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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
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) 232-6200
(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**
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$798,616,865 $159,724
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* 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 $19.50 per
share. This calculation assumes the purchase of 40,954,711 shares of Common
Stock of the Subject Company (including 35,541,698 shares outstanding as of
March 12, 1997, 3,113,013 shares subject to options to purchase Common Stock
of the Company outstanding as of March 12, 1997 and a maximum of 2,300,000
shares that may be issued upon conversion of the Subject Company's 6 1/2%
Convertible Subordinated Debentures due 2011).
** 1/50 of 1% of Transaction Valuation.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form
or Schedule and the date of its filing.
Amount Previously Paid: Filing Party:
Form or Registration No.: Date Filed:
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<PAGE> 2
This Tender Offer Statement on Schedule 14D-1 relates 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 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 (the "Offer to Purchase"), a copy of which is attached hereto as
Exhibit (a)(l), and in the related Letter of Transmittal, a copy of which is
attached hereto as Exhibit (a)(2) (which, together with the Offer to Purchase,
constitute the "Offer").
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is National Education Corporation. The
information set forth in Section 8 ("Certain Information Concerning the
Company") of the Offer to Purchase is incorporated herein by reference. The
address of its principal executive offices is 2601 Main Street, Irvine,
California 92614.
(b) The exact title of the class of equity securities being sought in the
Offer is Common Stock, par value $.01 per share, of the Company. The information
set forth in the Introduction (the "Introduction") of the Offer to Purchase is
incorporated herein by reference.
(c) The information set forth in Section 6 ("Price Range of the Shares;
Dividends") of the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by the Purchaser and the Parent.
The information set forth in Section 9 ("Certain Information Concerning the
Purchaser and Harcourt") of the Offer to Purchase and in Schedule I thereto is
incorporated herein by reference.
(e)-(f) Neither the Parent nor the Purchaser nor, to the best knowledge of
the Parent and the Purchaser, any of the persons listed in Schedule I to the
Offer to Purchase has during the last five years (i) been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) was a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a) Since January 1, 1994, there have been no transactions which would be
required to be disclosed under this Item 3(a) between any of the Purchaser, the
Parent or, to the best knowledge of the Purchaser and the Parent, any of the
persons listed in Schedule I to the Offer to Purchase and the Company or any of
its executive officers, directors or affiliates.
(b) The information set forth in the Introduction, Section 10 ("Background
of the Offer; Contacts with the Company") and Section 11 ("Purpose of the Offer
and the Proposed Harcourt Merger; Plans for the Company") of the Offer to
Purchase is incorporated herein by reference. Except as set forth in the
Introduction, Section 10 and Section 11 of the Offer to Purchase, since January
1, 1994, there have been no contacts, negotiations or transactions which would
be required to be disclosed under this Item 3(b) between any of the Purchaser,
the Parent or any of their respective subsidiaries or, to the best knowledge of
the Purchaser and the Parent, any of those persons listed in Schedule I to the
Offer to Purchase and the Company or its affiliates concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 12 ("Source and Amount of
Funds") of the Offer to Purchase is incorporated herein by reference.
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(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction, Section 10
("Background of the Offer; Contacts with the Company") and Section 11 ("Purpose
of the Offer and the Proposed Harcourt Merger; Plans for the Company") of the
Offer to Purchase is incorporated herein by reference.
(f)-(g) The information set forth in Section 7 ("Possible Effects of the
Offer on the Market for the Shares; Stock Exchange Listing; Exchange Act
Registration; Margin Regulations") of the Offer to Purchase is incorporated
herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in Section 9 ("Certain Information
Concerning the Purchaser and Harcourt") of the Offer to Purchase is incorporated
herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction, Section 9 ("Certain
Information Concerning the Purchaser and Harcourt") and Section 11 ("Purpose of
the Offer and the Proposed Harcourt Merger; Plans for the Company") of the Offer
to Purchase is incorporated herein by reference. Except as set forth in the
Introduction, Section 9 and Section 11 of the Offer to Purchase, none of the
Purchaser, the Parent, nor, to the best knowledge of the Purchaser or the
Parent, any of the persons listed in Schedule I to the Offer to Purchase, has
any contract, arrangement, understanding or relationship with any other person
with respect to any securities of the Company (including, but not limited to,
any contract, arrangement, understanding or relationship concerning the transfer
or the voting of any such securities, joint ventures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss or the
giving or withholding of proxies).
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 16 ("Certain Fees
and Expenses") of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 ("Certain Information Concerning the
Purchaser and Harcourt") of the Offer to Purchase is incorporated herein by
reference.
The incorporation by reference herein of the above-referenced financial
information does not constitute an admission that such information is material
to a decision by a stockholder of the Company whether to sell, tender or hold
Shares being sought in the Offer.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in the Introduction, Section 10 ("Background
of the Offer; Contacts with the Company") and Section 11 ("Purpose of the Offer
and the Proposed Harcourt Merger; Plans for the Company") of the Offer to
Purchase is incorporated herein by reference.
(b)-(d) The information set forth in the Introduction, Section 7 ("Possible
Effects of the Offer on the Market for the Shares; Stock Exchange Listing;
Exchange Act Registration; Margin Regulations") and Section 15 ("Certain Legal
Matters; Required Regulatory Approvals") is incorporated herein by reference.
(e) To the best knowledge of the Purchaser and the Parent, no such
proceedings are pending or have been instituted.
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(f) The information set forth in the entire text of the Offer to Purchase
and the Letter of Transmittal is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated April 21, 1997.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Form of letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Nominees.
(a)(5) Form of letter to Clients for Use by Brokers, Dealers, Commercial
Banks, Trust Companies and Nominees.
(a)(6) Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9.
(a)(7) Form of Summary Advertisement dated April 21, 1997.
(a)(8) Press Release issued by the Parent on April 16, 1997.
(a)(9) Press Release issued by the Parent on April 21, 1997.
(b) Credit Agreement dated as of December 16, 1994 among the Parent,
the banks listed therein, Morgan Guaranty Trust Company of New
York, as documentation agent, The First National Bank of Boston, as
administrative agent, The Bank of Nova Scotia and National
Westminster Bank Plc., as co-agents.
(c) Not Applicable.
(d) Not Applicable.
(e) Not Applicable.
(f) Not Applicable.
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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: April 21, 1997
<PAGE> 6
EXHIBIT INDEX
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EXHIBIT PAGE
NO. DESCRIPTION NO.
- -------- --------------------------------------------------------------------------- ----
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11(a)(1) Offer to Purchase dated April 21, 1997.....................................
11(a)(2) Letter of Transmittal......................................................
11(a)(3) Notice of Guaranteed Delivery..............................................
11(a)(4) Form of letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Nominees...................................................................
11(a)(5) Form of letter to Clients for Use by Brokers, Dealers, Commercial Banks,
Trust Companies and Nominees...............................................
11(a)(6) Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9...............................
11(a)(7) Form of Summary Advertisement dated April 21, 1997.........................
11(a)(8) Press Release issued by the Parent on April 16, 1997.......................
11(a)(9) Press Release issued by the Parent on April 21,1997........................
11(b) Credit Agreement dated as of December 16, 1994 among the Parent, the banks
listed therein, Morgan Guaranty Trust Company of New York, as documentation
agent, The First National Bank of Boston, as administrative agent, The Bank
of Nova Scotia and National Westminster Bank Plc., as co-agents. ..........
11(c) Not Applicable.
11(d) Not Applicable.
11(e) Not Applicable.
11(f) Not Applicable.
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<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
NATIONAL EDUCATION CORPORATION
AT
$19.50 NET PER SHARE
BY
NICK ACQUISITION CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
HARCOURT GENERAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON FRIDAY, MAY 16, 1997, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, (1) 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) being validly tendered and
not withdrawn prior to the expiration of the Offer (the "Minimum Condition"),
(2) 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"), having been terminated without any
payments by or penalties to the Company (other than any applicable payments
pursuant to Section 6.3 of the Sylvan Merger Agreement) (the "Sylvan Termination
Condition"), (3) the Company not having entered into or effectuated any new or
amended agreements with Sylvan or any other person or entity or otherwise having
taken any action, including, without limitation, the declaration or payment of
any dividend or distribution on the Shares, having the effect of impairing the
ability of Nick Acquisition Corporation, a Delaware corporation (the
"Purchaser"), to acquire the Company or otherwise diminishing the expected
economic value to the Purchaser of the acquisition of the Company (the "No
Impediments Condition"), (4) the Purchaser being satisfied, in its sole
discretion, that the unaffiliated stockholder vote specified in the Company's
Restated Certificate of Incorporation (the "Charter") would not be required
prior to the consummation of the Proposed Harcourt Merger (as hereinafter
defined) (the "Charter Condition"), and (5) the Purchaser being satisfied, in
its sole discretion, that Section 203 of the Delaware General Corporation Law
has been complied with in connection with the Purchaser's acquisition of the
Company or is invalid or otherwise inapplicable to the Purchaser in connection
with the Offer and the Proposed Harcourt Merger (the "Section 203 Condition").
The Offer is also subject to other terms and conditions contained in this Offer
to Purchase. See the Introduction and Sections 1, 14 and 15. The Offer is not
conditioned on obtaining financing.
The Dealer Managers for the Offer are:
GOLDMAN, SACHS & CO.
April 21, 1997
<PAGE> 2
IMPORTANT
The Purchaser reserves the right to amend the Offer (including amending the
purchase price) upon entry into a merger agreement with the Company or otherwise
or to negotiate a merger agreement with the Company not involving a tender
offer. In connection with the Offer, Harcourt General, Inc., a Delaware
corporation ("Harcourt"), or the Purchaser may commence a solicitation of
proxies from the Company's stockholders against approval of the Proposed Sylvan
Merger (as hereinafter defined). The Purchaser and Harcourt also reserve the
right to solicit the votes of the Company's stockholders at any annual or
special meeting of such stockholders.
Any stockholder desiring to tender all or any portion of his Shares should
either (a) complete and sign the Letter of Transmittal (or a facsimile thereof)
in accordance with the instructions in the Letter of Transmittal and mail or
deliver 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 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 his 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.
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 Offer to Purchase. Additional copies of this Offer to
Purchase, the Letter of Transmittal, the Notice of Guaranteed Delivery and other
related materials may be obtained from the Information Agent or from brokers,
dealers, commercial banks and trust companies.
<PAGE> 3
TABLE OF CONTENTS
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INTRODUCTION.......................................................................... 1
CERTAIN CONDITIONS TO THE OFFER....................................................... 4
THE TENDER OFFER...................................................................... 6
1. Terms of the Offer................................................................ 6
2. Acceptance for Payment and Payment................................................ 7
3. Procedures for Accepting the Offer and Tendering Shares........................... 8
4. Withdrawal Rights................................................................. 11
5. Certain Tax Consequences.......................................................... 11
6. Price Range of the Shares; Dividends.............................................. 12
7. Possible Effects of the Offer on the Market for the Shares; Stock Exchange
Listing; Exchange Act Registration; Margin Regulations............................ 12
8. Certain Information Concerning the Company........................................ 14
9. Certain Information Concerning the Purchaser and Harcourt......................... 15
10. Background of the Offer; Contacts with the Company................................ 17
11. Purpose of the Offer and the Proposed Harcourt Merger; Plans for the Company...... 20
12. Source and Amount of Funds........................................................ 25
13. Dividends and Distributions....................................................... 25
14. Certain Conditions of the Offer................................................... 26
15. Certain Legal Matters; Required Regulatory Approvals.............................. 30
16. Certain Fees and Expenses......................................................... 34
17. Miscellaneous..................................................................... 34
Schedule I Directors and Executive Officers of the Purchaser and Harcourt
</TABLE>
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To: The Stockholders of
NATIONAL EDUCATION CORPORATION
INTRODUCTION
Nick Acquisition Corporation, a Delaware corporation (the "Purchaser") and
a wholly-owned subsidiary of Harcourt General, Inc., a Delaware corporation
("Harcourt"), hereby offers to purchase all 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 $19.50 per Share,
upon the terms and subject to the conditions set forth in this Offer to Purchase
and in the related Letter of Transmittal (which together constitute the
"Offer").
