<PAGE> 1
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 1-6981
NATIONAL EDUCATION CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C>
DELAWARE 95-2774428
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
18400 VON KARMAN AVENUE, IRVINE, CALIFORNIA 92715
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 474-9400
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------
<S> <C>
Common Stock, New York Stock Exchange
$.01 par value Pacific Stock Exchange
6 1/2% Convertible Subordinated New York Stock Exchange
Debentures Due 2011 Pacific Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]
The aggregate market value of the registrant's voting stock held by
nonaffiliates of the registrant as of March 17, 1995, based on the closing price
for such Common Stock on the New York Stock Exchange on such date, was
$85,173,993.
The number of shares of registrant's Common Stock outstanding as of
March 17, 1995 was 29,576,757.
DOCUMENTS INCORPORATED BY REFERENCE
No documents are incorporated by reference in this Form 10-K/A
Amendment No. 1
==============================================================================
<PAGE> 2
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
(a) Executive Officers of the Company.
The following table provides information regarding executive officers
of the Company, including their ages as of March 28, 1995:
<TABLE>
<CAPTION>
Name, Age and Title: Five-Year Business Experience:
------------------- -----------------------------
<S> <C>
David C. Jones (73) Chairman of the Board since July 1989 and a Director of the Company
Chairman of the Board since 1983 (his current term expires in 1995). Acting Chief
Executive Officer from July 1989 to April 1990. Chairman of the
Joint Chiefs of Staff from June 1978 through June 1982. Member of
the Board of Advisors for SRA International, Inc., an information
technology company. Chairman of the Board of Advisors of the
National Civilian Community Corps.
Jerome W. Cwiertnia (53) President and Chief Executive Officer since April 1990. President
President and Chief and Chief Operating Officer from August 1989 to April 1990.
Executive Officer President from February 1988 to March 1989. Mr. Cwiertnia has been
a Director of the Company since 1984 (his current term expires in
1995), and has served as Chairman of the Board of Steck-Vaughn
Publishing Corporation, a subsidiary of the Company since March
1993.
Christine A. Gattenio (39) Vice President and Corporate Controller since April 1989.
Vice President and Corporate Controller since January 1987.
Corporate Controller
Philip C. Maynard (40) Vice President, Secretary and General Counsel since February 1994.
Vice President, Secretary and General Counsel of Orchids Paper Products Company from May 1993
General Counsel through January 1994. Chief Executive Officer and Director of
McClellan Development from May 1989 to May 1992. General Partner
of Urland, Morello, Dunn & Maynard law practice from February 1985
to May 1989.
Keith K. Ogata (40) Vice President, Chief Financial Officer and Treasurer since April
Vice President, Chief 1991. Vice President and Treasurer from April 1989 to April 1991.
Financial Officer and Treasurer since January 1987.
Treasurer
</TABLE>
2
<PAGE> 3
(b) Directors of the Company.
In addition to Messrs. Cwiertnia and Jones discussed under Executive
Officers above, the following table provides information regarding all other
members of the Board of Directors, including each person's age as of March 28,
1995. Titles are as officers of the Company unless otherwise indicated.
<TABLE>
<CAPTION>
Business Experience During Last Director
Name and Age Five Years and Other Directorships Since
------------ ---------------------------------- ---------
<S> <C> <C>
Richard C. Blum (59) Chairman of Richard C. Blum & Associates, L.P., a 1987
(term expires 1995) merchant banking firm. Vice Chairman of URS
Corporation and Director of Sumitomo Bank of
California, Triad Systems Corporation, Shaklee
Corporation, Immulogic Pharmaceutical Corporation,
Northwest Airlines Corporation and C.B. Commercial
Holdings, Inc. Special foreign advisor to Shanghai
International Trust and Investment Company (China).
Paul B. MacCready (69) Chairman of the Board, AeroVironment, Inc. 1992
(term expires 1995) Director of MacNeal-Schwendler Corporation.
