to read the full text of the merger agreement carefully.

 

Representations and warranties

 

Click2learn and Docent made a number of substantially identical representations and warranties in the merger agreement regarding aspects of their respective businesses, financial condition, structure and other facts pertinent to the transaction. Click2learn’s and Docent’s representations and warranties to each other expire at the effective time of the transaction.

 

The representations and warranties include representations as to:

 

  corporate organization;

 

  capital structure;

 

  obligations with respect to capital stock;

 

  authority to authorize and authorization of the merger agreement;

 

  filings and reports with the SEC;

 

  financial statements;

 

  compliance with the Sarbanes-Oxley Act of 2002;

 

  absence of certain changes since December 31, 2002;

 

  taxes;

 

  intellectual property;

 

  compliance with applicable laws;

 

  permits required to conduct such party’s business and compliance with those permits;

 

  litigation;

 

  brokers’ and finders’ fees;

 

  employee benefit plans and agreements;

 

  title to, or valid leasehold interests in, owned or leased properties and related matters;

 

  environmental matters;

 

  labor and employment matters;

 

  material contracts and commitments;

 

  information supplied in this joint proxy statement/prospectus and the related registration statement filed by Newco;

 

  board recommendation and approval of the transaction;

 

  the inapplicability of state takeover statutes;

 

  the fairness opinion received from the respective financial advisors;

 

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  rights plans, in the case of Docent; and

 

  Rule 145 affiliates under the Securities Act.

 

The representations and warranties in the merger agreement are complicated and not easily summarized. You are urged to carefully read the articles of the merger agreement entitled “Representations and Warranties of Click2learn” and “Representations and Warranties of Docent.”

 

Conduct of business before completion of the transaction

 

Click2learn and Docent agreed that, during the period from the execution date of the merger agreement until the earlier of the completion of the transaction or termination of the merger agreement, each of them will, unless the other party consents in writing:

 

  carry on its business diligently and in accordance with good commercial practice and in the ordinary course;

 

  pay its debts and taxes when due;

 

  pay or perform its material obligations when due;