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 by the Purchaser
pursuant to the Offer. However, any tendering stockholder or other payee who
fails to complete and sign the Substitute Form W-9 that is included in the
Letter of Transmittal may be subject to a required backup federal income tax
withholding of 31% of the gross proceeds payable to such stockholder or other
payee pursuant to the Offer. See Section 3. The Purchaser will pay all charges
and expenses of Goldman, Sachs & Co., as Dealer Managers (the "Dealer
Managers"), IBJ Schroder Bank & Trust Company, as Depositary (the "Depositary"),
and MacKenzie Partners, Inc., as Information Agent (the "Information Agent"),
incurred in connection with the Offer. See Section 16.
The purpose of the Offer and the Proposed Harcourt Merger (as defined
below) is to acquire control of, and the entire equity interest in, the Company.
The Purchaser currently intends, as soon as practicable following consummation
of the Offer, to seek to have the Company consummate a merger or similar
business combination with the Purchaser (the "Proposed Harcourt Merger")
pursuant to which each then outstanding Share (other than Shares owned by
Harcourt or any of its wholly-owned subsidiaries, Shares held in the treasury of
the Company and Shares held by stockholders who perfect appraisal rights under
the Delaware General Corporation Law (the "DGCL")) would be converted into the
right to receive cash in the same amount as received per Share in the Offer, and
the Company would become a wholly-owned subsidiary of Harcourt. In connection
with the Offer, Harcourt or the Purchaser may commence a solicitation of proxies
from the Company's stockholders against approval of the Proposed Sylvan Merger.
The Purchaser and Harcourt also reserve the right to solicit the votes of the
stockholders of the Company at any annual or special meeting of such
stockholders.
The Offer is conditioned upon the fulfillment of certain conditions
described herein. The Offer will expire at 12:00 midnight, New York City time,
on Friday, May 16, 1997, unless extended.
In October of 1994, a representative of Harcourt contacted a representative
of the Company to explore the possibility of a sale of the Company. In
connection therewith, Harcourt and the Company entered into a confidentiality
agreement, which included a standstill provision expiring on October 26, 1996.
After reviewing certain preliminary information provided by the Company and
after several telephone conversations between the Chief Financial Officer of
Harcourt and the then President and Chief Executive Officer of the Company and
Richard C. Blum, a member of the Board of Directors of the Company, Harcourt
terminated discussions with representatives of the Company in connection with
its consideration of a possible acquisition of the Company.
On March 12, 1997, the Company announced that it had entered into the
Agreement and Plan of Reorganization, dated as of March 12, 1997 (the "Sylvan
Merger Agreement"), with Sylvan Learning Systems, Inc., a Maryland corporation
("Sylvan"), contemplating the merger of a wholly-owned subsidiary of Sylvan with
and into the Company, with the Company being the surviving corporation (the
"Proposed Sylvan Merger"). In the Proposed Sylvan Merger, each Share would be
converted into the right to receive 0.58 of one share of Sylvan's Common Stock,
par value $.01 per share ("Sylvan Common Stock"). Based on the closing price of
the Sylvan Common Stock on the Nasdaq National Market (the "NASDAQ NM") on March
11, 1997, the last trading day preceding the date of the announcement of the
Sylvan Merger Agreement, of $35 1/8
1
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per share, the Proposed Sylvan Merger would have had a value of approximately
$788 million or $20.37 per Share. Based on the closing price of Sylvan Common
Stock on the NASDAQ NM on April 15, 1997, the last trading day preceding the
date of Harcourt's announcement that it would be commencing the Offer, of
$29 1/8 per share, the Proposed Sylvan Merger would have had a value of
approximately $653 million or $16.89 per Share. The Proposed Sylvan Merger is
subject to certain conditions, including approval by the stockholders of Sylvan
and the Company.
The Sylvan Merger Agreement provides that, among other things, the Company,
its affiliates and their respective officers, directors, employees,
representatives and agents will (i) cease all ongoing negotiations with any
other parties in connection with any acquisition of all or any material portion
of the assets of, or any equity interest in, the Company or any of the Company's
material subsidiaries or any business combination with the Company or any of the
Company's material subsidiaries, (ii) not solicit, initiate, encourage or
furnish information in response to any inquiries or proposals that constitute,
or could be expected to lead to, a proposal or offer for a merger,
consolidation, business combination, sale of substantial assets, or sale of
shares of capital stock (including by way of a tender offer or similar
transactions involving the Company) ("Company Acquisition Transactions"), (iii)
not engage in negotiations or discussions concerning, or provide any non-public
information to any person or entity relating to, any Company Acquisition
Transaction, and (iv) not agree to, approve or recommend any Company Acquisition
Transaction, except, with respect to clauses (ii) (as to the furnishing of
information only), (iii) and (iv), if the Company's Board of Directors has
received the written opinion of its counsel, 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
stockholders of the Company under the DGCL (it being understood that for this
purpose, the failure to respond to a proposal for a Company Acquisition
Transaction which in the judgment of the Company's Board of Directors and BZW,
the investment banking division of Barclays Bank PLC and the Company's financial
advisor, is superior, from a financial point of view, to the Company's
stockholders in comparison to the Proposed Sylvan Merger may be deemed to be a
breach of such fiduciary duty). If the Company receives any indications of
interest or proposals with respect to any Company Acquisition Transaction, it is
required under the Sylvan Merger Agreement to provide a copy of any such written
proposal to Sylvan immediately after receipt thereof by the Company or any of
its representatives or agents.
Based on the foregoing, Harcourt believes that the Offer will permit the
Company to furnish Harcourt with nonpublic information. The Sylvan Merger
Agreement further provides in Section 6.3 that Sylvan may terminate the Sylvan
Merger Agreement and become entitled to receive a fee of $30 million from the
Company if (i) the Company's Board of Directors has withdrawn or modified its
recommendation of the Sylvan Merger Agreement or the Proposed Sylvan Merger or
has resolved to do so for any reason other than the occurrence of an event
relating to Sylvan which has a material adverse effect on Sylvan, or (ii) the
Company fails to hold its stockholders' meeting to approve the Proposed Sylvan
Merger within 40 days after the Securities and Exchange Commission (the
"Commission") declares effective the registration statement relating to the
shares of Sylvan Common Stock to be issued in connection with the Proposed
Sylvan Merger. In addition, the Sylvan Merger Agreement provides in Section 6.3
that Sylvan may terminate the Sylvan Merger Agreement and become entitled to
receive a fee of $10 million from the Company if (i) the Company's stockholders
fail to approve the Proposed Sylvan Merger or (ii) there has been a material
breach of any representation, warranty, covenant or agreement of the Company
which remains uncured after the time periods specified in the Sylvan Merger
Agreement; provided that, an additional fee of $20 million shall be payable by
the Company to Sylvan if the Company consummates a Company Acquisition
Transaction within eight months of such termination.
The Sylvan Merger Agreement may also be terminated, without the payment of
any fee, by either Sylvan or the Company if the average last sale price for the
Sylvan Common Stock for the ten trading days ending on the last trading day
before the agreed upon effective time for the Proposed Sylvan Merger (the
"Average Share Price") is less than $29.86; provided that the Company may not so
terminate the Sylvan Merger Agreement if Sylvan agrees (the "Adjustment Option")
at such effective time to revise the number of shares of Sylvan Common Stock to
be issued in respect of each Share pursuant to the Proposed Sylvan Merger to
equal the quotient of (i) $29.86 multiplied by 0.58 divided by (ii) the Average
Share Price (the "Adjusted
2
<PAGE> 6
Conversion Ratio"). According to the registration statement of Sylvan (and the
preliminary proxy statement of the Company) with respect to the Proposed Sylvan
Merger filed with the Commission on April 17, 1997, Sylvan will not exercise its
Adjustment Option if the Average Share Price is below $29.13 (i.e. if the
Adjusted Conversion Ratio is above 0.5945, a ratio above which the Company's
stockholders would own 50% or greater of the combined company).
On April 14, 1997, the board of directors of Harcourt approved the
commencement of the Offer. On April 16, 1997, Harcourt sent a letter to the
Company and issued a press release stating that Harcourt's board of directors
had authorized the acquisition of the Company at a price of $19.50 per Share. On
April 21, 1997, Harcourt commenced the Offer. See Section 10.
The making of the Offer will enable the Purchaser to commence the process
of seeking regulatory approvals for its acquisition of the Company. See Section
15. In addition, by tendering Shares into the Offer, the Company's stockholders
effectively will be given the opportunity to express to the Company's Board of
Directors that they wish to be able to accept the Offer and to approve the
Proposed Harcourt Merger or a similar transaction with Harcourt.
Although the Purchaser will seek to have the Company consummate the
Proposed Harcourt Merger as soon as practicable after consummation of the Offer,
if the Board of Directors of the Company opposes the Offer and the Proposed
Harcourt Merger, certain provisions of the DGCL and the Company's Restated
Certificate of Incorporation (the "Charter") may affect the ability of the
Purchaser to obtain control of the Company and to effect the Proposed Harcourt
Merger. Accordingly, the timing and details of the Proposed Harcourt Merger will
depend on a variety of factors and legal requirements, the actions of the Board
of Directors of the Company, the number of Shares acquired by the Purchaser
pursuant to the Offer, and whether the Minimum Condition, the Sylvan Termination
Condition, the No Impediments Condition, the Charter Condition and the Section
203 Condition (each as defined below) are satisfied.
Although Harcourt will seek to enter into negotiations with the Company
with respect to the Proposed Harcourt Merger, there can be no assurance that
such negotiations will occur or, if such negotiations occur, as to the outcome
thereof. The Purchaser reserves the right to amend the Offer (including amending
the purchase price) upon entry into a merger agreement with the Company or
otherwise or to negotiate a merger agreement with the Company not involving a
tender offer.
In connection with the Offer and during its pendency, or in the event the
Offer is terminated or not consummated, or after the expiration of the Offer and
pending the consummation of the Proposed Harcourt Merger, in accordance with
applicable law and subject to the terms of any merger agreement that it may
enter into with the Company, Harcourt may explore any and all options which may
be available to it. In this regard, Harcourt or the Purchaser may commence a
solicitation of proxies from the Company's stockholders against approval of the
Proposed Sylvan Merger. Harcourt or the Purchaser may also determine to solicit
the votes of the Company's stockholders at any annual or special meeting of such
stockholders. After the expiration or termination of the Offer, Harcourt may
seek to acquire additional Shares, through open market purchases, privately
negotiated transactions, a tender offer or exchange offer or otherwise in order
to obtain a sufficient number of Shares to approve the transactions contemplated
hereby. In addition, after consummation of the Offer, whether or not the
Purchaser acquires additional Shares, the Purchaser currently intends to seek to
enter into the Proposed Harcourt Merger with the Company.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
THE COMPANY'S STOCKHOLDERS. ANY SUCH SOLICITATION WHICH HARCOURT OR THE
PURCHASER MIGHT MAKE WOULD BE MADE ONLY PURSUANT TO SEPARATE PROXY MATERIALS
COMPLYING WITH ALL APPLICABLE REQUIREMENTS OF SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"), AND THE RULES AND
REGULATIONS PROMULGATED THEREUNDER.
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<PAGE> 7
CERTAIN CONDITIONS TO THE OFFER
The Offer is subject to the fulfillment of certain conditions, including
the following:
Minimum Condition. Consummation of the Offer is conditioned (the "Minimum
Condition") upon there being validly tendered and not withdrawn prior to the
Expiration Date (as defined in Section 1) Shares representing at least a
majority of the total number of outstanding shares on a fully diluted basis
(assuming conversion of all outstanding Convertible Debentures (as defined
below) into Shares and the exercise of all outstanding options).
According to the Sylvan Merger Agreement, as of March 12, 1997, there were
issued and outstanding 36,239,254 Shares (including 697,556 Shares held in the
Company's treasury). In addition, there were 5,197,787 Shares reserved for
issuance in connection with the Company's stock option plans (of which options
to purchase 3,113,013 Shares were outstanding on such date) and 2,300,000 Shares
reserved for issuance upon conversion of the Company's 6 1/2% Convertible
Subordinated Debentures due 2011 (the "Convertible Debentures"). Based on the
foregoing, the Purchaser believes that the Minimum Condition would be satisfied
if at least 20,477,356 Shares were validly tendered and not withdrawn prior to
the Expiration Date.
If, upon consummation of the Offer, the Purchaser and Harcourt together own
a majority of the outstanding Shares (determined on a fully diluted basis), then
the Purchaser and Harcourt will own sufficient Shares to enable them to effect
stockholder approval of the Merger (subject to the requirements of the Charter
Provision and the Section 203 Condition described below).