David Bonderman (52) Managing General Partner of TPG Partners, L.P., an 1993
(term expires 1996) investment partnership, from December 1993 to
present. Indirect managing general partner of
various investment partnerships from August 1992 to
December 1993. Vice President and Chief Operating
Officer of Keystone, Inc. (formerly Robert M. Bass
Group, Inc.) from July 1983 to August 1992.
Director of National Re Corporation, Bell & Howell
Holdings Company and Carr Realty Corporation, and
Chairman of the Board of Continental Airlines, Inc.
Michael R. Klein (52) Partner, Wilmer, Cutler & Pickering law firm since 1991
(term expires 1996) 1974. Chairman of Realty Information Group, Inc.
since 1987. Director of Steck-Vaughn Publishing
Corporation since May 1993.
John J. McNaughton (72) Founder of the Company. President and Chairman of 1954
(term expires 1996) the Board from 1954 to 1980 and Chairman of the
Board from 1954 until retirement in 1988. Director
of Intervisual Books International. Owner of
McNaughton Farms.
Leonard W. Jaffe (76) Vice Chairman of the Board since July 1989. 1976
(term expires 1997) Private investor and consultant. Director of
Steck-Vaughn Publishing Corporation since May 1993.
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C> <C>
Frederic V. Malek (58) Co-Chairman of CB Commercial Real Estate Group, 1984
(term expires 1997) Inc. since April 1989. Chairman of Thayer Capital
Partners since April 1993. Vice Chairman of
Northwest Airlines from June 1990 through December
1991. President of Northwest Airlines from
September 1989 through June 1990. Prior to 1989,
President of Marriott Hotels and Resorts. Director
of Automatic Data Processing, Inc., FPL Group,
Inc., various PaineWebber Mutual Funds, American
Management Systems, Inc., Manor Care, Inc.,
Caterair International, ICF Kaiser, Inc., and
Northwest Airlines, Inc. Campaign Manager, Bush-
Quayle '92, from December 1991 to November 1992.
William D. Walsh (64) General Partner of Sequoia Associates, an 1987
(term expires 1997) investment partnership. Chairman of the Board of
Champion Road Machinery Limited. Director of URS
Corporation, Newcourt Credit Group, Inc., and
Consolidated Freightways, Inc. Chairman of the
Board of Newell Industrial Corporation and Deanco,
Inc. Director of Basic Vegetable Products
Corporation. Member of the Board of Visitors,
University of Southern California School of
Business Administration. Member of the Board of
Trustees of Fordham University. Member of the
Board of Advisors of Mike Yurosek & Son, L.P.
Member of the Visiting Committee for Harvard Law
School.
</TABLE>
(c) Compliance with Section 16(a) of the Exchange Act.
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC") and the New York Stock Exchange. Officers, directors and stockholders
owning more than 10% are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that, during the fiscal year
ended December 31, 1994, all filing requirements were complied with applicable
to its officers, directors, and greater than 10% beneficial owners.
4
<PAGE> 5
ITEM 11. EXECUTIVE COMPENSATION.
(a) Executive Compensation and Other Information.
The following tables disclose the cash compensation of, and stock
options provided to, the Company's five most highly compensated executive
officers, including the Chief Executive Officer.
TABLE I
SUMMARY COMPENSATION
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS (2)
------------------------- ------------
NUMBER OF
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY (1) BONUS OPTIONS (3)
- --------------------------- ---- ---------- --------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
Jerome W. Cwiertnia 1994 $ 312,000 $ 0 25,000 $ 6,000
Chief Executive Officer 1993 $ 312,000 $ 0 25,000 $ 6,746
1992 $ 312,000 $ 117,000 50,000 $ 6,653
Keith K. Ogata 1994 $ 171,789 $ 0 23,000 $ 6,000
Vice President, 1993 $ 156,500 $ 0 15,000 $ 6,376
Chief Financial Officer 1992 $ 141,000 $ 42,300 22,000 $ 6,552
and Treasurer
Christine A. Gattenio 1994 $ 122,580 $ 0 11,000 $ 5,414
Vice President and 1993 $ 116,865 $ 17,500 7,000 $ 5,428
Corporate Controller 1992 $ 111,300 $ 33,390 6,000 $ 6,118
David C. Jones 1994 $ 104,000 $ 0 7,000 $ 0
Chairman of the Board 1993 $ 104,000 $ 0 7,000 $ 0
1992 $ 104,000 $ 0 2,000 $ 0
Philip C. Maynard 1994 $ 112,019 $ 0 10,000 $ 0
Vice President, Secretary and
General Counsel (from and
after February 1, 1994)
</TABLE>
________________
(1) Amounts shown include cash and noncash compensation earned and received
by executive officers as well as amounts earned but deferred at the
election of these officers under the Company's 401(k) Retirement Plan.
