<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 3
TO
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
------------------------
NATIONAL EDUCATION CORPORATION
(NAME OF SUBJECT COMPANY)
NICK ACQUISITION CORPORATION
HARCOURT GENERAL, INC.
(BIDDER)
------------------------
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
63577110
(CUSIP NUMBER OF CLASS OF SECURITIES)
ERIC P. GELLER
SENIOR VICE PRESIDENT AND GENERAL COUNSEL
27 BOYLSTON STREET
CHESTNUT HILL, MASSACHUSETTS 02167
TELEPHONE: (617) 232-8200
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED
TO RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF BIDDER)
------------------------
Copy to:
ROBERT L. FRIEDMAN, ESQ.
SIMPSON THACHER & BARTLETT
425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10017
TELEPHONE: (212) 455-2000
CALCULATION OF FILING FEE
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Transaction Valuation* Amount of Filing Fee**
- --------------------------------------------------------------------------------------------
$859,753,902 $171,951
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</TABLE>
* For purposes of calculating fee only. Based on the offer to purchase all of
the outstanding shares of Common Stock of the Subject Company at $21.00 per
share. This calculation assumes the purchase of 40,940,662 shares of Common
Stock of the Subject Company (including 35,853,545 shares outstanding as of
May 12, 1997, 2,902,357 shares subject to options to purchase Common Stock of
the Company outstanding as of May 12, 1997 and a maximum of 2,184,760 shares
that may be issued upon the conversion of the Subject Company's 6 1/2%
Convertible Subordinated Debentures due 2011).
** 1/50 of 1% of Transaction Valuation. $12,227 is being wired with this
Amendment No. 3 as $159,724 was previously paid.
[X] Check box if any of the fee is offset as provided by Rule 0-11(a)(2) and
identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
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<S> <C>
Amout Previously Paid: $159,724 Filing Party: Nick Acquisition Corporation
Form or Registration No.: Schedule 14D-1 Date Filed: April 21, 1997
</TABLE>
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<PAGE> 2
This Amendment No. 3 amends and supplements the Tender Offer Statement on
Schedule 14D-1 filed on April 21, 1997 (as amended, the "Schedule 14D-1")
relating to the offer by Nick Acquisition Corporation, a Delaware corporation
(the "Purchaser") and a wholly-owned subsidiary of Harcourt General, Inc., a
Delaware corporation (the "Parent" or "Harcourt"), to purchase all of the
outstanding shares of Common Stock, par value $.01 per share (the "Shares"), of
National Education Corporation, a Delaware corporation (the "Company"), at an
amended purchase price of $21.00 per Share, net to the seller in cash, without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer to Purchase dated April 21, 1997, as amended and supplemented by the
Supplement thereto dated May 14, 1997 (the "Supplement"), and in the related
Letter of Transmittal. Unless otherwise indicated, all capitalized terms used
but not defined herein shall have the meanings assigned to them in the Schedule
14D-1.
ITEM 1. SECURITY AND SUBJECT COMPANY.
Item 1 is hereby amended and supplemented as follows:
(a) Reference is hereby made to the information set forth in the
Introduction of the Supplement, which is incorporated herein by reference
in its entirety.
(b) Reference is hereby made to the information set forth in Section 2
("Price Range of Shares; Dividends") of the Supplement which is
incorporated herein by reference in its entirety.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
Item 3 is hereby amended and supplemented as follows:
(a)-(b) -- Reference is hereby made to the information set forth in
the Introduction, Section 3 ("Background of the Amended Offer; Contacts
with the Company"), Section 4 ("Plans for the Company"), Section 5 ("Merger
Agreement") and Section 6 ("Certain Conditions of the Offer") of the
Supplement, which is incorporated herein by reference in its entirety.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Item 4 is hereby amended and supplemented as follows:
(a)-(b) -- Reference is hereby made to the information set forth in
Section 7 ("Source and Amount of Funds") of the Supplement, which is
incorporated herein by reference in its entirety.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
Item 5 is amended and supplemented as follows:
The information provided in this Amendment No. 3 under Item 3 is hereby
incorporated by reference.
Reference is hereby made to the information set forth in the Introduction,
Section 1 ("Amended Terms of the Offer; Expiration Date"), Section 3
("Background of the Amended Offer; Contacts with the Company"), Section 4
("Plans for the Company"), and Section 5 ("Merger Agreement") of the Supplement,
which is incorporated herein by reference in its entirety.
2
<PAGE> 3
ITEM 10. ADDITIONAL INFORMATION.
Item 10 is hereby amended and supplemented as follows:
(b)-(c), (e) -- Reference is hereby made to the information set forth in
Section 3 ("Background of the Amended Offer; Contacts with the Company "),
Section 5 ("Merger Agreement") and Section 8 ("Certain Legal Matters and
Regulatory Approvals") of the Supplement, which is incorporated herein by
reference in its entirety.
(f) -- Reference is hereby made to the information set forth in the
Supplement, a copy of which is attached as Exhibit 11(a)(12) hereto and which is
incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
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(a)(12) Supplement to the Offer to Purchase dated May 14, 1997
(a)(13) Letter of Transmittal
(a)(14) Notice of Guaranteed Delivery
(a)(15) Form of letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees
(a)(16) Form of letter to Clients for use by Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees
(a)(17) Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9
(a)(18) Form of Summary Advertisement dated May 14, 1997
(c)(1) Agreement and Plan of Merger dated as of May 12, 1997 among the Parent, the
Purchaser and the Company
(c)(2) Letter Agreement and Mutual Release dated May 12, 1997 among the Parent, the
Company and Sylvan Learning Systems, Inc.
</TABLE>
3
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SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this Statement is true, complete and correct.
HARCOURT GENERAL, INC.
By: /s/ ERIC P. GELLER
---------------------------------------
Name: Eric P. Geller
Title: Senior Vice President, General
Counsel and Secretary
NICK ACQUISITION CORPORATION
By: /s/ ERIC P. GELLER
---------------------------------------
Name: Eric P. Geller
Title: Vice President and Secretary
Date: May 14, 1997
<PAGE> 5
EXHIBIT INDEX
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EXHIBIT PAGE
NO. DESCRIPTION NO.
- --------- -------------------------------------------------------------------------- ----
<S> <C> <C>
11(a)(12) Supplement to the Offer to Purchase dated May 14, 1997....................
11(a)(13) Letter of Transmittal.....................................................
11(a)(14) Notice of Guaranteed Delivery.............................................
11(a)(15) Form of letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees..................................................................
11(a)(16) Form of letter to Clients for use by Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees..............................................
11(a)(17) Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9..............................
11(a)(18) Form of Summary Advertisement dated on May 14, 1997.......................
11(c)(1) Agreement and Plan of Merger dated as of May 12, 1997 among the Parent,
the Purchaser and the Company.............................................
11(c)(2) Letter Agreement and Mutual Release dated May 12, 1997 among the Parent,
the Company and Sylvan Learning Systems, Inc..............................
</TABLE>
<PAGE> 1
SUPPLEMENT TO OFFER TO PURCHASE
NICK ACQUISITION CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
HARCOURT GENERAL, INC.
HAS AMENDED ITS TENDER OFFER TO INCREASE
THE CASH PURCHASE PRICE FOR
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
NATIONAL EDUCATION CORPORATION
TO
$21.00 NET PER SHARE
THE OFFER HAS BEEN EXTENDED. THE OFFER AND WITHDRAWAL RIGHTS WILL
EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY,
MAY 27, 1997, UNLESS FURTHER EXTENDED.
THE BOARD OF DIRECTORS OF THE COMPANY HAS DETERMINED THAT THE OFFER AND THE
MERGER DESCRIBED HEREIN ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
STOCKHOLDERS OF THE COMPANY, HAS APPROVED THE OFFER AND THE MERGER AND
RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
TO THE OFFER.
The Offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the expiration of the Offer Shares
(as hereinafter defined) representing at least a majority of the total number of
outstanding shares of Common Stock of National Education Corporation, a Delaware
corporation (the "Company"), on a fully diluted basis (assuming conversion of
all outstanding 6 1/2% Convertible Subordinated Debentures due 2011 of the
Company and the exercise of all outstanding options). The Offer is also subject
to other terms and conditions contained herein. See the Introduction and Section
6 of this Supplement.
(Continued on next page)
------------------------
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
May 14, 1997
<PAGE> 2
(Continued from previous page)
IMPORTANT
ON MAY 12, 1997, THE PURCHASER, HARCOURT AND THE COMPANY (EACH AS DEFINED
HEREIN) ENTERED INTO A MERGER AGREEMENT (AS DEFINED HEREIN) WHICH CONTAINS THE
TERMS AND CONDITIONS DESCRIBED IN SECTION 5 OF THIS SUPPLEMENT.
Any stockholder desiring to tender all or any portion of such stockholder's
shares of Common Stock, par value $.01 per share (the "Shares"), of the Company
should either (a) complete and sign a Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions in such Letter of Transmittal and
mail or deliver it together with the certificate(s) representing tendered Shares
and any other required documents to the Depositary (as hereinafter defined) or
tender such Shares pursuant to the procedures for book-entry transfer set forth
in Section 3 of the Offer to Purchase or (b) request his broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
him. A stockholder whose Shares are registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if he desires to tender
such Shares.
A stockholder who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, may tender such
Shares by following the procedures for guaranteed delivery set forth in Section
3 of the Offer to Purchase.
Questions and requests for assistance may be directed to Goldman, Sachs &
Co. (the "Dealer Managers") or to MacKenzie Partners, Inc. (the "Information
Agent") at their respective addresses and telephone numbers set forth on the
back cover of this Supplement. Additional copies of this Supplement, the Offer
to Purchase, the related Letter of Transmittal and the related Notice of
Guaranteed Delivery may also be obtained from the Information Agent or from
brokers, dealers, commercial banks or trust companies.
<PAGE> 3
To: The Stockholders of
NATIONAL EDUCATION CORPORATION
INTRODUCTION
The following information amends and supplements the Offer to Purchase
dated April 21, 1997 (the "Offer to Purchase") of Nick Acquisition Corporation,
a Delaware corporation (the "Purchaser") and a wholly-owned subsidiary of
Harcourt General, Inc., a Delaware corporation ("Harcourt"). Pursuant to this
Supplement, the Purchaser is now offering to purchase all of the outstanding
shares of Common Stock, par value $.01 per share (the "Shares"), of National
Education Corporation, a Delaware corporation (the "Company"), at a purchase
price of $21.00 per Share net to the seller in cash without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase,
as amended and supplemented by this Supplement, and in the related Letter of
Transmittal (which together constitute the "Offer"). Unless the context requires
otherwise, terms not defined herein have the meanings ascribed to them in the
Offer to Purchase.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE
OFFER AND THE MERGER (AS HEREINAFTER DEFINED) ARE FAIR TO, AND IN THE BEST
INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY, HAS APPROVED THE OFFER AND THE
MERGER AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES.
Procedures for tendering Shares are set forth in Section 3 of the Offer to
Purchase. Tendering stockholders may continue to use the original (yellow)
Letter of Transmittal and the original (grey) Notice of Guaranteed Delivery
previously circulated with the Offer to Purchase, or the revised (blue) Letter
of Transmittal and the revised (pink) Notice of Guaranteed Delivery circulated
with this Supplement. While the Letter of Transmittal previously circulated with
the Offer to Purchase refers only to the Offer to Purchase, stockholders using
such document to tender their Shares will nevertheless receive $21.00 per Share
for each Share validly tendered and not properly withdrawn and accepted for
payment pursuant to the Offer, subject to the conditions of the Offer.
STOCKHOLDERS WHO HAVE PREVIOUSLY VALIDLY TENDERED AND NOT PROPERLY
WITHDRAWN THEIR SHARES PURSUANT TO THE OFFER ARE NOT REQUIRED TO TAKE ANY
FURTHER ACTION, EXCEPT AS MAY BE REQUIRED BY THE GUARANTEED DELIVERY PROCEDURE
IF SUCH PROCEDURE WAS UTILIZED. IF SHARES ARE ACCEPTED FOR PAYMENT AND PAID FOR
BY THE PURCHASER PURSUANT TO THE OFFER, SUCH STOCKHOLDERS WILL RECEIVE, SUBJECT
TO THE CONDITIONS OF THE OFFER, THE INCREASED TENDER PRICE OF $21.00 PER SHARE.
SEE SECTION 4 OF THE OFFER TO PURCHASE FOR THE PROCEDURES FOR WITHDRAWING SHARES
TENDERED PURSUANT TO THE OFFER.
Except as otherwise set forth in this Supplement and in the revised Letter
of Transmittal, the terms and conditions previously set forth in the Offer to
Purchase remain applicable in all respects to the Offer, and this Supplement
should be read in conjunction with the Offer to Purchase.
THE OFFER IS NO LONGER SUBJECT TO THE SYLVAN TERMINATION CONDITION, THE NO
IMPEDIMENTS CONDITION, THE CHARTER CONDITION OR THE SECTION 203 CONDITION
INCLUDED IN THE OFFER TO PURCHASE. THE OFFER IS NOW CONDITIONED UPON, AMONG
OTHER THINGS, THERE BEING VALIDLY TENDERED ON OR PRIOR TO THE EXPIRATION DATE
(AS DEFINED BELOW) AND NOT PROPERLY WITHDRAWN SHARES REPRESENTING AT LEAST A
MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED BASIS
(ASSUMING CONVERSION OF ALL OUTSTANDING 6 1/2% CONVERTIBLE SUBORDINATED
DEBENTURES DUE 2011 OF THE COMPANY AND THE EXERCISE OF ALL OUTSTANDING OPTIONS)
(DEFINED BELOW AS THE MINIMUM CONDITION). THE OFFER REMAINS SUBJECT TO CERTAIN
OTHER TERMS AND CONDITIONS CONTAINED HEREIN IN ADDITION TO THE MINIMUM
CONDITION. SEE SECTION 6 OF THIS SUPPLEMENT.
Harcourt, the Purchaser and the Company have entered into an Agreement and
Plan of Merger, dated as of May 12, 1997 (the "Merger Agreement"), which
provides for, among other things, (i) an increase in the price per Share to be
paid pursuant to the Offer from $19.50 per Share to $21.00 per Share, net to the
seller in cash without interest thereon, (ii) the amendment and restatement of
certain conditions to the Offer as set forth in their entirety in Section 6 of
this Supplement, (iii) the extension of the Offer to Tuesday, May 27,
1
<PAGE> 4
1997 and (iv) the merger of the Purchaser with the Company (the "Merger")
following the consummation of the Offer. In the Merger, each Share (other than
Shares held in the treasury of the Company, Shares owned by Harcourt, the
Purchaser or any other direct or indirect wholly-owned subsidiary of Harcourt or
of the Company and Dissenting Shares (as such term is defined in the Merger
Agreement)), shall be cancelled, extinguished and converted into the right to
receive $21.00 per Share in cash without interest thereon, less any applicable
withholding taxes. See Section 5 of this Supplement.
BZW, the investment banking division of Barclays Bank Plc ("BZW"), has
delivered to the Board of Directors of the Company its written opinion, dated
May 9, 1997, that, based upon and subject to the information contained in such
opinion, as of such date, the consideration to be received by holders of Shares,
other than Harcourt and the Purchaser, in the Offer and the Merger is fair to
such holders from a financial point of view.
Section 203 of the Delaware General Corporation Law (the "DGCL") and the
unaffiliated stockholder vote specified in the Non-Affiliated Shares Provision
(as defined in the Offer to Purchase) are no longer applicable to the Merger
because the Board of Directors of the Company has approved the Merger and the
Merger Agreement. Accordingly, the Section 203 Condition and the Charter
Condition, as well as the No Impediments Condition, described in the Offer to
Purchase are no longer applicable to the Offer.
The Sylvan Termination Condition described in the Offer to Purchase is also
no longer applicable to the Offer since, on May 12, 1997, Harcourt, the Company
and Sylvan entered into an agreement whereby (i) Sylvan agreed that the Sylvan
Merger Agreement would automatically terminate immediately prior to the
execution of the Merger Agreement and receipt by Sylvan of the $30 million
termination fee due thereunder, (ii) Harcourt and the Company jointly and
severally agreed to have the Company pay Sylvan the $30 million termination fee
and (iii) Sylvan, on the one hand, and Harcourt and the Company, on the other
hand, agreed to release all claims they might have against the other.
Based on the representations and warranties of the Company contained in the
Merger Agreement, as of May 12, 1997, there were 35,853,545 Shares outstanding
(not including 697,556 Shares held in the Company's treasury), 4,996,131 Shares
reserved for issuance in connection with the Company's stock option plans (of
which options to purchase 2,902,357 Shares were outstanding) and 2,184,760
Shares reserved for issuance upon conversion of the Company's 6 1/2% Convertible
Subordinated Debentures (the "Debentures"). Harcourt currently beneficially owns
an aggregate of 100 Shares, representing less than 1% of the Shares outstanding.
See Section 8 of the Offer to Purchase. Based on this information, the Minimum
Condition will be satisfied if at least 20,470,332 Shares are validly tendered
and not properly withdrawn on or prior to the Expiration Date. If the Minimum
Condition is satisfied, the Purchaser will be able to approve the Merger without
the affirmative vote of the holders of any other Shares.
THE OFFER TO PURCHASE, THIS SUPPLEMENT AND THE RELATED LETTER OF
TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
1. AMENDED TERMS OF THE OFFER; EXPIRATION DATE. Pursuant to the Merger
Agreement, the price per Share to be paid pursuant to the Offer has been
increased from $19.50 per Share to $21.00 per Share, net to the seller in cash
without interest thereon, upon the terms and subject to the conditions of the
Offer. All stockholders whose Shares are validly tendered and not properly
withdrawn and accepted for payment pursuant to the Offer (including Shares
tendered prior to the date of this Supplement) will receive the increased price.
Pursuant to the Merger Agreement, the Offer has been extended. The Offer
will expire at 12:00 Midnight, New York City time, on Tuesday, May 27, 1997,
unless and until the Purchaser, in its sole discretion, subject to the
provisions of the Merger Agreement, shall have further extended the period
during which the Offer is open, in which event the term "Expiration Date" shall
mean the latest time and date at which the Offer, as so extended by the
Purchaser, shall expire. See Section 5 of this Supplement for a description of
the provisions of the Merger Agreement regarding extensions of the Offer by the
Purchaser.
2
<PAGE> 5
The Offer is conditioned upon, among other things, satisfaction of each of
the conditions described above in the Introduction and in Section 6 of this
Supplement (the "Tender Offer Conditions"). The Purchaser reserves the right
(but shall not be obligated), subject to the provisions of the Merger Agreement,
to waive any or all of such conditions (other than the Minimum Condition).
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. This Supplement, the Offer to Purchase, the revised (blue)
Letter of Transmittal and other relevant materials will be mailed to record
holders of Shares whose names appear on the Company's stockholder list and will
be furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Company's
stockholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing for subsequent transmittal to beneficial
owners of Shares.
2. PRICE RANGE OF SHARES; DIVIDENDS. The high and low sales prices per
Share as reported by published financial sources during the second quarter
(through May 12, 1997) of the year ending December 31, 1997 were $20 5/8 and
$12 1/2, respectively. On May 12, 1997, the last full trading day prior to the
announcement of the execution of the Merger Agreement, according to published
financial sources, the reported closing sale price per Share on the NYSE
Composite Tape was $20 1/2.
STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
3. BACKGROUND OF THE AMENDED OFFER; CONTACTS WITH THE COMPANY. On April
25, 1997, Richard A. Smith, Chairman and Chief Executive Officer of Harcourt,
Robert A. Smith, President and Co-Chief Executive Officer of Harcourt, John R.
Cook, Senior Vice President and Chief Financial Officer of Harcourt, and Robert
L. Friedman of Simpson Thacher & Bartlett, counsel to Harcourt, met with Richard
C. Blum and Frederic V. Malek, members of the Board of Directors of the Company,
to explore the possibility of a negotiated acquisition transaction between
Harcourt and the Company. Although Mr. Richard Smith indicated a possible
willingness to increase Harcourt's pending offer from $19.50 to $20.25 per Share
in order to secure a negotiated transaction, Messrs. Blum and Malek indicated
their doubt that the Board of Directors of the Company would endorse a revised
Harcourt offer at $20.25 per Share.
On the evening of April 29, 1997, Messrs. Richard Smith and Blum discussed
further on a telephone conversation the possibility of a negotiated acquisition
transaction between Harcourt and the Company at a price of, but in no event more
than, $21.00 per Share subject to confirmatory due diligence by Harcourt.
On April 30, 1997, several telephone conversations occurred between
representatives of Harcourt and its legal advisors and representatives of the
Company and its legal advisors relating to a possible negotiated acquisition
transaction between Harcourt and the Company at a price of, but in no event more
than, $21.00 per Share, subject to confirmatory due diligence by Harcourt to be
completed during the following week.
At a meeting on May 2, 1997, the Company's Board of Directors agreed to
permit Harcourt to conduct confirmatory due diligence during the next week.
On May 1, 1997, Harcourt issued the following press release:
"Harcourt General, Inc. announced today that it was engaged in
negotiations with National Education Corporation concerning an acquisition
transaction based on a per share price of, but in no event more than,
$21.00. Pursuant to the contemplated transaction, Harcourt General would
increase its present offer to purchase all NEC shares to $21.00 per share.
This transaction is subject to confirmatory due diligence by Harcourt
General to be completed during the next week. The NEC Board has agreed to
permit Harcourt General to conduct this due diligence pursuant to a
standard confidentiality agreement. Harcourt General said that there can be
no assurance that such discussions will lead to an acceptable transaction
or that any such transaction will be approved by the board of directors of
Harcourt General or NEC. If these negotiations are not successful, Harcourt
General will continue its offer to purchase all NEC shares at $19.50 per
share."
3
<PAGE> 6
On May 2, 1997, Harcourt and the Company entered into a confidentiality
agreement. On such date and during the following week, representatives of
Harcourt met with management of the Company and its subsidiaries and conducted
due diligence.
On Friday, May 2, 1997, Harcourt's legal advisors delivered a draft merger
agreement to the Company and its legal advisors.
Pursuant to teleconferences held from Wednesday, May 7, 1997 through
Monday, May 12, 1997, negotiations were conducted between representatives of the
Company and Harcourt concerning the terms of the Merger Agreement.
On May 8, 1997, Sam Yau, the Chief Executive Officer of the Company,
telephoned Douglas L. Becker, the President and Co-Chief Executive Officer of
Sylvan, and Messrs. Yau and Becker discussed the possibility of Sylvan
terminating the Sylvan Merger Agreement in exchange for the payment by the
Company of the $30 million fee contemplated by Section 6.3 of the Sylvan Merger
Agreement.
On Friday, May 9, 1997, the Board of Directors of the Company met to
discuss Harcourt's proposal to acquire the Company at the price of, but in no
event more than, $21.00 per Share, including the terms of the draft merger
agreement. Following the delivery of the oral opinion of BZW to the Company's
Board of Directors (subsequently confirmed in writing) that the consideration to
be received by holders of Shares (other than Harcourt and the Purchaser)
pursuant to each of the Offer and the Merger is fair to such holders from a
financial point of view, the Company's Board of Directors approved the terms of
such proposal, including the terms contained in the draft merger agreement in
the form presented at the meeting which had been negotiated by the two parties
and their respective representatives during the course of the week. The
Company's Board of Directors authorized designated officers of the Company to
execute the Merger Agreement substantially in the form presented at the meeting
with such changes thereto as designated officers of the Company deemed
appropriate, subject to termination of the Sylvan Merger Agreement.
On May 12, 1997, Harcourt, the Company and Sylvan entered into an agreement
whereby (i) Sylvan agreed that the Sylvan Merger Agreement would automatically
terminate immediately prior to the execution of the Merger Agreement and receipt
by Sylvan of the $30 million termination fee due thereunder, (ii) Harcourt and
the Company jointly and severally agreed to have the Company pay Sylvan the $30
million termination fee and (iii) Sylvan, on the one hand, and Harcourt and the
Company, on the other hand, agreed to release all claims they might have against
the other.
Pursuant to negotiations held by teleconferences on Monday, May 12, 1997,
an agreement was reached between representatives of the Company and Harcourt on
all of the remaining terms of the Merger Agreement. Later that evening, the
Merger Agreement was executed. In the morning of Tuesday, May 13, 1997, Harcourt
and the Company issued the following joint press release:
"Harcourt General, Inc. and National Education Corporation today
announced a definitive merger agreement for Harcourt General to acquire NEC
for $21.00 per share in cash. Both Boards of Directors have approved the
transaction, valued at approximately $800 million.
'We are delighted to be moving ahead on a friendly basis on this
outstanding strategic combination,' said Richard A. Smith, Chairman and
Chief Executive Officer of Harcourt General. 'NEC's diverse mix of
educational products and services and distribution channels fit extremely
well with our existing publishing businesses and will help accelerate our
long-term growth in the dynamic market for broad-based educational
services.'
'We believe this transaction is in the best interests of NEC
shareholders,' said Sam Yau, President and Chief Executive Officer of NEC.
'In addition, we believe that our customers and employees will benefit from
Harcourt General's investment and commitment to being a major player in
educational services.'
Sylvan Learning Systems, Inc. has agreed to terminate its previous
merger agreement with NEC and will receive a payment of $30 million
pursuant to that agreement.
4
<PAGE> 7
Harcourt General's pending tender offer, which is not subject to
financing, is being amended to increase the offer to $21.00 per NEC share
and to extend the expiration date to 12:00 midnight on May 27, 1997.
The Company also announced that the Hart-Scott-Rodino antitrust
waiting period for the tender offer has expired. Consummation of the merger
is subject to customary terms and conditions."
4. PLANS FOR THE COMPANY. Pursuant to the Merger Agreement, Harcourt, the
Purchaser and the Company have agreed, among other things, to modify the
composition of the Board of Directors of the Company to include nominees of the
Purchaser following consummation of the Offer. See Section 5 of this Supplement.
5. MERGER AGREEMENT. The following is a summary of the Merger Agreement, a
copy of which is an exhibit to Amendment No. 3, filed by Harcourt and the
Purchaser with the Commission on May 14, 1997, to the Tender Offer Statement on
Schedule 14D-1 of the Purchaser and Harcourt filed with the Commission in
connection with the Offer (the "Schedule 14D-1"). Such summary is qualified in
its entirety by reference to the Merger Agreement. Terms not defined herein have
the meaning ascribed to them in the Merger Agreement.
The Offer. In the Merger Agreement, the Purchaser has agreed subject to
certain conditions to, among other things, amend the Offer (i) to increase the
purchase price offered to $21.00 per Share, (ii) to modify the conditions of the
Offer to conform to the Tender Offer Conditions and (iii) to extend the Offer to
May 27, 1997. The obligations of the Purchaser to accept for payment any Shares
tendered will be subject to the satisfaction of the Tender Offer Conditions any
of which may be waived; provided, however, that, without the consent of the
Company, the Purchaser will not waive the Minimum Condition. Without the consent
of the Company, the Purchaser will not (i) reduce the Offer Price, (ii) change
the form of consideration payable in the Offer (other than by adding
consideration), (iii) reduce the number of Shares to be purchased in the Offer
or (iv) impose conditions to the Offer in addition to the Tender Offer
Conditions which are adverse to the holders of the Shares. Subject to the terms
and conditions of the Merger Agreement, and unless the Company otherwise
consents in writing, Harcourt and the Purchaser agree that the Purchaser will
accept for payment and pay for Shares as soon as it is permitted to do so under
applicable law, subject to the prior satisfaction of the Tender Offer
Conditions. Notwithstanding the foregoing, the Purchaser may extend the Offer,
notwithstanding the prior satisfaction of the Tender Offer Conditions, for up to
five business days and then thereafter on a day-to-day basis for up to another
five business days if as of the expiration date of the Offer (including as a
result of any extensions thereof), there shall have been tendered more than 80%
but less than 90% of the outstanding Shares so that the Merger could not be
effected without a meeting of the Company's stockholders in accordance with the
applicable provisions of the DGCL; provided that, after the initial extension
pursuant to this sentence, the Offer shall not be subject to any conditions
other than (i) the conditions set forth in clauses (a)(i) or (ii) or (d)(ii) of
the Tender Offer Conditions and (ii) the absence of any intentional breach by
the Company of the representations, warranties, covenants or agreements set
forth in the Merger Agreement which has a material adverse effect on the
business, assets (whether tangible or intangible), financial condition, results
of operations or business prospects of the Company and its subsidiaries taken as
a whole.
Pursuant to the Merger Agreement, the Company has approved and consented to
the Offer and represented and warranted that (a) its Board of Directors (at a
meeting duly called and held on May 9, 1997) has unanimously (1) determined that
the Offer and the Merger are fair to and in the best interests of the holders of
Shares, (2) approved the Merger Agreement, the Offer and the Merger, (3)
resolved to recommend acceptance of the Offer by the stockholders of the Company
and approval and adoption of the Merger Agreement and the Merger by the
stockholders of the Company, and (4) taken all other action necessary to render
Section 203 of the DGCL inapplicable to the Offer and the Merger; and (b) BZW
has delivered to the Board of Directors of the Company its opinion that the
consideration to be received by the holders of Shares (other than Harcourt and
the Purchaser) pursuant to the Offer and the Merger is fair to the holders of
Shares from a financial point of view.