Sylvan Termination Condition. Consummation of the Offer is conditioned
upon the Sylvan Merger Agreement having been terminated without any payments by
or penalties to the Company (other than any applicable payments pursuant to
Section 6.3 of the Sylvan Merger Agreement) (the "Sylvan Termination
Condition"). In the event that the Sylvan Merger Agreement has not been
terminated and the Company is believed by the Purchaser to be taking steps to
seek stockholder approval of the Sylvan Merger Agreement, Harcourt and the
Purchaser may solicit proxies in opposition to the Proposed Sylvan Merger.
No Impediments Condition. Consummation of the Offer is conditioned upon
the Company not having entered into or effectuated any new or amended agreements
with Sylvan or any other person or entity or otherwise having taken any action,
including, without limitation, the declaration or payment of any dividend or
distribution on the Shares, having the effect of impairing the ability of the
Purchaser to acquire the Company or otherwise diminishing the expected economic
value to the Purchaser of the acquisition of the Company (the "No Impediments
Condition"). In the event that the Company enters into or effectuates any
agreements or otherwise takes any action, or is taking steps to effectuate any
such agreement or action, which the Purchaser believes will have the effect of
preventing the satisfaction of the No Impediments Condition, Harcourt or the
Purchaser may determine to solicit the votes of the stockholders of the Company
at any annual or special meeting of such stockholders to change the composition
of the Board of Directors of the Company in order to insure that the
reconstituted Board of Directors will take all such actions necessary or
appropriate (subject to such directors' fiduciary duties) to approve and
effectuate the consummation of the Offer and the Proposed Harcourt Merger.
Charter Condition. Consummation of the Offer is conditioned upon the
Purchaser being satisfied, in its sole discretion, that the unaffiliated
stockholder vote specified in the Non-Affiliated Shares Provision (as
hereinafter defined) would not be required prior to the consummation of the
Proposed Harcourt Merger (the "Charter Condition"). The Charter provides that,
in addition to any vote required by law, the affirmative vote of the holders of
at least a majority of the Non-Affiliated Shares (as hereinafter defined) is
required to approve certain business combinations (including the Proposed
Harcourt Merger) between the Company and a person who or which, together with
its affiliates and associates and persons with whom any of it, its affiliates
and associates have an agreement regarding the Shares, is the beneficial owner
of more than 10% of the outstanding Shares (a "Dominant Stockholder"), unless
(i) such business combination is approved by a majority of the directors of the
Company who were directors prior to the time when such person became a Dominant
Stockholder and continue to be directors at the time the determination is made
or (ii) the per Share consideration to be received by the Company's stockholders
in such business combination is not less
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<PAGE> 8
than the highest per share price paid by the Dominant Stockholder in acquiring
any Shares (the "Non-Affiliated Shares Provision"). "Non-Affiliated Shares"
means Shares which are not beneficially owned by the Dominant Stockholder.
The consummation of the Offer would make the Purchaser a "Dominant
Stockholder." However, since the same per Share consideration would be paid in
the Proposed Harcourt Merger as the purchase price offered in the Offer and
since the Purchaser and its affiliates currently own only 100 Shares (all of
which were acquired at $15.00 per share), the Purchaser believes that the
Non-Affiliated Shares Provision would not be applicable to the Proposed Harcourt
Merger. The Charter Condition would also be satisfied if a majority of the
current members of the Board of Directors of the Company approved the Offer and
the Proposed Harcourt Merger.
Section 203 Condition. Consummation of the Offer is conditioned upon the
Purchaser being satisfied, in its sole discretion, that Section 203 of the DGCL
has been complied with in connection with the Purchaser's acquisition of the
Company or is invalid or otherwise inapplicable to the Purchaser in connection
with the Offer and the Proposed Harcourt Merger (the "Section 203 Condition").
The Proposed Harcourt Merger, including the timing and details thereof, is
subject to, among other things, the provisions of the DGCL, including Section
203 thereof. In general, Section 203 of the DGCL provides that a Delaware
corporation such as the Company may not engage in any "Business Combination"
(defined to include a variety of transactions, including a merger) with any
"Interested Stockholder" (defined generally as a person that directly or
indirectly beneficially owns 15% or more of the corporation's outstanding voting
stock), or any affiliate of an Interested Stockholder, for three years after the
date on which the Interested Stockholder became an Interested Stockholder,
unless (i) prior to the date such Interested Stockholder became an Interested
Stockholder, the board of directors of such corporation approved either the
Business Combination or the transaction which resulted in the stockholder
becoming an Interested Stockholder, (ii) upon consummation of the transaction
which resulted in the stockholder becoming an Interested Stockholder, the
Interested Stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding for purposes of
determining the number of shares outstanding those shares held by persons who
are directors and also officers of the corporation and employee stock plans in
which employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or exchange
offer) or (iii) on or subsequent to the date the stockholder becomes an
Interested Stockholder, the Business Combination is (a) approved by the board of
directors of the corporation and (b) authorized at an annual or special meeting
of stockholders by the affirmative vote of the holders of at least 66 2/3% of
the outstanding voting stock of the corporation which is not owned by the
Interested Stockholder.
Section 203(b)(6) of the DGCL provides that the restrictions contained in
Section 203 of the DGCL do not apply to a Business Combination that is proposed
prior to the consummation or abandonment of and following the announcement or
notification of one of certain extraordinary transactions (including a merger)
involving the corporation which transaction (i) is with or by a person who
either was not an Interested Stockholder during the previous three years or who
became an Interested Stockholder with the approval of the corporation's board of
directors and (ii) has been approved or has not been opposed by a majority of
the members of the board of directors then in office who were directors prior to
any person becoming an Interested Stockholder during the previous three years or
were recommended for election or elected to succeed such directors by a majority
of such directors. Accordingly, based on the foregoing, the Purchaser believes
that, because the Sylvan Merger Agreement was approved by the Board of Directors
of the Company, the restrictions on Business Combinations contained in Section
203 would not be applicable to the Proposed Harcourt Merger pursuant to Section
203(b)(6).
The Section 203 Condition would also be satisfied if the Board of Directors
of the Company approved the Offer and the Proposed Harcourt Merger prior to
consummation of the Offer, or if, upon consummation of the Offer, the Purchaser
owned at least 85% of the total voting stock of the Company outstanding at the
time the transaction commenced (excluding Shares owned by persons who are
directors and also officers of the Company and possibly excluding Shares held in
certain employee stock plans), or if the Purchaser, in its sole
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<PAGE> 9
discretion, were satisfied that Section 203 was invalid or its restrictions were
otherwise inapplicable to the Purchaser in connection with the Proposed Harcourt
Merger for any reason, including, without limitation, those specified in Section
203. See Section 11.
Certain other conditions to the consummation of the Offer are described in
Section 14. The Purchaser expressly reserves the right to waive any one or more
of the conditions to the Offer. See Sections 14 and 15.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE
WITH RESPECT TO THE OFFER.
THE TENDER OFFER
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is 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 on or prior to the Expiration Date
(as hereinafter defined). The term "Expiration Date" means 12:00 midnight, New
York City time, on Friday, May 16, 1997, unless and until the Purchaser, in its
sole discretion, shall have extended the period of time for which the Offer is
open, in which event the term "Expiration Date" shall mean the time and date at
which the Offer, as so extended by the Purchaser, shall expire.
The Purchaser expressly reserves the right, in its sole discretion, at any
time and from time to time, to extend the period during which the Offer is open
for any reason, including the occurrence of any of the events specified in
Section 14, by giving oral or written notice of such extension to the
Depositary. During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer and subject to the right of a
tendering stockholder to withdraw such stockholder's Shares. See Section 4.
Subject to the applicable regulations of the Commission, the Purchaser also
expressly reserves the right, in its sole discretion, at any time or from time
to time, to (i) delay acceptance for payment of or, regardless of whether such
Shares were theretofore accepted for payment, payment for any Shares pending
receipt of any regulatory or governmental approvals specified in Section 15,
(ii) terminate the Offer (whether or not any Shares have theretofore been
accepted for payment) if any condition referred to in Section 14 has not been
satisfied or upon the occurrence of any event specified in Section 14 and (iii)
waive any condition or otherwise amend the Offer in any respect, in each case,
by giving oral or written notice of such delay, termination, waiver or amendment
to the Depositary and, other than in the case of any such waiver, by making a
public announcement thereof. The Purchaser acknowledges (i) that Rule 14e-1(c)
under the Exchange Act requires the Purchaser to pay the consideration offered
or return the Shares tendered promptly after the termination or withdrawal of
the Offer and (ii) that the Purchaser may not delay acceptance for payment of,
or payment for (except as provided in clause (i) of the preceding sentence), any
Shares upon the occurrence of any event specified in Section 14 without
extending the period of time during which the Offer is open.
The rights reserved by the Purchaser in the preceding paragraph are in
addition to the Purchaser's rights pursuant to Section 14. Any such extension,
delay, termination or amendment will be followed as promptly as practicable by
public announcement thereof, and such announcement in the case of an extension
will be made no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date. Without limiting the manner
in which the Purchaser may choose to make any public announcement, subject to
applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange Act,
which require that material changes be promptly disseminated to holders of
Shares), the Purchaser shall have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to the Dow Jones News Service.
If the Purchaser makes a material change in the terms of the Offer, or if
it waives a material condition to the Offer, the Purchaser will extend the Offer
and disseminate additional tender offer materials to the extent required by
Rules 14d-4(c) and 14d-6(d) under the Exchange Act. The minimum period during
which an offer must remain open following material changes in the terms of the
offer, other than a change in price or a change in percentage of securities
sought or a change in any dealer's soliciting fee, will depend upon the facts
6
<PAGE> 10
and circumstances, including the materiality, of the changes. In the
Commission's view, an offer should remain open for a minimum of five business
days from the date the material change is first published, sent or given to
stockholders, and, if material changes are made with respect to information that
approaches the significance of price and the percentage of securities sought, a
minimum of ten business days may be required to allow for adequate dissemination
and investor response. With respect to a change in price or, subject to certain
limitations, a change in the percentage of securities sought or a change in any
dealer's soliciting fee, a minimum ten business day period from the date of such
change is generally required to allow for adequate dissemination to
stockholders. Accordingly, if prior to the Expiration Date, the Purchaser
decreases the number of Shares being sought, or increases or decreases the
consideration offered pursuant to the Offer, and if the Offer is scheduled to
expire at any time earlier than the period ending on the tenth business day from
the date that notice of such increase or decrease is first published, sent or
given to holders of Shares, the Offer will be extended at least until the
expiration of such ten business day period. For purposes of the Offer, a
"business day" means any day other than a Saturday, Sunday or a federal holiday
and consists of the time period from 12:01 a.m. through 12:00 midnight, New York
City time.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THE SATISFACTION OF THE
MINIMUM CONDITION, THE SYLVAN TERMINATION CONDITION, THE NO IMPEDIMENTS
CONDITION, THE CHARTER CONDITION AND THE SECTION 203 CONDITION. SEE SECTION
14. The Purchaser reserves the right (but shall not be obligated), in
accordance with applicable rules and regulations of the Commission, to waive any
or all of such conditions. If, by the Expiration Date, any or all of such
conditions have not been satisfied, the Purchaser may, in its sole discretion,
elect to (i) extend the Offer and, subject to applicable withdrawal rights,
retain all tendered Shares until the expiration of the Offer, as extended,
subject to the terms of the Offer, (ii) waive all of the unsatisfied conditions
and, subject to complying with applicable rules and regulations of the
Commission, accept for payment all Shares so tendered and not extend the Offer
or (iii) terminate the Offer and not accept for payment any Shares and return
all tendered Shares to tendering stockholders. In the event that the Purchaser
waives any condition set forth in Section 14, the Commission may, if the waiver
is deemed to constitute a material change to the information previously provided
to the stockholders, require that the Offer remain open for an additional period
of time and/or that the Purchaser disseminate information concerning such
waiver.