(2) Although certain of the Company's long-term incentive plans permit grants
of restricted stock, no grants of restricted stock were made during 1992,
1993 or 1994.
(3) Consists of matching contributions made by the Company on behalf of such
officers to the Company's 401(k) Retirement Plan.
5
<PAGE> 6
TABLE II
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
INDIVIDUAL GRANTS OPTION TERM (10 YEARS) (2)
- -------------------------------------------------------------------------------- ----------------------------
NUMBER OF PERCENT
SECURITIES OF TOTAL EXERCISE EXPIR-
UNDERLYING OPTIONS GRANTED PRICE ATION
OPTIONS TO EMPLOYEES IN (PER DATE
NAME GRANTED (1) FISCAL YEAR SHARE) (M/D/Y) 5% 10%
- --------------------- ----------- --------------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Jerome W. Cwiertnia 25,000 6.14% $ 6.65 3/03/04 $ 104,554 $ 264,960
Keith K. Ogata 18,000 4.42% $ 6.65 3/03/04 $ 75,279 $ 190,771
5,000 1.23% $ 4.11 12/29/04 $ 12,932 $ 32,771
Christine A. Gattenio 8,500 2.09% $ 6.65 3/03/04 $ 35,548 $ 90,086
2,500 .61% $ 4.11 12/29/04 $ 6,466 $ 16,386
David C. Jones 7,000 1.72% $ 6.65 3/03/04 $ 29,275 $ 74,189
Philip C. Maynard 5,000 1.23% $ 6.51 2/02/04 $ 20,478 $ 51,896
5,000 1.23% $ 4.11 12/29/04 $ 12,932 $ 32,771
</TABLE>
________________
(1) All options are exercisable in four equal annual increments commencing
one year from the date of grant, except that Mr. Jones has an option
to purchase 2,000 shares (included above) which is exercisable in full
one year from the date of grant. All options become exercisable in
full after a change of control of the Company.
(2) In accordance with Instruction 6 to Item 402(c) of Regulation S-K
promulgated under the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, stock price appreciation
has been calculated using a base price of the per share exercise price
for each option, which exercise price equals the average closing price
for the Company's Common Stock for the ten trading days prior to the
date of grant. Annual 5% and 10% appreciation represents the
following per share increases: (a) from an exercise price of $4.11 to
appreciated prices of $6.67 (5%) and $10.67 (10%), (b) from an
exercise price of $6.51 to appreciated prices of $10.61 (5%) and
$16.89 (10%) and (c) from an exercise price of $6.65 to appreciated
prices of $10.83 (5%) and $17.25 (10%).
6
<PAGE> 7
TABLE III
AGGREGATED OPTION EXERCISES IN LAST
FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF VALUE OF
SECURITIES UNDERLYING UNEXERCISED IN-THE-MONEY
NUMBER OF UNEXERCISED OPTIONS OPTIONS AT
SHARES AT DECEMBER 31, 1994 DECEMBER 31, 1994 (1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Jerome W. Cwiertnia 0 $ 0 193,476 76,190 $ 114,063 $ 0
Keith K. Ogata 0 $ 0 46,692 48,714 $ 17,611 $ 63
Christine A. Gattenio 0 $ 0 31,260 21,121 $ 16,334 $ 31
David C. Jones 0 $ 0 45,250 10,750 $ 31,938 $ 0
Philip C. Maynard 0 $ 0 0 10,000 $ 0 $ 63
</TABLE>
________________
(1) Based upon the difference between the closing price on the New York
Stock Exchange on December 31, 1994 of $4.125 and the option exercise
price.