The Merger. The Merger Agreement provides that at the Effective Time the
Purchaser will be merged with and into the Company. By virtue of the Merger, at
the Effective Time, each outstanding Share (other
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<PAGE> 8
than (i) any Shares which are held by any direct or indirect wholly-owned
subsidiary of the Company or in the treasury of the Company, or which are held
by Harcourt or any of its direct or indirect wholly-owned subsidiaries
(including the Purchaser), all of which will be canceled, and (ii) Dissenting
Shares, will be cancelled and converted into the right to receive an amount in
cash, without interest, equal to the price paid for each Share pursuant to the
Offer (the "Merger Consideration") payable to the holder thereof less any
required withholding taxes. At the Effective Time, each share of outstanding
common stock of the Purchaser will become one share of common stock of the
Company (the "Surviving Corporation"). Immediately prior to the Effective Time,
each outstanding option of the Company exercisable into Shares, whether or not
then exercisable, shall be cancelled by the Company, and the holder thereof
shall be entitled to receive at the Effective Time or as soon as practicable
thereafter from the Company in consideration for such cancellation an amount in
cash equal to the product of (a) the number of Shares previously subject to such
outstanding option and (b) the excess, if any, of the Merger Consideration over
the exercise price per Share previously subject to such outstanding option. For
a description of certain rights available to stockholders upon consummation of
the Offer or the Merger, see Section 11 of the Offer to Purchase.
Agreements of the Company, the Purchaser and Harcourt. In the Merger
Agreement, the Company has agreed that during the period from the date of the
Merger Agreement to the earlier of termination of the Merger Agreement or the
Effective Time, except as otherwise approved in writing by Harcourt, the Company
and each of its subsidiaries will conduct their respective business only in the
ordinary course of business consistent with past practice and will use all
reasonable efforts consistent with past practices and policies to preserve
intact their respective business organization (including the services of their
existing employees) and preserve their relationships with customers, suppliers
and others having business dealings with them, to the end that their goodwill
and ongoing business shall be unimpaired at the Effective Time.
The Merger Agreement provides that neither the Company nor any of its
subsidiaries will (i) amend or propose to amend its Certificate of Incorporation
or By-Laws; (ii) authorize for issuance, issue or sell any shares of its stock
(other than in connection with the conversion of the Debentures outstanding on
May 12, 1997 (the "Outstanding Debentures") and the exercise of currently
outstanding stock options) or any of its other securities or equity equivalents,
or make any amendments to such securities; (iii) split, combine or reclassify
any shares of its capital stock, declare, set aside or pay any dividend or other
distribution in respect of its capital stock, or redeem or otherwise acquire any
of its securities or any securities of the Company's subsidiaries, except that
the Company may repurchase Outstanding Debentures to the extent necessary to
satisfy its 1997 sinking fund obligation under the indenture by which the
Debentures were issued; (iv) (A) incur or assume any debt or issue any debt
securities except for borrowings under existing lines of credit in the ordinary
course of business; (B) assume, guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other person or entity except in the ordinary course of business consistent
with past practice, and except for obligations of wholly-owned subsidiaries of
it; (C) make any loans, advances or capital contributions to, or investments in,
any other person or entity (other than to wholly-owned subsidiaries of it or
advances to employees in the ordinary course of business consistent with past
practice and in amounts not material to the maker of such loan or advance); (D)
pledge or otherwise encumber shares of its capital stock or any of its
subsidiaries; or (E) mortgage or pledge any of its material assets, or create or
suffer to exist any material lien thereupon; (v) except as may be required by
law or as contemplated by the Merger Agreement or subject to certain exceptions,
enter into, adopt or amend or terminate any bonus, profit sharing, compensation,
severance, termination, stock option, stock appreciation right, restricted
stock, performance unit, stock equivalent, stock purchase agreement, pension,
retirement, deferred compensation, employment, severance or other employee
benefit agreement, trust, plan, fund or other arrangement for the benefit or
welfare of any director, officer, employee or former employee or independent
contractor in any manner, or (except for normal increases in the ordinary course
of business consistent with past practice that, in the aggregate, do not result
in a material increase in benefits or compensation expense to it and as required
under existing agreements) increase in any manner the compensation or fringe
benefits of any director, officer or employee or pay any benefit not required by
any plan and arrangement as in effect as of May 12, 1997; (vi) acquire, sell,
lease, license to others or dispose of any assets outside the ordinary course of
business which individually or in the aggregate are material to the Company and
its subsidiaries, or enter into any commitment or transaction outside the
ordinary course of
6
<PAGE> 9
business consistent with past practice which would be material to the Company
and its subsidiaries; (vii) except as may be required as a result of a change in
law or in generally accepted accounting principles, change any of the accounting
principles or practices used by it; (viii) revalue in any material respect any
of its assets, including, without limitation, writing down the value of
inventory or writing-off notes or accounts receivable other than in the ordinary
course of business; (ix) (A) subject to certain exceptions, acquire or agree to
acquire any corporation, partnership or other business organization or division
thereof or any equity interest therein; (B) enter into any contract or agreement
other than in the ordinary course of business consistent with past practice
which would be material to it; (C) authorize any new capital expenditure or
expenditures which, individually, is in excess of $250,000 or, in the aggregate,
are in excess of $2,500,000; or (D) enter into or amend any contract, agreement,
commitment or arrangement providing for the taking of any action that would be
prohibited by the Merger Agreement; (x) make any tax election or settle or
compromise any income tax liability material to the Company; (xi) pay, discharge
or satisfy and claims, liabilities or obligations, other than the payment,
discharge or satisfaction in the ordinary course of business of liabilities
reflected or reserved against in, or contemplated by, the consolidated financial
statements (or the notes thereto) of the Company and the Company's subsidiaries
or incurred in the ordinary course of business consistent with past practice or
customary fees and expenses relating to the transactions contemplated by the
Merger Agreement; (xii) settle or compromise any pending or threatened suit,
action or claim relating to the transactions contemplated by the Merger
Agreement; or (xiii) take, or agree to take, any of the foregoing actions or any
action which would make any of the representations or warranties of the Company
untrue or incorrect as of the date when made.
The Merger Agreement provides that promptly after the consummation of the
Offer, unless the Merger is effected under Section 253 of the DGCL (the "short
form merger provisions"), the Company will convene a meeting of its stockholders
for the purpose of voting upon the Merger Agreement and the Merger. Unless the
Company's Board of Directors has received the written opinion of Irell & Manella
LLP to the effect that the taking of any of the following actions would
constitute a violation of the Board of Directors' fiduciary responsibilities to
the holders of the Shares under applicable law, the Company has agreed to (A)
include in the Proxy Statement (i) the recommendation of its Board of Directors
that holders of Shares approve and adopt the Merger Agreement and approve the
Merger and (ii) the written opinion of BZW that the consideration to be received
by such holders (other than Harcourt and the Purchaser) pursuant to the Offer
and the Merger is fair to such holders and (B) use its reasonable best efforts
to obtain the necessary approval and adoption of the Merger Agreement and the
Merger by its stockholders. For a description of the short-form merger
provisions, which under certain circumstances could be applicable to the Merger,
see Section 11 of the Offer to Purchase.
The Merger Agreement provides that, unless the Merger is effected pursuant
to the short form merger provisions, as promptly as practicable following
Harcourt's request, the Company will prepare and file a preliminary proxy
statement with the Commission and will use its reasonable best efforts to have
it cleared by the Commission at the earliest practicable time.
Pursuant to the Merger Agreement, promptly following the purchase by the
Purchaser of Shares pursuant to the Offer, the Purchaser will be entitled to
designate up to such number of directors, rounded up to the next whole number,
of the Company as will give the Purchaser representation on the Board of
Directors equal to the product of the total number of directors on the Board of
Directors of the Company (giving effect to the directors elected pursuant to the
Merger Agreement) multiplied by the percentage that the aggregate number of
Shares beneficially owned by the Purchaser and its affiliates bears to the total
number of Shares then outstanding. At such times, the Company will use its best
efforts to cause persons designated by the Purchaser to constitute the same
percentage as is on the Board of Directors of the Company of (i) each committee
of the Board of Directors of the Company, (ii) each board of directors of each
domestic subsidiary of the Company and (iii) each committee of each such board.
Until the Effective Time, the Company will use its reasonable best efforts to
ensure that all the members of the Board of Directors of the Company as of the
date of the Merger Agreement who are not employees of the Company will remain
members of the Board of Directors of the Company.
Schedule II attached to Amendment No. 2 to the Company's Schedule 14D-9
dated May 14, 1997 (as amended, the "Schedule 14D-9") sets forth information
with respect to the possible designation by the
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<PAGE> 10
Purchaser, pursuant to the Merger Agreement, of persons to be elected to the
Board of Directors of the Company. The Purchaser currently intends to choose the
designees to the Company's Board of Directors which it has the right to
designate pursuant to the Merger Agreement from among the directors and officers
of Harcourt listed in Schedule I to the Offer to Purchase.
The Company has agreed to take all actions required pursuant to Section
14(f) and Rule 14f-1 under the Exchange Act in order to fulfill its obligations
under the Merger Agreement described in the preceding paragraph and will include
in the Schedule 14D-9 or a separate Rule 14f-1 information statement provided to
stockholders such information with respect to the Company and its officers and
directors and affiliates required by Section 14(f) and Rule 14f-1 under the
Exchange Act.
Following the appointment of the Purchaser's designees as described above
and prior to the Effective Time, any amendment (or recommendation thereof) by
the Board of Directors of the Company of the Merger Agreement, the Certificate
of Incorporation or By-Laws of the Company, any termination of the Merger
Agreement by the Company, any extension by the Company of the time for the
performance of any obligations or other acts of the Purchaser or waiver of any
of the Company's rights thereunder, and any other consent or action by the Board
of Directors of the Company thereunder, will require the concurrence of a
majority of the directors of the Company then in office who are not designated
by the Purchaser.
Pursuant to the Merger Agreement, from the date of the Merger Agreement to
the Effective Time, the Company will afford Harcourt and its representatives and
advisors reasonable access to the officers, employees, agents, properties,
offices, plants and other facilities and to all books and records of the Company
and its subsidiaries, and shall furnish Harcourt with such financial, operating
and other data and information as Harcourt may from time to time reasonably
request.
Under the Merger Agreement, the Company, its affiliates and their
respective officers, directors, employees, representatives and agents (i) will
immediately cease any existing discussions or negotiations with any parties with
respect to any acquisition (other than the transactions contemplated by the
Merger Agreement) of all or any material portion of the assets of, or any equity
interest in, the Company or any of its subsidiaries or any business combination
with the Company or any of its subsidiaries, (ii) will not, directly or
indirectly, solicit, initiate, encourage, or furnish information in response to
any inquiries or proposals that constitute, or could reasonably be expected to
lead to, a proposal or offer for a merger, consolidation, business combination,
sale of substantial assets, sale of shares of capital stock (including without
limitation by way of a tender offer or similar transactions involving the
Company) (any of the foregoing transactions being referred to as an "Acquisition
Transaction"), (iii) will not engage in negotiations or discussions concerning,
or provide any non-public information to any person or entity relating to, any
Acquisition Transaction, and (iv) will not agree to, approve or recommend any
Acquisition Transaction; except, with respect to clauses (ii) (as to the
furnishing of information only), (iii) and (iv), where any such person or entity
has submitted a written proposal to the Company's Board of Directors relating to
an Acquisition Transaction and the Company's Board of Directors has received the
written opinion of Irell & Manella LLP to the effect that the failure of the
Company's Board of Directors to so act would constitute a violation of the Board
of Directors' fiduciary responsibilities to the holders of the Shares under
applicable law (it being understood that for this purpose, the failure to
respond to an Acquisition Proposal which in the judgment of the Company's Board
of Directors and BZW is superior, from a financial point of view, to the
Company's stockholders may be deemed to be a breach of such fiduciary duty). If
the Company nevertheless receives any indications of interest or proposals with
respect to any Acquisition Transactions, it will provide a copy of any such
written proposal to the Purchaser immediately after receipt thereof by the
Company or any of its representatives or agents, will notify Harcourt
immediately if any such proposal (whether oral or written) is made and will keep
Harcourt promptly advised of all developments which could reasonably be expected
to culminate in the Board of Directors of the Company withdrawing, modifying or
amending its recommendation of the Offer, the Merger and the other transactions
contemplated by the Merger Agreement. Except with Harcourt's consent, the
Company has agreed not to release any third party from, or waive any provisions
of, any confidentiality or standstill agreement to which the Company is a party.
The Merger Agreement provides that each of the Company, Harcourt and the
Purchaser will cooperate and use their respective reasonable best efforts to
take all appropriate action to consummate the Merger,
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<PAGE> 11
including cooperation in the preparation and filing of the Offer Documents, the
Schedule 14D-9, the Proxy Statement, any required filings under the HSR Act, any
required foreign filings and obtaining all licenses, permits, consents,
approvals, authorizations, qualifications and orders of governmental authorities
and parties to contracts with the Company and its subsidiaries as are necessary
for consummation of the Merger and fulfillment of the conditions to the Offer
and the Merger.
Certain Employee Benefits Matters. In the Merger Agreement, Harcourt and
the Company agreed that (i) the condition in Section 8 of the Company's
supplemental executive retirement plan, as amended (the "SERP"), that a
participant's employment with the Company must be terminated voluntarily or
involuntarily within two years of a change of control in order to receive
accelerated vesting and payout of SERP retirement benefits, will be waived for
Gary Keisling and Charles Moran; (ii) Messrs. Keisling and Moran will be
entitled to payment of SERP retirement benefits, with interest from the
consummation of the Offer, only when their employment terminates; (iii) there
will be no further accrual of additional benefits under the SERP from and after
the consummation of the Offer with respect to Messrs. Keisling and Moran and
(iv) Messrs. Keisling and Moran will not participate in any of Harcourt's
retirement plans. In addition, Harcourt and the Company acknowledged that the
option committee of Steck-Vaughn's board of directors may amend all options
exercisable for common stock of Steck-Vaughn to provide for the acceleration of
vesting and the mandatory cash-out of such options upon the initiation of any
going-private transaction for Steck-Vaughn.
Indemnification; Directors' and Officers' Insurance. The Merger Agreement
provides that the Company will, and Harcourt will cause the Surviving
Corporation to, from and after the Effective Time, indemnify, defend and hold
harmless each person who was, or has been at any time prior to the date of the
Merger Agreement or who becomes prior to the Effective Time, an officer or
director of the Company or any of its subsidiaries against all losses, claims,
damages, costs, expenses, liabilities or judgments or amounts that are paid in
settlement with the approval of the indemnifying party (which approval shall not
be unreasonably withheld) of or in connection with any claim, action, suit,
proceeding or investigation based in whole or in part on or arising in whole or
in part out of the fact that such person is or was a director or officer, of the
Company or any of its subsidiaries, whether pertaining to any matter existing or
occurring at or prior to the Effective Time and whether asserted or claimed
prior to, or at or after, the Effective Time.
For a period of five years after the Effective Time, Harcourt will cause
the Surviving Corporation to use reasonable efforts to maintain in effect, if
available, directors' and officers' liability insurance covering those persons
who are currently covered by the Company's directors' and officers' liability
insurance policy on terms and in an amount comparable to those now applicable to
directors and officers of the Company; provided, however, that in no event shall
the Surviving Corporation be required to expend in any year in excess of 125% of
the current premium being paid by the Company for such coverage.
Disposition of Litigation. The Company will give Harcourt the opportunity
to participate in the defense or settlement of any litigation against the
Company or any of its subsidiaries and their respective directors; provided,
however, that no such settlement shall be agreed to without Harcourt's consent,
which consent shall not be unreasonably withheld.
Postponement of Steck-Vaughn Annual Meeting. The Company will as soon as
possible cause Steck-Vaughn Publishing Corporation ("Steck-Vaughn") to
indefinitely postpone its annual meeting of stockholders currently scheduled for
May 29, 1997, and will cause Steck-Vaughn to take no action unless compelled by
legal process to reschedule such annual meeting or to call a special meeting of
stockholders of Steck-Vaughn except in accordance with the Merger Agreement
unless and until the Merger Agreement has been terminated in accordance with its
terms.
Representations and Warranties. The Merger Agreement contains customary
representations and warranties with respect to the Company, including with
respect to the Company's and Steck-Vaughn's financial statements and financial
condition; the accuracy of the documents and reports filed by the Company and
Steck-Vaughn with the Commission; the absence of any material undisclosed
liabilities; the absence of certain changes or events which could have a
material adverse effect on the business, assets (whether tangible or
intangible), financial condition, results of operations or business prospects of
the Company and its subsidiaries taken as a whole; the absence of certain
defaults and legal violations; the absence of certain litigation; with respect
to the Company's intellectual property, material contracts, tax matters,
environmental
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<PAGE> 12
matters, regulatory and compliance matters, labor matters, customers and
suppliers and employee benefit plans; the absence of conflicts with other
documents; the absence of certain liens and encumbrances; and with respect to
the effect of the Offer on the outstanding options of NETG Holding, Inc., a
wholly-owned subsidiary of the Company.
In the Merger Agreement, Harcourt and the Purchaser have made customary
representations and warranties, including that the Purchaser has or will have
sufficient funds available to pay for all Shares tendered in the Offer or
otherwise acquired in the Merger.
Conditions to the Merger. The respective obligations of Harcourt, the
Purchaser and the Company to effect the Merger are subject to the satisfaction
or waiver (subject to applicable law) at or prior to the Effective Time of each
of the following conditions: (i) if required by the DGCL, the Merger Agreement
and the Merger will have been approved and adopted by holders of a majority of
the outstanding Shares; (ii) any waiting period (and any extension thereof)
under the HSR Act applicable to the Merger will have expired or been terminated;
(iii) no statute, rule, regulation, executive order, decree, ruling, injunction
or other order will have been enacted, entered, promulgated or enforced by any
court or governmental authority which prohibits, restrains, enjoins or restricts
the consummation of the Merger; and (iv) the Purchaser will have accepted for
payment and paid for the Shares tendered pursuant to the Offer.
Termination. The Merger Agreement may be terminated and the transactions
contemplated thereby may be abandoned, at any time prior to the Effective Time,
whether before or after approval of the Merger by the Company's stockholders:
(a) by mutual written consent of the Company, Harcourt and the Purchaser; (b) by
the Company if the Offer shall not have been consummated within 90 days
following the date of the Merger Agreement; (c) by either Harcourt or the
Company, if any governmental or regulatory agency located or having jurisdiction
within the United States or any country or economic region in which either the
Company or Harcourt has material assets or operations will have issued an order,
decree or ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the acceptance for payment of, or payment for, Shares
pursuant to the Offer or the Merger and such order, decree or ruling or other
action will have become final and nonappealable, except if the party relying on
the provision described in this clause (c) to terminate the Merger Agreement is
in breach of any of its material obligations under the Merger Agreement; (d) by
Harcourt if due to a failure to satisfy any of the Tender Offer Conditions, the
Purchaser will have (i) terminated the Offer or (ii) failed to pay for Shares
pursuant to the Offer within 90 days of the date of the Merger Agreement unless
such termination or failure has been caused by or results from the failure of
Harcourt or the Purchaser to perform in any material respect any of its
respective covenants or agreements contained in the Merger Agreement; (e) by the
Company if (i) due to a failure of any of the Tender Offer Conditions, the
Purchaser shall have terminated the Offer, unless such termination has been
caused by or results from the failure of the Company to perform in any material
respect any of its covenants or agreements contained in the Merger Agreement,
(ii) prior to the purchase of Shares pursuant to the Offer, any person shall
have made a bona fide offer to acquire the Company (A) that the Board of
Directors of the Company determines in its good faith judgment is more favorable
to the Company's stockholders from a financial point of view than the Offer and
the Merger and (B) as a result of which the Company's Board of Directors has
received the written opinion of Irell & Manella LLP to the effect that the
failure of the Company's Board of Directors to terminate the Merger Agreement
would constitute a violation of the Board of Directors' fiduciary
responsibilities to the holders of the Common Stock under applicable law (it
being understood that for this purpose, the failure to respond to a bona fide
offer to acquire the Company which in the judgment of the Company's Board of
Directors and BZW is superior, from a financial point of view, to the Company's
stockholders may be deemed to be a breach of such fiduciary duty) or (iii) prior
to the purchase of Shares pursuant to the Offer (A) there shall have been a
breach of any representation or warranty on the part of Harcourt or the
Purchaser contained in the Merger Agreement which could reasonably be expected
to materially adversely affect (or materially delay) the consummation of the
Offer or (B) there shall have been a breach of any covenant or agreement on the
part of Harcourt or the Purchaser contained in the Merger Agreement which could
reasonably be expected to materially adversely affect (or materially delay) the
consummation of the Offer, which in the case of (A) or (B) shall not have been
cured prior to the earlier of (x) 10 business days following notice of such
breach and (y) two business days prior to the date on which the Offer expires
(including any extensions thereof); provided that such termination under the
immediately
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<PAGE> 13
preceding clause (ii) shall not be effective until the Company has made payment
of the full fee and expense and other reimbursement described under "Sylvan
Termination Fee" and "Fees and Expenses" below; (f) by Harcourt prior to the
purchase of Shares pursuant to the Offer, if (i) there shall have been a breach
of any representation or warranty on the part of the Company contained in the
Merger Agreement that has a material adverse effect on the business, assets
(whether tangible or intangible), financial condition, results of operations or
business prospects of the Company and its subsidiaries, taken as a whole, (ii)
there shall have been a breach of any covenant or agreement on the part of the
Company contained in the Merger Agreement that has a material adverse effect on
the business, assets (whether tangible or intangible), financial condition,
results of operations or business prospects of the Company and its subsidiaries
taken as a whole or which materially adversely affects (or materially delays)
the consummation of the Offer, which in the case of (i) or (ii) shall not have
been cured prior to the earlier of (A) 10 business days following notice of such
breach and (B) two business days prior to the date on which the Offer expires
(including any extensions thereof), (iii) the Company's Board of Directors will
have withdrawn or modified in a manner adverse to the Purchaser its approval or
recommendation of the Offer, the Merger Agreement or the Merger or shall have
approved or recommended another offer or transaction, or shall have resolved to
effect any of the foregoing, or (iv) the Minimum Condition shall not have been
satisfied by the expiration date of the Offer (including extensions thereof) and
on or prior to such date (A) any person (other than Harcourt or the Purchaser)
shall have made a bona fide proposal or public announcement or communication to
the Company with respect to a Third Party Acquisition (as defined below) or (B)
any person (including the Company or any of its affiliates or subsidiaries),
other than Harcourt or any of its affiliates, shall have become the beneficial
owner of more than 30% of the Shares.
"Third Party Acquisition" is defined in the Merger Agreement as the
occurrence of any of the following events: (i) the acquisition of the Company by
merger, tender offer or otherwise by any person other than Harcourt, the
Purchaser or any affiliate (a "Third Party"); (ii) the acquisition by a Third
Party of 30.0% or more of the assets of the Company and its subsidiaries taken
as a whole; (iii) the acquisition by a Third Party of more than 30.0% of the
outstanding Shares; (iv) the adoption by the Company of a plan of liquidation or
the declaration or payment of an extraordinary dividend; or (v) the repurchase
by the Company or any of its subsidiaries of 30.0% or more of the outstanding
Shares.
In the event of the termination of the Merger Agreement, the Merger
Agreement will forthwith become void and there will be no liability on the part
of any party thereto or their respective officers, directors, stockholders or
affiliates, subject to limited exceptions; provided, however, that nothing
therein will relieve any party from liability for any breach of the Merger
Agreement; provided, further, that neither Harcourt nor the Purchaser shall be
entitled to any punitive damages in the event of any breach of the Merger
Agreement if the fee referred to in "Fees and Expenses" below has been paid in
full to Harcourt.
Sylvan Termination Fee. Pursuant to the Merger Agreement, Harcourt has
provided the funds to the Company which has paid the $30,000,000 termination fee
payable by the Company to Sylvan as a result of the termination of the Sylvan
Merger Agreement.
The Company has agreed to reimburse Harcourt for such amount if: (i) the
Company intentionally breaches any of its representations, warranties, covenants
or agreements set forth in the Merger Agreement and such breach has a material
adverse effect on the business, assets (whether tangible or intangible),
financial condition, results of operations or business prospects of the Company
and its subsidiaries taken as a whole and Harcourt terminates the Merger
Agreement and the Offer pursuant to the provisions described under clause (f)(i)
or (ii) under "Termination" above; (ii) the Merger Agreement is terminated
pursuant to the provisions described under "Termination" and the Company is
required to pay the fee pursuant to the provisions described under "Fees and
Expenses" below; or (iii) the Merger Agreement is terminated in accordance with
its terms and, within eight months thereafter, the Company enters into an
agreement with respect to, or consummates, a Third Party Acquisition with Sylvan
(or any affiliate or associate thereof). If the Company is required to reimburse
Harcourt for any amount (the "Reimbursement Amount") pursuant to the immediately
preceding sentence and the Reimbursement Amount is not paid within five business
days after it is due, Harcourt, at its sole option, may demand (the "Demand")
that the Company tender to Harcourt, immediately in satisfaction of the
Reimbursement Amount, such number of Shares equal to (x) the
11
<PAGE> 14
Reimbursement Amount divided by (y) the average market price the Common Stock on
each of the five consecutive trading days immediately preceding the trading day
prior to the Demand.
Fees and Expenses. Under the Merger Agreement, if: (i) Harcourt terminates
the Merger Agreement pursuant to the provisions described in clauses (f)(i),
(ii) or (iv)(A) under "Termination" above, or if the Company terminates the
Merger Agreement pursuant to the provision described in clause (e)(i) under
"Termination" above under circumstances that would have permitted Harcourt to
terminate the Merger Agreement pursuant to the provisions described in clauses
(f)(i), (ii) or (iv)(A) under "Termination" above, and within eight months
thereafter, the Company enters into an agreement with respect to (and thereafter
consummates), or consummates, a Third Party Acquisition; or (ii) the Company
terminates the Merger Agreement pursuant to the provisions described in clause
(e)(ii) under "Termination" above or Harcourt terminates the Merger Agreement
pursuant to the provisions described in clauses (f)(iii) or (iv)(B) under
"Termination" above; then the Company will pay to Harcourt, within one business
day following any termination by Harcourt pursuant to the provisions described
in clauses (f)(iii) or (iv)(B) under "Termination" above or simultaneously with
the consummation of any such Third Party Acquisition or any termination by the
Company pursuant to the provisions described in clause (e)(ii) under
"Termination" above, a cash fee of (x) in any case involving a Third Party
Acquisition with Sylvan (including any termination pursuant to such clauses
(e)(ii) or (f)(iii) or (iv)(B)), $30 million and (y) in all other cases, $10
million, provided, however, that the Company in no event shall be obligated to
pay more than one such fee with respect to all such agreements and occurrences
and such termination. The Company's obligations described under "Fees and
Expenses" are in addition to any other payment obligations of the Company which
may arise under the provisions described under "Sylvan Termination Fee."
Except as otherwise specifically provided herein, each party shall bear its
own expenses in connection with the Merger Agreement and the transactions
contemplated thereby.
Amendment and Modification. Subject to the terms of the Merger Agreement
and applicable law, the Merger Agreement may be amended, modified and
supplemented in writing by the parties thereto in any and all respects before
the Effective Time (notwithstanding any stockholder approval of the Merger), by
action taken by the respective Boards of Directors of Harcourt, the Purchaser
and the Company or by the respective officers authorized by such Boards of
Directors, provided, however, that after any such stockholder approval, no
amendment will be made which by law requires further approval by such
stockholders without such further approval.