Requests are being made to the Company for the use of the Company's
stockholder list and security position listings for the purpose of disseminating
the Offer to holders of Shares. Upon compliance by the Company with such
requests, this Offer to Purchase and the related Letter of Transmittal and, if
required, other relevant materials will be mailed to record holders of Shares
and will be furnished to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
stockholder list or who are listed as participants in a clearing agency's
security position listing for subsequent transmittal to beneficial owners of
Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of the Offer as so extended or amended), the Purchaser will
purchase, by accepting for payment, and will pay for, all Shares validly
tendered and not withdrawn (as permitted by Section 4) prior to the Expiration
Date promptly after the later to occur of (i) the Expiration Date and (ii) the
satisfaction or waiver of the conditions to the Offer set forth in Section 14.
In addition, subject to applicable rules of the Commission, the Purchaser
expressly reserves the right to delay acceptance for payment of, or payment for,
Shares pending receipt of any regulatory or governmental approvals specified in
Section 15.
For information with respect to approvals which may be required to be
obtained prior to the consummation of the Offer, including under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Investment Canada Act (Canada) (the "ICA") and the Competition Act
(Canada) (the "Competition Act"), see Section 15.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) Share Certificates for
such Shares or timely confirmation (a "Book-Entry Confirmation") of the
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company or the Philadelphia Depository Trust Company
(collectively, the "Book-Entry Transfer Facilities")
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<PAGE> 11
pursuant to the procedures set forth in Section 3, (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 below) in
connection with a book-entry transfer and (iii) any other documents required by
the Letter of Transmittal.
The term "Agent's Message" means a message transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an express acknowledgment from the participant in such Book-Entry
Transfer Facility tendering the Shares which are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Purchaser may enforce such
agreement against such participant.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not withdrawn
as, if and when the Purchaser gives oral or written notice to the Depositary of
the Purchaser's acceptance of such Shares for payment pursuant to the Offer. In
all cases, upon the terms and subject to the conditions of the Offer, payment
for Shares purchased 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 payment from the Purchaser
and transmitting payment to validly tendering stockholders. Under no
circumstances will interest on the purchase price for Shares be paid by the
Purchaser.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if Share Certificates are submitted representing more Shares than are
tendered, Share Certificates representing unpurchased or untendered Shares will
be returned, without expense to the tendering stockholder (or, in the case of
Shares delivered by book-entry transfer into the Depositary's account at a
Book-Entry Transfer Facility pursuant to the procedures set forth in Section 3,
such Shares will be credited to an account maintained within such Book-Entry
Transfer Facility), as promptly as practicable following the expiration,
termination or withdrawal of the Offer.
IF, PRIOR TO THE EXPIRATION DATE, THE PURCHASER SHALL INCREASE THE
CONSIDERATION OFFERED TO HOLDERS OF SHARES PURSUANT TO THE OFFER, SUCH INCREASED
CONSIDERATION SHALL BE PAID TO ALL HOLDERS OF SHARES THAT ARE PURCHASED PURSUANT
TO THE OFFER, WHETHER OR NOT SUCH SHARES WERE TENDERED PRIOR TO SUCH INCREASE IN
CONSIDERATION.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more of the Purchaser's subsidiaries or
affiliates the right to purchase all or any portion of the Shares tendered
pursuant to the Offer, but any such transfer or assignment will not relieve the
Purchaser of its obligations under the Offer or prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. Except as set
forth below, in order for Shares to be validly tendered pursuant to the Offer,
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees, or an Agent's Message
in 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 this 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 below and
Book-Entry Confirmation must be received by the Depositary, in each case on or
prior to the Expiration Date, or (ii) the guaranteed delivery procedures set
forth below must be complied with.
The method of delivery of Share certificates, the Letter of Transmittal and
all other required documents is at the option and sole risk of the tendering
stockholder, and the 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.
Book-Entry Transfer. The Depositary will make a request to establish
accounts with respect to the Shares at each of the Book-Entry Transfer
Facilities for purposes of the Offer within two business days after the date of
this Offer to Purchase. Any financial institution that is a participant in the
system of any Book-
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<PAGE> 12
Entry Transfer Facility may make book-entry delivery of Shares by causing such
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account at such Book-Entry Transfer Facility in accordance with such Book-Entry
Transfer Facility's procedures for such transfer. However, although delivery of
Shares may be effected through book-entry transfer into the Depositary's account
at a Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile
thereof), properly completed and duly executed, with any required signature
guarantees, or an Agent's Message in connection with a book-entry transfer, and
any other required documents must, in any case, be transmitted to and received
by the Depositary at one of its addresses set forth on the back cover of this
Offer to Purchase on or prior to the Expiration Date, or the guaranteed delivery
procedure set forth below must be complied with.
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.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm that is a bank, broker, dealer, credit union, savings
association or other entity which is a member in good standing of the Securities
Transfer Agents Medallion Program (an "Eligible Institution"), unless the Shares
tendered thereby are tendered (i) by a registered holder of Shares who has not
completed either the box labeled "Special Payment Instructions" or the box
labeled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for
the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If the Share Certificates are registered in the name of a person other than
the signer of the Letter of Transmittal, or if payment is to be made to, or
Share Certificates for unpurchased Shares are to be issued or returned to, a
person other than the registered holder, then the tendered certificates must be
endorsed or accompanied by appropriate stock powers, signed exactly as the name
or names of the registered holder or holders appear on the certificates, with
the signatures on the certificates or stock powers guaranteed by an Eligible
Institution as provided in the Letter of Transmittal. See Instructions 1 and 5
of the Letter of Transmittal.
If the Share Certificates are forwarded separately to the Depositary, a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) must accompany each such delivery.
Guaranteed Delivery. If a stockholder desires to tender Shares pursuant to
the Offer and such stockholder's 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 following guaranteed delivery procedures are duly complied with:
(i) such tender is 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, is
received by the Depositary, as provided below, 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 together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees (or an Agent's Message)
and any other documents required by the Letter of Transmittal are received
by the Depositary within three New York Stock Exchange, Inc. ("NYSE")
trading days after the date of execution of such Notice of Guaranteed
Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by facsimile transmission to the Depositary and must include a
guarantee by an Eligible Institution in the form set forth in such Notice of
Guaranteed Delivery and a representation that the stockholder on whose behalf
the tender is being made is deemed to own the Shares being tendered within the
meaning of Rule 14e-4 under the Exchange Act.
Notwithstanding any other provision hereof, payment for Shares accepted for
payment pursuant to the Offer will in all cases be made only after timely
receipt by the Depositary of Share Certificates for, or Book-
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<PAGE> 13
Entry Confirmation with respect to, such Shares, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), together with any
required signature guarantees (or an Agent's Message) and any other documents
required by the Letter of Transmittal. Accordingly, payment might not be made to
all tendering stockholders at the same time, and will depend upon when Share
Certificates are received by the Depositary or Book-Entry Confirmations of such
Shares are received into the Depositary's account at a Book-Entry Transfer
Facility.
Backup Federal Income Tax Withholding. UNDER THE BACKUP FEDERAL INCOME TAX
LAWS APPLICABLE TO CERTAIN STOCKHOLDERS (OTHER THAN CERTAIN EXEMPT STOCKHOLDERS,
INCLUDING, AMONG OTHERS, ALL CORPORATIONS AND CERTAIN FOREIGN INDIVIDUALS), THE
DEPOSITARY MAY BE REQUIRED TO WITHHOLD 31% OF THE AMOUNT OF ANY PAYMENTS MADE TO
SUCH STOCKHOLDERS PURSUANT TO THE OFFER OR THE PROPOSED HARCOURT MERGER. TO
PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING, EACH SUCH STOCKHOLDER MUST
PROVIDE THE DEPOSITARY WITH SUCH STOCKHOLDER'S CORRECT TAXPAYER IDENTIFICATION
NUMBER AND CERTIFY THAT SUCH STOCKHOLDER IS NOT SUBJECT TO BACKUP FEDERAL INCOME
TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF
TRANSMITTAL. SEE INSTRUCTION 9 OF THE LETTER OF TRANSMITTAL.
Appointment as Proxy. By executing the Letter of Transmittal, a tendering
stockholder irrevocably appoints designees of the Purchaser, and each of them,
as such stockholder's attorneys-in-fact and proxies, with full power of
substitution, in the manner set forth in the Letter of Transmittal, to the full
extent of such stockholder's rights with respect to the Shares tendered by such
stockholder and accepted for payment by the Purchaser and with respect to any
and all other Shares and other securities or rights issued or issuable in
respect of such Shares on or after March 31, 1997. All such powers of attorney
and proxies shall be considered irrevocable and coupled with an interest in the
tendered Shares. Such appointment will be effective upon the acceptance for
payment of such Shares by the Purchaser in accordance with the terms of the
Offer. Upon such acceptance for payment, all other powers of attorney and
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 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.
Determination of Validity. All questions as to the form of documents and
the validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding on all parties. The
Purchaser reserves the absolute right to reject any or all tenders determined by
it not to be in proper form or the acceptance of or payment for which may, in
the opinion of the Purchaser's counsel, be unlawful. The Purchaser also reserves
the absolute right to waive any of the conditions of the Offer or any defect or
irregularity in any tender of Shares of any particular stockholder whether or
not similar defects or irregularities are waived in the case of other
stockholders.
The Purchaser's interpretation of the terms and conditions of the Offer
(including the Letter of Transmittal and the instructions thereto) will be final
and binding. No tender of Shares will be deemed to have been validly made until
all defects and irregularities with respect to such tender have been cured or
waived by the Purchaser. None of Harcourt, the Purchaser or any of their
respective affiliates or assigns, the Dealer Managers, the Depositary, the
Information Agent or any other person or entity will be under any duty to give
any notification of any defects or irregularities in tenders or incur any
liability for failure to give any such notification.
The Purchaser's acceptance for payment of Shares tendered pursuant to any
of the procedures described above will constitute a binding agreement between
the tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
10
<PAGE> 14
4. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 4,
tenders of Shares made pursuant to the Offer are irrevocable. 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 as provided herein, may also
be withdrawn at any time after June 20, 1997 (or such later date as may apply in
case the Offer is extended).
If, for any reason whatsoever, acceptance for payment of any Shares
tendered pursuant to the Offer is delayed, or the Purchaser is unable to accept
for payment or pay for Shares tendered pursuant to the Offer, then, without
prejudice to the Purchaser's rights set forth herein, the Depositary may,
nevertheless, on behalf of the Purchaser, retain tendered Shares and such Shares
may not be withdrawn except to the extent that the tendering stockholder is
entitled to and duly exercises withdrawal rights as described in this Section 4.
Any such delay will be by an extension of the Offer to the extent required by
law.
In order for a withdrawal to be effective, a written or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase. Any
such notice of withdrawal must specify the name of the person who tendered the
Shares to be withdrawn, the number of Shares to be withdrawn, and (if Share
Certificates have been tendered) the name of the registered holder of the Shares
as set forth in the Share Certificate, if different from that of the person who
tendered such Shares. If Share Certificates have been delivered or otherwise
identified to the Depositary, then prior to the physical release of such
certificates, the tendering stockholder must submit the serial numbers shown on
the particular certificates evidencing the Shares to be withdrawn and the
signature on the notice of withdrawal must be guaranteed by an Eligible
Institution, except in the case of Shares tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the procedures
for book-entry transfer set forth in Section 3, the notice of withdrawal must
specify the name and number of the account at the appropriate 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 first sentence of this paragraph.
Withdrawals of Shares may not be rescinded. Any Shares properly withdrawn will
be deemed not validly tendered for purposes of the Offer, but may be retendered
at any subsequent time prior to the Expiration Date by following any of the
procedures described in Section 3.
All questions as to the form and validity (including time of receipt) of
notices of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding. None of Harcourt,
the Purchaser or any of their respective affiliates or assigns, the Dealer
Managers, the Depositary, the Information Agent or any other person or entity
will be under any duty to give any notification of any defects or irregularities
in any notice of withdrawal or incur any liability for failure to give any such
notification.
5. CERTAIN TAX CONSEQUENCES. The receipt of cash for Shares pursuant to
the Offer or the Proposed Harcourt Merger will be a taxable transaction for
federal income tax purposes and may also be a taxable transaction under
applicable state, local, foreign and other tax laws. For federal income tax
purposes, each selling stockholder would generally recognize gain or loss equal
to the difference between the amount of cash received and such stockholder's tax
basis for the sold Shares. Such gain or loss will be capital gain or loss
(assuming the Shares are held as a capital asset) and any such capital gain or
loss will be long term if, as of the date of sale, the Shares were held for more
than one year or will be short term if, as of such date, the Shares were held
for one year or less.