(b) Severance Benefits.
Pursuant to Company policy, in the event Mr. Cwiertnia's employment is
terminated without cause or after a change of control, Mr. Cwiertnia would be
entitled to continuation of his salary and fringe benefits for two years or, at
his option, a lump sum payment equal to two years' salary (currently $312,000
per year). Other executive officers, except Mr. Jones, would be entitled to
receive severance benefits of one year's salary and fringe benefits or, at the
executive's option, a lump sum payment equal to one year's salary in the event
of termination of employment without cause or after a change of control. As of
January 1, 1995, the lump sum payments would be $184,200 to Mr. Ogata, $131,315
to Ms. Gattenio and $133,750 to Mr. Maynard.
(c) Supplemental Executive Retirement Plan.
The Company has a Supplemental Executive Retirement Plan (the "SERP")
for its executive officers and subsidiary presidents designated by the
Compensation and Option Committee. The SERP currently has eleven participants
including Messrs. Cwiertnia, Ogata and Maynard, and Ms. Gattenio. A
participant in the SERP will receive lifetime retirement income in the amount
of 60% of the average earnings (as defined in the SERP) of the participant
(reduced by the amount of a participant's primary social security benefits)
multiplied by a percentage based on the participant's number of years of
credited service under the SERP. The credited service percentage for executive
officers is 10% after the sixth year and increases 10% per year thereafter
until it reaches 100% at 15 years of credited service.
The estimated credited years of service and credited service
percentage for the participating executive officers as of February 28, 1995 are
as follows: Mr. Cwiertnia - 15 years (100%), Mr. Ogata - 9 years (40%), Ms.
Gattenio - 9 years (40%) and Mr. Maynard -1 year (0%). Based on historical
compensation levels and continued employment to age 65, approximate annual
retirement benefits would be: Mr. Cwiertnia - $262,700, Mr. Ogata - $95,500,
Ms. Gattenio - $75,700 and Mr. Maynard - $59,000. The retirement benefit
described above assumes payment at age 65. A reduced retirement benefit is
provided to a participant who elects to receive benefits after age 60 and prior
to age 65.
7
<PAGE> 8
The SERP provides for a death benefit of between two and three times
the average earnings of a participant, and a surviving spouse and minor
children also receive certain benefits under the SERP. The SERP provides for
disability benefits of up to 60% of a participant's average earnings. In
addition to the severance benefits noted in the preceding section, if a
participant's employment with the Company terminates within two years following
a change of control of the Company, a participant is entitled to a cash sum
equal to the present value of full retirement benefits without regard to years
of service completed. As of December 31, 1994, the executive officers would be
entitled to approximately the following: Mr. Cwiertnia - $1,600,000, Mr.Ogata
- - $353,500, Ms. Gattenio - $289,300 and Mr. Maynard - $226,800.
The following Table IV presents information regarding estimated annual
benefits payable under the SERP upon retirement at age 65 (normal retirement
age under the SERP) in specified compensation and years of service
classifications:
TABLE IV
PENSION PLAN TABLE (1)
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------
REMUNERATION 3 6 9 12 15
- ------------ --- --- --- ---- ----
<S> <C> <C> <C> <C> <C>
$ 125,000 $ 0 $ 7,500 $ 30,000 $ 52,500 $ 75,000
$ 150,000 $ 0 $ 9,000 $ 36,000 $ 63,000 $ 90,000
$ 175,000 $ 0 $ 10,500 $ 42,000 $ 73,500 $ 105,000
$ 200,000 $ 0 $ 12,000 $ 48,000 $ 84,000 $ 120,000
$ 225,000 $ 0 $ 13,500 $ 54,000 $ 94,500 $ 135,000
$ 250,000 $ 0 $ 15,000 $ 60,000 $ 105,000 $ 150,000
$ 300,000 $ 0 $ 18,000 $ 72,000 $ 126,000 $ 180,000
$ 400,000 $ 0 $ 24,000 $ 96,000 $ 168,000 $ 240,000
$ 450,000 $ 0 $ 27,000 $ 108,000 $ 189,000 $ 270,000
$ 500,000 $ 0 $ 30,000 $ 120,000 $ 210,000 $ 300,000
</TABLE>
________________
(1) Estimated benefits shown before reduction for social security
benefits.