6. CERTAIN CONDITIONS OF THE OFFER. Pursuant to the Merger Agreement, the
conditions of the Offer are hereby amended and restated in their entirety as
follows:
Notwithstanding any other provision of the Offer, the Purchaser shall
not be required to accept for payment or, subject to any applicable rules
and regulations of the Commission, including Rule 14e-l(c) under the
Exchange Act (relating to the Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay
for any Shares tendered pursuant to the Offer, and may postpone the
acceptance for payment or, subject to the restriction referred to above,
payment for any Shares tendered pursuant to the Offer, and may amend or
terminate the Offer in accordance with the Merger Agreement if, prior to
the expiration of the Offer, (i) Shares representing at least a majority of
the total number of outstanding Shares on a fully diluted basis (assuming
conversion of all outstanding Debentures into Shares and the exercise of
all outstanding options) shall not have been validly tendered and not
properly withdrawn prior to the expiration of the Offer (the "Minimum
Condition") or (ii) at any time on or after the date of the Merger
Agreement and prior to the acceptance for payment of or payment for Shares,
any one or more of the following conditions occurs or has occurred:
(a) there shall have been instituted or pending any action or
proceeding brought by any governmental authority before any federal or
state court, or any order or preliminary or permanent injunction entered
in any action or proceeding before any federal or state court or
governmental, administrative or regulatory authority or agency, or any
other action taken, or statute, rule, regulation, legislation,
interpretation, judgment or order enacted, entered, enforced,
promulgated, amended, issued or deemed applicable to Harcourt,
Purchaser, the Company or any subsidiary or
12
<PAGE> 15
affiliate of Purchaser or the Company or the Offer or the Merger, by any
legislative body, court, government or governmental, administrative or
regulatory authority or agency that would reasonably be expected to have
the effect of: (i) making illegal, materially delaying or otherwise
directly or indirectly restraining or prohibiting the making of the
Offer, the acceptance for payment of, or payment for, some of or all the
Shares by the Purchaser or any of its affiliates or the consummation of
any of the transactions contemplated by the Merger Agreement or
materially delaying the Merger; (ii) prohibiting or materially limiting
the ownership or operation by the Company or any of its subsidiaries or
Harcourt, the Purchaser or any of Harcourt's affiliates of all or any
material portion of the business or assets of the Company or any of its
subsidiaries or Harcourt, or any of its affiliates, or compelling
Harcourt, the Purchaser or any of Harcourt's affiliates to dispose of or
hold separate all or any material portion of the business or assets of
the Company or any of its subsidiaries or Harcourt, or any of its
affiliates, as a result of the transactions contemplated by the Offer or
the Merger Agreement; (iii) imposing or confirming limitations on the
ability of Harcourt, the Purchaser or any of Harcourt's affiliates
effectively to acquire or hold or to exercise full rights of ownership
of Shares, including without limitation the right to vote any Shares
acquired or owned by Harcourt or the Purchaser or any of its affiliates
on all matters properly presented to the stockholders of the Company,
including without limitation the adoption and approval of the Merger
Agreement and the Merger or the right to vote any shares of capital
stock of any subsidiary directly or indirectly owned by the Company; or
(iv) requiring divestiture by Harcourt or the Purchaser or any of their
affiliates of any Shares; provided that Harcourt and Purchaser shall
have used their reasonable best efforts to cause any such judgment,
order or injunction to be vacated or lifted;
(b) there shall have occurred any event that is reasonably likely
to have a material adverse effect on the business, assets (whether
tangible or intangible), financial condition, results of operations or
business prospects of the Company and its subsidiaries taken as a whole;
(c) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) a
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) any limitation (whether or
not mandatory) by any government or governmental, administrative or
regulatory authority or agency, domestic or foreign, on the extension of
credit by banks or other lending institutions, (iv) a commencement of a
war or armed hostilities or other national or international calamity
directly or indirectly involving the United States or having a material
adverse effect on the business, assets (whether tangible or intangible),
financial condition, results of operations or business prospects of the
Company and its subsidiaries taken as a whole or materially adversely
affecting (or materially delaying) the consummation of the Offer or (v)
in the case of any of the foregoing existing at the time of commencement
of the Offer, a material acceleration or worsening thereof;
(d) (i) it shall have been publicly disclosed or Purchaser shall
have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under
the Exchange Act) of more than 30% of the outstanding Shares has been
acquired by any corporation (including the Company or any of its
subsidiaries or affiliates), partnership, person or other entity or
group (as defined in Section 13(d)(3) of the Exchange Act), other than
Harcourt or any of its affiliates, or (ii) (A) the Board of Directors of
the Company or any committee thereof shall have withdrawn or modified in
a manner adverse to Harcourt or the Purchaser the approval or
recommendation of the Offer, the Merger or the Merger Agreement, or
approved or recommended any takeover proposal or any other acquisition
of more than 5% of the outstanding Shares other than the Offer and the
Merger, (B) any corporation, partnership, person or other entity or
group shall have entered into a definitive agreement or an agreement in
principle with the Company with respect to a tender offer or exchange,
offer for any Shares or a merger, consolidation or other business
combination with or involving the Company or any of its subsidiaries, or
(C) the Board of Directors of the Company or any committee thereof shall
have resolved to do any of the foregoing;
13
<PAGE> 16
(e) any of the representations and warranties of the Company set
forth in the Merger Agreement that are qualified as to materiality shall
not be true and correct, or any such representations and warranties that
are not so qualified shall not be true and correct in any material
respect, in each case as if such representations and warranties were
made at the time of such determination, and (i) the Company fails to
cause such representations and warranties to be true and correct within
ten business days after written notice from the Purchaser and (ii) the
failure of such representation and warranty to be true and correct has a
material adverse effect on the business, assets (whether tangible or
intangible), financial condition, results of operations or business
prospects of the Company and its subsidiaries taken as a whole;
(f) the Company shall have failed to perform in any material
respect any obligation or to comply in any material respect with any
agreement or covenant of the Company to be performed or complied with by
it under the Merger Agreement, and (i) the Company fails to cure any
such failure within ten business days after written notice from the
Purchaser and (ii) the failure to comply with such agreement or covenant
has a material adverse effect on the business, assets (whether tangible
or intangible), financial condition, results of operations or business
prospects of the Company and its subsidiaries taken as a whole;
(g) the Merger Agreement shall have been terminated in accordance
with its terms or the Offer shall have been terminated with the consent
of the Company;
(h) any waiting periods under the HSR Act applicable to the
purchase of Shares pursuant to the Offer shall not have expired or been
terminated, or any material approval, permit, authorization or consent
of any domestic or foreign governmental, administrative or regulatory
agency (federal, state, local, provincial or otherwise) shall not have
been obtained on terms satisfactory to Harcourt in its reasonable
discretion and the failure to obtain such approval, permit,
authorization or consent has a material adverse effect on the business,
assets (whether tangible or intangible), financial condition, results of
operations or business prospects of the Company and its subsidiaries
taken as a whole; or
(i) giving effect to the consummation of the Offer, all outstanding
stock options granted by NETG Holding, Inc., a Delaware corporation and
wholly-owned subsidiary of the Company ("NETG"), for shares of NETG
common stock shall not have terminated upon consummation of the Offer;
which, in the reasonable, good faith judgment of the Purchaser with respect
to each and every matter referred to above and regardless of the
circumstances giving rise to any such condition (except for any action or
inaction by the Purchaser or any of its affiliates constituting a breach of
the Offer or the Merger Agreement), makes it inadvisable to proceed with
the Offer, or with such acceptance for payment of or payment for Shares or
to proceed with the Merger.
The foregoing conditions are for the sole benefit of the Purchaser and
may be asserted by the Purchaser regardless of the circumstances giving
rise to any such condition (except for any action or inaction by the
Purchaser or any of its affiliates constituting a breach of the Merger
Agreement or the Commission's rules and regulations) or (other than the
Minimum Condition) may be waived by the Purchaser in whole or in part at
any time and from time to time in its sole discretion (subject to the terms
of the Merger Agreement). The failure by the Purchaser at any time to
exercise any of the foregoing rights shall not be deemed a waiver of any
such right, the waiver of any such right with respect to particular facts
and other circumstances shall not be deemed a waiver with respect to any
other facts and circumstances, and each such right shall be deemed an
ongoing right that may be asserted at any time and from time to time.
7. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the
Purchaser to purchase all outstanding Shares and to pay related fees and
expenses is expected to be approximately $845.0 million. The Purchaser plans to
obtain all funds needed for the Offer and the Merger through a capital
contribution which will be made by Harcourt to the Purchaser.
14
<PAGE> 17
In the Merger Agreement, Harcourt and the Purchaser have represented and
warranted that Purchaser has or will have sufficient funds to pay for all Shares
tendered in the Offer or otherwise acquired in the Merger. The Offer is not
conditioned upon obtaining financing.
8. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS. On April 24, 1997,
Harcourt filed with the Federal Trade Commission (the "FTC") and the Antitrust
Division of the Department of Justice its Premerger Notification and Report Form
in connection with the purchase of Shares pursuant to the Offer. The applicable
provisions of the HSR Act impose a 15-calendar day waiting period following the
Purchaser's filing. That waiting period expired at 11:59 p.m., New York City
time, on Friday, May 9, 1997.
9. MISCELLANEOUS. Harcourt and the Purchaser have filed with the
Commission amendments to the Tender Offer Statement on Schedule 14D-1 pursuant
to Rule 14d-3 of the General Rules and Regulations under the Exchange Act
furnishing certain additional information with respect to the Offer, and may
file further amendments thereto. The Tender Offer Statement on Schedule 14D-1
and any and all amendments thereto, including exhibits, may be examined and
copies may be obtained from the Commission in the same manner as described in
Section 8 of the Offer to Purchase with respect to information concerning the
Company (except that the amendments will not be available at the regional
offices of the Commission).
Except as modified by this Supplement, the terms and conditions set forth
in the Offer to Purchase remain applicable in all respects to the Offer and this
Supplement should be read in conjunction with the Offer to Purchase and the
related Letter of Transmittal.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF THE PURCHASER OR HARCOURT NOT CONTAINED IN THE OFFER
TO PURCHASE AND HEREIN OR IN THE RELATED LETTER OF TRANSMITTAL AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
NICK ACQUISITION CORPORATION
May 14, 1997
15
<PAGE> 18
Facsimile copies of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal, certificates for Shares
and any other required documents should be sent or delivered by each stockholder
of the Company or his broker, dealer, commercial bank, trust company or other
nominee to the Depositary at one of its addresses as set forth below:
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or Overnight Courier:
IBJ Schroder Bank & Trust Company (212) 858-6211 IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station To Confirm Facsimile New York, New York 10004
New York, NY 10274-0084 Transmissions Call: Attn: Securities Processing
Attn: Reorganization Operations Window, Subcellar One
Department (212) 852-2103 (SC-1)
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent or the Dealer Managers at their respective telephone numbers and addresses
set forth below. Additional copies of this Supplement, the Offer to Purchase,
the Letter of Transmittal and other tender offer materials may be obtained from
the Information Agent as set forth below, and will be furnished promptly at the
Purchaser's expense. You may also contact your broker, dealer, commercial bank,
trust company or other nominee for assistance concerning the Offer.
The Information Agent for the Offer is:
[MACKENZIE LOGO]
156 Fifth Avenue
New York, NY 10010
(212) 929-5500 (call collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
(800) 323-5678 (toll free)
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
NATIONAL EDUCATION CORPORATION
PURSUANT TO THE OFFER TO PURCHASE
DATED APRIL 21, 1997
AND THE SUPPLEMENT THERETO
DATED MAY 14, 1997
BY
NICK ACQUISITION CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
HARCOURT GENERAL, INC.
THE OFFER HAS BEEN EXTENDED. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MAY 27, 1997,
UNLESS FURTHER EXTENDED.
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or By Overnight Courier:
IBJ Schroder Bank & Trust Company (212) 858-2611 IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station To Confirm New York, New York 10004
New York, New York 10274-0084 Facsimile Transmissions Call: Attn: Securities Processing
Attn: Reorganization Operations Window, Subcellar One,
Department (212) 858-2103 (SC-1)
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN
AS SET FORTH ABOVE, WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
While the original (yellow) Letter of Transmittal previously circulated
with the Offer to Purchase dated April 21, 1997 refers only to such Offer to
Purchase, stockholders using such document to tender their Shares (as such term
is defined below) will nevertheless receive $21.00 per Share for each Share
validly tendered and not properly withdrawn and accepted for payment pursuant to
the Offer (as defined below), subject to the conditions of the Offer.
Stockholders who have previously validly tendered and not properly withdrawn
their Shares pursuant to the Offer are not required to take any further action
to receive, subject to the conditions of the Offer, the increased tender price
of $21.00 per Share if Shares are accepted for payment and paid for by the
Purchaser (as defined below) pursuant to the Offer.
<PAGE> 2
This revised Letter of Transmittal or the previously circulated original
(yellow) Letter of Transmittal is to be completed by stockholders either if
certificates for Shares (as defined below) are to be forwarded herewith or,
unless an Agent's Message (as defined in Section 2 of the Offer to Purchase (as
defined below)) is utilized, if tenders of Shares are to be made by book-entry
transfer into the account of IBJ Schroder Bank & Trust Company, as Depositary
(the "Depositary"), at The Depository Trust Company or the Philadelphia
Depository Trust Company (each a "Book-Entry Transfer Facility" and,
collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures
set forth in Section 3 of the Offer to Purchase. Stockholders who tender Shares
by book-entry transfer are referred to herein as "Book-Entry Stockholders".
Holders of Shares whose certificates for such Shares (the "Share
Certificates") are not immediately available or who cannot deliver their Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date (as defined in Section 1 of the Offer to Purchase), or who
cannot complete the procedure for book-entry transfer on a timely basis, must
tender their Shares according to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase. See Instruction 2. DELIVERY OF DOCUMENTS TO
A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER
FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
- --------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
================================================================================
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
(ATTACH ADDITIONAL LIST, IF NECESSARY)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES
SHARE EVIDENCED BY
CERTIFICATE SHARE SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C>
==============================================================================================================================
==============================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL SHARES.......................................................................
- ------------------------------------------------------------------------------------------------------------------------------
* NEED NOT BE COMPLETED BY BOOK-ENTRY STOCKHOLDERS.
** UNLESS OTHERWISE INDICATED, ALL SHARE CERTIFICATES DELIVERED TO THE DEPOSITARY WILL BE DEEMED TO HAVE BEEN TENDERED. SEE
INSTRUCTION 4.
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 3
[ ] CHECK HERE IF SHARES ARE BEING TENDERED BY BOOK-ENTRY TRANSFER MADE TO AN
ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN A BOOK-ENTRY TRANSFER MAY
DELIVER SHARES BY BOOK-ENTRY TRANSFER):
Name of Tendering Institution
- --------------------------------------------------------------------------------
Check box of Book-Entry Transfer Facility (check one):
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
[ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of Registered Owner(s):
- --------------------------------------------------------------------------------
Window Ticket Number (if any):
- --------------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
-----------------------------------------------------------------
If delivered by Book-Entry Transfer, check box of Book-Entry Transfer Facility
(check one):
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number
- --------------------------------------------------------------------------------
Transaction Code Number
- --------------------------------------------------------------------------------
3
<PAGE> 4
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby tenders to Nick Acquisition Corporation, a Delaware
corporation (the "Purchaser") and a wholly-owned subsidiary of Harcourt General,
Inc., a Delaware corporation, the above-described shares of Common Stock, par
value $.01 per share (the "Shares"), of National Education Corporation, a
Delaware corporation (the "Company"), at a purchase price of $21.00 per Share,
net to the seller in cash without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase dated April 21, 1997 (the
"Offer to Purchase"), as amended and supplemented by the Supplement thereto
dated May 14, 1997 (the "Supplement"), and in this Letter of Transmittal (which
together with the Offer to Purchase and the Supplement constitute the "Offer").
The undersigned understands that the Purchaser reserves the right to transfer or
assign, in whole or from time to time in part, to one or more of its affiliates,
the right to purchase all or any portion of the Shares tendered pursuant to the
Offer, receipt of which is hereby acknowledged.
Subject to, and effective upon, acceptance for payment for the Shares
tendered herewith in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, the Purchaser all
right, title and interest in and to all of the Shares that are being tendered
hereby and any and all dividends, distributions (including any additional
Shares) or rights declared, paid or issued with respect to the tendered Shares
on or after March 31, 1997, and payable or distributable to the undersigned on a
date prior to the transfer to the name of the Purchaser or nominee or transferee
of the Purchaser on the Company's stock transfer records of the Shares it
tendered herewith (collectively, a "Distribution"), and appoints the Depositary
the true and lawful agent and attorney-in-fact of the undersigned with respect
to such Shares (and any Distribution) with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest) to (a) deliver such Share Certificates (as defined herein) (and any
Distribution) or transfer ownership of such Shares (and any Distribution) on the
account books maintained by a Book-Entry Transfer Facility, together in either
case with appropriate evidences of transfer, to the Depositary for the account
of the Purchaser, (b) present such Shares (and any Distributions) for transfer
on the books of the Company and (c) receive all benefits and otherwise exercise
all rights of beneficial ownership of such Shares (and any Distribution), all in
accordance with the terms and subject to the conditions of the Offer.
The undersigned irrevocably appoints designees of the Purchaser as such
stockholder's proxy, with full power of substitution, to the full extent of such
stockholder's rights with respect to the Shares tendered by such stockholder and
accepted for payment by the Purchaser and with respect to any and all other
Shares or other securities or rights issued or issuable in respect of such
Shares on or after March 31, 1997. Such appointment will be effective when, and
only to the extent that, the Purchaser accepts such Shares for payment. Upon
such acceptance for payment, all prior proxies given by such stockholder with
respect to such Shares and such other securities or rights prior to such payment
will be revoked, without further action, and no subsequent powers of attorney
and proxies may be given by such stockholder (and, if given, will not be deemed
effective). The designees of the Purchaser will, with respect to the Shares and
such other securities or rights for which such appointment is effective, be
empowered to exercise all voting and other rights of such stockholder as they in
their sole discretion may deem proper at any annual or special meeting of the
Company's stockholders, or any adjournment or postponement thereof, or by
written consent in lieu of any such meeting or otherwise. In order for Shares to
be deemed validly tendered, immediately upon the acceptance for payment of such
Shares, the Purchaser or its designee must be able to exercise full voting
rights with respect to such Shares and other securities or rights, including
voting at any meeting of stockholders.
The undersigned hereby represents and warrants that (a) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any Distribution) and (b) when the Shares are accepted for
payment by the Purchaser, the Purchaser will acquire good, marketable and
unencumbered title to the Shares (and any Distribution), free and clear of all
liens, restrictions, charges and encumbrances, and the same will not be subject
to any adverse claim. The undersigned, upon request, will execute and deliver
any additional documents deemed by the Depositary or the Purchaser to be
necessary or desirable to complete the sale, assignment and transfer of the
Shares tendered hereby (and any Distribution). In addition, the undersigned
shall promptly remit and transfer to the Depositary for the account of the
Purchaser any and all Distributions in respect of the Shares tendered hereby,
accompanied by appropriate documentation of transfer; and pending such
remittance or appropriate assurance thereof, the Purchaser will
4
<PAGE> 5
be, subject to applicable law, entitled to all rights and privileges as owner of
any such Distribution and may withhold the entire purchase price or deduct from
the purchase price the amount or value thereof, as determined by the Purchaser
in its sole discretion.
All authority herein conferred or agreed to be conferred shall not be
affected by and shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the undersigned.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time prior to the
Expiration Date (as defined in the Supplement) and, unless theretofore accepted
for payment by the Purchaser pursuant to the Offer, may also be withdrawn at any
time after June 20, 1997 (or such later date as may apply in case the Offer is
extended). See Section 4 of the Offer to Purchase.
The undersigned understands that tenders of Shares pursuant to any of the
procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and the Purchaser upon the terms and subject to the conditions set forth in the
Offer, including the undersigned's representation that the undersigned owns the
Shares being tendered.
Unless otherwise indicated herein under "Special Payment Instructions",
please issue the check for the purchase price and/or issue or return any
certificate(s) for Shares not tendered or not accepted for payment in the
name(s) of the registered holder(s) appearing under "Description of Shares
Tendered". Similarly, unless otherwise indicated herein under "Special Delivery
Instructions", please mail the check for the purchase price and/or any
certificate(s) for Shares not tendered or not accepted for payment (and
accompanying documents, as appropriate) to the address(es) of the registered
holder(s) appearing under "Description of Shares Tendered". In the event that
both the Special Delivery Instructions and the Special Payment Instructions are
completed, please issue the check for the purchase price and/or any
certificate(s) for Shares not tendered or accepted for payment in the name of,
and deliver such check and/or such certificates to, the person or persons so
indicated. Unless otherwise indicated herein under "Special Payment
Instructions", please credit any Shares tendered herewith by book-entry transfer
that are not accepted for payment by crediting the account at the Book-Entry
Transfer Facility (as defined herein) designated above. The undersigned
recognizes that the Purchaser has no obligation, pursuant to the Special Payment
Instructions, to transfer any Shares from the name(s) of the registered
holder(s) thereof if the Purchaser does not accept for payment any of the Shares
so tendered.
5
<PAGE> 6
SIGN HERE
(AND COMPLETE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
-------------------------------------------------------------
-------------------------------------------------------------
(SIGNATURE(S) OF HOLDER(S))
Dated:
---------------------------------------------- , 1997
(Must be signed by registered holder(s) exactly as name(s)
appear(s) on Share Certificate(s) or on a security position
listing or by person(s) authorized to become registered
holder(s) by certificates and documents transmitted herewith.
If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or
others acting in a fiduciary or representative capacity,
please provide the following information and see Instruction
5.)
Name(s)------------------------------------------------------
-------------------------------------------------------------
(PLEASE PRINT)
Capacity (Full Title)
--------------------------------------------
Address------------------------------------------------------
-------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number ( )
------------------------------
Tax Identification or
Social Security Number
------------------------------------------
COMPLETE SUBSTITUTE FORM W-9 ON REVERSE
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
--------------------------------------------
Name --------------------------------------------------------
Name of Firm-------------------------------------------------
(PLEASE PRINT)
Address------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone Number ( )
------------------------------
Dated:
---------------------------------------------- , 1997
SIGN
HERE
<PAGE> 7
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be issued in the name of someone other than
the undersigned, or if Shares tendered by book-entry transfer which are
not accepted for payment are to be returned by credit to an account
maintained at a Book-Entry Transfer Facility.
Issue: [ ] Check [ ] Certificate to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX ID. OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON THE REVERSE SIDE)
Credit Shares tendered by book-entry transfer that are not accepted for
payment to (Check one):
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
------------------------------------------------------------
(ACCOUNT NUMBER)
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificate(s) for Shares not tendered or not
accepted for payment and/or the check for the purchase price of Shares
accepted for payment are to be sent to someone other than the undersigned,
or to the undersigned at an address other than that above.
Mail: [ ] Check [ ] Certificates to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAX ID. OR SOCIAL SECURITY NO.)
(SEE SUBSTITUTE FORM W-9 ON THE REVERSE SIDE)
------------------------------------------------------------
7
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. No signature guarantee is required on this
Letter of Transmittal (a) if this Letter of Transmittal is signed by the
registered holder(s) of Shares (which term, for purposes of this document, shall
include any participant in a Book-Entry Transfer Facility whose name appears on
a security position listing as the owner of Shares) tendered herewith, unless
such holder(s) has completed either the box entitled "Special Payment
Instructions" or the box entitled "Special Delivery Instructions" above, or (b)
if such Shares are tendered for the account of a firm which is a bank, broker,
dealer, credit union, savings association or other entity which is a member in
good standing of the Security Transfer Agents Medallion Program (each of the
foregoing being referred to as an "Eligible Institution"). In all other cases,
all signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution. See Instruction 5 of this Letter of Transmittal.
2. Requirements of Tender. This Letter of Transmittal is to be completed
by stockholders either if certificates are to be forwarded herewith or, unless
an Agent's Message is utilized, if tenders are to be made pursuant to the
procedure for tender by book-entry transfer set forth in Section 3 of the Offer
to Purchase. Share Certificates, or timely confirmation (a "Book-Entry
Confirmation") of a book-entry transfer of such Shares into the Deposit Account
at a Book-Entry Transfer Facility, as well as this Letter of Transmittal (or a
facsimile hereof), properly completed and duly executed, together with any
required signature guarantees, or an Agent's Message in connection with a
book-entry transfer, and any other documents required by this Letter of
Transmittal, must be received by the Depositary at one of its addresses set
forth herein prior to the Expiration Date (as defined in the Supplement).
Stockholders whose Share Certificates are not immediately available or who
cannot deliver their Share Certificates and all other required documents to the
Depositary prior to the Expiration Date or who cannot complete the procedure for
delivery by book-entry transfer on a timely basis may tender their Shares by
properly completing and duly executing a Notice of Guaranteed Delivery pursuant
to the guaranteed delivery procedure set forth in Section 3 of the Offer to
Purchase. Pursuant to such procedure: (i) such tender must be made by or through
an Eligible Institution; (ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form made available by the Purchaser,
must be received by the Depositary on or prior to the Expiration Date; and (iii)
the Share Certificates (or a Book-Entry Confirmation) representing all tendered
Shares, in proper form for transfer, in each case together with the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees (or, in the case of a book-entry
delivery, an Agent's Message) and any other documents required by this Letter of
Transmittal, must be received by the Depositary within three New York Stock
Exchange, Inc. trading days after the date of execution of such Notice of
Guaranteed Delivery.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, SHARE CERTIFICATES
AND ALL OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH ANY BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING STOCKHOLDER
AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY
INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution of
this Letter of Transmittal (or a facsimile hereof), waive any right to receive
any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares and any other required
information should be listed on a separate signed schedule attached hereto.
4. Partial Tenders. (Not Applicable to Book-Entry Stockholders) If fewer
than all the Shares evidenced by any Share Certificate submitted are to be
tendered, fill in the number of Shares which are to be tendered in the box
entitled "Number of Shares Tendered". In such cases, new Share Certificates for
the Shares that were evidenced by your old Share Certificates, but were not
tendered by you, will be sent to you, unless otherwise provided in the
appropriate box on this Letter of Transmittal, as soon as practicable after the
Expiration Date. All Shares represented by Share Certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
8
<PAGE> 9
5. Signatures on Letter of Transmittal, Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificate(s) without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If any of the tendered Shares are registered in different names on several
certificates, it will be necessary to complete, and submit as many separate
Letters of Transmittal as there are different registrations of certificates.
If this Letter of Transmittal or any certificates or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to the Purchaser of their authority so to act must be submitted.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares listed and transmitted hereby, no endorsements of certificates or
separate stock powers are required unless payment is to be made to or
certificates for Shares not tendered or not purchased are to be issued in the
name of a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the certificate(s) listed, the certificate(s) must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name(s) of the registered holder(s) appear(s) on the
certificate(s). Signatures on such certificates or stock powers must be
guaranteed by an Eligible Institution.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction
6, the Purchaser will pay any stock transfer taxes with respect to the transfer
and sale of Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price is to be made to, or if certificate(s) for Shares
not tendered or accepted for payment are to be registered in the name of, any
person other than the registered holder(s), or if tendered certificate(s) are
registered in the name of any person other than the person(s) signing this
Letter of Transmittal, the amount of any stock transfer taxes (whether imposed
on the registered holder(s) or such person) payable on account of the transfer
to such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or an exemption therefrom, is submitted.
Except as otherwise provided in this Instruction 6, it will not be
necessary for transfer tax stamps to be affixed to the certificate(s) listed in
this Letter of Transmittal.
7. Special Payment and Delivery Instructions. If a check is to be issued
in the name of, and/or certificates for Shares not tendered or not accepted for
payment are to be issued or returned to, a person other than the signer of this
Letter of Transmittal or if a check and/or such certificates are to be returned
to a person other than the person(s) signing this Letter of Transmittal or to an
address other than that shown in this Letter of Transmittal, the appropriate
boxes on this Letter of Transmittal must be completed. A Book-Entry Stockholder
may request that Shares not accepted for payment be credited to such account
maintained at a Book-Entry Transfer Facility as such Book-Entry Stockholder may
designate under "Special Payment Instructions". If no such instructions are
given, such Shares not accepted for payment will be returned by crediting the
account at the Book-Entry Transfer Facility designated above.
8. Waiver of Conditions. The conditions of the Offer may be waived by the
Purchaser in whole or in part at any time and from time to time in its sole
discretion.
9. 31% Backup Withholding; Substitute Form W-9. Under U.S. Federal income
tax law, a stockholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Depositary is
not provided with the correct TIN, the Internal Revenue Service may subject the
stockholder or other payee to a $50 penalty. In addition, payments that are made
to such stockholder or other payee with respect to Shares purchased pursuant to
the Offer may be subject to 31% backup withholding.
Certain stockholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient,
9
<PAGE> 10
the stockholder must submit a Form W-8, signed under penalties of perjury,
attesting to that individual's exempt status. A Form W-8 can be obtained from
the Depositary. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to backup
withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Depositary.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
10. Requests for Assistance or Additional Copies. Questions or requests
for assistance may be directed to the Dealer Managers or the Information Agent
at their respective addresses and telephone numbers set forth below. Additional
copies of the Offer to Purchase, the Supplement, this Letter of Transmittal and
the Notice of Guaranteed Delivery may also be obtained from the Information
Agent or from brokers, dealers, commercial banks or trust companies.
11. Lost, Destroyed or Stolen Certificates. If any certificate
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. The stockholder will then be instructed as to
the steps that must be taken in order to replace the certificate. This Letter of
Transmittal and related documents cannot be processed until the procedures for
replacing lost or destroyed certificates have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE HEREOF), PROPERLY
COMPLETED AND DULY EXECUTED, WITH ANY REQUIRED SIGNATURE GUARANTEES, OR AN
AGENT'S MESSAGE IN CONNECTION WITH A BOOK-ENTRY TRANSFER, TOGETHER WITH SHARE
CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER OR THE NOTICE OF GUARANTEED
DELIVERY, AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY
PRIOR TO THE EXPIRATION DATE.
10
<PAGE> 11
ALL TENDERING STOCKHOLDERS MUST COMPLETE THE FOLLOWING:
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY, AS DEPOSITARY
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------
PART I--Taxpayer Identification Number-- ------------------------------
Social Security Number or
SUBSTITUTE Enter taxpayer identification number in the Employer Identification Number
FOR ALL ACCOUNTS box at right. (For most individuals, this is
FORM W-9 your social security number. If you do not
have a number, see Obtaining a Number in the
enclosed Guidelines.) Certify by signing and
dating below. Note: If the account is in
more than one name, see the chart in the
enclosed Guidelines to determine which
number to give the payer.
----------------------------------------------------------------------------
PART II--For Payees Exempt From Backup Withholding, see the enclosed
Guidelines and complete as instructed therein.
CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
DEPARTMENT OF THE Number (or I am waiting for a number to be issued to me), and
TREASURY (2) I am not subject to backup withholding either because I have not been
INTERNAL REVENUE notified by the Internal Revenue Service (the "IRS") that I am subject to
SERVICE backup withholding as a result of failure to report any interest or
dividends, or the IRS has notified me that I am no longer subject to
backup withholding.
OR CERTIFICATE INSTRUCTIONS--You must cross out Item (2) above if you have
been notified by the IRS that you are subject to backup withholding because
PAYEE'S REQUEST of underreporting interest or dividends on your tax return. However, if
FOR TAXPAYER after being notified by the IRS that you were subject to backup withholding
IDENTIFICATION
NUMBER ("TIN") you received another notification from the IRS that you are no longer
subject to backup withholding, do not cross out Item (2). (Also see
instructions in the enclosed Guidelines.)
----------------------------------------------------------------------------
SIGN HERE SIGNATURE: DATE: ,
1997
NAME:
- ----------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR"
IN THE SPACE PROVIDED FOR THE TIN IN PART I OF SUBSTITUTE FORM W-9.