The foregoing discussion may not be applicable to certain types of
stockholders, including stockholders who acquired Shares pursuant to the
exercise of employee stock options or otherwise as compensation, individuals who
are not citizens or residents of the United States and foreign corporations, or
entities that are otherwise subject to special tax treatment under the Internal
Revenue Code of 1986, as amended (such as insurance companies, tax-exempt
entities and regulated investment companies).
The federal income tax discussion set forth above is included for general
information only. Each stockholder is urged to consult such stockholder's tax
advisor with respect to the tax consequences to such stockholder of the Offer
and Proposed Harcourt Merger, including federal, state and local tax
consequences.
11
<PAGE> 15
6. PRICE RANGE OF THE SHARES; DIVIDENDS. According to the Company's Annual
Report on Form 10-K for the year ended December 31, 1996 (the "1996 Annual
Report"), the Shares are listed and traded on the NYSE and the Pacific Stock
Exchange ("PSE") under the symbol NEC. The following table sets forth, for the
quarters indicated, the high and low market prices per Share as reported in the
1996 Annual Report with respect to periods occurring in 1995 and 1996 and as
reported by published financial sources with respect to periods in 1997.
<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
Year Ended December 31, 1995:
First Quarter.............................................. $4 5/8 $2 1/2
Second Quarter............................................. 5 3/4 3 1/8
Third Quarter.............................................. 8 3/8 4 7/8
Fourth Quarter............................................. 8 3/4 6 3/8
Year Ended December 31, 1996:
First Quarter.............................................. 11 3/4 7 5/8
Second Quarter............................................. 22 3/4 11 3/4
Third Quarter.............................................. 20 3/4 13
Fourth Quarter............................................. 19 1/4 11 5/8
Year Ended December 31, 1997:
First Quarter.............................................. 17 1/2 12 3/8
Second Quarter (through April 15, 1997).................... 15 1/2 12 3/8
</TABLE>
According to the 1996 Annual Report, no cash or stock dividends were
declared or paid on the Shares during 1996 or 1995 and the Company has no
present intent to pay cash dividends.
On March 11, 1997, the last full day of trading prior to the announcement
of the execution of the Sylvan Merger Agreement, according to published sources,
the reported closing price on the NYSE Composite Tape for the Shares was $17 1/8
per Share. On April 15, 1997, the last full day of trading prior to the
announcement by Harcourt that it would be commencing the Offer, according to
published sources, the reported closing price on the NYSE Composite Tape for the
Shares was $15.00 per Share. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET
QUOTATION FOR THE SHARES.
7. POSSIBLE EFFECTS OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK
EXCHANGE LISTING; EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS.
Possible Effects of the Offer on the Market for the Shares. The purchase
of Shares pursuant to the Offer will reduce the number of Shares that might
otherwise trade publicly and could adversely affect the liquidity and market
value of the remaining Shares held by the public. The purchase of Shares
pursuant to the Offer can also be expected to reduce the number of holders of
Shares. The Purchaser cannot predict whether the reduction in the number of
Shares that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for or marketability of the Shares or whether it
would cause future market prices to be greater or less than the Offer price
therefor.
Stock Exchange Listing. The Shares are currently listed and traded on the
NYSE, which constitutes the principal trading market for the Shares. The Shares
are also listed on the PSE. Depending upon the number of Shares purchased
pursuant to the Offer and the number of Shares accumulated by other parties, the
Shares may no longer meet the requirements of the NYSE and the PSE for continued
listing on the NYSE and the PSE and may be delisted.
According to the NYSE's published guidelines, the NYSE would consider
delisting the Shares if, among other things, the number of record holders of at
least 100 Shares should fall below 1,200, the number of publicly held Shares
(exclusive of holdings of officers, directors, their immediate families and
other concentrated holdings of 10% or more ("NYSE Excluded Holdings")) should
fall below 600,000 or the aggregate market value of publicly held Shares
(exclusive of NYSE Excluded Holdings) should fall below $5,000,000.
12
<PAGE> 16
According to the PSE's published guidelines, the PSE would consider
delisting the Shares if, among other things, (i) the number of public beneficial
holders of Shares should fall below 400 or the number of beneficial holders of
at least 100 Shares should fall below 300, (ii) the number of publicly held
Shares should fall below 200,000 (exclusive of management or other concentrated
holdings) and the aggregate market value of publicly held Shares should drop
below $1,000,000 (exclusive of management or other concentrated holdings), (iii)
the Company's net worth should drop below $4,000,000 or (iv) the bid price of
the Shares should drop to less than $3 per Share.
Depending upon the number of Shares acquired pursuant to the Offer, the
Shares may no longer meet the requirements for continued listing on the NYSE
and/or the PSE. If as a result of the purchase of Shares pursuant to the Offer,
the Shares no longer meet the requirements of the NYSE or the PSE for continued
listing and the listing of the Shares is discontinued, the market for the Shares
could be adversely affected.
In the event that the Shares were no longer listed or traded on the NYSE
and/or the PSE, it is possible that the Shares would trade on another securities
exchange or in the over-the-counter market and that price quotations would be
reported by such exchange, through the National Association of Securities
Dealers Automated Quotation System ("NASDAQ") or other sources. Such trading and
the availability of such quotations would, however, depend upon the number of
stockholders and/or the aggregate market value of the Shares remaining at such
time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act as described below and other factors.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. The purchase of the Shares pursuant to the Offer may result in the
Shares becoming eligible for deregistration under the Exchange Act. Registration
of the Shares may be terminated upon application by the Company to the
Commission if the Shares are not listed on a "national securities exchange" and
there are fewer than 300 record holders of Shares. Termination of registration
of the Shares under the Exchange Act would substantially reduce the information
required to be furnished by the Company to its stockholders and the Commission
and would make certain provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b) and the requirements of furnishing a
proxy statement in connection with stockholders' meetings pursuant to Section
14(a) or 14(c) and the related requirement of an annual report, no longer
applicable to the Company. If the Shares are no longer registered under the
Exchange Act, the requirements of Rule 13e-3 under the Exchange Act with respect
to "going private" transactions would no longer be applicable to the Company.
Furthermore, the ability of "affiliates" of the Company and persons holding
"restricted securities" of the Company to dispose of such securities pursuant to
Rule 144 promulgated under the Securities Act of 1933, as amended, may be
impaired or, with respect to certain persons, eliminated. If registration of the
Shares under the Exchange Act were terminated, the Shares would no longer be
"margin securities" or eligible for stock exchange listing or NASDAQ reporting.
The Purchaser believes that the purchase of the Shares pursuant to the Offer may
result in the Shares becoming eligible for deregistration under the Exchange Act
and it would be the intention of the Purchaser to cause the Company to make an
application for termination of registration of the Shares as soon as possible
after successful completion of the Offer, if the Shares are then eligible for
such termination.
If registration of the Shares is not terminated prior to the Proposed
Harcourt Merger, then the Shares will be delisted from the NYSE and the PSE and
the registration of the Shares under the Exchange Act will be terminated
following the consummation of the Proposed Harcourt Merger.
Margin Regulations. The Shares are currently "margin securities" under the
regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve Board"), which have the effect, among other things, of allowing
brokers to extend credit on the collateral of such Shares for the purpose of
buying, carrying or trading in securities ("Purpose Loans"). Depending upon
factors such as the number of record holders of the Shares and the number and
market value of publicly held Shares, following the purchase of Shares pursuant
to the Offer, the Shares might no longer constitute "margin securities" for
purposes of the Federal Reserve Board's margin regulations and, therefore, could
no longer be used as collateral for Purpose Loans
13
<PAGE> 17
made by brokers. In addition, if registration of the Shares under the Exchange
Act were terminated, the Shares would no longer constitute "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY. The information concerning
the Company contained in this Offer to Purchase, including financial
information, has been taken from or based upon publicly available documents and
records on file with the Commission and other public sources. The summary
information concerning the Company in this Section 8 and elsewhere in this Offer
to Purchase is derived from the 1996 Annual Report and other publicly available
information. The summary information set forth below is qualified in its
entirety by reference to such reports (which may be obtained and inspected as
described below) and should be considered in conjunction with the more
comprehensive financial and other information in such reports and other publicly
available reports and documents filed by the Company with the Commission and
other publicly available information. Although the Purchaser and Harcourt do not
have any knowledge that would indicate that any statements contained herein
based upon such reports are untrue, neither the Purchaser nor Harcourt assumes
any responsibility for the accuracy or completeness of the information contained
therein, or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information but
which are unknown to the Purchaser and Harcourt.
General. The Company is a global provider of interactive multimedia
products and services for the education and training marketplace. The Company
was originally incorporated in California in 1954 and reincorporated in Delaware
in 1972. The Company's business is conducted primarily through three operating
entities: ICS Learning Systems, Inc. ("ICS"), Steck-Vaughn Publishing
Corporation ("Steck-Vaughn") and National Education Training Group, Inc.
("NETG").
ICS provides distance learning opportunities in vocational, degree and
professional self-studies to consumers and companies throughout the world.
Headquartered in Scranton, Pennsylvania, ICS and its predecessors have provided
distance education opportunities to over 11 million students since its founding
in 1890.
Steck-Vaughn publishes supplemental educational materials used in
elementary, secondary and adult education. Headquartered in Austin, Texas,
Steck-Vaughn, together with its predecessors, has been a publisher of
educational materials since 1936. Steck-Vaughn closed its initial public
offering in July 1993; currently, the Company owns approximately 83% of
Steck-Vaughn.
Established in the late 1960s, NETG develops, markets and distributes
interactive multimedia products to train information technology professionals
and end-users of technology. Headquartered in Naperville, Illinois, NETG offers
multimedia training solutions to help organizations worldwide maximize their
performance and their investments in people and technology.
Financial Information. Set forth below are certain selected consolidated
financial data for the Company's last three fiscal years which were derived from
the 1996 Annual Report. More comprehensive financial information is included in
the reports (including management's discussion and analysis of financial
condition and results of operations) and other documents filed by the Company
with the Commission, and the following financial data is qualified in its
entirety by reference to such reports and other documents including the
financial information and related notes contained therein. Such reports and
other documents may be examined and copies thereof may be obtained from the
offices of the Commission and the NYSE in the manner set forth below.
14
<PAGE> 18
NATIONAL EDUCATION CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
------------------------------------
1996 1995 1994
-------- --------- ---------
<S> <C> <C> <C>
INCOME STATEMENT DATA
Net revenues............................................. $288,801 $ 258,598 $ 241,614
Income (loss) from continuing operations................. 21,360 (87,223) (14,093)
Income (loss) from discontinued operations............... -- -- (9,420)
Loss on disposal of discontinued operations.............. -- -- (40,032)
Net income (loss)........................................ 21,360 (87,223) (63,545)
EARNINGS (LOSS) PER SHARE
From continuing operations............................... $ .58 $ (2.73) $ (.48)
Net income (loss)........................................ .58 (2.73) (2.14)
Weighted average number of shares outstanding
(primary).............................................. 36,691 31,893 29,640
BALANCE SHEET DATA (At Period End)
Cash and investment securities........................... $ 19,129 $ 23,868 $ 28,130
Total assets............................................. 222,089 185,262 270,245
Long-term debt and capital lease obligations............. 87,203 66,333 83,883
Stockholders' equity..................................... 34,018 7,481 73,016
</TABLE>
The Shares are registered under the Exchange Act. Accordingly, the Company
is subject to the informational filing requirements of the Exchange Act and in
accordance therewith is obligated to file periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. Information as of particular dates concerning the
Company's directors and officers, their remuneration, options granted to them,
the principal holders of the Company's securities and any material interest of
such persons in transactions with the Company is required to be disclosed in
such proxy statements and distributed to the Company's stockholders and filed
with the Commission. Such reports, proxy statements and other information should
be available for inspection at the public reference facilities of the Commission
located in Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
should also be available for inspection and copying at prescribed rates at the
regional offices of the Commission located at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite
1300, New York, New York 10048. Copies of this material may also be obtained by
mail, upon payment of the Commission's customary fees, from the Commission's
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. The
Commission also maintains an Internet web site at http://www.sec.gov that
contains reports, proxy statements and other information. In addition, such
material should also be available for inspection at the library of the New York
Stock Exchange, 20 Broad Street, New York, New York 10005. Except as otherwise
noted in this Offer to Purchase, all of the information with respect to the
Company set forth in this Offer to Purchase has been derived from publicly
available information.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND HARCOURT. The
Purchaser, a Delaware corporation and a wholly owned subsidiary of Harcourt, was
organized in connection with the Offer and has not carried on any activities to
date other than those incident to its formation and the commencement of the
Offer.