(d) Compensation Committee Interlocks and Insider Participation.
The Compensation and Option Committee is comprised of Messrs. Walsh
(Chairman), Blum, Jaffe and Malek. There are no interlocking relationships
between any executive officers of the Company and any entity whose directors or
executive officers serve on the Company's Board or Compensation and Option
Committee.
Mr. Blum is the Chairman of Richard C. Blum & Associates, L.P. ("RCBA
L.P.," which, prior to its October 1994 conversion, was known as Richard C.
Blum & Associates, Inc.). Both Mr. Blum and RCBA L.P. are deemed beneficial
owners of more than 5% of the Company's outstanding Common Stock (see "Security
Ownership of Certain Beneficial Owners and Management" below). In the past,
RCBA L.P. has provided consulting and investment banking services on behalf of
the Company, including its subsidiaries, on a variety of strategic issues
relating to enhancement of stockholder values. For example, RCBA L.P. was
actively involved in the public offering of one of the Company's subsidiaries,
Steck-Vaughn Publishing Corporation, in 1993. However, in 1994, RCBA L.P. did
not perform for the Company, nor receive compensation from the Company for, any
consulting or investment banking services.
8
<PAGE> 9
(e) Directors' Fees and Benefits.
The Company pays each of its directors who is not an employee of the
Company an annual fee of $15,000, plus $1,500 for each Board meeting attended.
Nonemployee directors serving on the Executive Committee receive an additional
$6,000 each year, but do not receive compensation for attending Executive
Committee meetings. Nonemployee directors serving on board committees other
than the Executive Committee receive $1,000 for each committee meeting attended
(unless the committee meeting is in conjunction with a Board meeting, in which
case the director receives $500 per committee meeting). Mr. Jaffe receives an
additional $6,000 for serving as Vice Chairman of the Board and $6,000 as
Chairman of the Executive Committee; in addition, Mr. Jaffe received a monthly
automobile allowance of $500 (for an aggregate of $6,000 during 1994). Other
committee chairmen receive an additional $3,000 each year. All directors are
entitled to a $2,500 annual financial planning allowance.
Under a supplemental benefit plan, each participating director
receives an annual accrual equal to such director's fees for each year subject
to a maximum annual accrual of $25,000 for 1991 and future years, and a maximum
annual accrual of $15,000 for 1990 and prior years; however, any director
failing to attend in a calendar year 50% or more of the aggregate number of
meetings of the Board and of committees on which he serves does not receive any
annual accrual for such year. Upon retirement from the Board, each director
will be paid monthly installments totalling $25,000 each year until his
retirement benefit is exhausted; however, if his accrued benefit is less than
$125,000, it will be paid over five years. If a director dies prior to
retirement, his beneficiary will receive the greater of $15,000 per year for
ten years or the director's retirement benefit. If a director becomes disabled
prior to retirement, the Company will pay him the retainer through the end of
the elected term and will thereafter pay retirement benefits.
Under the 1991 Directors' Stock Option Plan, each eligible director (a
director who was not an employee of the Company when he was first elected to
the Board) receives an initial stock option at fair market value to purchase
5,000 shares of the Company's Common Stock. The initial option vests and first
becomes exercisable in two equal annual installments of 2,500 shares each,
commencing one year from the date of grant. At the first regular Board meeting
each year through the year 2001, each eligible director receives a stock option
at fair market value, exercisable in full one year from the date of grant, to
purchase 2,000 shares of the Company's Common Stock; however, a director does
not receive the annual option for one year if he received the initial option at
a meeting later than the first regular Board meeting of the prior calendar
year.