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or
(2) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number by the
time of payment, 31% of all reportable payments made to me will be withheld.
Signature
------------------------------------------------ Date
------------------------------------------------------ , 1997
- --------------------------------------------------------------------------------
<PAGE> 12
The Information Agent for the Offer is:
mackenzie logo
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
(800) 323-5678 (toll free)
May 14, 1997
<PAGE> 1
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
NATIONAL EDUCATION CORPORATION
TO
NICK ACQUISITION CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
HARCOURT GENERAL, INC.
As set forth in Section 3 of the Offer to Purchase described below, this
instrument or one substantially equivalent hereto must be used to accept the
Offer (as defined below) if certificates for Shares (as defined below) are not
immediately available or the certificates for Shares and all other required
documents cannot be delivered to the Depositary prior to the Expiration Date (as
defined in the Supplement described below) or if the procedures for book-entry
transfer cannot be completed on a timely basis. This instrument may be delivered
by hand or mail or transmitted by facsimile transmission to the Depositary.
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand or By Overnight Courier:
IBJ Schroder Bank & Trust Company (212) 858-2611 IBJ Schroder Bank & Trust Company
P.O. Box 84 One State Street
Bowling Green Station To Confirm New York, New York 10004
Facsimile Transmissions
New York, New York 10274-0084 Call: Attn: Securities Processing
Attn: Reorganization Operations Window, Subcellar One,
Department (212) 858-2103 (SC-1)
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This form is not to be used to guarantee signatures. If a signature on a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box in the Letter of Transmittal.
Ladies and Gentlemen:
The undersigned hereby tender(s) to Nick Acquisition Corporation, a
Delaware corporation, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated April 21, 1997 (the "Offer to Purchase"), as amended
and supplemented by the Supplement thereto dated May 14, 1997 (the
"Supplement"), and in the related Letter of Transmittal (which together
constitute the "Offer"), receipt of which is hereby acknowledged, the number of
shares of Common Stock, par value $.01 per share (the "Shares"), of National
Education Corporation, a Delaware corporation, indicated below pursuant to the
guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.
<PAGE> 2
Signature(s)
- ---------------------------------------
Name(s) of Record Holders
- ------------------------------------------------------
PLEASE TYPE OR PRINT
Number of Shares
Certificate Nos. (If Available)
- ------------------------------------------------------
- ------------------------------------------------------
Dated
- ----------------------------------------, 1997
Address(es)
- ----------------------------------------
- ------------------------------------------------------
ZIP CODE
Area Code and Tel. No(s)
- -------------------------
Check one box (if Shares will
be tendered by book-entry transfer)
[ ] The Depository Trust Company
[ ] Philadelphia Depository Trust Company
Account Number
- ----------------------------------
- ------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm which is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Security Transfer Agents Medallion Program, (a) represents that the above named
person(s) "own(s)" the Shares tendered hereby within the meaning of Rule 14e-4
under the Securities Exchange Act of 1934, as amended ("Rule 14e-4"), (b)
represents that such tender of Shares complies with Rule 14e-4, and (c)
guarantees to deliver to the Depositary either the certificates evidencing all
tendered Shares, in proper form for transfer, or to deliver Shares pursuant to
the procedure for book-entry transfer into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company (each a
"Book-Entry Transfer Facility"), in either case together with the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees or an Agent's Message (as defined in Section 2
of the Offer to Purchase) in the case of a book-entry delivery, and any other
required documents, all within three New York Stock Exchange, Inc. trading days
after the date hereof.
- ------------------------------------------------------
NAME OF FIRM
- ------------------------------------------------------
ADDRESS
- ------------------------------------------------------
ZIP CODE
AREA CODE AND TEL. NO.
- ---------------------------
- ------------------------------------------------------
AUTHORIZED SIGNATURE
Name
- ----------------------------------------------
PLEASE TYPE OR PRINT
Title
- ------------------------------------------------
Dated
- ----------------------------------------, 1997
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE.
CERTIFICATES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
NICK ACQUISITION CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
HARCOURT GENERAL, INC.
HAS AMENDED ITS TENDER OFFER
TO INCREASE THE CASH PURCHASE PRICE FOR
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
NATIONAL EDUCATION CORPORATION
TO
$21.00 NET PER SHARE
THE OFFER HAS BEEN EXTENDED. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME,
ON TUESDAY, MAY 27, 1997, UNLESS FURTHER EXTENDED.
<TABLE>
<S> <C>
To Brokers, Dealers, Commercial Banks, May 14, 1997
Trust Companies and Other Nominees:
</TABLE>
We have been appointed by Nick Acquisition Corporation, a Delaware
corporation (the "Purchaser") and a wholly-owned subsidiary of Harcourt General,
Inc., a Delaware corporation (the "Parent"), to act as Dealer-Managers in
connection with the Purchaser's offer to purchase for cash all the outstanding
shares of Common Stock, par value $.01 per share (the "Shares"), of National
Education Corporation, a Delaware corporation (the "Company"), at a purchase
price of $21.00 per Share, net to the seller in cash without interest thereon,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated April 21, 1997 (the "Offer to Purchase"), as amended and supplemented by
the Supplement thereto dated May 14, 1997 (the "Supplement"), and in the related
Letter of Transmittal (which together constitute the "Offer") enclosed herewith.
Holders of Shares whose certificates for such Shares ("Share Certificates") are
not immediately available or who cannot deliver their Share Certificates and all
other required documents to the Depositary (as defined below) prior to the
Expiration Date (as defined in the Offer to Purchase), or who cannot complete
the procedures for book-entry transfer on a timely basis, must tender their
Shares according to the guaranteed delivery procedures set forth in Section 3 of
the Offer to Purchase.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
The Offer is conditioned upon, among other things, Shares representing at
least a majority of the total number of outstanding shares of Common Stock of
the Company on a fully diluted basis (assuming conversion of all outstanding
6 1/2% Convertible Subordinated Debentures due 2011 of the Company and the
exercise of all outstanding options) being validly tendered and not withdrawn
prior to the expiration of the Offer. The Offer is also subject to other terms
and conditions. See the Introduction and Section 6 of the Supplement. The Offer
is not conditioned on obtaining financing. The Offer is no longer subject to the
Sylvan Termination Condition, the No Impediments Condition, the Charter
Condition or the Section 203 Condition described in the Offer to Purchase.
<PAGE> 2
Enclosed herewith for your information and forwarding to your clients are
copies of the following documents:
1. The Offer to Purchase, dated April 21, 1997, and the Supplement,
dated May 14, 1997.
2. The revised blue Letter of Transmittal to tender Shares for your
use and for the information of your clients. Facsimile copies of the Letter
of Transmittal may be used to tender Shares.
3. The revised pink Notice of Guaranteed Delivery for Shares to be
used to accept the Offer if Share Certificates are not immediately
available or if such certificates and all other required documents cannot
be delivered to IBJ Schroder Bank & Trust Company (the "Depositary") by the
Expiration Date or if the procedure for book-entry transfer cannot be
completed by the Expiration Date.
4. A revised gold printed form of letter which may be sent to your
clients for whose accounts you hold Shares registered in your name or in
the name of your nominee, with space provided for obtaining such clients'
instructions with regard to the Offer.
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
6. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MAY 27, 1997, UNLESS THE OFFER
IS FURTHER EXTENDED.
In order to take advantage of the Offer, a duly executed and properly
completed Letter of Transmittal, together with any required signature
guarantees, or an Agent's Message (as defined in Section 2 of the Offer to
Purchase) in connection with a book-entry delivery of Shares, and any other
documents required by the Letter of Transmittal must be received by the
Depositary at one of its addresses set forth on the back cover of the Offer to
Purchase on or prior to the Expiration Date and either (i) Share Certificates
representing tendered Shares must be received by the Depositary, or such Shares
must be tendered pursuant to the procedure for book-entry transfer set forth in
the Offer to Purchase and Book-Entry Confirmation (as defined in Section 2 of
the Offer to Purchase) must be received by the Depositary, in each case on or
prior to the Expiration Date, or (ii) the guaranteed delivery procedures set
forth in Section 3 of the Offer to Purchase must be complied with, all in
accordance with the instructions set forth in the Letter of Transmittal and the
Offer to Purchase.
While the Letter of Transmittal previously circulated with the Offer to
Purchase refers only to the Offer to Purchase, stockholders using such document
to tender their Shares will nevertheless receive $21.00 per share for each share
validly tendered and not property withdrawn and accepted for payment pursuant to
the Offer, subject to the conditions of the Offer.
If holders of Shares desire to tender Shares pursuant to the Offer and
their Share Certificates are not immediately available or time will not permit
all required documents to reach the Depositary on or prior to the Expiration
Date, or the procedures for book-entry transfer cannot be completed on a timely
basis, such Shares may nevertheless be tendered if all of the guaranteed
delivery procedures specified in Section 3 of the Offer to Purchase are duly
complied with.
Neither the Parent nor the Purchaser will pay any fees or commissions to
any broker, dealer or other person (other than the Dealer Managers and MacKenzie
Partners, Inc. (the "Information Agent") as described in the Offer to Purchase)
for soliciting tenders of Shares pursuant to the Offer. The Parent or the
Purchaser will, however, upon request, reimburse you for customary clerical and
mailing expenses incurred by you in forwarding any of the enclosed materials to
your clients. The Purchaser will pay any stock transfer taxes with respect to
the transfer and sale of Shares to it or its order pursuant to the Offer, except
as otherwise provided in Instruction 6 of the Letter of Transmittal.
<PAGE> 3
Any inquiries you may have with respect to the Offer should be addressed to
Goldman, Sachs & Co., the Dealer Managers, or the Information Agent, at their
respective addresses and telephone numbers set forth on the back cover of the
Offer to Purchase. Additional copies of the enclosed materials may be obtained
from the Information Agent.
Very truly yours,
GOLDMAN, SACHS & CO.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, THE PARENT, THE COMPANY, THE
DEPOSITARY, THE DEALER MANAGERS OR THE INFORMATION AGENT, OR ANY AFFILIATE OF
ANY OF THEM, OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE
ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN
THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE> 1
NICK ACQUISITION CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
HARCOURT GENERAL, INC.
HAS AMENDED ITS TENDER OFFER
TO INCREASE THE CASH PURCHASE PRICE FOR
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
NATIONAL EDUCATION CORPORATION
TO
$21.00 NET PER SHARE
THE OFFER HAS BEEN EXTENDED. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MAY 27, 1997, UNLESS FURTHER
EXTENDED.
To Our Clients: May 14, 1997
Enclosed for your consideration is an Offer to Purchase dated April 21,
1997 (the "Offer to Purchase"), a Supplement thereto dated May 14, 1997 (the
"Supplement"), and the related Letter of Transmittal relating to an offer by
Nick Acquisition Corporation, a Delaware corporation (the "Purchaser") and a
wholly-owned subsidiary of Harcourt General, Inc., a Delaware corporation, to
purchase all of the outstanding shares of Common Stock, par value $.01 per share
(the "Shares"), of National Education Corporation, a Delaware corporation (the
"Company"), at a purchase price of $21.00 per Share, net to the seller in cash
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase, as amended and supplemented by the Supplement, and the
related Letter of Transmittal (which together constitute the "Offer"). We are
the holder of record of Shares held by us for your account. A tender of such
Shares can be made only by us as the holder of record and pursuant to your
instructions. The Letter of Transmittal is furnished to you for your information
only and cannot be used by you to tender Shares held by us for your account.
We request instructions as to whether you wish to have us tender on your
behalf any or all of such Shares held by us for your account, pursuant to the
terms and subject to the conditions set forth in the Offer to Purchase as
amended and supplemented by the Supplement.
Your attention is directed to the following:
1. The tender price is $21.00 per Share, net to the seller in cash
without interest thereon.
2. The Offer is made for all of the outstanding Shares.
3. The Offer is conditioned upon, among other things, Shares
representing at least a majority of the total number of outstanding shares
of Common Stock of the Company on a fully diluted basis (assuming
conversion of all outstanding 6 1/2% Convertible Subordinated Debentures
due 2011 of the Company and the exercise of all outstanding options) being
validly tendered and not withdrawn prior to the expiration of the Offer.
The Offer is also subject to other terms and conditions. See the
Introduction and Section 6 of the Supplement. The Offer is not conditioned
on obtaining financing. The Offer is no longer subject to the Sylvan
Termination Condition, the No Impediments Condition, the Charter Condition
or the Section 203 Condition described in the Offer to Purchase.
<PAGE> 2
4. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to the
Offer.
5. The Offer and withdrawal rights will expire at 12:00 Midnight, New
York City time, on Tuesday, May 27, 1997, unless the Offer is further
extended.
6. Upon the terms and subject to the conditions of the Offer
(including, the Supplement and, if the Offer is further extended or
amended, the terms and conditions of any such extension or amendment), the
Purchaser will accept for payment and thereby purchase all Shares validly
tendered and not withdrawn in accordance with the procedures set forth in
Section 4 of the Offer to Purchase on or prior to the Expiration Date (as
defined in the Supplement). Notwithstanding any other provision of the
Offer, payment for Shares purchased pursuant to the Offer will in all cases
be made only after timely receipt by the Depositary of (i) Share
Certificates for such Shares or timely confirmation of the book-entry
transfer of such Shares into the Depositary's account at The Depository
Trust Company or Philadelphia Depository Trust Company pursuant to the
procedures set forth in Section 3 of the Offer to Purchase, (ii) the Letter
of Transmittal (or a facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or an Agent's Message (as
defined in Section 2 of the Offer to Purchase) in connection with a
book-entry transfer and (iii) any other documents required by the Letter of
Transmittal.
The Offer is being made solely by the Offer to Purchase, as amended and
supplemented by the Supplement, and the related Letter of Transmittal and is
being made to all holders of Shares. The Purchaser is not aware of any state
where the making of the Offer is prohibited by administrative or judicial action
pursuant to any valid state statute. If the Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, the Purchaser will make a good faith effort to comply with any
such state statute. If, after such good faith effort, the Purchaser cannot
comply with such state statute, the Offer will not be made to (nor will tenders
be accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of the Purchaser by the Dealer Managers or one or more registered brokers
or dealers that are licensed under the laws of such jurisdiction.
If you wish to have us tender any or all of the Shares held by us for your
account, please instruct us by completing, executing and returning to us the
instruction form contained in this letter. If you authorize a tender of your
Shares, all such Shares will be tendered unless otherwise specified in such
instruction form. Your instructions should be forwarded to us in ample time to
permit us to submit a tender on your behalf prior to the expiration of the
Offer.
Stockholders who have previously validly tendered and not properly
withdrawn their Shares pursuant to the Offer are not required to take any
further action, except as may be required by the guaranteed delivery procedure
if such procedure was utilized. If Shares are accepted for payment and paid for
by the Purchaser pursuant to the Offer, such stockholders will receive, subject
to the conditions of the Offer, the increased purchase price of $21.00 per
Share. See Section 4 of the Offer to Purchase for the procedures for withdrawing
Shares tender pursuant to the Offer.
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
NATIONAL EDUCATION CORPORATION
The undersigned acknowledge(s) receipt of your letter enclosing the Offer
to Purchase dated April 21, 1997 (the "Offer to Purchase"), the Supplement
thereto dated May 14, 1997 (the "Supplement") and the related Letter of
Transmittal pursuant to an offer by Nick Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of Harcourt General, Inc., a Delaware
corporation, to purchase all outstanding shares of Common Stock, par value $.01
per share (the "Shares"), of National Education Corporation, a Delaware
corporation.
This will instruct you to tender the number of Shares indicated below (or,
if no number is indicated below, all Shares) which are held by you for the
account of the undersigned, upon the terms and subject to the conditions set
forth in the Offer to Purchase, as amended and supplemented by the Supplement,
and in the related Letter of Transmittal furnished to the undersigned.
NUMBER OF SHARES TO BE TENDERED*
--------------------------------------------- SHARES
DATED , 1997
SIGN HERE
SIGNATURES(S)
PLEASE PRINT NAME(S)
ADDRESS
AREA CODE AND TELEPHONE NUMBER
TAX IDENTIFICATION OR
SOCIAL SECURITY NUMBER
- ---------------
* Unless otherwise indicated, it will be assumed that all of your Shares held by
us for your account are to be tendered.
<PAGE> 1
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER.
Social security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------
GIVE THE
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY
NUMBER OF--
=========================================================
GIVE THE EMPLOYER
FOR THIS TYPE OF ACCOUNT: IDENTIFICATION
NUMBER OF--
- ---------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of
account) the account or, if
combined funds, any
one of the
individuals(1)
3. Husband and wife (joint The actual owner of
account) the account or, if
joint funds, either
person(1)
4. Custodian account of a minor The minor(2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if
the minor is the
only contributor,
the minor(1)
6. Account in the name of guardian The ward, minor, or
or committee for a designated incompetent
ward, minor, or incompetent person(3)
person
7. a. The usual revocable savings The grantor-
trust account (grantor is trustee(1)
also trustee)
b. So-called trust account that The actual owner(1)
is not a legal or valid trust
under State law
8. Sole proprietorship account The owner(4)
- ---------------------------------------------------------
9. A valid trust, estate or The legal entity
pension trust (Do not furnish the
identifying number
of the personal
representative or
trustee unless the
legal entity itself
is not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in the The partnership
name of the business
13. Association, club or other tax- The organization
exempt organization
14. A broker or registered nominee The broker or
nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a state
or local government, school
district, or prison) that
receives agricultural program
payments
- ---------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service (the "IRS") and
apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- An international organization or any agency or instrumentality thereof.
- A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding including the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one non-resident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- Payments described in section 6049(b)(5) to non-resident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX
CONSULTANT OR THE INTERNAL REVENUE SERVICE
<PAGE> 1
EXHIBIT 11(a)(18)
THIS ANNOUNCEMENT IS NEITHER AN OFFER TO PURCHASE NOR A SOLICITATION OF AN OFFER
TO SELL SHARES. THE OFFER IS BEING MADE SOLELY BY THE OFFER TO PURCHASE DATED
APRIL 21, 1997, THE SUPPLEMENT THERETO DATED MAY 14, 1997 AND THE RELATED LETTER
OF TRANSMITTAL AND IS BEING MADE TO ALL HOLDERS OF SHARES. THE PURCHASER IS NOT
AWARE OF ANY STATE WHERE THE MAKING OF THE OFFER IS PROHIBITED BY ADMINISTRATIVE
OR JUDICIAL ACTION PURSUANT TO A STATE STATUTE. IF THE PURCHASER BECOMES AWARE
OF ANY STATE WHERE THE MAKING OF THE OFFER IS PROHIBITED, THE PURCHASER WILL
MAKE A GOOD FAITH EFFORT TO COMPLY WITH ANY SUCH STATUTE OR SEEK TO HAVE SUCH
STATUTE DECLARED INAPPLICABLE TO THE OFFER. IF, AFTER SUCH GOOD FAITH EFFORT,
THE PURCHASER CANNOT COMPLY WITH ANY APPLICABLE STATUTE, THE OFFER WILL NOT BE
MADE TO (NOR WILL TENDERS BE ACCEPTED FROM OR ON BEHALF OF) THE HOLDERS OF
SHARES IN SUCH STATE. IN THOSE JURISDICTIONS WHOSE SECURITIES, BLUE SKY OR OTHER
LAWS REQUIRE THE OFFER TO BE MADE BY A LICENSED BROKER OR DEALER, THE OFFER
SHALL BE DEEMED TO BE MADE ON BEHALF OF THE PURCHASER BY GOLDMAN SACHS & CO. OR
ONE OR MORE REGISTERED BROKERS OR DEALERS LICENSED UNDER THE LAWS OF SUCH
JURISDICTIONS.
HARCOURT GENERAL, INC.
THROUGH ITS WHOLLY-OWNED SUBSIDIARY
NICK ACQUISITION CORPORATION
HAS AMENDED ITS TENDER OFFER TO INCREASE
THE CASH PURCHASE PRICE FOR
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
NATIONAL EDUCATION CORPORATION
TO
$21 NET PER SHARE
Nick Acquisition Corporation, a Delaware corporation (the "Purchaser") and a
wholly-owned subsidiary of Harcourt General, Inc., a Delaware corporation (the
"Parent"), is now offering to purchase all of the outstanding shares of common
stock, par value $.01 per share (the "Shares"), of National Education
Corporation, a Delaware corporation (the "Company"), at a purchase price of
$21.00 per Share net to the seller in cash without interest thereon, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
April 21, 1997 (the "Offer to Purchase"), as amended and supplemented by the
Supplement thereto dated May 14, 1997 (the "Supplement"), and in the related
Letter of Transmittal (which together constitute the "Offer"). Shares previously
tendered and not properly withdrawn constitute valid tenders for purposes of the
Offer.
THE OFFER HAS BEEN EXTENDED. THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT
12:00 MIDNIGHT, NEW YORK CITY TIME, ON TUESDAY, MAY 27, 1997, UNLESS FURTHER
EXTENDED.
The Board of Directors of the Company has determined that the Offer and the
Merger (as defined below) are fair to, and in the best interests of, the
stockholders of the Company, has approved the Offer and the Merger and
recommends that stockholders accept the Offer and tender their Shares.
The Offer is conditioned upon, among other things, there being validly
tendered and not properly withdrawn prior to the expiration of the Offer a
number of Shares representing a majority of the total number of outstanding
Shares on a fully diluted basis. The Offer is also subject to other terms and
conditions. See the Introduction and Section 6 of the Supplement.
The Offer is being amended and supplemented pursuant to an Agreement and
Plan of Merger dated as of May 12, 1997 (the "Merger Agreement") among the
Parent, the Purchaser and the Company which provides for, among other things,
(i) an increase in the purchase price per Share to be paid pursuant to the Offer
from $19.50 per Share to $21.00 per Share, (ii) the amendment and restatement of
certain conditions to the Offer as set forth in their entirety in Section 6 of
the Supplement, (iii) the extension of the Offer to Tuesday, May 27, 1997 and
(iv) the merger of the Purchaser with the Company (the "Merger") following the
consummation of the Offer. In the Merger, each Share (other than Shares held in
the treasury of the Company, Shares owned by the Parent, the Purchaser or any
other direct or indirect wholly-owned subsidiary of the Parent or of the Company
and Dissenting Shares (as such term is defined in the Merger Agreement)) shall
be canceled, extinguished and converted into the right to receive $21.00 per
Share in cash without interest thereon, less any applicable withholding taxes.
For purposes of the Offer the Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary (as defined in the Supplement) of the Purchaser's acceptance for
payment of such Shares pursuant to the Offer. Upon the terms and subject to the
conditions of the Offer, payment for Shares accepted for payment pursuant to the
Offer will be made by deposit of the purchase price therefor with the
Depositary, which will act as agent for tendering stockholders for the purpose
of receiving payments from the Purchaser and transmitting such payments to
stockholders whose Shares have been accepted for payment. Under no circumstance
will interest on the purchase price for Shares be paid, regardless of any delay
in making such payment. In all cases, payment for Shares tendered and accepted
for payment pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates representing Shares ("Share Certificates"), or
timely confirmation of a book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company or the Philadelphia
Depository Trust Company (each a "Book-Entry Transfer Facility") pursuant to the
procedures set forth in Section 3 of the Offer to Purchase, (ii) the Letter of
Transmittal delivered with the Offer to Purchase or the revised Letter of
Transmittal delivered with the Supplement (or a facsimile of either) properly
completed and duly executed, with any required signature guarantees, or an
Agent's Message (as defined in Section 2 of the Offer to Purchase) in connection
with a book-entry transfer, and (iii) any other documents required by such
Letter of Transmittal.
The Purchaser expressly reserves the right, in its sole discretion, subject
to the terms of the Merger Agreement, at any time and from time to time, to
extend further the period during which the Offer is open for any reason,
including the occurrence of any of the events specified in Section 6 of the
Supplement, by giving written notice of such extension to the Depositary. Any
such extension will be followed as promptly as practicable by public
announcement to be made no later than 9:00 A.M., New York City time, on the next
business day after the previously scheduled Expiration Date.
The term "Expiration Date" means 12:00 Midnight, New York City time, on
Tuesday, May 27, 1997, unless and until the Purchaser shall have further
extended, subject to the terms of the Merger Agreement, the period during which
the Offer is open, in which event the term "Expiration Date" shall mean the
latest time and date at which the Offer, as so further extended by the
Purchaser, shall expire.
Tenders of Shares made pursuant to the Offer are irrevocable, except that
Shares tendered pursuant to the Offer may be withdrawn at any time on or prior
to the Expiration Date and, unless theretofore accepted for payment by the
Purchaser pursuant to the Offer, may also be withdrawn at any time after June
20, 1997. For a withdrawal to be effective, a written telegraphic, telex or
facsimile transmission of notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of the
Supplement. Any such notice of withdrawal must specify the name of the
registered holder, if different from that of the person who tendered such
Shares. If Share Certificates to be withdrawn have been delivered or otherwise
identified to the Depositary, then, prior to the physical release of such
certificates, the serial numbers shown on such certificates must be submitted to
the Depositary and the signatures on the notice of withdrawal must be guaranteed
by an Eligible Institution (as defined in Section 3 of the Offer to Purchase)
unless such Shares have been tendered for the account of any Eligible
Institution. If Shares have been tendered pursuant to the procedure for
book-entry transfer as set forth in Section 3 of the Offer to Purchase, any
notice of withdrawal must specify the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares, in which
case a notice of withdrawal will be effective if delivered to the Depositary by
any method of delivery described in the second sentence of this paragraph. All
questions as to the term and validity (including time of receipt) of any notice
of withdrawal will be determined by the Purchaser, in its sole discretion, whose
determination will be final and binding.
The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the
General Rules and Regulations under the Securities Exchange Act of 1934, as
amended, is contained in the Offer to Purchase, as amended and supplemented by
the Supplement, and is incorporated herein by reference.
The Company has provided the Purchaser with the Company's stockholder lists
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase, the Supplement, the revised Letter of
Transmittal and other relevant materials will be mailed to record holders of
Shares whose names appear on the Company's stockholder list and will be
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the stockholder
list or, if applicable, who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
The Offer to Purchase, the Supplement and the related Letter of Transmittal
contain important information which should be read before any decision is made
with respect to the Offer.
Questions and requests for assistance may be directed to the Dealer Managers
or the Information Agent as set forth below. Requests for copies of the Offer to
Purchase, the Supplement, the related Letter of Transmittal and all other tender
offer materials may be directed to the Information Agent, and copies will be
furnished promptly at the Purchaser's expense. The Purchaser will not pay any
fees or commissions to any broker or dealer or any other person (other than the
Dealer Managers and the Information Agent) for soliciting tenders of Shares
pursuant to the Offer.
The Information Agent for the Offer is:
[mackenzie logo]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
85 Broad Street
New York, New York 10004
(800) 323-5678 (toll free)
May 14, 1997
<PAGE> 1
- ---------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
Among
HARCOURT GENERAL INC.,
NICK ACQUISITION CORPORATION
and
NATIONAL EDUCATION CORPORATION
Dated as of May 12, 1997
- ---------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I
THE OFFER ................................... 1
SECTION 1.1 The Offer ............................................... 1
SECTION 1.2 Company Action .......................................... 3
ARTICLE II
THE MERGER .................................. 4
SECTION 2.1 The Merger .............................................. 4
SECTION 2.2 Effective Time .......................................... 5
SECTION 2.3 Effects of the Merger ................................... 5
SECTION 2.4 Certificate of Incorporation; By-Laws ................... 5
SECTION 2.5 Directors and Officers .................................. 5
SECTION 2.6 Conversion of Securities ................................ 5
SECTION 2.7 Treatment of Company Outstanding
Options .............................................. 6
SECTION 2.8 Dissenting Shares and Section 262
Shares ............................................... 6
SECTION 2.9 Surrender of Shares; Stock Transfer
Books ................................................ 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY ............. 8
SECTION 3.1 Organization and Standing; Subsidiaries ................. 9
SECTION 3.2 Capitalization of the Company ........................... 9
SECTION 3.3 Financial Statements; Exchange Act
Filings .............................................. 11
SECTION 3.4 No Undisclosed Liabilities .............................. 12
SECTION 3.5 Absence of Certain Changes, Events or
Conditions ........................................... 13
SECTION 3.6 No Default .............................................. 13
SECTION 3.7 Litigation, Etc ......................................... 13
SECTION 3.8 Intellectual Property ................................... 14
SECTION 3.9 Environmental Laws and Regulations ...................... 15
SECTION 3.10 Compliance .............................................. 15
SECTION 3.11 Labor Matters ........................................... 16
SECTION 3.12 Offer Documents; Proxy Statement ........................ 16
SECTION 3.13 No Conflict With Other Documents ........................ 16
SECTION 3.14 Authority; Consents ..................................... 17
SECTION 3.15 Contracts ............................................... 18
SECTION 3.16 Customers and Suppliers ................................. 19
SECTION 3.17 Tax Matters ............................................. 19
SECTION 3.18 Title to Properties; Absence of Liens
and Encumbrances, Etc ................................ 20
SECTION 3.19 Pension and Employee Benefit Plans ...................... 20
SECTION 3.20 Foreign Corrupt Practices Act ........................... 22
SECTION 3.21 Insurance ............................................... 23
SECTION 3.22 No Pending Transactions ................................. 23
<PAGE> 3
Page
SECTION 3.23 Disclosure .............................................. 24
SECTION 3.24 Transactions with Affiliates ............................ 24
SECTION 3.25 Opinion of Financial Advisor ............................ 24
SECTION 3.26 Brokers ................................................. 24
SECTION 3.27 Section 203 of the DGCL Not Applicable .................. 24
SECTION 3.28 NETG Options ............................................ 25
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER ............... 25
SECTION 4.1 Corporate Organization ................................... 25
SECTION 4.2 Authority Relative to This Agreement ..................... 25
SECTION 4.3 No Conflict; Required Filings and
Consents .............................................. 25
SECTION 4.4 Offer Documents; Proxy Statement ......................... 26
SECTION 4.5 Brokers .................................................. 27
SECTION 4.6 Sufficient Funds ......................................... 27
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER ...................... 27
SECTION 5.1 Conduct of Business of the Company
Pending the Merger .................................... 27
ARTICLE VI
ADDITIONAL AGREEMENT ........................ 30
SECTION 6.1 Stockholders Meeting ..................................... 30
SECTION 6.2 Proxy Statement .......................................... 30
SECTION 6.3 Company Board Representation; Section
14(f) ................................................. 31
SECTION 6.4 Access to Information; Confidentiality ................... 32
SECTION 6.5 No Solicitation of Transactions .......................... 32
SECTION 6.6 SERP; Steck-Vaughn Options ............................... 33
SECTION 6.7 Indemnification .......................................... 34
SECTION 6.8 Amendment to Indenture ................................... 35
SECTION 6.9 Notification of Certain Matters .......................... 36
SECTION 6.10 Further Action; Reasonable Best Efforts .................. 36
SECTION 6.11 Public Announcements ..................................... 36
SECTION 6.12 Disposition of Litigation ................................ 36
SECTION 6.13 Postponement of Steck-Vaughn Annual
Meeting ............................................... 37
ARTICLE VII
CONDITIONS OF MERGER ........................ 37
SECTION 7.1 Conditions to Obligation of Each Party
to Effect the Merger .................................. 37
ARTICLE VIII
<PAGE> 4
Page
TERMINATION, AMENDMENT AND WAIVER ........................... 37
397
SECTION 8.1 Termination .............................................. 37
SECTION 8.2 Effect of Termination .................................... 39
SECTION 8.3 Fees and Expenses ........................................ 39
SECTION 8.4 Amendment ................................................ 41
SECTION 8.5 Waiver ................................................... 42
ARTICLE IX
GENERAL PROVISIONS .......................... 42
SECTION 9.1 Non-Survival of Representations,
Warranties and Agreements ............................. 42
SECTION 9.2 Notices .................................................. 42
SECTION 9.3 Certain Definitions ...................................... 43
SECTION 9.4 Severability ............................................. 44
SECTION 9.5 Entire Agreement; Assignment ............................. 44
SECTION 9.6 Parties in Interest ...................................... 44
SECTION 9.7 Governing Law ............................................ 45
SECTION 9.8 Headings ................................................. 45
SECTION 9.9 Counterparts ............................................. 45
ANNEX A Offer Conditions
EHXIBIT A Certificate of Incorporation of National Education Corporation
<PAGE> 5
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 12, 1997 (the "Agreement"),
among HARCOURT GENERAL, INC., a Delaware corporation ("Parent"), NICK
ACQUISITION CORPORATION, a Delaware corporation and a wholly-owned subsidiary of
Parent ("Purchaser"), and NATIONAL EDUCATION CORPORATION, a Delaware corporation
(the "Company").