The principal businesses of Harcourt are publishing and specialty
retailing. Harcourt also has operations in career transition and related
professional services.
Harcourt Brace & Company, a wholly-owned subsidiary of Harcourt ("Harcourt
Brace"), is among the world's largest publishing houses, publishing books,
scholarly journals and related materials in both print and electronic media for
the educational, scientific, technical, medical, professional and trade markets.
The educational and trade publishing group of Harcourt Brace includes the
operations of Harcourt Brace School; Holt, Rinehart and Winston; Harcourt Brace
College and The Psychological Corporation. Harcourt Brace
15
<PAGE> 19
School publishes textbooks and related instructional materials for kindergarten
through grade 8. Holt, Rinehart and Winston publishes instructional materials
for grades 7 through 12. Harcourt Brace College publishes books and other
materials for the college and university market under the Harcourt Brace,
Saunders and Dryden Press imprints. The Psychological Corporation provides tests
and related products and services for educational, psychological, clinical and
professional assessment and, through its subsidiary, Assessment Systems,
provides computerized tests for business and professional credentialing and
licensing. The Harcourt Brace trade division publishes children's books, general
adult fiction and nonfiction hardcover books, and trade paperbacks under the
Harvest imprint.
The scientific, technical, medical and professional publishing group of
Harcourt Brace includes the operations of Academic Press, W.B. Saunders,
Harcourt Brace Professional Publishing and Harcourt Brace Legal and Professional
Publishing. Academic Press publishes scholarly books and journals in print and
electronic formats in the life, physical, social and computer sciences, which
are sold in the United States and abroad. W.B. Saunders publishes books and
periodicals as well as other multimedia materials in the health sciences, which
are sold in the United States and abroad, and, through its International Medical
News Group division, which was acquired in January 1996, publishes
advertising-based newspapers for physicians. Harcourt Brace Professional
Publishing publishes reference guides and newsletters for certified public
accountants and tax professionals. Harcourt Brace Legal and Professional
Publishing conducts review courses under the BAR/BRI name for individuals
preparing for bar examinations, as well as review courses for CPA accreditation
and graduate school entrance examinations.
Harcourt also owns approximately 53% of the outstanding equity of The
Neiman Marcus Group, Inc. ("NMG"), which operates Neiman Marcus Stores, Bergdorf
Goodman and NM Direct. NMG is a separate public company which is listed on the
NYSE and is subject to the reporting requirements of the Exchange Act. Neiman
Marcus Stores is a high fashion specialty retailer which offers women's and
men's apparel, fashion accessories, shoes, cosmetics, furs, precious jewelry,
decorative home accessories, fine china, crystal and silver, gourmet food
products and children's apparel and gift items. Bergdorf Goodman is a high
fashion, exclusive retailer of high quality women's and men's apparel, fashion
accessories, precious jewelry, decorative home accessories, gifts and gourmet
foods. NM Direct operates an upscale direct marketing business, which primarily
offers apparel under the Neiman Marcus name and, through its Horchow catalog,
offers hard goods such as home furnishings and decorative accessories to its
domestic and international customers.
Harcourt believes that Drake Beam Morin, Inc., a wholly-owned subsidiary of
Harcourt ("DBM"), is the world's leading organizational and individual
transition consulting firm. DBM assists organizations and individuals worldwide
in outplacement, employee selection, performance evaluation, career management
and transition management.
The name, citizenship, business address, principal occupation or
employment, and five year employment history of each of the directors and
executive officers of the Purchaser and Harcourt and certain other information
are set forth in Schedule I hereto.
Set forth below are certain selected consolidated financial data relating
to Harcourt and its subsidiaries for Harcourt's last three fiscal years which
have been derived from the financial statements contained in Harcourt's Annual
Reports to its stockholders for the fiscal years ended October 31, 1996 and
October 31, 1995 filed by Harcourt with the Commission. More comprehensive
financial information is included in the reports (including management's
discussion and analysis of financial condition and results of operations) and
other documents filed by Harcourt with the Commission, and the following
financial data is qualified in its entirety by reference to such reports and
other documents, including the financial information and related notes contained
therein. Such reports and other documents may be examined and copies thereof may
be obtained from the offices of the Commission and the NYSE in the same manner
as set forth with respect to information about the Company in Section 8.
16
<PAGE> 20
HARCOURT GENERAL, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED OCTOBER 31,
----------------------------------------
1996 1995 1994
---------- ---------- ----------
<S> <C> <C> <C>
INCOME STATEMENT DATA
Revenues............................................... $3,289,919 $3,034,736 $2,850,777
Operating earnings..................................... 344,722 317,896 310,140
Net earnings........................................... 190,851 165,883 177,532
BALANCE SHEET DATA (At Period End)
Cash and equivalents and short-term investments........ $ 774,916 $ 606,823 $ 819,659
Total assets........................................... 3,326,238 2,884,336 3,242,364
Total long-term liabilities............................ 939,074 999,854 1,123,341
Total shareowners' equity.............................. 1,033,532 941,113 1,047,355
</TABLE>
Harcourt currently beneficially owns 100 Shares (less than 1%) of the
35,541,698 Shares represented by the Company in the Sylvan Merger Agreement as
outstanding at March 12, 1997, all of which Shares were acquired by Harcourt on
the open market on April 15, 1997 at a price of $15.00 per Share.
Except as set forth elsewhere in this Offer to Purchase: (i) neither
Harcourt nor the Purchaser nor, to the knowledge of Harcourt or the Purchaser,
any of the persons listed in Schedule I hereto or any associate or
majority-owned subsidiary of Harcourt or the Purchaser or any of the persons so
listed, beneficially owns or has a right to acquire any Shares or any other
equity securities of the Company; (ii) neither Harcourt nor the Purchaser nor,
to the knowledge of Harcourt or the Purchaser, any of the persons or entities
referred to in clause (i) above or any of their executive officers, directors or
subsidiaries has effected any transaction in the Shares or any other equity
securities of the Company during the past 60 days; (iii) neither Harcourt nor
the Purchaser nor, to the knowledge of Harcourt or the Purchaser, any of the
persons listed in Schedule I hereto, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company (including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the voting
of any such securities, joint ventures, loan or option arrangements, puts or
calls, guaranties of loans, guaranties against loss or the giving or withholding
of proxies, consents or authorizations); (iv) since January 1, 1994, there have
been no transactions which would require reporting under the rules and
regulations of the Commission between Harcourt or the Purchaser or any of their
respective subsidiaries or, to the knowledge of Harcourt or the Purchaser, any
of the persons listed in Schedule I hereto, on the one hand, and the Company or
any of its executive officers, directors or affiliates, on the other hand; and
(v) since January 1, 1994, there have been no contacts, negotiations or
transactions between Harcourt or the Purchaser or any of their respective
subsidiaries or, to the knowledge of Harcourt or the Purchaser, any of the
persons listed in Schedule I hereto, on the one hand, and the Company or any of
its subsidiaries or affiliates, on the other hand, concerning a merger,
consolidation or acquisition, a tender offer or other acquisition of securities,
an election of directors or a sale or other transfer of a material amount of
assets.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. In October of
1994, John R. Cook, Senior Vice President and Chief Financial Officer of
Harcourt, contacted Jerome Cwertnia, the then President and Chief Executive
Officer of the Company, to explore the possibility of an acquisition of the
Company. In connection therewith, Harcourt and the Company entered into a
confidentiality agreement, which included a standstill provision expiring on
October 26, 1996. After reviewing certain preliminary information provided by
the Company and after several telephone conversations between Mr. Cook and each
of Mr. Cwertnia and Mr. Richard C. Blum, a member of the Company's Board of
Directors, Harcourt terminated discussions with representatives of the Company
in connection with its consideration of a possible acquisition of the Company.
On March 12, 1997, the Company announced that it had entered into the
Sylvan Merger Agreement contemplating the Proposed Sylvan Merger. In the
Proposed Sylvan Merger, each Share would be converted into the right to receive
0.58 of one share of Sylvan Common Stock. Based on the closing price of the
Sylvan
17
<PAGE> 21
Common Stock on the NASDAQ NM on March 11, 1997, the last trading day preceding
the date of the announcement of the Sylvan Merger Agreement, of $35 1/8 per
share, the Proposed Sylvan Merger would have had a value of approximately $788
million or $20.37 per Share. Based on the closing price of the Sylvan Common
Stock on the NASDAQ NM on April 15, 1997, the last day preceding the date of
Harcourt's announcement that it would be commencing the Offer, of $29 1/8 per
share, the Proposed Sylvan Merger would have had a value of approximately $653
million or $16.89 per Share. The Proposed Sylvan Merger is subject to certain
conditions, including approval by the stockholders of Sylvan and the Company.
The Sylvan Merger Agreement provides that, among other things, the Company,
its affiliates and their respective officers, directors, employees,
representatives and agents will (i) cease all ongoing negotiations with any
other parties in connection with any acquisition of all or any material portion
of the assets of, or any equity interest in, the Company or any of the Company's
material subsidiaries or any business combination with the Company or any of the
Company's material subsidiaries, (ii) not solicit, initiate, encourage or
furnish information in response to any inquiries or proposals that constitute,
or could be expected to lead to, a proposal or offer for a Company Acquisition
Transaction, (iii) not engage in negotiations or discussions concerning, or
provide any non-public information to any person or entity relating to, any
Company Acquisition Transaction, and (iv) not agree to, approve or recommend any
Company Acquisition Transaction, except, with respect to clauses (ii) (as to the
furnishing of information only), (iii) and (iv), if the Company's Board of
Directors has received the written opinion of its counsel, 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 stockholders of the Company under the DGCL (it being
understood that for this purpose, the failure to respond to a proposal for a
Company Acquisition Transaction which in the judgment of the Company's Board of
Directors and BZW, the investment banking division of Barclays Bank PLC and the
Company's financial advisor, is superior, from a financial point of view, to the
Company's stockholders in comparison to the Proposed Sylvan Merger may be deemed
to be a breach of such fiduciary duty). If the Company receives any indications
of interest or proposals with respect to any Company Acquisition Transaction, it
is required under the Sylvan Merger Agreement to provide a copy of any such
written proposal to Sylvan immediately after receipt thereof by the Company or
any of its representatives or agents.
Based on the foregoing, Harcourt believes that the Offer will permit the
Company to furnish Harcourt with non-public information. The Sylvan Merger
Agreement further provides in Section 6.3 that Sylvan may terminate the Sylvan
Merger Agreement and become entitled to receive a fee of $30 million from the
Company if (i) the Company's Board of Directors has withdrawn or modified its
recommendation of the Sylvan Merger Agreement or the Proposed Sylvan Merger or
has resolved to do so for any reason other than the occurrence of an event
relating to Sylvan which has a material adverse effect on Sylvan, or (ii) the
Company fails to hold its stockholders' meeting to approve the Proposed Sylvan
Merger within 40 days after the Commission declares effective the registration
statement relating to the shares of Sylvan Common Stock to be issued in
connection with the Proposed Sylvan Merger. In addition, the Sylvan Merger
Agreement provides in Section 6.3 that Sylvan may terminate the Sylvan Merger
Agreement and become entitled to receive a fee of $10 million from the Company
if (i) the Company's stockholders fail to approve the Proposed Sylvan Merger or
(ii) there has been a material breach of any representation, warranty, covenant
or agreement of the Company which remains uncured after the time periods
specified in the Sylvan Merger Agreement; provided that, an additional fee of
$20 million shall be payable by the Company to Sylvan if the Company consummates
a Company Acquisition Transaction within eight months of such termination.
The Sylvan Merger Agreement may also be terminated, without the payment of
any fee, by either Sylvan or the Company if the Average Share Price is less than
$29.86; provided that the Company may not so terminate the Sylvan Merger
Agreement if Sylvan exercises the Adjustment Option. According to the
registration statement of Sylvan (and the preliminary proxy statement of the
Company) with respect to the Proposed Sylvan Merger filed with the Commission on
April 17, 1997, Sylvan will not exercise its Adjustment Option if the Average
Share Price is below $29.13 (i.e. if the Adjusted Conversion Ratio is above
0.5945, a ratio above which the Company's stockholders would own 50% or greater
of the combined company).