All of the directors of the Company are eligible to participate in the
1991 Directors' Stock Option Plan, except Mr. Cwiertnia. Mr. McNaughton
became an eligible director as of February 1, 1994.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT.
The following table sets forth information as of February 28, 1995
(unless otherwise noted) concerning the shares of the Company's Common Stock
beneficially owned by (i) each beneficial owner of more than 5% of the
outstanding shares of Common Stock; (ii) each director of the Company; (iii)
the Chief Executive Officer and the four most highly compensated other
executive officers; and (iv) all directors and executive officers of the
Company as a group. Except as otherwise noted, each beneficial owner listed
has sole investment and voting power (or shares such powers with his or her
spouse) of the shares indicated. Beneficial ownership includes any shares the
individual has the right to acquire within 60 days following February 28, 1995
through the exercise of any stock option or other right. As of February 28,
1995, there were 29,576,601 issued and outstanding shares of Common Stock of
the Company, not including treasury shares or shares issuable on exercise of
options or conversion of debentures.
9
<PAGE> 10
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL OR AMOUNT AND NATURE PERCENT
ENTITY OR NUMBER OF POSITION WITH OF BENEFICIAL OF
PERSONS IN GROUP THE COMPANY OWNERSHIP (1) CLASS
- ----------------- ---------------------------- ----------------- -------
<S> <C> <C> <C>
Richard C. Blum & Associates, L.P. 6,063,410 (2) 17.5%
Westport Asset Management, Inc. 3,520,950 (3) 11.9%
Tweedy Brown Company L.P., TBK
Partners, L.P. and Vanderbilt
Partners, L.P. 2,752,120 (4) 9.3%
Richard C. Blum Director 6,077,250 (5) 17.6%
David Bonderman Director 127,500 (6) *
Jerome W. Cwiertnia President, Chief Executive
Officer and Director 250,061 (7) *
Leonard W. Jaffe Director 34,000 *
David C. Jones Chairman of the Board 69,875 *
Michael R. Klein Director 19,000 *
Paul B. MacCready Director 7,000 *
Frederic V. Malek Director 37,950 (8) *
John J. McNaughton Director 24,300 *
William D. Walsh Director 15,914 *
Christine A. Gattenio Vice President and Corporate
Controller 46,707 *
Philip C. Maynard Vice President, Secretary
and General Counsel 1,250 *
Keith K. Ogata Vice President, Chief Financial
Officer and Treasurer 77,539 *
All Directors and Executive Officers
as a Group (13 persons) 6,638,346 (1) 19.0%
</TABLE>
________________
* Less than 1%.
(1) The shares listed in the table include the following stock options
exercisable on or within 60 days after February 28, 1995: Mr. Blum -
11,000 shares; Mr. Bonderman - 2,500 shares; Mr. Cwiertnia - 211,008
shares; Mr. Jaffe - 26,000 shares; Mr. Jones - 49,750 shares; Mr. Klein -
9,000 shares; Mr. MacCready - 7,000 shares; Mr. Malek - 11,000 shares;
Mr. McNaughton - 2,500 shares; Mr. Walsh - 11,000 shares; Ms. Gattenio -
35,506 shares; Mr. Maynard - 1,250 shares; Mr. Ogata - 60,406 shares; and
all directors and officers as a group - 437,920 shares.
The shares listed in the table also include the following debentures
convertible into Common Stock of the Company: (a) 5,000,000 shares
issuable upon conversion of Senior Subordinated Convertible Debentures
due 2006 (the "Senior Debentures due 2006") indirectly owned by Richard
C. Blum & Associates, L.P. ("RCBA L.P.") and Mr. Blum, which 5,000,000
shares includes 125,000 shares issuable upon conversion of Senior
Debentures due 2006 owned indirectly by Mr. Bonderman (see fn. 6 below)
and held in an advisory account managed by RCBA L.P., and 25,000 shares
issuable on conversion of Senior Debentures due 2006 owned indirectly by
Mr. Malek (see fn. 8 below) and held in an advisory account managed by
RCBA L.P.; (b) 4,000 shares issuable on conversion of Subordinated
Convertible Debentures due 2011 (the "Debentures due 2011") owned by Mr.