WHEREAS, Purchaser has outstanding an offer (such offer as amended
pursuant to this Agreement is hereinafter referred to as the "Offer") to
purchase all of the outstanding shares of Common Stock, par value $0.01 per
share, of the Company (the "Company Common Stock"; all of the outstanding shares
of Company Common Stock being hereinafter collectively referred to as the
"Shares"), at a purchase price of $19.50 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set forth
in the Offer to Purchase dated April 21, 1997, and in the related letter of
transmittal;
WHEREAS, in consideration of the Company's entering into this Agreement,
Parent is willing to cause Purchaser to increase the price to be paid pursuant
to the Offer to $21.00 per Share;
WHEREAS, the Board of Directors of the Company has (i) determined that
this Agreement and the transactions contemplated hereby, including each of the
Offer and the Merger (as defined below), is fair to and in the best interests of
the stockholders of the Company, (ii) approved this Agreement and the
transactions contemplated hereby and (iii) resolved to recommend acceptance of
the Offer and the Merger and approval of this Agreement by such stockholders;
and
WHEREAS, the Board of Directors of Parent and Purchaser have each approved
this Agreement and the merger (the "Merger") of Purchaser with the Company in
accordance with the General Corporation Law of the State of Delaware ("DGCL")
upon the terms and subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, and intending to be legally bound hereby,
Parent, Purchaser and the Company hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1 The Offer. (a) Provided that no event shall have occurred and
no circumstance shall exist which would result in a failure to satisfy any of
the conditions or events set forth in Annex A hereto (the "Offer Conditions"),
Purchaser shall amend the Offer as soon as practicable after
<PAGE> 6
the date hereof, and in any event within five business days from the date
hereof, (i) to increase the purchase price offered to $21.00 per Share, (ii) to
modify the conditions of the Offer to conform to the Offer Conditions and (iii)
to make such other amendments as are required to conform the Offer to this
Agreement and provisions of applicable laws. The obligation of Purchaser to
accept for payment Shares tendered shall be subject to the satisfaction of the
Offer Conditions. Purchaser expressly reserves the right, in its sole
discretion, to waive any such condition (other than the Minimum Condition as
defined in the Offer Conditions) and make any other changes in the terms and
conditions of the Offer, provided that, unless previously approved by the
Company in writing, no change may be made which decreases the price per Share
payable in the Offer, changes the form of consideration payable in the Offer
(other than by adding consideration), reduces the maximum number of Shares to be
purchased in the Offer, or imposes conditions to the Offer in addition to those
set forth herein which are adverse to holders of the Shares. Purchaser covenants
and agrees that, subject to the terms and conditions of this Agreement,
including but not limited to the Offer Conditions, it will accept for payment
and pay for Shares as soon as it is permitted to do so under applicable law,
subject to the prior satisfaction of the Offer Conditions. Notwithstanding the
immediately preceding sentence, Purchaser may extend the Offer, notwithstanding
the prior satisfaction of the Offer Conditions, for up to five business days and
then thereafter on a day-to-day basis for up to another five business days, if
as of the expiration date of the Offer (including as a result of any extensions
thereof), there shall have been tendered more than 80% but less than 90% of the
outstanding Shares so that the Merger could not be effected without a meeting of
the Company's stockholders in accordance with the applicable provisions of the
DGCL; provided that, after the initial extension pursuant to this sentence, the
Offer shall not be subject to any conditions other than (i) the conditions set
forth in clauses (a)(i) or (ii) or (d)(ii) of the Offer Conditions and (ii) the
absence of any intentional breach by the Company of the representations,
warranties, covenants or agreements set forth in this Agreement which has a
Material Adverse Effect on the Corporation. It is agreed that the Offer
Conditions are for the benefit of Purchaser and may be asserted by Purchaser
regardless of the circumstances giving rise to any such condition (other than
any action or inaction by Purchaser or Parent constituting a breach of this
Agreement) or, except with respect to the Minimum Condition, may be waived by
Purchaser, in whole or in part at any time and from time to time, in its sole
discretion. Purchaser shall terminate the Offer upon termination of this
Agreement pursuant to its terms.
(b) As soon as reasonably practicable after the date hereof, and in
any event within five business days from the date hereof, Purchaser and Parent
shall amend their Tender Offer Statement on Schedule 14D-1 (the "Schedule
14D-1") with respect to the Offer which was originally filed with the
<PAGE> 7
Securities and Exchange Commission (the "SEC" or "Commission") on April 21,
1997, and shall file such amendment with the SEC. The Company and its counsel
shall be given the opportunity to review the Schedule 14D-1 before it is filed
with the Commission, and shall be given copies of any comment letters from the
Commission regarding the Schedule 14D-1 and the opportunity to participate in
conversations with the Commission staff. The Schedule 14D-1 will contain a
supplement to the Offer to Purchase dated April 21, 1997 and revised forms of
the related letter of transmittal (which Schedule 14D-1, Offer to Purchase and
other documents, together with any further supplements or amendments thereto,
are referred to herein collectively as the "Offer Documents"). The Schedule
14D-1 and all amendments thereto will comply in all material respects with the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules
and regulations promulgated thereunder. Parent, Purchaser and the Company each
agrees promptly to correct any information provided by it for use in the Offer
Documents that shall have become false or misleading in any material respect,
and Parent and Purchaser further agree to take all steps necessary to cause the
Schedule 14D-1 as so corrected to be filed with the SEC and the other Offer
Documents as so corrected to be disseminated to holders of Shares, in each case
as and to the extent required by applicable federal securities laws.
SECTION 1.2 Company Action. (a) The Company hereby approves of and
consents to the Offer and represents and warrants that: (i) its Board of
Directors, at a meeting duly called and held on May 9, 1997, has unanimously (A)
determined that this Agreement and the transactions contemplated hereby,
including each of the Offer and the Merger, are fair to and in the best
interests of the holders of Shares, (B) approved this Agreement and the
transactions contemplated hereby and (C) resolved to recommend that the
stockholders of the Company accept the Offer, tender their Shares to Purchaser
thereunder and approve this Agreement and the transactions contemplated hereby;
and (ii) BZW, the investment banking division of Barclays Bank PLC (the
"Financial Adviser" or "BZW"), has delivered to the Board of Directors of the
Company its written opinion that the consideration to be received by holders of
Shares, other than Parent and Purchaser, pursuant to each of the Offer and the
Merger is fair to such holders from a financial point of view. The Company has
been authorized by the Financial Adviser to permit, subject to prior review and
consent by the Financial Adviser (such consent not to be unreasonably withheld),
the inclusion of such fairness opinion (or a reference thereto) in the Offer
Documents and in the Schedule 14D-9 referred to below and the Proxy Statement
referred to in Section 3.12. The Company hereby consents to the inclusion in the
Offer Documents of the recommendations of the Company's Board of Directors
described in this Section 1.2(a).
(b) The Company shall file with the SEC, contemporaneously with the
amendment to the Offer pursuant to Section 1.1, a Solicitation/Recommendation
Statement on
<PAGE> 8
Schedule 14D-9 (together with all amendments and supplements thereto, the
"Schedule 14D-9"), containing the recommendations of the Company's Board of
Directors described in Section 1.2(a)(i) and shall promptly mail the Schedule
14D-9 to the stockholders of the Company. Parent and its counsel shall be given
the opportunity to review the Schedule 14D-9 before it is filed with the
Commission, and shall be given copies of any comment letters from the Commission
regarding the Schedule 14D-9 and the opportunity to participate in conversations
with the Commission staff. The Schedule 14D-9 and all amendments thereto will
comply in all material respects with the Exchange Act and the rules and
regulations promulgated thereunder. The Company, Parent and Purchaser each
agrees promptly to correct any information provided by it for use in the
Schedule 14D-9 that shall have become false or misleading in any material
respect, and the Company further agrees to take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws.
(c) In connection with the Offer, if requested by Purchaser, the
Company shall promptly furnish Purchaser with mailing labels, security position
listings, any non-objecting beneficial owner lists and any available listings or
computer files containing the names and addresses of the record holders of
Shares, each as of a recent date, and shall promptly furnish Purchaser with such
additional information (including but not limited to updated lists of
stockholders, mailing labels, security position listings and non-objecting
beneficial owner lists) and such other assistance as Parent, Purchaser or their
agents may reasonably require in communicating the Offer to the record and
beneficial holders of Shares.
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to the conditions of
this Agreement and in accordance with the DGCL, at the Effective Time (as
defined in Section 2.2), Purchaser shall be merged with and into the Company. As
a result of the Merger, the separate corporate existence of Purchaser shall
cease and the Company shall continue as the surviving corporation of the Merger
(the "Surviving Corporation"). At Parent's election, the Merger may
alternatively be structured so that (i) the Company is merged with and into
Parent, Purchaser or any other direct or indirect subsidiary of Parent (provided
that in such event the Company makes no representation as to whether any
consents are required, or any agreements are adversely affected, thereby) or
(ii) any direct or indirect subsidiary of Parent other than Purchaser is merged
with and into the Company. In the event of such an election, the parties agree
to execute an appropriate amendment to this Agreement in order to reflect such
election.
<PAGE> 9
SECTION 2.2 Effective Time. As soon as practicable after the satisfaction
or waiver of the conditions set forth in Article VII, the parties hereto shall
cause the Merger to be consummated by filing this Agreement or a certificate of
merger or a certificate of ownership and merger (the "Certificate of Merger")
with the Secretary of State of the State of Delaware, in such form as required
by and executed in accordance with the relevant provisions of the DGCL (the date
and time of the filing of the Certificate of Merger with the Secretary of State
of the State of Delaware (or such later time as is specified in the Certificate
of Merger) being the "Effective Time").
SECTION 2.3 Effects of the Merger. The Merger shall have the effects set
forth in the applicable provisions of the DGCL. Without limiting the generality
of the foregoing and subject thereto, at the Effective Time all the property,
rights, privileges, immunities, powers and franchises of the Company and
Purchaser shall vest in the Surviving Corporation, and all debts, liabilities
and duties of the Company and Purchaser shall become the debts, liabilities and
duties of the Surviving Corporation.
SECTION 2.4 Certificate of Incorporation; By-Laws. (a) At the Effective
Time and without any further action on the part of the Company and Purchaser,
the Certificate of Incorporation of the Company as in effect immediately prior
to the Effective Time shall be amended so as to read in its entirety in the form
set forth as Exhibit A hereto, and, as so amended, until thereafter further
amended as provided therein and under the DGCL it shall be the certificate of
incorporation of the Surviving Corporation.
(b) At the Effective Time and without any further action on the part
of the Company and Purchaser, the By-Laws of Purchaser shall be the By-Laws of
the Surviving Corporation and thereafter may be amended or repealed in
accordance with their terms or the Certificate of Incorporation of the Surviving
Corporation and as provided by law.
SECTION 2.5 Directors and Officers. The directors of Purchaser immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-Laws of the Surviving Corporation, and the officers of
Purchaser immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are
duly elected or appointed (as the case may be) and qualified. The Company shall
use reasonable best efforts to cause each director of the Company (other than
any directors appointed pursuant to Section 6.3(a)) to resign from its Board of
Directors at or prior to the Effective Time.
SECTION 2.6 Conversion of Securities. At the Effective Time, by virtue of
the Merger and without any action on the
<PAGE> 10
part of Purchaser, the Company or the holders of any of the following
securities:
(a) Each Share issued and outstanding immediately prior to the
Effective Time (other than any Shares to be cancelled pursuant to Section
2.6(b) and any Dissenting Shares (as defined in Section 2.8(a))) shall be
cancelled, extinguished and converted into the right to receive $21.00 in
cash or any higher price that may be paid pursuant to the Offer (the
"Merger Consideration") payable to the holder thereof, without interest,
upon surrender of the certificate formerly representing such Share in the
manner provided in Section 2.9, less any required withholding taxes.
(b) Each share of Company Common Stock held in the treasury of the
Company and each Share owned by Parent, Purchaser or any other direct or
indirect wholly-owned subsidiary of Parent or of the Company, in each case
immediately prior to the Effective Time, shall be cancelled and retired
without any conversion thereof and no payment or distribution shall be
made with respect thereto.
(c) Each share of common, preferred or other capital stock of
Purchaser issued and outstanding immediately prior to the Effective Time
shall be converted into and become one validly issued, fully paid and
nonassessable share of identical common, preferred or other capital stock
of the Surviving Corporation.
SECTION 2.7 Treatment of Company Outstanding Options. Prior to the
Effective Time, the Board of Directors of the Company (or, if appropriate, any
Committee thereof) shall adopt appropriate resolutions and take all other
actions necessary to provide that immediately prior to the Effective Time, each
Company Outstanding Option (as defined herein) then outstanding, whether or not
then exercisable, shall be cancelled by the Company, and the holder thereof
shall be entitled to receive at the Effective Time or as soon as practicable
thereafter from the Company in consideration for such cancellation an amount in
cash equal to the product of (a) the number of Shares previously subject to such
Company Outstanding Option and (b) the excess, if any, of the Merger
Consideration over the exercise price per Share previously subject to such
Company Outstanding Option.
SECTION 2.8 Dissenting Shares and Section 262 Shares. (a) Notwithstanding
anything in this Agreement to the contrary, shares of Company Common Stock that
are issued and outstanding immediately prior to the Effective Time and which are
held by stockholders who have not voted in favor of or consented to the Merger
and shall deliver a written demand for appraisal of such shares of Company
Common Stock in the time and manner provided in Section 262 of the DGCL and
shall not fail to perfect or shall not effectively withdraw or lose their rights
to appraisal and payment under the DGCL (the
<PAGE> 11
"Dissenting Shares") shall not be converted into the right to receive the Merger
Consideration, but shall be entitled to receive the consideration as shall be
determined pursuant to Section 262 of the DGCL; provided, however, that if such
holder shall fail to perfect or shall effectively withdraw or lose his, her or
its right to appraisal and payment under the DGCL, such holder's shares of
Company Common Stock shall thereupon be deemed to have been converted, at the
Effective Time, into the right to receive the Merger Consideration set forth in
Section 2.6(a) of this Agreement, without any interest thereon.
(b) The Company shall give Parent (i) prompt notice of any demands
for appraisal pursuant to Section 262 received by the Company, withdrawals of
such demands, and any other instruments served pursuant to the DGCL and received
by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the DGCL. The Company
shall not, except with the prior written consent of Parent (which consent shall
not be unreasonably withheld or delayed), make any payment with respect to any
such demands for appraisal or offer to settle or settle any such demands.
SECTION 2.9 Surrender of Shares; Stock Transfer Books. (a) Prior to the
Effective Time, Purchaser shall designate a bank or trust company to act as
agent for the holders of Shares in connection with the Merger (the "Paying
Agent") to receive the Merger Consideration to which holders of Shares shall
become entitled pursuant to Section 2.6(a). When and as needed, Parent or
Purchaser will make available to the Paying Agent sufficient funds to make all
payments pursuant to Section 2.9(b). Such funds shall be invested by the Paying
Agent as directed by Purchaser or, after the Effective Time, the Surviving
Corporation, provided that such investments shall be in obligations of or
guaranteed by the United States of America, in commercial paper obligations
rated A-1 or P-1 or better by Moody's Investors Service, Inc. or Standard &
Poor's Corporation, respectively, or in certificates of deposit, bank repurchase
agreements or banker's acceptances of commercial banks with capital exceeding
$500 million. Any net profit resulting from, or interest or income produced by,
such investments will be payable to the Surviving Corporation or Parent, as
Parent directs.
(b) Promptly after the Effective Time, the Surviving Corporation
shall cause to be mailed to each record holder, as of the Effective Time, of an
outstanding certificate or certificates which immediately prior to the Effective
Time represented Shares (the "Certificates"), a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Paying Agent) and instructions for use in effecting the surrender of the
Certificates for payment of the Merger Consideration therefor. Upon surrender to
the Paying Agent of a Certificate, together with such letter of
<PAGE> 12
transmittal, duly completed and validly executed in accordance with the
instructions thereto, and such other documents as may be required pursuant to
such instructions, the holder of such Certificate shall be entitled to receive
in exchange therefor the Merger Consideration for each Share formerly
represented by such Certificate, and such Certificate shall then be cancelled.
No interest shall be paid or accrued for the benefit of holders of the
Certificates on the Merger Consideration payable upon the surrender of the
Certificates. If payment of the Merger Consideration is to be made to a person
other than the person in whose name the surrendered Certificate is registered,
it shall be a condition of payment that the Certificate so surrendered shall be
properly endorsed or shall be otherwise in proper form for transfer and that the
person requesting such payment shall have paid any transfer and other taxes
required by reason of the payment of the Merger Consideration to a person other
than the registered holder of the Certificate surrendered or shall have
established to the satisfaction of the Surviving Corporation that such tax
either has been paid or is not applicable.
(c) At any time following one year after the Effective Time, the
Surviving Corporation shall be entitled to require the Paying Agent to deliver
to it any funds (including any interest received with respect thereto) which had
been made available to the Paying Agent and which have not been disbursed to
holders of Certificates, and thereafter such holders shall be entitled to look
to the Surviving Corporation (subject to abandoned property, escheat or other
similar laws) only as general creditors thereof with respect to the Merger
Consideration payable upon due surrender of their Certificates. Notwithstanding
the foregoing, neither the Surviving Corporation nor the Paying Agent shall be
liable to any holder of a Certificate for Merger Consideration delivered to a
public official pursuant to any applicable abandoned property, escheat or
similar law.
(d) At the Effective Time, the stock transfer books of the Company
shall be closed and thereafter there shall be no further registration of
transfers of shares of Company Common Stock on the records of the Company. From
and after the Effective Time, the holders of Certificates evidencing ownership
of Shares outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such Shares except as otherwise provided for
herein or by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to the Purchaser that the
statements contained in this Article III are true and correct, except as set
forth in the disclosure schedule delivered by the Company to the Purchaser on or
before the date of this Agreement (the "Company Disclosure Schedule"). The
Company Disclosure Schedule shall be arranged
<PAGE> 13
in sections corresponding to the numbered and lettered sections contained in
this Article III. The disclosure in any paragraph shall be deemed to constitute
disclosure for all sections in this Article III.
SECTION 3.1 Organization and Standing; Subsidiaries. (a) Each of the
Company and its subsidiaries whose business or assets are material to the
Company either individually or on a consolidated basis (collectively, the
"Company Subsidiaries", and, together with the Company, collectively the
"Corporation") is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to own, lease and operate its properties
and to carry on its businesses as now being conducted, except where the failure
to be so organized, existing and in good standing or to have such power and
authority would not, and reasonably could not be expected to, individually or in
the aggregate, have a Material Adverse Effect on the Corporation. When used in
connection with the Company or any of its subsidiaries, the term "Material
Adverse Effect" means any change or effect that would be materially adverse to
the business, assets (whether tangible or intangible), financial condition,
results of operations or business prospects of the Company and its subsidiaries
taken as a whole. The Company has heretofore delivered to Purchaser accurate and
complete copies of the Company's Certificate of Incorporation and By-Laws, as
currently in effect, and promptly will deliver to Purchaser accurate and
complete copies of the Certificate of Incorporation and By-Laws, as currently in
effect, of each of the Company Subsidiaries. The Company Disclosure Schedule
includes a list of each of the Company's subsidiaries.
(b) Each of the Company and the Company Subsidiaries is duly
qualified or licensed and in good standing to do business in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary, except
in such jurisdictions where the failure to be so duly qualified or licensed and
in good standing would not, individually or in the aggregate, have a Material
Adverse Effect on the Corporation.
SECTION 3.2 Capitalization of the Company. (a) The Company's entire
authorized capital stock consists of 70,000,000 shares, of which 65,000,000
shares are classified as Company Common Stock, and 5,000,000 of which are
classified as Preferred Stock, par value $.10 per share (the "Preferred Stock").
As of the date hereof, there are no shares of Preferred Stock issued and
outstanding, 35,853,545 shares of Company Common Stock issued and outstanding
(not including 697,556 shares of Company Common Stock held in the Company's
treasury), 4,996,131 shares reserved for issuance in connection with the
Company's stock option plans (of which options to purchase 2,902,357 shares are
outstanding (the "Company Outstanding Options")); and 2,184,760 shares reserved
<PAGE> 14
for issuance upon conversion of the Company's 6 1/2% Convertible Debentures (the
"Debentures") outstanding on the date hereof (the "Outstanding Debentures").
Except as set forth above or in the Company Disclosure Schedule, there are
outstanding (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company or any of the Company Subsidiaries
convertible into or exchangeable for shares of capital stock or other voting
securities of the Company, (iii) no options, warrants or other rights to acquire
from the Company or any of the Company Subsidiaries (including any rights issued
or issuable under a shareholders rights plan or similar arrangement), and no
obligations of the Company or any of the Company Subsidiaries to issue, any
capital stock, voting securities or securities convertible into or exchangeable
for capital stock or voting securities of the Company, (iv) no equity
equivalents, interests in the ownership or earnings of the Company or any of the
Company Subsidiaries or other similar rights (with the securities listed in
clauses (i) through (iv) referred to collectively as the "Corporation's
Securities"), and (v) no outstanding obligations of the Company or any of the
Company Subsidiaries to repurchase, redeem or otherwise acquire any of the
Corporation's Securities or to make any investment (by loan, capital
contribution or otherwise) in any other entity. The Company Disclosure Statement
sets forth a list of all Company Outstanding Options, including the shares of
each holder thereof, which such options are currently vested and which such
options will vest as a result of the Merger.
(b) All of the outstanding capital stock of, or other ownership
interests in, each of the Company Subsidiaries, is owned by the Company,
directly or indirectly, free and clear of any Lien or any other limitation or
restriction (including any restriction on the right to vote or sell the same,
except as may be provided as a matter of law). For purposes of this Agreement,
"Lien" means, with respect to any asset (including, without limitation, any
security) any mortgage, lien, pledge, charge, security interest or encumbrance
of any kind in respect of such asset. There are no securities of the Company or
any of the Company Subsidiaries convertible into or exchangeable for, no options
or other rights to acquire from the Company or any of the Company Subsidiaries,
and no other contract, understanding, arrangement or obligation (whether or not
contingent) providing for the issuance or sale, directly or indirectly, of any
capital stock or other ownership interests in, or any other securities of, any
of the Company Subsidiaries. There are no outstanding contractual obligations of
the Company or any of the Company Subsidiaries to repurchase, redeem or
otherwise acquire any outstanding shares of capital stock or other ownership
interests in any subsidiary of the Company.
(c) All issued and outstanding shares of the capital stock of the
Company and each of the Company Subsidiaries have been duly authorized and
validly issued and are fully paid and non-assessable, free of any preemptive
rights. The Company Outstanding Options and the Outstanding
<PAGE> 15
Debentures have been duly authorized and validly issued and are in full force
and effect. As of the date hereof, there are $54,619,000 principal amount of
Outstanding Debentures; and $2,875,000 principal amount of Debentures have
heretofore been repurchased by the Company.
SECTION 3.3 Financial Statements; Exchange Act Filings. (a) The Company
has heretofore delivered to the Purchaser copies of: (i) the Company's
consolidated financial statements as of and for the years ended December 31,
1994, 1995 and 1996, which have been audited by Price Waterhouse, independent
public accountants (the "Company Audited Financial Statements"), and (ii) the
Company's unaudited consolidated financial statements as of and for the three
months ended March 31, 1997, (the "Company Unaudited Financial Statements"). The
Company Audited Financial Statements and Company Unaudited Financial Statements
(collectively, the "Company Financial Statements") fairly present, in conformity
with generally accepted accounting principles applied on a consistent basis by
the Company (except as may be indicated in the notes thereto) and in conformity
with the Commission's Regulation S-X, the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and cash flows for the periods then ended
(subject in the case of any unaudited financial statements to normal recurring
year-end audit adjustments, which are not expected to be material in amount).
Since January 1, 1997, the Company has not made any changes in the accounting
policies applied to the Company Audited Financial Statements, and no such
changes are currently contemplated nor, to the best of the Company's knowledge,
required under generally accepted accounting principles or the Commission's
Regulation S-X. The restructuring charges and losses from discontinued
operations shown on the Company Financial Statements have been properly recorded
in accordance with generally accepted accounting principles, represent
management's best estimate of the cost of discontinuing the operations to which
such charges relate, and to the best of the Company's knowledge, there will be
no further charges other than those already accrued on the Company Financial
Statements as a result of the discontinuation of such operations.
(b) The Company has heretofore delivered to the Purchaser copies of:
(i) the financial statements of Steck-Vaughn Publishing Corporation
("Steck-Vaughn") as of and for the years ended December 31, 1994, 1995 and 1996,
which have been audited by Price Waterhouse, independent public accountants (the
"Steck-Vaughn Audited Financial Statements"), and (ii) Steck-Vaughn's unaudited
consolidated financial statements as of and for the three months ended March 31,
1997 (the "Steck-Vaughn Unaudited Financial Statements"). The Steck-Vaughn
Audited Financial Statements and Steck-Vaughn Unaudited Financial Statements
(collectively, the "Steck-Vaughn Financial Statements") fairly present, in
conformity with generally accepted accounting principles applied on a consistent
basis by the Company (except as may be indicated in
<PAGE> 16
the notes thereto) and in conformity with the Commission's Regulation S-X, the
consolidated financial position of Steck-Vaughn and its consolidated
subsidiaries as of the dates thereof and their consolidated results of
operations and cash flows for the periods then ended (subject in the case of any
unaudited interim financial statements to normal recurring year-end audit
adjustments, which are not expected to be material in amount). Since January 1,
1997, Steck-Vaughn has not made any changes in the accounting policies applied
to the Steck-Vaughn Audited Financial Statements, and no such changes are
currently contemplated nor, to the best of the Company's knowledge, required
under generally accepted accounting principles or the Commission's Regulation
S-X.
(c) The Company has heretofore delivered to the Purchaser complete
copies of all periodic reports, statements and other documents (including
Exhibits thereto) that the Company and Steck-Vaughn have filed with the
Commission under the Exchange Act since January 1, 1993 (collectively, the
"Company SEC Reports"). All Company SEC Reports required to be filed with the
Commission by the Company and Steck-Vaughn during the twelve months preceding
the date of this Agreement were filed in a timely manner and complied in all
material respects with the applicable requirements of the Exchange Act and the
rules and regulations promulgated thereunder. At the time filed with the SEC, no
Company SEC Report contained any untrue statement of a material fact or omitted
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
SECTION 3.4 No Undisclosed Liabilities. (a) Except as and to the extent
reflected or reserved against in the consolidated balance sheets included within
the Company Financial Statements, at the date of such statements, the
Corporation had no material liabilities or obligations (whether accrued,
absolute or contingent), of the character which, under generally accepted
accounting principles, should be accrued, shown, disclosed or indicated in a
consolidated balance sheet of the Company or explanatory notes or information
supplementary thereto, including without limitation, any liabilities resulting
from failure to comply with any law or any federal, state, local or foreign tax
liabilities due or to become due whether (i) incurred in respect of or measured
by income for any period ending on or prior to the close of business on such
dates, or (ii) arising out of transactions entered into, or any state of facts
existing, on or prior thereto.