On April 14, 1997, the board of directors of Harcourt approved the
commencement of the Offer. On the same day, Robert L. Friedman of Simpson
Thacher & Bartlett, counsel to Harcourt, telephoned Mr. Richard
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C. Blum, a member of the Board of Directors of the Company, and informed Mr.
Blum that Harcourt wished to acquire the Company. Late in the evening on April
15, 1997, Mr. Friedman telephoned Mr. Blum again to inform him that Harcourt was
disseminating a press release early the following morning announcing its
intention to commence a tender offer for all outstanding Shares at $19.50 per
Share. Further discussions between Mr. Friedman and Mr. Blum took place on April
16 and April 17, 1997. In each of these telephone conversations, Mr. Blum
indicated his doubt that the Board of Directors of the Company would endorse
Harcourt's offer. On the morning of April 16, 1997, Richard A. Smith, Chairman
and Chief Executive Officer of Harcourt, sent the following letter to Mr. Sam
Yau, President and Chief Executive Officer of the Company:
Mr. Sam Yau
President and Chief Executive Officer
National Education Corporation
2601 Main Street
Irvine, CA 92614
Dear Mr. Yau:
Harcourt General, Inc. ("Harcourt") announced today that it will
commence a cash tender offer for all of the outstanding shares of National
Education Corporation ("NEC") at $19.50 per share. This price represents a
15.4% premium over the value of the NEC/Sylvan Learning Systems, Inc.
("Sylvan") stock proposal announced last month, based upon the closing
price of the Sylvan shares on April 15, and a 54.5% premium over the
closing market price of the NEC shares on March 4, five trading days before
NEC's merger agreement with Sylvan was announced (and prior to the sharp
increase in the market price of NEC's shares during such period prior to
the announcement of the NEC/Sylvan transaction). Following the completion
of the tender offer, Harcourt intends to effect a merger in which all
remaining NEC stockholders will also receive the same cash price paid in
the tender offer. Our tender offer is not subject to any financing
contingencies. We believe our offer provides an extraordinary cash value to
all of your stockholders.
As you undoubtedly know, we have expressed interest in a possible
business combination between our two companies in the past. Following the
announcement of your transaction with Sylvan, we conducted an intensive
strategic review and have concluded that the strategic and financial
advantages of combining our two companies are too compelling to ignore.
While in most circumstances we would have preferred to precede our offer
with discussions with you and your management, in light of your existing
agreement with Sylvan and to underscore the seriousness of our intentions,
we believed that commencing an offer was the best way to facilitate the
consideration of our proposal by you and your Board. Indeed, we would
strongly prefer to negotiate a merger agreement with standard terms and
conditions to the extent you are permitted to do so under your existing
agreement.
The price we are offering in our proposal, $19.50 per share, clearly
provides significantly greater and more certain value to your stockholders
than the proposed transaction with Sylvan. Accordingly, we strongly believe
that, pursuant to Section 3.2 of your agreement with Sylvan, you should
promptly request and obtain from your counsel their opinion confirming that
you and your Board of Directors are obligated by principles of fiduciary
duty to consider, and fully inform yourselves with respect to, our
proposal. Also, we expect that, upon your receipt of such advice and
consistent with your clear fiduciary duties, any information which has been
made available to Sylvan be made available to us as well, so that our offer
and its terms may be formulated with the full benefit of all information
provided to Sylvan.
Our Board of Directors is fully supportive of our proposal and has
authorized and approved it. Consistent with our Board's action, we and our
advisors are prepared to meet with you and your advisors at your earliest
convenience. Nonetheless, until the proposed pending transaction with
Sylvan is
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terminated in accordance with its terms and NEC enters into an agreement
with us, our cash tender will stand on its own as an offer made directly to
your stockholders. While we understand that your agreement with Sylvan is
subject to a breakup fee, we assume that you have been advised by your
counsel concerning the Board's fiduciary responsibilities and will not
place any additional impediments in the way of stockholder choice or
otherwise improperly interfere with the election machinery or voting
process.
We look forward to meeting with you and your Board shortly. With your
cooperation, we are confident that a transaction can be concluded which
will be in the best interests of your company and its stockholders. Please
call at your earliest convenience so that we can discuss our proposal in
full detail.
Sincerely,
/s/ RICHARD A. SMITH
---------------------
Richard A. Smith
Chief Executive Officer
Also in the morning on April 16, 1997, Harcourt issued the following press
release:
"Harcourt General, Inc. announced today that it will commence an
all-cash tender offer for all of the outstanding common shares of National
Education Corporation at a price of $19.50 per share.
Following the completion of the tender offer, Harcourt General intends
to effect a merger in which all remaining NEC stockholders will also
receive the same cash price paid in the tender offer.
Harcourt General's $19.50 per share offer, which has a total
transaction value of approximately $740 million, represents a 15.4% premium
over the value of the NEC/Sylvan Learning Systems, Inc. stock merger
proposal announced last month, based upon the per share price of the Sylvan
shares yesterday, and a 54.5% premium over the closing market price of NEC
shares on March 4, five trading days before the NEC/Sylvan merger proposal
was announced.
Richard A. Smith, chairman and chief executive officer of Harcourt
General said 'NEC fits very well with and adds significant growth potential
to our existing portfolio of educational businesses. It would add new
distribution channels for our existing products and would also accelerate
our entry into several non-traditional educational high growth markets,
including distance learning, supplemental publishing and computer-based
training.'
The tender offer is subject to customary conditions and the
termination of the merger agreement between NEC and Sylvan in accordance
with its terms. The offer will not be subject to any financing
contingencies. The complete terms and conditions of the tender offer will
be set forth in the offering documents to be filed shortly with the
Securities and Exchange Commission.
Harcourt General also indicated that it plans, subject to its ability
to effectuate the merger with NEC, to seek to acquire the outstanding
shares of common stock of Steck-Vaughn Publishing Corporation not currently
owned by NEC at a price per share of $14.00. Harcourt General has not yet
determined the manner in which it would seek to acquire the Steck-Vaughn
shares or the timing of any such acquisition. Harcourt General reserves the
right to change its plan to acquire Steck Vaughn shares and, accordingly,
there can be no assurance that it will acquire the Steck-Vaughn shares."
On April 21, 1997, the Purchaser commenced the Offer.
11. PURPOSE OF THE OFFER AND THE PROPOSED HARCOURT MERGER; PLANS FOR THE
COMPANY.
Purpose of the Offer and the Proposed Harcourt Merger. The purpose of the
Offer is for Harcourt to acquire control of, and the entire equity interest in,
the Company. The Offer, as the first step in the acquisition of the Company, is
intended to facilitate the acquisition of all Shares. The Purchaser is seeking
to
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<PAGE> 24
consummate the Proposed Harcourt Merger with the Company as promptly as
practicable following the consummation of the Offer. The purpose of the Proposed
Harcourt Merger is to acquire all Shares not beneficially owned by the Purchaser
following the consummation of the Offer.
Pursuant to the Proposed Harcourt Merger, each Share outstanding (other
than Shares owned by Harcourt or any of its wholly-owned subsidiaries, Shares
held in the treasury of the Company, and Shares held by stockholders who perfect
appraisal rights under the DGCL) would be converted into the right to receive an
amount in cash equal to the price per Share paid pursuant to the Offer. Although
it is the current intention of Harcourt to consummate the Proposed Harcourt
Merger as promptly as practicable following the consummation of the Offer, such
consummation depends on a number of factors and circumstances, and there can be
no assurance that the Proposed Harcourt Merger will be consummated or, if
consummated, the timing thereof.
Consummation of the Proposed Harcourt Merger will require approval by the
Company's Board of Directors and the affirmative vote of the holders of a
majority of the Shares outstanding if, following completion of the Offer, the
Purchaser owns less than 90% of the outstanding Shares. Assuming the Offer is
consummated and that the Minimum Condition and the other conditions to the Offer
are satisfied, the Purchaser will hold a majority of the Shares outstanding and
sufficient Shares for stockholder approval of the Proposed Harcourt Merger.
However, as described below, certain provisions of the Charter and the DGCL may
impair or delay the obtaining of the approval of the Company's Board of
Directors and the consummation of the Proposed Harcourt Merger.
Alternatively, the "short-form" merger provisions of the DGCL provide that
if, following completion of the Offer, the Purchaser owns 90% or more of the
Shares, the Purchaser would have the power to consummate the Proposed Harcourt
Merger without any action by the Company's Board of Directors and without the
vote of any of the Company's other stockholders.
Although Harcourt will seek to enter into negotiations with the Company
with respect to the Proposed Harcourt Merger, there can be no assurance that
such negotiations will occur or, if such negotiations occur, as to the outcome
thereof. The Purchaser reserves the right to amend the Offer (including amending
the purchase price) upon entry into a merger agreement with the Company or
otherwise or to negotiate a merger agreement with the Company not involving a
tender offer.
In connection with the Offer and during its pendency, or in the event the
Offer is terminated or not consummated, or after the expiration of the Offer and
pending the consummation of the Proposed Harcourt Merger, in accordance with
applicable law and subject to the terms of any merger agreement that it may
enter into with the Company, Harcourt may explore any and all options which may
be available to it. In this regard, Harcourt or the Purchaser may commence a
solicitation of proxies from the Company's stockholders against approval of the
Proposed Sylvan Merger. Harcourt or the Purchaser may also determine to solicit
the votes of the Company's stockholders at any annual or special meeting of such
stockholders. After the expiration or termination of the Offer, Harcourt may
seek to acquire additional Shares, through open market purchases, privately
negotiated transactions, a tender offer or exchange offer or otherwise in order
to obtain a sufficient number of Shares to approve the transactions contemplated
hereby. In addition, after consummation of the Offer, whether or not the
Purchaser acquires additional Shares, the Purchaser currently intends to seek to
enter into the Proposed Harcourt Merger with the Company.
The making of the Offer will enable the Purchaser to commence the process
of seeking regulatory approvals for its acquisition of the Company. See Section
15. In addition, by tendering Shares into the Offer, the Company's stockholders
effectively will be given the opportunity to express to the Company's Board of
Directors that they wish to be able to accept the Offer and to approve the
Proposed Harcourt Merger or a similar transaction with Harcourt.
THE OFFER DOES NOT CONSTITUTE A SOLICITATION OF PROXIES FOR ANY MEETING OF
THE COMPANY'S STOCKHOLDERS. ANY SUCH SOLICITATION WHICH HARCOURT OR THE
PURCHASER MIGHT MAKE WOULD BE MADE ONLY PURSUANT TO SEPARATE PROXY MATERIALS
COMPLYING WITH ALL APPLICABLE REQUIREMENTS OF SECTION 14(a) OF THE EXCHANGE ACT,
AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER.
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Plans for the Company. If Harcourt acquires control of the Company, it
intends to conduct a further review of the Company and its subsidiaries and
their respective assets, businesses, corporate structure, capitalization,
operations, properties, policies, management and personnel. After such review,
Harcourt will determine what actions or changes, if any, would be desirable in
light of the circumstances which then exist, and reserves the right to effect
such actions or changes. Harcourt's decisions could be affected by information
hereafter obtained, changes in general economic or market conditions or in the
business of the Company or its subsidiaries, actions by the Company or its
subsidiaries and other factors. Harcourt currently intends, subject to its
ability to effectuate the Proposed Harcourt Merger, to seek to acquire the
outstanding shares of common stock of Steck-Vaughn not currently owned by the
Company (the "SV Shares") at a price per share of $14.00. Harcourt has not yet
determined the manner in which it would seek to acquire the SV Shares, whether
through a merger, tender offer or open market or privately negotiated purchases,
or the timing of any such transaction or transactions. Harcourt reserves the
right to change its plan to acquire SV Shares and, accordingly, there can be no
assurance that Harcourt will consummate the acquisition of the SV Shares.
Except as described in this Offer to Purchase, neither Harcourt nor the
Purchaser has any present plans or proposals that would relate to or would
result in (i) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving the Company or any of its subsidiaries,
(ii) a sale or transfer of a material amount of assets of the Company or any of
its subsidiaries, (iii) any change in the present Board of Directors or
management of the Company (other than changes to the Board of Directors if the
Proposed Harcourt Merger is consummated), (iv) any material changes in the
present capitalization or dividend policy of the Company, (v) any other material
change in the Company's corporate structure or business, (vi) causing a class of
securities of the Company to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association or (vii) a class of equity securities
of the Company becoming eligible for termination of registration pursuant to
Section 12(g)(4) of the Exchange Act.