Jaffe; (c) 4,000 shares issuable on conversion of Debentures due 2011
owned by Mr. Jones; (d) 1,000 shares issuable on conversion of Debentures
due 2011 owned by Ms. Gattenio; and (e) 6,000 shares issuable on
conversion of Debentures due 2011 owned by Mr. Ogata. All directors and
10
<PAGE> 11
officers as a group hold Senior Debentures due 2006 and Debentures due
2011 convertible into an aggregate of 5,015,000 shares.
(2) According to a Form 3 filed with the Securities and Exchange Commission
(the "SEC") on or around November 9, 1994, Richard C. Blum & Associates,
Inc. ("RCBA Inc."), converted the form of its business by transferring
all of its assets and its advisory responsibilities to Richard C. Blum &
Associates, L.P. ("RCBA L.P."). Those assets included RCBA Inc.'s
general partnership interests in BK Capital Partners II, a California
limited partnership ("BK II"), BK Capital Partners III Limited
Partnership ("BK III"), BK Capital Partners IV, L.P. ("BK IV") and BK-NEC
II, a California general partnership ("BK-NEC II"). Those partnerships
hold the following securities: (a) BK II: 325,110 shares and Senior
Debentures due 2006 convertible into 375,000 shares, (b) BK III: 100,000
shares and Senior Debentures due 2006 convertible into 725,000 shares,
(c) BK IV: 20,900 shares and (d) BK-NEC II: Senior Debentures due 2006
convertible into 1,500,000 shares. In addition, RCBA Inc. transferred to
RCBA L.P. advisory responsibilities, including investment and voting
discretion, over several advisory accounts that hold, in aggregate,
617,400 shares and Senior Debentures due 2006 convertible into 2,400,000
shares. RCBA L.P. disclaims beneficial ownership of these securities
except to the extent of its pecuniary interest therein.
(3) According to a Schedule 13G dated January 25, 1995 and filed with the
SEC, Westport Asset Management, Inc., 253 Riverside Avenue, Westport,
Connecticut 06880 ("Westport") has sole voting and dispositive power over
390,600 shares and shared voting and dispositive power over 3,130,350
shares. From the Schedule 13G, it appears that the 3,130,350 shares are
held in discretionary accounts managed by Westport, while the 390,600
shares are beneficially owned by officers and stockholders of Westport.
Westport disclaims beneficial ownership of such 390,600 shares, and
disclaims the existence of a group.
(4) Tweedy, Browne Company L.P. ("TBC"), TBK Partners, L.P. ("TBK") and
Vanderbilt Partners, L.P. ("Vanderbilt"), each with a principal business
address of 52 Vanderbilt Avenue, New York, New York 10017, jointly filed
Amendment No. 1 to Statement on Schedule 13D with the SEC on or around
February 24, 1995, disclosing the following: (a) TBC may be deemed to
have beneficial ownership of 2,435,920 shares held in TBC's customers'
accounts, but for which TBC disclaims beneficial ownership, and over
which TBC has sole voting power for 2,191,565 shares and shared
dispositive power for 2,435,920 shares, (b) TBK has sole voting and
dispositive power over 234,500 shares held directly by TBK, (c)
Vanderbilt has sole voting and dispositive power over 81,700 shares held
directly by Vanderbilt, (d) Christopher H. Browne, William H. Browne,
James M. Clark, Jr. and John D. Spears, each a general partner of each of
TBC, TBK and Vanderbilt, and each with a principal business address of 52
Vanderbilt Avenue, New York, New York 10017, each may be deemed to have
beneficial ownership of the aggregate 2,752,120 shares held in TBC's
customers' accounts and by TBK and Vanderbilt, but for which each person
disclaims beneficial ownership and (e) Thomas R. Knapp, a general partner
of TBK, with a principal business address of 52 Vanderbilt Avenue, New
York, New York 10017, may be deemed to have beneficial ownership of the
234,500 shares held by TBK, but for which Mr. Knapp disclaims beneficial
ownership. All of the foregoing entities and individuals deny that they
are or should be deemed, in any combination, a group within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
(5) Mr. Blum, the Chairman of RCBA L.P., directly owns 13,840 shares
(including 11,000 shares issuable upon the exercise of stock options).