(b) Except as and to the extent reflected or reserved against the
consolidated balance sheets included within the Steck-Vaughn Financial
Statements, at the date of such statements, Steck-Vaughn had no material
liabilities or obligations (whether accrued, absolute or contingent), of the
character which, under generally accepted accounting principles, should be
accrued, shown, disclosed or indicated in a consolidated balance sheet of
Steck-Vaughn or explanatory
<PAGE> 17
notes or information supplementary thereto, including without limitation, any
liabilities resulting from failure to comply with any law or any federal, state,
local or foreign tax liabilities due or to become due whether (i) incurred in
respect of or measured by income for any period prior to the close of business
on such dates, or (ii) arising out of transactions entered into, or any state of
facts existing, prior thereto.
SECTION 3.5 Absence of Certain Changes, Events or Conditions. Since
January 1, 1997, (i) the Company has not incurred any liabilities of any nature,
whether or not accrued, contingent or otherwise, which would have a Material
Adverse Effect on the Company, and (ii) there have been no events, changes or
effects with respect to the Company and the Company Subsidiaries having or which
could have, individually or in the aggregate, a Material Adverse Effect on the
Company, and (iii) the Company and the Company Subsidiaries have conducted their
businesses only in the ordinary course and in a manner consistent with prior
practice.
SECTION 3.6 No Default. Neither the Company nor any of the Company
Subsidiaries is in default or violation (and no event has occurred which with
notice or the lapse of time or both would constitute a default or violation) of
any term, condition or provision of (i) its Certificate of Incorporation or
By-Laws (or similar governing documents), (ii) any note, bond, mortgage,
indenture, lease, license, contract, agreement or other instrument or obligation
to which the Company or any of the Company Subsidiaries is now a party or by
which any of them or any of their respective properties or assets may be bound,
or (iii) any order, writ, injunction, decree, law, statute, rule or regulation
applicable to the Company, any of the Company Subsidiaries or any of their
respective properties or assets, except in the case of (ii) or (iii) for
violations, breaches or defaults that would not, individually or in the
aggregate, have a Material Adverse Effect on the Corporation.
SECTION 3.7 Litigation, Etc. (i) There is no suit, claim, action,
proceeding or investigation pending or, to the knowledge of the Company,
threatened against the Company or any of the Company Subsidiaries or any of
their respective properties or assets before any court, administrative agency or
commission or other governmental authority or instrumentality ("Governmental
Entity") which, individually or in the aggregate, could have a Material Adverse
Effect on the Corporation if decided adversely to the Corporation or could
prevent or delay the consummation of the transactions contemplated by this
Agreement, and (ii) neither the Company nor any of the Company Subsidiaries is
subject to any outstanding order, writ, injunction or decree which, insofar as
can be reasonably foreseen, individually or in the aggregate, in the future
could have a Material Adverse Effect on the Corporation or could prevent or
delay the consummation of the transactions contemplated hereby. Except as noted
on the Company Disclosure Schedule, all claims listed thereon are covered by the
Company's liability insurance (subject in each
<PAGE> 18
case to applicable deductibles not in excess of $500,000 ($1,000,000 in the case
of the Company's directors' and officers' liability insurance)) and are being
defended by and at the cost of the Company's liability insurance carrier.
SECTION 3.8 Intellectual Property. (a) The Company or one of the Company
Subsidiaries owns, or is licensed or otherwise possesses legally enforceable
rights to use, all patents, trademarks, trade names, service marks, copyrights,
and any applications for such patents, trademarks, trade names, service marks
and copyrights, processes, formulae, methods, schematics, technology, know-how,
computer software programs or applications and tangible or intangible
proprietary information or material that are necessary to conduct the business
of the Corporation as currently conducted, or proposed to be conducted, the
absence of which would be reasonably likely to have a Material Adverse Effect on
the Corporation (the "Company Intellectual Property Rights"). The Company
Disclosure Schedule lists (i) all patents and patent applications and all
trademarks, registered copyrights, trade names and service marks, which the
Company considers to be material to the business of the Corporation and included
in the Company Intellectual Property Rights, including the jurisdictions in
which each such Company Intellectual Property Right has been issued or
registered or in which any such application for such issuance and registration
has been filed, (ii) all material licenses, sublicenses and other agreements as
to which the Company or any of the Company Subsidiaries is a party and pursuant
to which any person is authorized to use any Company Intellectual Property
Rights, and (iii) all material licenses, sublicenses and other agreements as to
which the Company or any of the Company Subsidiaries is a party and pursuant to
which the Company or any of the Company Subsidiaries is authorized to use any
third party patents, trademarks or copyrights, including software ("Company
Third Party Intellectual Property Rights") which are incorporated in or form a
part of any Corporation product that is material to its business.
(b) Neither the Company nor any of the Company Subsidiaries is, nor
will any of them be as a result of the execution and delivery of this Agreement
or the performance of its obligations under this Agreement, in breach of any
license, sublicense or other agreement relating to the Company Intellectual
Property Rights or Company Third Party Intellectual Property Rights, the breach
of which could have a Material Adverse Effect on the Corporation.
(c) To the Company's knowledge, all patents, registered trademarks,
service marks and copyrights held by the Company or any of the Company
Subsidiaries are valid and subsisting. Neither the Company nor any of the
Company Subsidiaries (i) has been sued (or threatened with suit or notified of a
claim) involving a claim of infringement of any patents, trademarks, service
marks, copyrights or violation of any trade secret or other proprietary right of
any third party; and (ii) has any knowledge that the manufacturing,
<PAGE> 19
marketing, licensing or sale of its products or services infringes any patent,
trademark, service mark, copyright, trade secret or other proprietary right of
any third party, which infringement could have a Material Adverse Effect on the
Corporation.
SECTION 3.9 Environmental Laws and Regulations. (i) The Company and each
of the Company Subsidiaries is in compliance with all applicable Federal, state,
foreign and local laws and regulations relating to pollution or protection of
human health or the environment (including, without limitation, ambient air,
surface water, ground water, land surface or subsurface strata) (collectively,
"Environmental Laws"), except for non-compliance that individually or in the
aggregate would not have a Material Adverse Effect on the Corporation, which
compliance includes, but is not limited to, the possession by the Company and
the Company Subsidiaries of all material permits and other governmental
authorizations required under applicable Environmental Laws, and compliance with
the terms and conditions thereof; (ii) neither the Company nor any of the
Company Subsidiaries has received written notice of, or is the subject of, any
action, cause of action, claim, investigation, demand or notice by any person or
entity alleging liability under or non-compliance with any Environmental Law (an
"Environmental Claim") that individually or in the aggregate would have a
Material Adverse Effect on the Corporation; and (iii) there are no circumstances
that are reasonably likely to prevent or interfere with such compliance in the
future or give rise to an Environmental Claim in the future.
SECTION 3.10 Compliance. (i) The Company and each of the Company
Subsidiaries hold all licenses, permits, variances, exemptions, orders,
approvals and other authorizations of all Governmental Entities necessary for
the lawful conduct of their respective businesses (the "Company Permits"),
except for failures to hold such permits, licenses, variances, exemptions,
orders, approvals and other authorizations which would not, individually or in
the aggregate, have a Material Adverse Effect on the Corporation; (ii) the
Company and the Company Subsidiaries are in compliance with the terms of each of
the Company Permits, except where the failure so to comply would not have a
Material Adverse Effect on the Corporation, (iii) the businesses of the Company
and the Company Subsidiaries are not being conducted in violation of any law,
ordinance or regulation of any Governmental Entity, except for violations or
possible violations which individually or in the aggregate do not, and, insofar
as reasonably can be foreseen, in the future will not, have a Material Adverse
Effect on the Corporation, and (iv) no investigation or review by any
Governmental Entity with respect to the Company or any of the Company
Subsidiaries is pending or, to the best knowledge of the Company, threatened,
nor, to the best knowledge of the Company, has any Governmental Entity indicated
an intention to conduct the same, other than, in each case, those which the
<PAGE> 20
Company reasonably believes will not have a Material Adverse Effect on the
Corporation.
SECTION 3.11 Labor Matters. Neither the Company nor any of the Company
Subsidiaries is a party to any collective bargaining agreement relating to its
employees. No labor dispute, strike, work stoppage, employee action,
organizational activity or labor relations problem of any kind which has
affected or may affect the Company, any of the Company Subsidiaries or any of
their respective businesses or operations has occurred during the past five
years or currently is pending or, to the knowledge of the Company, threatened.
SECTION 3.12 Offer Documents; Proxy Statement. Neither the Schedule 14D-9,
nor any of the information supplied by the Company in writing for inclusion in
the Offer Documents, shall, at the respective times such Schedule 14D-9, the
Offer Documents or any amendments or supplements thereto are filed with the SEC
or are first published, sent or given to stockholders, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. Neither the proxy statement to be sent to the stockholders of the
Company in connection with the Stockholders Meeting (as defined in Section 6.1)
or the information statement to be sent to such stockholders, as appropriate
(such proxy statement or information statement, as amended or supplemented, is
herein referred to as the "Proxy Statement"), shall, at the date the Proxy
Statement (or any amendment thereof or supplement thereto) is first mailed to
stockholders and at the time of the Stockholders Meeting and at the Effective
Time, be false or misleading with respect to any material fact, or omit to state
any material fact required to be stated therein or necessary in order to make
the statements made therein, in the light of the circumstances under which they
are made, not misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Stockholders
Meeting which has become false or misleading. Notwithstanding the foregoing, the
Company makes no representation or warranty with respect to any information
supplied by Parent or Purchaser or any of their respective representatives in
writing which is contained in the Schedule 14D-9 or the Proxy Statement. The
Schedule 14D-9 and the Proxy Statement will comply in all material respects as
to form with the requirements of the Exchange Act and the rules and regulations
promulgated thereunder.
SECTION 3.13 No Conflict With Other Documents. Neither the execution,
delivery or performance of this Agreement by the Company nor the consummation by
the Company of the transactions contemplated hereby will (i) conflict with or
result in any breach of any provision of the respective Certificate of
Incorporation or By-Laws (or similar governing documents) of the Company or of
any of the Company
<PAGE> 21
Subsidiaries; (ii) trigger the rights of the Company or any of the Company
Subsidiaries or any holder of the Corporation's Securities under any shareholder
rights plan or similar arrangement; (iii) restrict any business combination
between the Purchaser or any of its subsidiaries and the Company or any of its
subsidiaries; (iv) result in a violation or breach of, or constitute (with or
without due notice or lapse of time or both) a default (or give rise to any
right of termination, amendment, cancellation or acceleration) under, or result
in the material modification of, any of the terms, conditions or provisions of
any note, bond, mortgage, indenture, lease, license, contract, agreement or
other instrument or obligation to which the Company or any of the Company
Subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound; or (v) violate any order, writ, injunction,
decree, law, statute, rule or regulation applicable to the Company or any of the
Company Subsidiaries or any of their respective properties or assets, except in
the case of (iv) or (v) for violations, breaches or defaults which could not,
individually or in the aggregate, have a Material Adverse Effect on the
Corporation.
SECTION 3.14 Authority; Consents. (a) The Company has all necessary
corporate power and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
the Company's Board of Directors and no other corporate proceedings on the part
of the Company or any of the Company Subsidiaries are necessary to authorize
this Agreement or to consummate the transactions contemplated hereby (other
than, with respect to the Merger (unless effected pursuant to Section 253 of the
DGCL) the approval and adoption of this Agreement by the holders of a majority
of the then outstanding shares of Company Common Stock). This Agreement has been
duly and validly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company, enforceable against the Company in
accordance with its terms.
(b) Upon Company Stockholder Approval (as defined below) (to the
extent the Merger is not effected pursuant to Section 253 of the DGCL), the
satisfaction of all other conditions contained herein and the filing of the
Certificate of Merger with the Secretary of State of the State of Delaware, this
Agreement will result in the valid, legally binding and enforceable statutory
merger of Purchaser with and into the Company.
(c) Under the Company's Certificate of Incorporation, By-Laws, the
regulations of the New York Stock Exchange, Inc. and other laws and regulations
applicable to the Company and the Company Subsidiaries only the affirmative vote
of the holders of at least a majority of the outstanding shares of Company
Common Stock voting together as a single class ("Company Stockholder Approval")
is required and
<PAGE> 22
sufficient for the approval by the Company's stockholders of the transactions
contemplated by this Agreement (to the extent the Merger is not effected
pursuant to Section 253 of the DGCL).
(d) No consent, approval, order or authorization of, or
registration, declaration or filing with (i) any Governmental Entity or (ii) any
individual, corporation or other entity (including any holder of the
Corporation's Securities) is required by or with respect to the Company in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, except for (A) the Company Stockholder
Approval, (B) the filing of the Certificate of Merger with the Delaware
Secretary of State, (C) if applicable, the filing of the Proxy Statement with
the Commission in accordance with the Exchange Act, (D) satisfaction of all
information and waiting period requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended ("HSR") and any regulations promulgated
thereunder, (E) such consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state "blue sky",
or securities laws and the securities laws of any foreign country, (F) those set
forth in the Company Disclosure Schedule, and such other consents,
authorizations, filings, approvals and registrations which, if not obtained or
made, would not be reasonably likely to have a Material Adverse Effect on the
Corporation.
SECTION 3.15 Contracts. (a) Neither the Company nor any of the Company
Subsidiaries is a party to or subject to: (i) any employment contract or
independent contractor arrangements with any officer, consultant, director or
employee or former employee or any other person; (ii) any plan or contract or
arrangement providing for bonuses, pensions, options, deferred compensation,
retirement payments, profit sharing, or the like; (iii) any contract or
agreement with any labor union; (iv) any contract, agreement, instrument or
other document that would be required to be filed as an exhibit to a
Registration Statement on Form S-1 were the Company or any of the Company
Subsidiaries to file such a Registration Statement on the date of this
Agreement, (v) any contract, agreement, instrument or other document not entered
into by the Company or any of the Company Subsidiaries in the ordinary course of
business, under which the Company or any of the Company Subsidiaries is required
to make annual payments to any third party in excess of $500,000 or (vi) any
agreement, voting trust, understanding or arrangement, written or oral,
concerning the election of directors. Neither the Company nor any of the Company
Subsidiaries has breached, or received in writing any claim or threat that it
has breached, any of the terms or conditions of any agreement, contract or
commitment referred to in the prior sentence ("Company Material Contracts") in
such a manner as would permit any other party to cancel or terminate the same or
would permit any other party to seek material damages from the Company or any of
the Company Subsidiaries under any Company Material Contract. Each Company
Material Contract that has not expired or been
<PAGE> 23
terminated is in full force and effect and is not subject to any material
default thereunder of which the Company is aware by any party obligated to the
Company or any of the Company Subsidiaries pursuant to the Company Material
Contract.
(b) The consummation of the Merger and the transactions contemplated
by this Agreement will not cause a default under, or provide any right of
termination or modification with respect to, any Company Material Contract which
default, termination or modification would have a Material Adverse Effect on the
Corporation.
SECTION 3.16 Customers and Suppliers. Neither the Company nor any of the
Company Subsidiaries has received notice that, nor do any of them have knowledge
or any reason to believe that, any customer that represented 5% or more of the
Company's consolidated revenues in any of the past three years will not continue
to do business with the Company or the Company Subsidiaries at volumes
consistent with past practices subsequent to the Merger. Neither the Company nor
any of the Company Subsidiaries has any outstanding purchase contracts or
commitments or unaccepted purchase orders which are in excess of the normal,
ordinary and usual requirements of its business. No entity which is now
supplying, or during 1996 supplied, to the Company or the Company Subsidiaries
products and services has reduced or otherwise discontinued, or threatened to
reduce or discontinue, supplying such items to the Company or the Company
Subsidiaries on reasonable terms, except for such reductions or discontinuations
which would not have a Material Adverse Effect on the Corporation.
SECTION 3.17 Tax Matters. (a) For the purposes of this Agreement, a "Tax"
or, collectively, "Taxes," means any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad valorem, transfer,
franchise, withholding, payroll, recapture, employment, excise and property
taxes, together with all interest, penalties and additions imposed with respect
to such amounts and any obligations under any agreements or arrangements with
any other person or entity with respect to such amounts and including any
liability for taxes of a predecessor entity.
(b) The Company and the Company Subsidiaries have accurately
prepared and timely filed all material federal, state, local and foreign
returns, estimates, information statements and reports required to be filed at
or before the Effective Time ("Returns") relating to any and all Taxes
concerning or attributable to the Company, any of the Company Subsidiaries or
any of their operations or assets, and such Returns are true and correct in all
material respects and have been completed in all material respects in accordance
with applicable law; and copies of all Returns of the Company and the Company
Subsidiaries for the past three years have been or will be provided by the
Company to Purchaser.
<PAGE> 24
(c) The Company and each of the Company Subsidiaries as of the
Effective Time: (i) will have paid all Taxes any of them is required to pay
prior to the Effective Time, (ii) will have withheld with respect to their
employees all federal and state income taxes, FICA, FUTA and other Taxes
required to be withheld, and (iii) will have collected all sales and use taxes
on account of sales by the Company or any Company Subsidiary or use of any of
their products, except in each instance where any failure to make such payment
or withholding would not be reasonably likely to have a Material Adverse Effect
on the Corporation.
(d) There is no Tax deficiency outstanding, proposed or assessed
against the Company or any of the Company Subsidiaries that is not reflected as
a liability on the Company Financial Statements nor has the Company or any of
the Company Subsidiaries executed any waiver of any statute of limitations on or
extending the period for the assessment or collection of any Tax.
SECTION 3.18 Title to Properties; Absence of Liens and Encumbrances,
Etc. The Company Disclosure Schedule sets forth a true and complete list of all
real property owned by the Company or the Company Subsidiaries and real property
leased by the Company or the Company Subsidiaries pursuant to leases providing
for the occupancy, in each case, of not less than 18,000 square feet ("Material
Leases") and the name of the lessor, the date of the Material Lease and each
amendment to the Material Lease and the aggregate annual rental or other fee
payable under any such Material Lease. The Company and the Company Subsidiaries
have good and marketable title to all their owned properties and assets, real
and personal, in each case free and clear of all liens, encumbrances, and
imperfections of title, except those liens, encumbrances or imperfections of
title which individually or in the aggregate would not have a Material Adverse
Effect on the Corporation. Neither the Company nor any of the Company
Subsidiaries has received any notice of violation of any applicable zoning laws,
orders, regulations, or requirements relating to its operations or properties it
owns or leases which has not been complied with, nor any proposed changes in any
such laws, orders or regulations which might have a Material Adverse Effect on
the Corporation. The Company has no knowledge of any threatened or impending
condemnation by any Government Entity of any properties owned or leased by the
Company or the Company Subsidiaries. All Material Leases are in good standing,
valid and effective in accordance with their respective terms, and neither the
Company nor any Company Subsidiary is in default under any of such leases and to
the best knowledge of the Company, no landlord or third party is in default
under any of such leases, except where the lack of such good standing, validity
and effectiveness or the existence of such default would not have a Material
Adverse Effect on the Corporation.
SECTION 3.19 Pension and Employee Benefit Plans. (a) The Company has
set forth on the Company Disclosure
<PAGE> 25
Schedule all employee benefit plans (including "employee benefit plans" as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), whether or not subject to ERISA, and all bonus, stock
option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other similar employee benefit plans, and all
unexpired severance agreements, written or otherwise, for the benefit of, or
relating to, any current or former employee of the Company or any of the Company
Subsidiaries or any trade or business (whether or not incorporated) which is a
member or which is under common control with the Company within the meaning of
Section 414 of the Code (an "ERISA Affiliate") (together, the "Company Employee
Plans").
(b) With respect to each Company Employee Plan, the Company has
made or will make available to Parent, a true and correct copy of (i) the most
recent annual report (Form 5500) filed with the Internal Revenue Service
("IRS"), (ii) such Company Employee Plan, (iii) each trust agreement and group
annuity contract, if any, relating to such Company Employee Plan and (iv) the
most recent actuarial report or valuation relating to a Company Employee Plan
subject to Title IV of ERISA.
(c) With respect to the Company Employee Plans, individually and
in the aggregate, no event has occurred, and to the knowledge of the Company
there exists no condition or set of circumstances, in connection with which the
Company or any subsidiary of the Company could be subject to any liability under
ERISA, the Code or any other applicable law that is reasonably likely to have a
Material Adverse Effect on the Corporation.
(d) With respect to the Company Employee Plans, individually and
in the aggregate, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no unfunded
benefit obligations which have not been accounted for by reserves, or otherwise
properly footnoted in accordance with generally accepted accounting principles,
on the Company Financial Statements, which obligations are reasonably expected
to have a Material Adverse Effect on the Corporation.
(e) Except as provided for in this Agreement, neither the Company
nor any of the Company Subsidiaries is a party to any oral or written (i) union
or collective bargaining agreement, (ii) agreement with any officer or other key
employee of the Company or any of the Company Subsidiaries, the benefits of
which are contingent, or the terms of which are materially altered, upon the
occurrence of a transaction involving the Company of the nature contemplated by
this Agreement, (iii) agreement with any officer providing any term of
employment or compensation guarantee extending for a period longer than one year
from the date hereof, providing for the payment of compensation in excess of
$100,000 per annum or providing for severance benefits or other benefits
<PAGE> 26
upon or following termination of employment, or (iv) agreement or plan,
including any stock option plan, stock appreciation right plan, restricted stock
plan or stock purchase plan, any of the benefits of which will be increased, or
the vesting of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement.
(f) Each of the Company Employee Plans which is intended to
qualify under Section 401 of the Code is designated on the Company Disclosure
Schedule as being a qualified plan (the Plans so designated being hereinafter
referred to as the "Company Qualified Plans"). Each Company Qualified Plan is
qualified under Section 401(a) of the Code and is the subject of a currently
effective determination letter from the Internal Revenue Service confirming such
qualification. True and correct copies of all determination letters from the
Internal Revenue Service with respect to the Company Qualified Plans which were
issued after the effective date of ERISA have been or will be delivered to the
Purchaser. With respect to each Company Qualified Plan, the Company has not
obtained a waiver of any minimum funding requirements imposed by ERISA or the
Code in respect of such Company Qualified Plan, and has not incurred any
liability to the Pension Benefit Guaranty Corporation in connection with any
such Company Qualified Plan. As of the date hereof, the value of the assets in
each of the Company Qualified Plans which is a defined benefit plan exceeds the
present value of accrued benefits of all participants in such Plan when such
benefits are valued on a termination basis using Pension Benefit Guaranty
Corporation interest and other assumptions. No "reportable event," as such term
is defined in ERISA and in regulations issued thereunder, has occurred with
respect to any of the Company Qualified Plans since the effective date of ERISA.
(g) The Company has identified to the Purchaser which, if any, of
the Company Employee Plans are multi-employer pension plans (as defined by
ERISA) and the number of employees of the Corporation who participated in
multi-employer plans during the year ended December 31, 1996. Since April 29,
1980, neither the Company nor any of the Company Subsidiaries has, with respect
to any multi-employer plan, suffered or otherwise caused a "complete withdrawal"
or "partial withdrawal" (as such terms are defined by ERISA) nor has the Company
engaged in any transaction that would be deemed to avoid or evade liabilities
related to such withdrawal.
SECTION 3.20 Foreign Corrupt Practices Act. Neither the Company nor any
of the Company Subsidiaries, nor any director, officer, agent, employee,
consultant, or any other person associated with or acting on behalf of any of
them, has engaged or is engaged in any course of conduct, or is a party to any
agreement or involved in any transaction, which has or
<PAGE> 27
would give rise to a violation of the Foreign Corrupt Practices Act of 1977 or
any other United States statute or regulation governing the conduct of business
abroad by United States corporations and their subsidiaries.
SECTION 3.21 Insurance. The Company Disclosure Schedule lists the
insurance currently carried by the Company and the Company Subsidiaries in
respect of their respective properties and operations, including, without
limitation, information as to limits of coverage, deductibles, annual premium
requirements and expiration dates with respect to product liability, general
liability, umbrella liability, contractual liability, employers' liability,
automobile liability, workers' compensation, property and casualty, business
interruption and other insurance carried by the Company and the Company
Subsidiaries (collectively, the "Company Insurance"). All Company Insurance
continues to be in full force and effect, and the Company and the Company
Subsidiaries are in compliance with all requirements and provisions thereof.
None of the Company Insurance is subject to any retroactive rate or audit
adjustments or co-insurance arrangements. The Company has no reason to believe
that any such Company Insurance will not be renewed upon the expiration thereof
at premiums substantially equivalent to those currently being paid by the
Company and the Company Subsidiaries. The Company Insurance heretofore and
currently carried by the Company and the Company Subsidiaries were and are
consistent with types and amounts of coverage customarily carried by similarly
situated companies.
SECTION 3.22 No Pending Transactions. (a) Except for the transactions
contemplated by this Agreement and the acquisition agreements or negotiations
described on the Company Disclosure Statement or in the Company's SEC Reports,
neither the Company nor any of the Company Subsidiaries is a party to or bound
by or the subject of any agreement, undertaking, commitment or discussion with
another party with respect to a proposal or offer for a merger, consolidation,
business combination, sale of substantial assets, sale of shares of capital
stock (including without limitation by way of a tender offer or similar
transactions involving the Company, other than the transactions contemplated by
this Agreement) (any of the foregoing transactions being referred to in this
Agreement as an "Acquisition Transaction").
(b) The Agreement and Plan of Reorganization dated as of March 12,
1997 (the "Sylvan Merger Agreement") between the Company and Sylvan Learning
Systems, Inc., a Maryland corporation ("Sylvan"), has been terminated without
any payments by or penalties or any liability to the Company (other than any
applicable payments pursuant to Section 6.3 of the Sylvan Merger Agreement).
(c) Neither of the Company nor any of the Company Subsidiaries has
entered into or effectuated any new or amended agreements with Sylvan or any
other person or entity or otherwise has taken any action, including, without
<PAGE> 28
limitation, the declaration or payment of any dividend or distribution on the
Shares, which would have the effect of impairing the ability of Purchaser to
consummate the Offer or the Merger or otherwise diminishes the expected economic
value to Purchaser of the acquisition of the Company.
SECTION 3.23 Disclosure. No representation or warranty made by the
Company in this Agreement and no statement contained in a certificate, schedule,
list or other instrument or document specified in or delivered pursuant to this
Agreement, whether heretofore furnished to the Purchaser or hereafter required
to be furnished to the Purchaser, contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact necessary to
make the statements contained herein or therein not misleading.
SECTION 3.24 Transactions with Affiliates. Neither the Company nor any
of the Company Subsidiaries is a party to any transaction with any (i) current
or former officer or director of the Company or any of the Company Subsidiaries,
or (ii) any parent, spouse, child, brother, sister or other family relation of
any such officer or director or (iii) any corporation, partnership or other
entity of which any such officer or director or any such family relation is an
officer, director, partner or greater than 10% stockholder (based on percentage
ownership of voting stock) or (iv) any "affiliate" or "associate" of any such
persons or entities (as such terms are defined in the rules and regulations
promulgated under the Securities Act of 1933, as amended), including, without
limitation, any transaction involving a contract, agreement or other arrangement
providing for the employment of, furnishing of materials, products or services
by, rental of real or personal property from, or otherwise requiring payments
to, any such person or entity.
SECTION 3.25 Opinion of Financial Advisor. BZW has delivered to the
Company its written opinion dated the date of this Agreement that the
consideration to be received by the holders of the Shares, other than Parent and
Purchaser, pursuant to each of the Offer and the Merger, is fair to such holders
from a financial point of view.
SECTION 3.26 Brokers. No broker, finder or investment banker (other
than BZW, the engagement letter with which is attached as Section 3.26 of the
Disclosure Schedule) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of the Company.
SECTION 3.27 Section 203 of the DGCL Not Applicable. The Boards of
Directors of the Company and the Company Subsidiaries have taken all action so
that the restrictions contained in Section 203 of the DGCL applicable to a
"business combination" (as defined in Section 203) will not apply to the
execution, delivery or performance of this Agreement or the
<PAGE> 29
consummation of the Offer or the Merger, the other transactions contemplated by
this Agreement or any other transaction between the Parent or any of its
subsidiaries and the Company or any of its subsidiaries.
SECTION 3.28 NETG Options. All outstanding stock options granted by
NETG Holding, Inc., a Delaware corporation and wholly-owned subsidiary of the
Company ("NETG"), for shares of NETG common stock will terminate upon
consummation of the Offer (assuming the Minimum Condition is satisfied).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent and
warrant to the Company that:
SECTION 4.1 Corporate Organization. Each of Parent and Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has all requisite corporate power and authority to
own, lease and operate its properties and to carry on its businesses as now
being conducted, except where the failure to be so organized, existing and in
good standing or to have such power and authority would not, and reasonably
could not be expected to, individually or in the aggregate, prevent the
consummation of the Offer or the Merger.
SECTION 4.2 Authority Relative to This Agreement. Each of Parent and
Purchaser has all necessary corporate power and authority to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by each of Parent and Purchaser and the consummation by each of
Parent and Purchaser of the transactions contemplated hereby have been duly
authorized by the Board of Directors of each of Parent and Purchaser and by
Parent as the sole stockholder of Purchaser and no other corporate proceedings
on the part of Parent or Purchaser are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Parent and Purchaser and, assuming due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of each such corporation enforceable against such
corporation in accordance with its terms.
SECTION 4.3 No Conflict; Required Filings and Consents. (a) The
execution, delivery and performance of this Agreement by Parent and Purchaser do
not and will not: (i) conflict with or violate the respective certificates of
incorporation or by-laws of Parent or Purchaser; (ii) assuming that all
consents, approvals and authorizations contemplated by clauses (i), (ii) and
(iii) of subsection (b) below have been obtained and all filings described in
such clauses have been made,
<PAGE> 30
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to Parent or Purchaser or by which either of them or their respective
properties are bound or affected; or (iii) result in any breach or violation of
or constitute a default (or an event which with notice or lapse of time or both
could become a default) or result in the loss of a material benefit under, or
give rise to any right of termination, amendment, acceleration or cancellation
of, or result in the creation of a Lien on any of the property or assets of
Parent or Purchaser pursuant to, any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument or obligation
to which Parent or Purchaser is a party or by which Parent or Purchaser or any
of their respective properties are bound or affected, except, in the case of
clauses (ii) and (iii), for any such conflicts, violations, breaches, defaults
or other occurrences which could not, individually or in the aggregate,
reasonably be expected to prevent the consummation of the Offer or the Merger.
(b) The execution, delivery and performance of this Agreement by
Parent and Purchaser do not and will not require any consent, approval,
authorization or permit of, action by, filing with or notification to, any
governmental or regulatory authority, domestic or foreign, except (i) for
applicable requirements, if any, of the Exchange Act and the rules and
regulations promulgated thereunder, the HSR Act, certain foreign filings and
approvals, state securities, takeover and Blue Sky laws, (ii) the filing of the
Certificate of Merger with the Delaware Secretary of State, and (iii) such
consents, approvals, authorizations, permits, actions, filings or notifications
the failure of which to make or obtain would not, individually or in the
aggregate, reasonably be expected to prevent the consummation of the Offer or
the Merger.
SECTION 4.4 Offer Documents; Proxy Statement. The Offer Documents, as
amended pursuant to Section 1.1, will not, at the time such Offer Documents as
so amended are filed with the SEC or are first published, sent or given to
stockholders, as the case may be, contain any untrue statement of a material
fact or omit to state any material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. The information
supplied by Parent or Purchaser in writing for inclusion in the Proxy Statement
shall not, on the date the Proxy Statement is first mailed to stockholders, at
the time of the Stockholders Meeting (as defined in Section 6.1) or at the
Effective Time, contain any statement which, at such time and in light of the
circumstances under which it shall be made, is false or misleading with respect
to any material fact, or shall omit to state a material fact required to be
stated therein or necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Stockholders Meeting which
has become false or misleading. Notwithstanding the foregoing, Parent and
<PAGE> 31
Purchaser make no representation or warranty with respect to any information
supplied by the Company or any of its representatives which is contained in or
incorporated by reference in the Proxy Statement or the Offer Documents. The
Offer Documents, as amended and supplemented, will comply in all material
respects as to form with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder.
SECTION 4.5 Brokers. No broker, finder or investment banker (other than
Goldman, Sachs & Co.) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of Parent or Purchaser.
SECTION 4.6 Sufficient Funds. The Purchaser has or will have sufficient
funds available to pay for all Shares tendered in the Offer (as amended pursuant
to Section 1(a) hereof) or otherwise acquired in the Merger.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business of the Company Pending the Merger.
Except as contemplated by this Agreement, during the period from the date hereof
to the earlier of termination of this Agreement or the Effective Time, the
Company agrees to conduct its business and that of its subsidiaries only in the
ordinary course of business consistent with past practice and to use all
reasonable efforts consistent with past practices and policies to preserve
intact its present business organization (including the services of its existing
employees) and preserve its relationships with customers, suppliers and others
having business dealings with it, to the end that its goodwill and ongoing
business shall be unimpaired at the Effective Date. Without limiting the
generality of the foregoing, and except as otherwise expressly provided in this
Agreement, neither the Company nor any of its subsidiaries will, without the
prior written consent of the Purchaser:
(a) amend or propose to amend its Certificate of Incorporation
or By-Laws;
(b) (i) authorize for issuance, issue, sell, deliver or agree
or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any stock of any class or any other securities
or equity equivalents (including, without limitation, any stock options
or stock appreciation rights), except (x) shares of Company Common
Stock issuable upon conversion of the Outstanding Debentures (at a
conversion rate of one share of Company Common Stock for every $25.00
of Outstanding Debentures) and (y) shares of Company
<PAGE> 32
Common Stock issuable upon exercise of the Company Outstanding Options
or (ii) amend any of the terms of any such securities or agreements
outstanding as of the date hereof, except as specifically contemplated
by this Agreement;
(c) split, combine or reclassify any shares of its capital
stock, declare, set aside or pay any dividend or other distribution
(whether in cash, stock or property or any combination thereof) in
respect of its capital stock, or redeem or otherwise acquire any of its
securities or any securities of the Company's subsidiaries, except that
the Company may repurchase Outstanding Debentures to the extent
necessary to satisfy its 1997 sinking fund obligation under the
Indenture by which the Debentures were issued;
(d) (i) incur or assume any long-term or short-term debt or
issue any debt securities except for borrowings under existing lines of
credit in the ordinary course of business; (ii) assume, guarantee,
endorse or otherwise become liable or responsible (whether directly,
contingently or otherwise) for the obligations of any other person or
entity except in the ordinary course of business consistent with past
practice, and except for obligations of wholly-owned subsidiaries of
it; (iii) make any loans, advances or capital contributions to, or
investments in, any other person or entity (other than to wholly-owned
subsidiaries of it or advances to employees in the ordinary course of
business consistent with past practice and in amounts not material to
the maker of such loan or advance); (iv) pledge or otherwise encumber
shares of its capital stock or any of its subsidiaries; or (v) mortgage
or pledge any of its material assets, tangible or intangible, or create
or suffer to exist any material Lien thereupon;
(e) except as may be required by law or as contemplated by
this Agreement or described on the Company Disclosure Schedule, enter
into, adopt or amend or terminate any bonus, profit sharing,
compensation, severance, termination, stock option, stock appreciation
right, restricted stock, performance unit, stock equivalent, stock
purchase agreement, pension, retirement, deferred compensation,
employment, severance or other employee benefit agreement, trust, plan,
fund or other arrangement for the benefit or welfare of any director,
officer, employee or former employee or independent contractor in any
manner, or (except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense to it
and as
<PAGE> 33
required under existing agreements) increase in any manner the
compensation or fringe benefits of any director, officer or employee or
pay any benefit not required by any plan and arrangement as in effect
as of the date hereof (including, without limitation, the granting of
stock appreciation rights or performance units);
(f) acquire, sell, lease, license to others or dispose of any
assets outside the ordinary course of business which individually or in
the aggregate are material to the Corporation, or enter into any
commitment or transaction outside the ordinary course of business
consistent with past practice which would be material to the
Corporation;
(g) except as may be required as a result of a change in law
or in generally accepted accounting principles, change any of the
accounting principles or practices used by it;
(h) revalue in any material respect any of its assets,
including, without limitation, writing down the value of inventory or
writing-off notes or accounts receivable other than in the ordinary
course of business;
(i) (i) acquire or agree to acquire (by merger, consolidation,
acquisition of stock or assets or otherwise) any corporation,
partnership or other business organization or division thereof or any
equity interest therein, other than as specifically described on the
Company Disclosure Schedule; (ii) enter into any contract or agreement
other than in the ordinary course of business consistent with past
practice which would be material to it; (iii) authorize any new capital
expenditure or expenditures which, individually, is in excess of
$250,000 or, in the aggregate, are in excess of $2,500,000; or (iv)
enter into or amend any contract, agreement, commitment or arrangement
providing for the taking of any action that would be prohibited
hereunder;
(j) make any tax election or settle or compromise any income
tax liability material to the Company;
(k) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or reserved
against in, or contemplated by, the consolidated financial statements
(or the notes thereto) of the Company and the Company Subsidiaries or
incurred in the ordinary course of business consistent with past
practice or customary
<PAGE> 34
fees and expenses relating to the transactions contemplated by this
Agreement;
(l) settle or compromise any pending or threatened suit,
action or claim relating to the transactions contemplated hereby; or
(m) take, or agree in writing or otherwise to take, any of the
actions described in this Section 5.1(a) through 5.1(l) or any action
which would make any of the representations or warranties of the
Company contained in this Agreement untrue or incorrect as of the date
when made.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Stockholders Meeting. (a) The Company, acting through its
Board of Directors, shall, unless the Merger is effected under Section 253 of
the DGCL, (i) duly call, give notice of, convene and hold a meeting of its
stockholders as soon as practicable following consummation of the Offer for the
purpose of considering and taking action on this Agreement and the transactions
contemplated hereby (the "Stockholders Meeting") and (ii) unless the Company's
Board of Directors has received the written opinion of Irell & Manella LLP to
the effect that the taking of any of the following actions would constitute a
violation of the Board of Directors' fiduciary responsibilities to the holders
of the Company Common Stock under applicable law, (A) include in the Proxy
Statement the recommendation of the Board of Directors that the stockholders of
the Company vote in favor of the approval and adoption of this Agreement and the
transactions contemplated hereby and the written opinion of the Financial
Adviser that the consideration to be received by the stockholders of the Company
pursuant to the Offer and the Merger is fair to such stockholders and (B) use
its reasonable best efforts to obtain the necessary approval and adoption of
this Agreement and the transactions contemplated hereby by its stockholders. At
the Stockholders Meeting, Parent and Purchaser shall cause all Shares then owned
by them and their subsidiaries to be voted in favor of approval of this
Agreement and the transactions contemplated hereby.
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90% of the outstanding Shares, Purchaser may cause the Merger
to become effective as soon as reasonably practicable after such acquisition,
without a meeting of the Company's stockholders, in accordance with Section 253
of the DGCL.
SECTION 6.2 Proxy Statement. Unless the Merger is effected under
Section 253 of the DGCL, as soon as practicable following Parent's request, the
Company shall file with the SEC under the Exchange Act and the rules and
regulations
<PAGE> 35
promulgated thereunder, and shall use its reasonable best efforts to have
cleared by the SEC, the Proxy Statement with respect to the Stockholders
Meeting. Parent, Purchaser and the Company will cooperate with each other in the
preparation of the Proxy Statement; without limiting the generality of the
foregoing, each of Parent and Purchaser will furnish to the Company the
information relating to it required by the Exchange Act and the rules and
regulations promulgated thereunder to be set forth in the Proxy Statement. The
Company agrees to use its reasonable best efforts, after consultation with the
other parties hereto, to respond promptly to any comments made by the SEC with
respect to the Proxy Statement and any preliminary version thereof filed by it
and cause such Proxy Statement to be mailed to the Company's stockholders at the
earliest practicable time.
SECTION 6.3 Company Board Representation; Section 14(f). (a) Promptly
upon the purchase by Purchaser of Shares pursuant to the Offer, and from time to
time thereafter, Purchaser shall be entitled to designate up to such number of
directors, rounded to the next whole number, on the Board of Directors of the
Company as shall give Purchaser representation on the Board of Directors equal
to the product of the total number of directors on such Board (giving effect to
the directors elected pursuant to this sentence) multiplied by the percentage
that the aggregate number of Shares beneficially owned by Purchaser or any
affiliate of Purchaser bears to the total number of Shares then outstanding, and
the Company shall, at such time, promptly take all action necessary to cause
Purchaser's designees to be so elected, including either increasing the size of
the Board of Directors or securing the resignations of incumbent directors or
both. At such times, the Company will use its best efforts to cause persons
designated by Purchaser to constitute the same percentage as is on the Board of
Directors of the Company of (i) each committee of the Board of Directors of the
Company, (ii) each board of directors of each domestic subsidiary of the Company
and (iii) each committee of each such board, in each case to the extent
permitted by law. Until the Effective Time, the Company shall use its reasonable
best efforts to ensure that all the members of the Board of Directors of the
Company as of the date hereof who are not employees of the Company shall remain
members of the Board of Directors of the Company.
(b) The Company's obligations to appoint Purchaser's designees to
its Board of Directors shall be subject to Section 14(f) of the Exchange Act and
Rule 14f-1 promulgated thereunder. The Company shall promptly take all actions
required pursuant to Section 14(f) and Rule 14f-1 in order to fulfill its
obligations under this Section 6.3 and shall include in the Schedule 14D-9 or a
separate Rule 14f-1 information statement provided to stockholders such
information with respect to the Company and its officers and directors as is
required under Section 14(f) and Rule 14f-1 to fulfill its obligations under
this Section 6.3. Parent or Purchaser will supply to the Company and be solely
responsible
<PAGE> 36
for any information with respect to either of them and their nominees, officers,
directors and affiliates required by Section 14(f) and Rule 14f-1.
(c) Following the election or appointment of Purchaser's designees
pursuant to this Section 6.3 and prior to the Effective Time, any amendment (or
recommendation thereof) by the Board of Directors of the Company of this
Agreement or the Certificate of Incorporation or By-Laws of the Company, any
termination of this Agreement by the Company, any extension by the Company of
the time for the performance of any of the obligations or other acts of
Purchaser or waiver of any of the Company's rights hereunder, and any other
consent or action by the Board of Directors of the Company hereunder, will
require the concurrence of a majority of the directors of the Company then in
office who are not designated by Purchaser.
SECTION 6.4 Access to Information; Confidentiality. (a) From the date
hereof to the Effective Time, the Company shall, and shall cause its
subsidiaries, officers, directors, employees, auditors and other agents to,
afford the officers, employees, auditors and other agents of Parent, reasonable
access at all reasonable times to its officers, employees, agents, properties,
offices, plants and other facilities and to all books and records, and shall
furnish Parent with such financial, operating and other data and information as
Parent, through its officers, employees or agents may from time to time
reasonably request.
(b) Each of Parent and Purchaser will hold and will cause its
officers, employees, auditors and other agents to hold in confidence, unless
compelled to disclose by judicial or administrative process or, in the written
opinion of its legal counsel, by other requirements of law, all documents and
information concerning the Company and its subsidiaries furnished to Parent or
Purchaser in connection with the transactions contemplated in this Agreement in
accordance with the provisions of the letter dated May 1, 1997 between Parent
and the Company (the "Confidentiality Agreement"). In addition, all such
confidential documents and information shall promptly be redelivered to the
Company (whether in the possession of Parent, Purchaser or any other person
permitted by the terms of such letter to receive such documents and information)
and any copies, extracts or other reproductions, in whole or in part, of the
same will not be retained.
(c) No investigation pursuant to this Section 6.4 shall affect any
representations or warranties of the parties herein or the conditions to the
obligations of the parties hereto.
SECTION 6.5 No Solicitation of Transactions. The Company, its
affiliates and their respective officers, directors, employees, representatives
and agents (i) shall immediately cease any existing discussions or negotiations,
if any, with any parties with respect to any acquisition (other
<PAGE> 37
than the transactions contemplated by this Agreement) of all or any material
portion of the assets of, or any equity interest in, the Company or any of the
Company Subsidiaries or any business combination with the Company or any of the
Company Subsidiaries, (ii) shall not, directly or indirectly, solicit, initiate,
encourage, or furnish information in response to any inquiries or proposals that
constitute, or could reasonably be expected to lead to, an Acquisition
Transaction, (iii) shall not engage in negotiations or discussions concerning,
or provide any non-public information to any person or entity relating to, any
Acquisition Transaction, or (iv) shall not agree to, approve or recommend any
Acquisition Transaction; except, with respect to clauses (ii) (as to the
furnishing of information only), (iii) and (iv), where any such person or entity
has submitted a written proposal to the Company's Board of Directors relating to
an Acquisition Transaction and the Company's Board of Directors has received the
written opinion of Irell & Manella LLP to the effect that the failure of the
Company's Board of Directors to so act would constitute a violation of the Board
of Directors' fiduciary responsibilities to the holders of the Company Common
Stock under applicable law (it being understood that for this purpose, the
failure to respond to an Acquisition Proposal which in the judgment of the
Company's Board of Directors and BZW is superior, from a financial point of
view, to the Company's stockholders may be deemed to be a breach of such
fiduciary duty). If the Company shall nevertheless receive any indications of
interest or proposals with respect to any Acquisition Transactions, it shall
provide a copy of any such written proposal to Purchaser immediately after
receipt thereof by the Company or any of its representatives or agents, shall
notify Parent immediately if any such proposal (whether oral or written) is made
and shall keep Parent promptly advised of all developments which could
reasonably be expected to culminate in the Board of Directors of the Company
withdrawing, modifying or amending its recommendation of the Offer, the Merger
and the other transactions contemplated by this Agreement. Except with Parent's
consent, the Company agrees not to release any third party from, or waive any
provisions of, any confidentiality or standstill agreement to which the Company
is a party.
SECTION 6.6 SERP; Steck-Vaughn Options. (a) The parties hereto agree
that (i) the condition in Section 8 of the Company's supplemental executive
retirement plan, as amended (the "SERP"), that a participant's employment with
the Company must be terminated voluntarily or involuntarily within two years of
a change of control in order to receive accelerated vesting and payout of SERP
retirement benefits will be waived for Gary Keisling and Charles Moran; (ii)
Messrs. Keisling and Moran will be entitled to payment of SERP retirement
benefits, with interest from the consummation of the Offer, only when their
employment terminates; (iii) there will be no further accrual of additional
benefits under the SERP from and after the consummation of the Offer with
respect to Messrs. Keisling and Moran and (iv) Messrs. Keisling and
<PAGE> 38
Moran will not participate in any of Parent's retirement plans.
(b) The parties hereto acknowledge that the Option Committee of
the Board of Directors of Steck-Vaughn may amend all options exercisable for
common stock of Steck-Vaughn to provide for the acceleration of vesting and the
mandatory cash-out of such options upon the initiation of a going-private
transaction for Steck-Vaughn.
SECTION 6.7 Indemnification. (a) The Company shall and Parent shall
cause the Surviving Corporation to, from and after the Effective Time,
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date of this Agreement or who becomes prior to the Effective
Time, an officer or director of the Company or any of the Company Subsidiaries
(the "Indemnified Parties") against all losses, claims, damages, costs,
expenses, liabilities or judgments or amounts that are paid in settlement with
the approval of the indemnifying party (which approval shall not be unreasonably
withheld) of or in connection with any claim, action, suit, proceeding or
investigation based in whole or in part on or arising in whole or in part out of
the fact that such person is or was a director or officer, of the Company or any
of the Company Subsidiaries, whether pertaining to any matter existing or
occurring at or prior to the Effective Time and whether asserted or claimed
prior to, or at or after, the Effective Time ("Indemnified Liabilities")
including, without limitation, all losses, claims, damages, costs, expenses,
liabilities or judgments based in whole or in part on, or arising in whole or in
part out of, or pertaining to this Agreement or the transactions contemplated
hereby, in each case to the full extent a corporation is permitted under the
DGCL to indemnify its own directors and officers. The Company or the Surviving
Corporation, as the case may be, will pay expenses in advance of the final
disposition of any such action or proceeding to each Indemnified Party to the
full extent permitted by law upon receipt of any undertaking contemplated by
Section 145(e) of the DGCL. Without limiting the foregoing, in the event of any
such claim, action, suit, proceeding or investigation (whether arising before or
after the Effective Time), (i) Parent or the Surviving Corporation shall have
the right to assume the defense thereof and Parent shall not be liable to such
Indemnified Parties for any legal expenses of other counsel or any other
expenses subsequently incurred by such Indemnified Parties in connection with
the defense thereof, except that if Parent or the Surviving Corporation elects
not to assume such defense or counsel for the Indemnified Parties advises that
there are issues that raise conflicts of interest between Parent or the
Surviving Corporation and the Indemnified Parties, the Indemnified Parties may
retain counsel satisfactory to them, and Parent or the Surviving Corporation
shall pay all reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; provided, however, that
Parent shall be obligated pursuant to this paragraph (a) to pay for only one
firm of counsel for all Indemnified Parties
<PAGE> 39
in any jurisdiction unless the use of one counsel for such Indemnified Parties
would present such counsel with a conflict of interest, (ii) the Indemnified
Parties will cooperate in the defense of any such matter and (iii) Parent shall
not be liable for any settlement effected without its prior written consent,
which consent shall not be unreasonably withheld; and provided, further, that
Parent shall not have any obligation hereunder to any Indemnified Party when and
if a court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and nonappealable, that the
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by applicable law. Any Indemnified Party wishing to claim
indemnification under this Section 6.7, upon learning of any such claim, action,
suit, proceeding or investigation, shall promptly notify the Company or the
Surviving Corporation (but the failure so to notify an Indemnifying Party shall
not relieve it from any liability which it may have under this Section 6.7
except to the extent such failure prejudices such party), and shall deliver to
the Company (or, after the Effective Time, the Surviving Corporation) the
undertaking contemplated by the DGCL.
(b) For a period of five years after the Effective Time, Parent
shall cause the Surviving Corporation to use reasonable efforts to maintain in
effect, if available, directors' and officers' liability insurance covering
those persons who are currently covered by the Company's directors and
officers' liability insurance policy (a copy of which has heretofore been
delivered to Purchaser) on terms and in an amount comparable to those now
applicable to directors and officers of the Company; provided, however, that in
no event shall the Surviving Corporation be required to expend in any year in
excess of 125% of the current premium being paid by the Company for such
coverage.
(c) In the event that the Surviving Corporation or any of its
respective successors and assigns consolidates with or merges into any other
person and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or transfers and conveys all or substantially all
of its property and assets to any person, then, and in each case, proper
provisions shall be made so that the successors and assigns of the Surviving
Corporation assume the obligations set forth in this Section 6.7.
(d) The provisions of this Section 6.7 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and representatives, and may not be amended, altered or repealed without
the written consent of any affected Indemnified Party.
SECTION 6.8 Amendment to Indenture. Each of Purchaser and the Company
will use its best efforts to cause the Trustee under the Indenture relating to
the Debentures to amend the Indenture, effective at the Effective Time, such
that the Surviving Corporation assumes the rights and obligations of the Company
thereunder.
<PAGE> 40
SECTION 6.9 Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence or non-occurrence of any event the occurrence or
non-occurrence of which would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate and (ii) any failure of
the Company, Parent or Purchaser, as the case may be, to comply with or satisfy
any covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
Section 6.9 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
SECTION 6.10 Further Action; Reasonable Best Efforts. Upon the terms
and subject to the conditions of this Agreement, each of the parties hereto
shall use reasonable best efforts to take, or cause to be taken, all appropriate
action, and to do or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including but not limited to (i)
cooperation in the preparation and filing of the Offer Documents, the Schedule
14D-9, the Proxy Statement, any required filings under the HSR Act, any required
foreign filings and any amendments to any thereof and (ii) using its reasonable
best efforts to make all required regulatory filings and applications and to
obtain all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties to contracts
with the Company and its subsidiaries as are necessary for the consummation of
the transactions contemplated by this Agreement and to fulfill the conditions to
the Offer and the Merger. In case at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall use their reasonable best efforts to take all such necessary action.
SECTION 6.11 Public Announcements. Parent and the Company shall consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Offer, the Merger or this Agreement and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or pursuant to the rules of the
Commission or any listing agreement with its securities exchange.
SECTION 6.12 Disposition of Litigation. The Company shall give Parent
the opportunity to participate in the defense or settlement of any litigation
against the Company or any of its subsidiaries and their respective directors;
provided, however, that no such settlement shall be agreed to without Parent's
consent, which consent shall not be unreasonably withheld.
<PAGE> 41
SECTION 6.13 Postponement of Steck-Vaughn Annual Meeting. The Company
shall as soon as possible cause Steck-Vaughn to indefinitely postpone its
annual meeting of stockholders currently scheduled for May 29, 1997, and shall
cause Steck-Vaughn to take no action unless compelled by legal process to
reschedule such annual meeting or to call a special meeting of stockholders of
Steck-Vaughn except in accordance with this Agreement unless and until this
Agreement has been terminated in accordance with its terms.
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each Party to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) If required by the DGCL, this Agreement shall have been
approved by the affirmative vote of the stockholders of the Company by
the requisite vote in accordance with the Company's Certificate of
Incorporation and the DGCL (which the Company has represented shall be
solely the affirmative vote of a majority of the outstanding Shares).
(b) No statute, rule, regulation, executive order, decree,
ruling, injunction or other order (whether temporary, preliminary or
permanent) shall have been enacted, entered, promulgated or enforced by
any United States or state court or governmental authority which
prohibits, restrains, enjoins or restricts the consummation of the
Merger.
(c) Any waiting period applicable to the Merger under the HSR
Act shall have terminated or expired.
(d) Purchaser shall have purchased Shares pursuant to the
Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be terminated and the
Merger contemplated hereby may be abandoned at any time prior to the Effective
Time, notwithstanding any approval thereof by the stockholders of the Company:
(a) By mutual written consent of Parent, Purchaser and the
Company;
(b) By the Company if the Offer shall not have been
consummated within 90 days following the date hereof;
<PAGE> 42
(c) By Parent or the Company if any court of competent
jurisdiction or other governmental body located or having jurisdiction
within the United States or any country or economic region in which
either the Company or Parent, directly or indirectly, has material
assets or operations, shall have issued a final order, decree or ruling
or taken any other final action restraining, enjoining or otherwise
prohibiting the Offer or the Merger and such order, decree, ruling or
other action is or shall have become final and nonappealable, except if
the party relying on this clause (c) to terminate this Agreement is in
breach of any of its material obligations under this Agreement;
(d) By Parent if due to a failure of any of the Offer
Conditions, Purchaser shall have (i) terminated the Offer or (ii)
failed to pay for Shares pursuant to the Offer within 90 days following
the date hereof, unless such termination or failure has been caused by
or results from the failure of Parent or Purchaser to perform in any
material respect any of its respective covenants or agreements
contained in this Agreement;
(e) By the Company if (i) due to a failure of any of the Offer
Conditions, Purchaser shall have terminated the Offer, unless such
termination has been caused by or results from the failure of the
Company to perform in any material respect any of its covenants or
agreements contained in this Agreement, (ii) prior to the purchase of
Shares pursuant to the Offer, any person shall have made a bona fide
offer to acquire the Company (A) that the Board of Directors of the
Company determines in its good faith judgment is more favorable to the
Company's stockholders from a financial point of view than the Offer
and the Merger and (B) as a result of which the Company's Board of
Directors has received the written opinion of Irell & Manella LLP to
the effect that the failure of the Company's Board of Directors to
terminate this Agreement would constitute a violation of the Board of
Directors' fiduciary responsibilities to the holders of the Company
Common Stock under applicable law (it being understood that for this
purpose, the failure to respond to a bona fide offer to acquire the
Company which in the judgment of the Company's Board of Directors and
BZW is superior, from a financial point of view, to the Company's
stockholders may be deemed to be a breach of such fiduciary duty) or
(iii) prior to the purchase of Shares pursuant to the Offer (A) there
shall have been a breach of any representation or warranty on the part
of Parent or Purchaser contained in this Agreement which could
reasonably be expected to materially adversely affect (or materially
delay) the consummation of the Offer or (B) there shall have been a
breach of any covenant or agreement on the part of Parent or Purchaser
contained in this Agreement which could reasonably be expected to
materially adversely affect (or materially delay) the consummation of
the Offer, which in the case
<PAGE> 43
of (A) or (B) shall not have been cured prior to the earlier of (x) 10
business days following notice of such breach and (y) two business days
prior to the date on which the Offer expires (including any extensions
thereof); provided that such termination under clause (ii) hereof shall
not be effective until the Company has made payment of the full fee and
expense reimbursement required by Sections 8.3(b) and (c) hereof; or
(f) By Parent prior to the purchase of Shares pursuant to the
Offer, if (i) there shall have been a breach of any representation or
warranty on the part of the Company contained in this Agreement that
has a Material Adverse Effect on the Corporation, (ii) there shall have
been a breach of any covenant or agreement on the part of the Company
contained in this Agreement that has a Material Adverse Effect on the
Corporation or which materially adversely affects (or materially
delays) the consummation of the Offer, which in the case of (i) or (ii)
shall not have been cured prior to the earlier of (A) 10 business days
following notice of such breach and (B) two business days prior to the
date on which the Offer expires (including any extensions thereof),
(iii) the Company's Board of Directors shall have withdrawn or modified
(including by amendment of the Schedule 14D-9) in a manner adverse to
Purchaser its approval or recommendation of the Offer, this Agreement
or the Merger or shall have approved or recommended another offer or
transaction, or shall have resolved to effect any of the foregoing, or
(iv) the Minimum Condition shall not have been satisfied by the
expiration date of the Offer (including extensions thereof) and on or
prior to such date (A) any person (other than Parent or Purchaser)
shall have made a bona fide proposal or public announcement or
communication to the Company with respect to a Third Party Acquisition
or (B) any person (including the Company or any of its affiliates or
subsidiaries), other than Parent or any of its affiliates shall have
become the beneficial owner of more than 30% of the Shares.
SECTION 8.2 Effect of Termination. In the event of the termination of
this Agreement pursuant to Section 8.1, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto or their
respective officers, directors, stockholders or affiliates, except as set forth
in Section 8.3 and Section 9.1 hereof; provided, however, that nothing herein
shall relieve any party from liability for any breach hereof; provided, further,
that neither Parent nor Purchaser shall be entitled to any punitive damages in
the event of any breach hereof if the fee referred to in Section 8.3(c) has been
paid in full to Parent.
SECTION 8.3 Fees and Expenses.