Of the securities listed in the table, 6,063,410 shares are also reported
in the table as indirectly owned by RCBA L.P. (see fn. 2 above). Mr.
Blum reserves the right to disclaim beneficial ownership of securities
held indirectly by RCBA L.P. in excess of his pro rata ownership in RCBA
L.P.
(6) Includes 125,000 shares issuable upon conversion of Senior Debentures due
2006 held by Bonderman Family Limited Partnership, of which Mr.
Bonderman is the general partner.
(7) Excludes 450 shares owned by Mr. Cwiertnia's wife as custodian for their
son. Mr. Cwiertnia disclaims beneficial ownership of these 450 shares.
11
<PAGE> 12
(8) Includes 25,000 shares issuable upon conversion of Senior Debentures due
2006, which represents Mr. Malek's 16 2/3% interest in a general
partnership that holds Senior Debentures due 2006 convertible into
150,000 shares of the Company's Common Stock. Excludes Mr. Malek's
1.126% interest in BK II (see fn. 1 above), which owns 325,110 shares of
Common Stock and Senior Debentures due 2006 convertible into 375,000
shares of Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
(a) Transactions with Directors.
In 1994, Mr. McNaughton received consulting fees of $40,667 and
retirement payments of $58,850 per year minus social security benefits. The
consulting fees were paid pursuant to (i) a consulting contract that expired at
the end of January 1994, which contract provided for an annual consulting fee
of $125,000, and (ii) a subsequent one-year consulting and noncompete agreement
pursuant to which he received a consulting fee of $33,000 for the one-year
period ended January 31, 1995. Additionally, he received certain other fringe
benefits which, in 1994, totalled approximately $1,613. Effective February 1,
1994, Mr. McNaughton became eligible to receive fees paid to nonemployee
directors of the Company. Mr. McNaughton will continue to receive the
retirement payments noted above for the remainder of his life.
See also Item 11, "Executive Compensation--Compensation Committee
Interlocks and Insider Participation" for additional information regarding
transactions with directors.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
<TABLE>
<CAPTION>
NATIONAL EDUCATION CORPORATION Date
<S> <C>
By /s/ JEROME W. CWIERTNIA April 26, 1995
-------------------------
Jerome W. Cwiertnia
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the Company and in the capacities and on the dates indicated.
Date
By /s/ JEROME W. CWIERTNIA April 26, 1995
------------------------------
Jerome W. Cwiertnia,
Director, President and Chief
Executive Officer
(Principal Executive Officer)
By /s/ KEITH K. OGATA April 26, 1995
------------------------------
Keith K. Ogata, Vice President,
Chief Financial Officer and
Treasurer (Principal Financial
Officer)
By /s/ CHRISTINE A. GATTENIO April 26, 1995
------------------------------
Christine A. Gattenio, Vice
President and Corporate
Controller (Principal
Accounting Officer)
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
Date
<S> <C>
By: /s/ DAVID BONDERMAN April 27, 1995
---------------------------
David Bonderman, Director
By: /s/ LEONARD W. JAFFE April 25, 1995
---------------------------
Leonard W. Jaffe, Director
By: /s/ DAVID C. JONES April 25, 1995
---------------------------
David C. Jones, Director
By: /s/ MICHAEL R. KLEIN April 25, 1995
---------------------------
Michael R. Klein, Director
By: /s/ PAUL B. MACCREADY April 26, 1995
---------------------------
Paul B. MacCready, Director
By: /s/ FREDERIC V. MALEK April 25, 1995
---------------------------
Frederic V. Malek, Director
By: /s/ WILLIAM D. WALSH April 25, 1995
---------------------------
William D. Walsh, Director
</TABLE>
14