(a) Parent hereby agrees to immediately provide to the Company
which shall pay the $30,000,000 fee payable by the
<PAGE> 44
Company to Sylvan as a result of the termination of the Sylvan Merger Agreement
in connection with the transactions contemplated hereby and in accordance with
the terms of that certain letter agreement dated the date hereof among Parent,
the Company and Sylvan (the "Letter Agreement").
(b) Parent and the Company hereby agree that if:
(i) the Company intentionally breaches any of its
representations, warranties, covenants or agreements set forth in this
Agreement and such breach has a Material Adverse Effect on the
Corporation and Parent terminates this Agreement and the Offer pursuant
to Section 8.1(f) hereof;
(ii) this Agreement is terminated pursuant to Section 8.1
hereof and the Company is required to pay Parent the fee provided in
Section 8.3(c) hereof; or
(iii) this Agreement is terminated in accordance with its
terms and, within eight months thereafter, the Company enters into an
agreement with respect to, or consummates, a Third Party Acquisition
with Sylvan (or any affiliate or associate thereof);
then the Company shall reimburse Parent, within one business day following the
execution and delivery of such agreement or such occurrence, as the case may be,
for all amounts paid by Parent to the Company pursuant to Section 8.3(a) hereof.
The Company's obligations pursuant to this Section 8.3(b) shall be in addition
to any other payment obligations of the Company which may arise under this
Agreement, including, without limitation, Section 8.3(c).
"Third Party Acquisition" means the occurrence of any of the
following events: (i) the acquisition of the Company by merger, tender offer or
otherwise by any person other than Parent, Purchaser or any affiliate thereof (a
"Third Party"); (ii) the acquisition by a Third Party of 30% or more of the
assets of the Company and its subsidiaries, taken as a whole; (iii) the
acquisition by a Third Party of more than 30% of the outstanding Shares; (iv)
the adoption by the Company of a plan of liquidation or the declaration or
payment of an extraordinary dividend; or (v) the repurchase by the Company or
any of its subsidiaries of 30% or more of the outstanding Shares.
Upon the consummation of the Merger, the Company shall reimburse
Parent for all amounts paid by Parent to the Company pursuant to Section 8.3(a)
hereof.
(c) Parent and the Company hereby agree that if:
(i) Parent terminates this Agreement pursuant to Section
8.1(f)(i), (ii) or (iv)(A) hereof, or if the Company terminates this
Agreement pursuant to Section 8.1(e)(i) hereof under circumstances that
would have permitted Parent to terminate this Agreement pursuant to
Section 8.1(f)(i), (ii) or (iv)(A) hereof, and within eight months
thereafter, the Company enters into an
<PAGE> 45
agreement with respect to (and thereafter consummates), or consummates,
a Third Party Acquisition; or
(ii) the Company terminates this Agreement pursuant to
8.1(e)(ii) hereof or Parent terminates this Agreement pursuant to
Section 8.1(f)(iii) or (iv)(B) hereof;
then the Company shall pay to Parent, within one business day following any
termination by Parent pursuant to Section 8.1(f)(iii) or (iv)(B) above or
simultaneously with the consummation of any such Third Party Acquisition or any
termination by the Company pursuant to Section 8.1(e)(ii) above, a fee, in cash,
of (x) in any case involving a Third Party Acquisition with Sylvan (including
any termination pursuant to Section 8.1(e)(ii) or 8.1(f)(iii) or (iv)(B)), $30
million and (y) in all other cases, $10 million, provided, however, that the
Company in no event shall be obligated to pay more than one such fee to Parent
with respect to all such agreements and occurrences and such termination. The
Company's obligations pursuant to this Section 8.3(c) shall be in addition to
any other payment obligations of the Company which may arise under this
Agreement, including, without limitation, Section 8.3(b).
(d) If the Company is required to reimburse Parent for any amount
(the "Reimbursement Amount") pursuant to Section 8.3(b) and the Reimbursement
Amount is not paid within five business days after the events set forth in
Section 8.3(b) requiring payment of the Reimbursement Amount occur, Parent, at
its sole option, may demand (the "Demand") that the Company tender to Parent,
immediately in satisfaction of the Reimbursement Amount, such number of Shares
(rounded to the nearest whole share) (which at the request of Parent shall be
issued in shares of treasury stock, if available) equal to (x) the Reimbursement
Amount divided by (y) the Average Market Price. For purposes of this Section
8.3(d) "Average Market Price" shall mean the average of the average of the high
and low prices of Company Common Stock as reported on the New York Stock
Exchange Composite Tape on each of the five consecutive trading days immediately
preceding the trading day prior to the Demand. The Company acknowledges that it
is obligated hereunder to pay the Reimbursement Amount in cash and that such
obligation is not abrogated in any respect by the existence of the option of
Parent to seek satisfaction of such obligation by means of the Demand.
(e) Except as otherwise specifically provided herein, each party
shall bear its own expenses in connection with this Agreement and the
transactions contemplated hereby.
SECTION 8.4 Amendment. Subject to Section 6.3, this Agreement may be
amended by the parties hereto, notwithstanding any approval thereof by the
stockholders of the Company, by action taken by or on behalf of their respective
Boards of Directors at any time prior to the Effective Time; provided, however,
that, after approval of the
<PAGE> 46
Merger by the stockholders of the Company, no amendment may be made which under
applicable law requires further approval of such stockholders without obtaining
such required further approval. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto.
SECTION 8.5 Waiver. Subject to Section 6.3, at any time prior to the
Effective Time, any party hereto may, but shall not be required to, (a) extend
the time for the performance of any of the obligations or other acts of the
other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions contained herein. Any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations, Warranties and Agreements.
The representations, warranties and agreements in this Agreement shall terminate
at the Effective Time or upon the termination of this Agreement pursuant to
Section 8.1, as the case may be, except that the agreements set forth in Article
II, Section 6.7, Section 6.10 and Article IX shall survive the Effective Time
and those set forth in Section 6.4(b), Section 8.3 and Article IX shall survive
termination of this Agreement.
SECTION 9.2 Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly given upon receipt) by delivery in person, by cable,
telecopy, telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following addresses
(or at such other address for a party as shall be specified by like notice):
if to Parent or Purchaser:
Harcourt General, Inc.
27 Boylston Street
Chestnut Hill, Massachusetts 02167
Attention: Eric P. Geller, Esq.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: Robert L. Friedman, Esq.
if to the Company:
<PAGE> 47
National Education Corporation
2601 Main Street
Irvine, California 92714
Attention: Philip C. Maynard, Esq.
with a copy to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 500
Los Angeles, CA 90067
Attention: Alvin G. Segel, Esq.
SECTION 9.3 Certain Definitions. For purposes of this Agreement, the
term:
(a) "affiliate" of a person means a person that directly or
indirectly, through one or more intermediaries, controls, is controlled
by, or is under common control with, the first mentioned person;
(b) "beneficial owner" with respect to any Shares means a
person who shall be deemed to be the beneficial owner of such Shares
(i) which such person or any of its affiliates or associates
beneficially owns, directly or indirectly, (ii) which such person or
any of its affiliates or associates (as such term is defined in Rule
12b-2 of the Exchange Act) has, directly or indirectly, (A) the right
to acquire (whether such right is exercisable immediately or subject
only to the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of consideration rights, exchange
rights, warrants or options, or otherwise, or (B) the right to vote
pursuant to any agreement, arrangement or understanding or (iii) which
are beneficially owned, directly or indirectly, by any other persons
with whom such person or any of its affiliates or person with whom such
person or any of its affiliates or associates has any agreement,
arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of any shares;
(c) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or
as trustee or executor, of the power to direct or cause the direction
of the management policies of a person, whether through the ownership
of stock, as trustee or executor, by contract or credit arrangement or
otherwise;
(d) "generally accepted accounting principles" shall mean the
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such
other statements by such other entity as may be approved by a
significant segment of the
<PAGE> 48
accounting profession in the United States, in each case applied on a
basis consistent with the manner in which the audited financial
statements for the fiscal year of the Company ended December 31, 1996
were prepared;
(e) "person" means an individual, corporation, partnership,
association, trust, unincorporated organization, other entity or group
(as defined in Section 13(d)(3) of the Exchange Act); and
(f) "subsidiary" or "subsidiaries" of the Company, the
Surviving Corporation, Parent or any other person means any
corporation, partnership, joint venture or other legal entity of which
the Company, the Surviving Corporation, Parent or such other person, as
the case may be (either alone or through or together with any other
subsidiary), owns, directly or indirectly, 50% or more of the stock or
other equity interests the holder of which is generally entitled to
vote for the election of the board of directors or other governing body
of such corporation or other legal entity.
SECTION 9.4 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.
SECTION 9.5 Entire Agreement; Assignment. This Agreement, together with
the Letter Agreement and the Confidentiality Agreement, constitutes the entire
agreement among the parties with respect to the subject matter hereof and
supersedes all prior agreements and undertakings, both written and oral, among
the parties, or any of them, with respect to the subject matter hereof. This
Agreement shall not be assigned by operation of law or otherwise, except that
Parent and Purchaser may assign all or any of their respective rights and
obligations hereunder to any direct or indirect wholly owned subsidiary or
subsidiaries of Parent, provided, that no such assignment shall relieve the
assigning party of its obligations hereunder.
SECTION 9.6 Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto and its successors and
permitted assigns, and, except as provided in Section 6.7 hereof, nothing in
this Agreement, express or implied, is intended to or shall confer upon any
<PAGE> 49
other person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement.
SECTION 9.7 Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof.
SECTION 9.8 Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.9 Counterparts. This Agreement may be executed in one or more
counterparts, and by the different parties hereto in separate counterparts, each
of which when executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
<PAGE> 50
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
HARCOURT GENERAL, INC.
Attest:
/s/ Robert A. Licht By: /s/ Eric P. Geller
___________________________ _____________________________
Name: Eric P. Geller
Title: Senior Vice President
and General Counsel
NICK ACQUISITION CORPORATION
Attest:
/s/ Robert A. Licht By: /s/ Eric P. Geller
___________________________ _____________________________
Name: Eric P. Geller
Title: Vice President
NATIONAL EDUCATION CORPORATION
Attest:
/s/ Carol M. Hess By: /s/ Keith K. Ogata
___________________________ _____________________________
Name: Keith K. Ogata
Title: Vice President,
Chief Financial Officer
and Treasurer
<PAGE> 51
ANNEX A
Offer Conditions
The capitalized terms used in this Annex A have the meanings set
forth in the attached Agreement, except that the term "Merger Agreement" shall
be deemed to refer to the attached Agreement.
Notwithstanding any other provision of the Offer, Purchaser shall
not be required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-l(c) under the Exchange Act
(relating to Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for any Shares
tendered pursuant to the Offer, and may postpone the acceptance for payment or,
subject to the restriction referred to above, payment for any Shares tendered
pursuant to the Offer, and may amend or terminate the Offer in accordance with
the Merger Agreement if, prior to the expiration of the Offer, (i) Shares
representing at least a majority of the total number of outstanding shares of
Company Common Stock, on a fully diluted basis (assuming conversion of all
outstanding Debentures into Shares and the exercise of all Company Outstanding
Options) shall not have been validly tendered and not properly withdrawn prior
to the expiration of the Offer (the "Minimum Condition") or (ii) at any time on
or after the date hereof and prior to the acceptance for payment of or payment
for Shares, any one or more of the following conditions occurs or has occurred:
(a) there shall have been instituted or pending any action or
proceeding brought by any governmental authority before any federal of
state court, or any order or preliminary or permanent injunction
entered in any action or proceeding before any federal or state court
or governmental, administrative or regulatory authority or agency, or
any other action taken, or statute, rule, regulation, legislation,
interpretation, judgment or order enacted, entered, enforced,
promulgated, amended, issued or deemed applicable to Parent, Purchaser,
the Company or any subsidiary or affiliate of Purchaser or the Company
or the Offer or the Merger, by any legislative body, court, government
or governmental, administrative or regulatory authority or agency that
would reasonably be expected to have the effect of: (i) making illegal,
materially delaying or otherwise directly or indirectly restraining or
prohibiting the making of the Offer, the acceptance for payment of, or
payment for, some of or all the Shares by Purchaser or any of its
affiliates or the consummation of any of the transactions contemplated
by the Merger Agreement or materially delaying the Merger; (ii)
prohibiting or materially limiting the ownership or operation by the
Company or any of its subsidiaries or Parent, Purchaser or any of
Parent's affiliates of all or any material portion of the business or
assets of the Company or any of its subsidiaries or Parent, or any of
its affiliates, or
<PAGE> 52
compelling Parent, Purchaser or any of Parent's affiliates to dispose
of or hold separate all or any material portion of the business or
assets of the Company or any of its subsidiaries or Parent, or any of
its affiliates, as a result of the transactions contemplated by the
Offer or the Merger Agreement; (iii) imposing or confirming limitations
on the ability of Parent, Purchaser or any of Parent's affiliates
effectively to acquire or hold or to exercise full rights of ownership
of Shares, including without limitation the right to vote any Shares
acquired or owned by Parent or Purchaser or any of its affiliates on
all matters properly presented to the stockholders of the Company,
including without limitation the adoption and approval of the Merger
Agreement and the Merger or the right to vote any shares of capital
stock of any subsidiary directly or indirectly owned by the Company; or
(iv) requiring divestiture by Parent or Purchaser or any of their
affiliates of any Shares; provided, that Parent and Purchaser shall
have used their reasonable best efforts to cause any such judgment,
order or injunction to be vacated or lifted;
(b) there shall have occurred any event that is reasonably likely
to have a Material Adverse Effect on the Corporation;
(c) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on any national
securities exchange or in the over-the-counter market in the United
States, (ii) a declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States, (iii) any limitation
(whether or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic or foreign,
on the extension of credit by banks or other lending institutions, (iv)
a commencement of a war or armed hostilities or other national or
international calamity directly or indirectly involving the United
States or having a Material Adverse Effect on the Corporation or
materially adversely affecting (or materially delaying) the
consummation of the Offer or (v) in the case of any of the foregoing
existing at the time of commencement of the Offer, a material
acceleration or worsening thereof;
(d) (i) it shall have been publicly disclosed or Purchaser shall
have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under
the Exchange Act) of more than 30% of the outstanding Shares has been
acquired by any corporation (including the Company or any of its
subsidiaries or affiliates), partnership, person or other entity or
group (as defined in Section 13(d)(3) of the Exchange Act), other than
Parent or any of its affiliates, or (ii) (A) the Board of Directors of
the Company or any committee thereof shall have withdrawn or modified
in a manner adverse to Parent or Purchaser the
<PAGE> 53
approval or recommendation of the Offer, the Merger or the Merger
Agreement, or approved or recommended any takeover proposal or any
other acquisition of more than 5% of the outstanding Shares other than
the Offer and the Merger, (B) any corporation, partnership, person or
other entity or group shall have entered into a definitive agreement or
an agreement in principle with the Company with respect to a tender
offer or exchange, offer for any Shares or a merger, consolidation or
other business combination with or involving the Company or any of its
subsidiaries, or (C) the Board of Directors of the Company or any
committee thereof shall have resolved to do any of the foregoing;
(e) any of the representations and warranties of the Company set
forth in the Merger Agreement that are qualified as to materiality
shall not be true and correct, or any such representations and
warranties that are not so qualified shall not be true and correct in
any material respect, in each case as if such representations and
warranties were made at the time of such determination, and (i) the
Company fails to cause such representations and warranties to be true
and correct within ten business days after written notice from the
Purchaser and (ii) the failure of such representation and warranty to
be true and correct has a Material Adverse Effect on the Corporation;
(f) the Company shall have failed to perform in any material
respect any obligation or to comply in any material respect with any
agreement or covenant of the Company to be performed or complied with
by it under the Merger Agreement, and (i) the Company fails to cure any
such failure within ten business days after written notice from the
Purchaser and (ii) the failure to comply with such agreement or
covenant has a Material Adverse Effect on the Corporation;
(g) the Merger Agreement shall have been terminated in accordance
with its terms or the Offer shall have been terminated with the consent
of the Company;
(h) any waiting periods under the HSR Act applicable to the
purchase of Shares pursuant to the Offer shall not have expired or been
terminated, or any material approval, permit, authorization or consent
of any domestic or foreign governmental, administrative or regulatory
agency (federal, state, local, provincial or otherwise) shall not have
been obtained on terms satisfactory to the Parent in its reasonable
discretion and the failure to obtain such approval, permit,
authorization or consent has a Material Adverse Effect on the
Corporation; or
(i) giving effect to the consummation of the Offer, the
representations and warranties made by the Company
<PAGE> 54
set forth in Section 3.28 of the Merger Agreement shall not be true and
correct;
which, in the reasonable, good faith judgment of Purchaser with respect to each
and every matter referred to above and regardless of the circumstances giving
rise to any such condition (except for any action or inaction by Purchaser or
any of its affiliates constituting a breach of the Offer or the Merger
Agreement), makes it inadvisable to proceed with the Offer, or with such
acceptance for payment of or payment for Shares or to proceed with the Merger.
The foregoing conditions are for the sole benefit of Purchaser and may
be asserted by Purchaser regardless of the circumstances giving rise to any such
condition (except for any action or inaction by Purchaser or any of its
affiliates constituting a breach of the Merger Agreement) or (other than the
Minimum Condition) may be waived by Purchaser in whole or in part at any time
and from time to time in its sole discretion (subject to the terms of the Merger
Agreement). The failure by Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
<PAGE> 55
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF
NATIONAL EDUCATION CORPORATION
1. The name of the Corporation is NATIONAL EDUCATION CORPORATION.
2. The address of the registered office of the Corporation in the State of
Delaware is 1209 Orange Street, City of Wilmington, County of New Castle. The
name of the registered agent of the Corporation at such address is The
Corporation Trust Company.
3. The nature of the business or purposes to be conducted by the
Corporation is to engage in any lawful act or activity for which corporations
may be organized under the General Corporation Law of Delaware.
4. The total number of shares of stock which the Corporation shall have
authority to issue is One Thousand One Hundred (1,100) consisting of two classes
of shares designated respectively "Common Stock" and "Preferred Stock", and
referred to herein either as Common stock or Common shares and Preferred stock
or Preferred shares, respectively. The number of shares of Common stock shall be
One Thousand (1,000) and shall have a par value of $.01 per share, and the
number of shares of Preferred stock shall be One Hundred (100) and shall have a
par value of $.10 per share.
The Preferred shares may be issued from time to time in one or more series.
The Board of Directors is authorized to fix the number of shares of any series
of Preferred shares and to determine the designation of any such series. The
Board of Directors is also authorized to determine or alter the rights,
preferences, privileges, and restrictions granted to or imposed upon any wholly
unissued series of Preferred shares and, within the limits and restrictions
stated in any resolution or resolutions of the Board of Directors originally
fixing the number of shares constituting any series, to increase or decrease
(but not below the number of shares of such series then outstanding) the number
of shares of any such series subsequent to the issue of shares of that series.
5. The Corporation is to have perpetual existence.
6. A majority of the whole Board of Directors is empowered to make, alter
or repeal the By-laws of the Corporation.
7. Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof, or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of Title 8 of the Delaware Code, or on the
application of trustees in dissolution, or of any receiver or receivers
appointed for this Corporation under the provision of Section 279 of Title 8 of
the Delaware Code, order a meeting of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as the
case may be, to be summoned in such manner as the said court directs. If a
majority in number representing three-fourths in value of the creditors or class
of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation, as consequence of such compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which the said application has been made, be binding on all the creditors or
class of creditors, and/or on all the stockholders or class of stockholders of
this Corporation, as the case may be, and also on this Corporation.
8. Meetings of stockholders may be held within or without the State of
Delaware, as the By-laws may provide. The books of the Corporation may be kept
(subject to any provisions contained in the statutes) outside the State of
Delaware at such place or places as may be designated from time to time by the
Board of Directors or in the By-laws of the Corporation. Elections of directors
need not be by written ballot unless the By-laws of the Corporation shall so
provide.
A-1
<PAGE> 56
9. To the fullest extent permitted by the General Corporation Law of the
State of Delaware as the same exists or may hereafter be amended, a director of
the Corporation shall not be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
Any repeal or modification of this Article shall not result in any
liability for a director with respect to any action or omission occurring prior
to such repeal or modification.
A-2
<PAGE> 1
National Education Corporation
2601 Main Street
Irvine, California 92714
Sylvan Learning Systems, Inc.
1000 Lancaster Street
Baltimore, Maryland 21202
May 12, 1997
Gentlemen:
By this letter, you agree with us to amend the Agreement and Plan of
Reorganization (the "Sylvan Agreement") dated as of March 12, 1997, by and among
Sylvan Learning Systems, Inc. ("Sylvan") and National Education Corporation
("NEC") as follows. In the event that NEC and Harcourt General, Inc.
("Harcourt") come to an agreement on or before May 16, 1997 for a business
combination between NEC and Harcourt at a price of $21.00 per NEC share (the
"Harcourt Transaction"), NEC and Sylvan agree that the Sylvan Agreement shall
automatically and without any further action required by NEC or Sylvan be
terminated effective immediately prior to such time as Harcourt and NEC enter
into an agreement with respect to the Harcourt Transaction (the "Harcourt
Agreement"). No later than noon Pacific Daylight Time (the "Drop-Dead Time") on
the business day immediately following the execution of the Harcourt Agreement
(the "Drop-Dead Date"), NEC and Harcourt jointly and severally agree that a fee
of $30.0 million (the "Sylvan Fee") will be paid by NEC to Sylvan by wire
transfer in immediately available funds to the account of Sylvan at
NationsBank, N.A. (Account Number: 3933614751); provided, however, that if
the Sylvan Fee is not paid by the Drop-Dead Time, the Sylvan Agreement
shall be deemed not to have been terminated in accordance with the preceding
sentence and shall remain in full force and effect and no breach or right of
termination shall have occurred thereunder as a result of actions taken in
compliance with the preceding sentence. Notwithstanding the foregoing, in the
event the Sylvan Fee is paid to Sylvan following the Drop-Dead Time but on the
Drop-Dead Date and by noon Eastern Daylight Time on the business day immediately
following the Drop-Dead Date Sylvan has not (i) rejected the Sylvan fee in a
written notice to NEC and (ii) irrevocably instructed NationsBank, N.A. to
refund the Sylvan fee to NEC, the Sylvan Agreement shall be deemed to have been
terminated in accordance with the second sentence of this letter agreement.
Sylvan shall be entitled to no further payments from NEC or Harcourt pursuant to
the Sylvan Agreement or otherwise. Upon effectiveness of the termination of the
Sylvan Agreement pursuant to the second sentence hereof, the mutual release set
forth as Annex A hereto shall become effective.
<PAGE> 2
Please indicate your agreement to the foregoing by executing this
letter in the space below.
Very truly yours,
NATIONAL EDUCATION CORPORATION
By: /s/ Keith K. Ogata
_________________________
Name: Keith K. Ogata
Title: Vice President, Chief
Financial Officer and
Treasurer
Accepted and agreed: Accepted and agreed:
SYLVAN LEARNING SYSTEMS, INC. HARCOURT GENERAL, INC.
By: /s/ Douglas L. Becker By: /s/ Eric P. Geller
________________________ ________________________
Name: Douglas L. Becker Name: Eric P. Geller
Title: President and Co-Chief Title: Senior Vice President and
Executive Officer General Counsel
<PAGE> 3
Annex A
MUTUAL RELEASE
WHEREAS, Sylvan Learning Systems, Inc., a Maryland corporation
("Sylvan"), and National Education Corporation, a Delaware corporation ("NEC"),
are parties to an Agreement and Plan of Reorganization by and among Sylvan and
NEC dated as of March 12, 1997 (the "Reorganization Agreement"); and
WHEREAS, Harcourt General, Inc., a Delaware corporation
("Harcourt"), through a wholly-owned subsidiary has commenced a tender offer to
purchase all the outstanding capital stock of NEC (the "Tender Offer"); and
WHEREAS, Sylvan, NEC and Harcourt have entered into a letter
agreement (the "Letter Agreement") dated May 12, 1997; and
WHEREAS, Sylvan and NEC wish to resolve any actual or potential
controversies or disputes between them arising out of or relating to the
Reorganization Agreement if the Reorganization Agreement is terminated in
accordance with the terms of the Letter Agreement:
NOW, THEREFORE,
1. In consideration of the release of Sylvan by NEC and Harcourt
contained herein, (i) Sylvan for itself, its predecessors, successors and
assigns (ii) does hereby remise, release and forever discharge and covenant not
to sue (iii) NEC and Harcourt and the corporate predecessors, successors,
assigns, subsidiaries, affiliates, parents and divisions, as well as the present
and former officers, partners, directors, advisory directors, employees, agents,
stockholders, advisers (including without limitation, financial advisors) and
attorneys of each of NEC and Harcourt and their heirs, executors,
administrators, and representatives (collectively, the "NEC/Harcourt
Releasees"), (iv) of and from all manner of actions, causes of action, suits,
debts, dues, sums of money, accounts, bonds, bills, specialties, covenants,
contracts, controversies, agreements, promises, damages, judgments, executions,
rights, claims, and demands whatsoever, in law or in equity, whether known or
unknown, suspected or unsuspected, (v) which against the NEC/Harcourt Releasees,
or any of them, Sylvan or Sylvan's predecessors, successors, or assigns or any
of the present or former officers, directors, employees, agents, stockholders,
advisers (including without limitation, financial advisors) or attorneys of the
foregoing, or any of their heirs, executors, administrators, representatives,
successors or assigns, acting in any capacity, ever had or now has or hereafter
can, shall, or may have, (vi) arising out of or relating to the Reorganization
Agreement (including without limitation the negotiation, execution, amendment or
termination of the Reorganization Agreement) or the Tender Offer or the
transactions contemplated thereby (including, without limitation, any claim for
tortious interference with the Reorganization Agreement or the transactions
contemplated
<PAGE> 4
thereby), (vii) subject to the exception provided in Paragraph 3 of this Mutual
Release.
2. In consideration of the release of NEC and Harcourt by Sylvan
contained herein, (i) NEC and Harcourt each for itself, its predecessors,
successors and assigns (ii) does hereby remise, release and forever discharge
and covenant not to sue (iii) Sylvan and its corporate predecessors, successors,
assigns, subsidiaries, affiliates, parents and divisions, as well as the present
and former officers, partners, directors, advisory directors, employees, agents,
stockholders, advisors (including, without limitation, financial advisors) and
attorneys of the foregoing and their heirs, executors, administrators, and
representatives (collectively, the "Sylvan Releasees"), (iv) of and from all
manner of actions, causes of action, suits, debts, dues, sums of money,
accounts, bonds, bills, specialties, covenants, contracts, controversies,
agreements, promises, damages, judgements, executions, rights, claims, and
demands whatsoever, in law, or in equity, whether known or unknown, suspected or
unsuspected, (v) which against the Sylvan Releasees, or any of them, NEC or
Harcourt or each's predecessors, successors, or assigns or any of the present or
former officers, directors, employees, agents, stockholders, advisers
(including, without limitation, financial advisors) or attorneys of the
foregoing, or any of their heirs, executors, administrators, representatives,
successors or assigns, acting in any capacity, ever had or now has or hereafter
can, shall, or may have, (vi) arising out of or relating to the Reorganization
Agreement (including without limitation the negotiation, execution, amendment or
termination of the Reorganization Agreement) or the Tender Offer or the
transactions contemplated thereby (including, without limitation, any claim for
tortious interference with the Tender Offer or the Transactions contemplated
thereby).
3. Nothing in this Mutual Release shall affect Sylvan's rights or
claims to payments from NEC (or Harcourt on behalf of NEC) pursuant to the third
sentence of the Letter Agreement.
4. This Mutual Release shall inure to the benefit of and shall be
binding upon the heirs, executors, administrators and successors of Sylvan, the
Sylvan Releasees, NEC and Harcourt and the NEC/Harcourt Releasees.
5. This Mutual Release shall be governed and construed in accordance
with the substantive law of the State of New York without regard to principles
of choice or conflict of laws.
6. The person who enters into and executes this Mutual Release on
behalf of Sylvan warrants and represents that he or she has been duly authorized
by Sylvan to do so. The person who enters into and executes this Mutual Release
on behalf of NEC warrants and represents that he or she has been duly authorized
by NEC to do so. The person who enters into and executes this Mutual Release on
behalf of Harcourt warrants and represents that he or she has been duly
authorized by Harcourt to do so.
<PAGE> 5
7. This Mutual Release may be modified only by a writing signed by
the Releasees.
8. This Mutual Release shall only be effective after the Merger
Agreement has been terminated in accordance with the terms of the Letter
Agreement; provided, that this Mutual Release shall automatically and without
any further action required by Harcourt, NEC or Sylvan be terminated effective
immediately in the event the Sylvan Fee is not paid by the Drop-Dead Time or is
not paid to Sylvan following the Drop-Dead Time but on the Drop-Dead Date and is
not accepted by Sylvan in accordance with the terms of the Letter Agreement.
9. Capitalized terms which are used herein but not defined herein
are used herein as defined in the Letter Agreement.
<PAGE> 6
IN WITNESS WHEREOF, Sylvan, NEC and Harcourt have executed this
Mutual Release by their duly authorized officers as of the 12th day of May,
1997.
<TABLE>
<S> <C>
SYLVAN LEARNING SYSTEMS, INC. NATIONAL EDUCATION CORPORATION
By: /s/ Douglas L. Becker By: /s/ Keith K. Ogata
----------------------- ---------------------
Name: Douglas L. Becker Name: Keith K. Ogata
Title: President and Co-Chief Title: Vice President, Chief Financial
Executive Officer Officer and Treasurer
HARCOURT GENERAL, INC.
By: /s/ Eric P. Geller
----------------------
Name: Eric P. Geller
Title: Senior Vice President and
General Counsel
</TABLE>