If the Offer is consummated with the Minimum Condition being satisfied, the
Purchaser will hold a majority of the Shares outstanding and sufficient Shares
for stockholder approval of the Proposed Harcourt Merger. However, in light of
the restrictions described below, there can be no assurance that the Proposed
Harcourt Merger will be proposed to the stockholders of the Company or be
consummated or as to the timing thereof. NONETHELESS, IF THE BOARD OF DIRECTORS
OF THE COMPANY VOTES TO APPROVE THE OFFER AND THE PROPOSED HARCOURT MERGER, THE
CHARTER CONDITION AND THE SECTION 203 CONDITION WILL BE SATISFIED.
Neither Harcourt nor the Purchaser can give any assurance as to whether, as
a result of information hereafter obtained by either Harcourt or the Purchaser,
changes in general economic or market conditions or in the business of the
Company, or other presently unforeseen factors, the Proposed Harcourt Merger
will be proposed to the Company's stockholders or whether the Proposed Harcourt
Merger will be delayed or abandoned. If for any reason the Proposed Harcourt
Merger is not consummated, Harcourt and the Purchaser reserve the right to
acquire additional Shares following the expiration of the Offer through private
purchases, market transactions, tender or exchange offers or otherwise on terms
and at prices that may be more or less favorable than those of the Offer or,
subject to any applicable legal restrictions, to dispose of any or all Shares
acquired by Harcourt and the Purchaser.
Board and Stockholder Approval. In general, under the DGCL, a merger of
two Delaware corporations requires the adoption of a resolution by the Board of
Directors of each of the corporations desiring to merge approving an agreement
of merger containing provisions with respect to certain statutorily specified
matters and the approval of such agreement of merger by the stockholders of each
corporation by the affirmative vote of the holders of a majority of all the
outstanding shares of stock entitled to vote on such merger. Assuming that the
Offer is consummated and that the Minimum Condition and the other conditions to
the Offer are satisfied, the Purchaser will hold a majority of the Shares
outstanding and sufficient Shares for stockholder approval of the Proposed
Harcourt Merger and the election of directors of the Company. If the Offer is
consummated, but the Purchaser acquires or controls the voting power of less
than 90% of the Shares and the members of the Company's Board of Directors
refuse to approve the Proposed Harcourt Merger, Harcourt or the Purchaser may
determine to solicit additional votes of the stockholders of the Company at any
annual or special meeting of such stockholders in order to change the
composition of the Board of Directors of the
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<PAGE> 26
Company to ensure that the reconstituted Board of Directors will take all such
actions necessary or appropriate (subject to such directors' fiduciary duties)
to approve and effectuate the consummation of the Proposed Harcourt Merger.
However, the DGCL also provides that if a parent company owns at least 90% of
each class of stock of a subsidiary, the parent company can effect a short-form
merger with that subsidiary without the action of the other stockholders or the
board of directors of the subsidiary. Accordingly, if, as a result of the Offer
or otherwise, the Purchaser acquires or controls the voting power of at least
90% of the Shares, the Purchaser could, and intends to, effect the Proposed
Harcourt Merger without prior notice to, or any action by, any other stockholder
of the Company or the Board of Directors of the Company.
Delaware Business Combination Law. In general, Section 203 of the DGCL
provides that a Delaware corporation such as the Company may not engage in any
Business Combination (defined to include a variety of transactions, including a
merger) with any Interested Stockholder (defined generally as a person that,
directly or indirectly, beneficially owns 15% or more of the corporation's
outstanding voting stock), or any affiliate of an Interested Stockholder, for
three years after the date on which the Interested Stockholder becomes an
Interested Stockholder. The Business Combination Prohibition does not apply if
certain conditions, described below, are satisfied. Section 203 of the DGCL
provides that a "beneficial owner" of voting stock includes any person who,
individually or together with any of its affiliates or associates, has (i) the
right to acquire voting stock (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options or otherwise, (ii) the right to vote such stock pursuant to
any agreement, arrangement or understanding, or (iii) any agreement, arrangement
or understanding for the purposes of acquiring, holding, voting or disposing of
such stock with any other person that beneficially owns, directly or indirectly,
such stock.
The Business Combination Prohibition does not apply to a particular
Business Combination between a corporation and a particular Interested
Stockholder if (i) prior to the date such Interested Stockholder became an
Interested Stockholder, the board of directors of such corporation approved
either the Business Combination or the transaction which resulted in the
stockholder becoming an Interested Stockholder, or (ii) upon consummation of the
transaction which resulted in the stockholder becoming an Interested
Stockholder, the Interested Stockholder owned at least 85% of the voting stock
of the corporation outstanding at the time the transaction commenced, excluding
for purposes of determining the number of shares outstanding those shares held
by (x) persons who are directors and also officers of the corporation and (y)
employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer, or (iii) on or subsequent to the date
the stockholder becomes an Interested Stockholder, the Business Combination is
(a) approved by the board of directors of the corporation and (b) authorized at
an annual or special meeting of stockholders by the affirmative vote of at least
66 2/3% of the outstanding voting stock of the corporation which is not owned by
the Interested Stockholder.
Section 203(b)(6) of the DGCL provides that the restrictions contained in
Section 203 of the DGCL do not apply to a Business Combination that is proposed
prior to the consummation or abandonment of and following the announcement or
notification of one of certain extraordinary transactions (including a merger)
involving the corporation which transaction (i) is with or by a person who
either was not an Interested Stockholder during the previous three years or who
became an Interested Stockholder with the approval of the corporation's board of
directors and (ii) has been approved or has not been opposed by a majority of
the members of the board of directors then in office who were directors prior to
any person becoming an Interested Stockholder during the previous three years or
were recommended for election or elected to succeed such directors by a majority
of such directors. Accordingly, based on the foregoing, the Purchaser believes
that, because the Sylvan Merger Agreement was approved by the Board of Directors
of the Company, the restrictions on Business Combinations contained in Section
203 would not be applicable to the Proposed Harcourt Merger pursuant to Section
203(b)(6). In any event, under the circumstances of the Offer and under
applicable law, the Purchaser believes that the Board of Directors of the
Company is obligated by its fiduciary responsibilities to approve, pursuant to
Section 203 of the DGCL, the acquisition of Shares pursuant to the Offer and the
Proposed Harcourt Merger.
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<PAGE> 27
The foregoing summary of Section 203 of the DGCL does not purport to be
complete and is qualified in its entirety by reference to the provisions of
Section 203 of the DGCL.
Non-Affiliated Shares Provision. The Charter provides that, in addition to
any vote required by law, the affirmative vote of the holders of at least a
majority of the Non-Affiliated Shares is required to approve certain business
combinations (including the Proposed Harcourt Merger) between the Company and a
Dominant Stockholder, unless (i) such business combination is approved by a
majority of the directors of the Company who were directors prior to the time
when such person became a Dominant Stockholder and continue to be directors at
the time the determination is made or (ii) the per Share consideration to be
received by the Company's stockholders in such business combination is not less
than the highest per share price paid by the Dominant Stockholder in acquiring
any Shares. The Charter Condition requires that the Purchaser be satisfied, in
its sole discretion, that the unaffiliated stockholder vote specified in the
Non-Affiliated Shares Provision would not be required prior to the consummation
of the Proposed Harcourt Merger.
The consummation of the Offer would make the Purchaser a Dominant
Stockholder. However, since the same per Share consideration would be paid in
the Proposed Harcourt Merger as the purchase price offered in the Offer and
since the Purchaser and its affiliates currently own only 100 Shares (all of
which were acquired at $15.00 per share), the Purchaser believes that the
Non-Affiliated Shares Provision would not be applicable to the Proposed Harcourt
Merger. The Charter Condition would also be satisfied if a majority of the
current members of the Board of Directors of the Company approved the Offer and
the Proposed Harcourt Merger. The Purchaser believes that under the
circumstances of the Offer and under applicable law, the Board of Directors of
the Company is obligated by its fiduciary responsibilities to so approve the
Proposed Harcourt Merger in order to permit the Offer and the Proposed Harcourt
Merger to be consummated.
The foregoing summary of the Non-Affiliated Shares Provision does not
purport to be complete and is qualified in its entirety by reference to the
provisions of the Charter.
Other Charter and By-law Provisions. The Charter and the Company's By-laws
(the "By-laws") contain certain provisions that may delay the consummation of
the Proposed Harcourt Merger following the purchase of the Shares pursuant to
the Offer, including, among other things, (i) a provision that provides that the
Company's Board of Directors be classified into three classes, with each class
elected for a term of three years and one class elected each year at the
Company's annual meeting of stockholders, (ii) a provision that special meetings
of stockholders may be called only by the Chief Executive Officer or the Board
of Directors of the Company and (iii) a provision that the stockholders may
amend the By-laws only by the affirmative vote of the holders of not less than
two-thirds of the outstanding Shares.
If the members of the Company's Board of Directors were to refuse to
approve the Proposed Harcourt Merger following the consummation of the Offer,
unless 90% or more of the outstanding Shares were tendered and purchased
thereby, Harcourt would have to replace at least a majority of the members of
the Company's Board of Directors in order to consummate the Proposed Harcourt
Merger. In order to obtain control of the Company's Board of Directors, Harcourt
would have to seek to amend the By-laws, at a meeting of the Company's
stockholders, to increase the size of the Board of Directors to a number
sufficient to elect at such meeting a majority of the directors. Harcourt or the
Purchaser may determine to solicit the votes of the stockholders of the Company
at any annual or special meeting of stockholders for such purpose.
The foregoing summary of these Charter and By-law provisions does not
purport to be complete and is qualified in its entirety by reference to the full
text of the Charter and By-laws.
Appraisal Rights. No appraisal rights are available in connection with the
Offer. However, if the Proposed Harcourt Merger is consummated, stockholders of
the Company will have certain rights under Section 262 of the DGCL to dissent
and demand appraisal of, and payment in cash of the fair value of, their Shares.
Such rights, if the statutory procedures were complied with, could lead to a
judicial determination of the fair value (excluding any element of value arising
from the accomplishment or expectation of the Proposed Harcourt Merger) required
to be paid in cash to such dissenting holders for their Shares. Any such
judicial determination of the fair value of Shares could be based upon
considerations other than, or in addition to, the price paid in the Offer and
the market value of the Shares, including asset values and the investment value
of
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<PAGE> 28
the Shares. The value so determined could be more or less than the purchase
price per the applicable Share pursuant to the Offer or the consideration per
the applicable Share to be paid in the Proposed Harcourt Merger.
In addition, several decisions by Delaware courts have held that, in
certain instances, a controlling stockholder of a corporation involved in a
merger has a fiduciary duty to the other stockholders that requires the merger
to be fair to such other stockholders. In determining whether a merger is fair
to minority stockholders, the Delaware courts have considered, among other
things, the type and amount of consideration to be received by the stockholders
and whether there were fair dealings among the parties. Although the remedies of
rescission or other damages are possible in an action challenging a merger as a
breach of fiduciary duty, decisions of the Delaware courts have indicated that
in most cases the remedy available in a merger that is found not to be "fair" to
minority stockholders is a damages remedy based on essentially the same
principles as an appraisal.
THE FOREGOING SUMMARY OF THE RIGHTS OF OBJECTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF THE PROCEDURES TO BE FOLLOWED BY
STOCKHOLDERS DESIRING TO EXERCISE ANY AVAILABLE DISSENTERS' RIGHTS. THE
PRESERVATION AND EXERCISE OF DISSENTERS' RIGHTS REQUIRE STRICT ADHERENCE TO THE
APPLICABLE PROVISIONS OF THE DGCL.
"Going Private" Transactions. The Commission has adopted Rule 13e-3 under
the Exchange Act which is applicable to certain "going private" transactions and
which may under certain circumstances be applicable to the Proposed Harcourt
Merger. However, Rule 13e-3 would be inapplicable if (i) the Shares are
deregistered under the Exchange Act prior to the Proposed Harcourt Merger or
other business combination or (ii) the Proposed Harcourt Merger or other
business combination is consummated within one year after the purchase of the
Shares pursuant to the Offer and the amount paid per Share in the Proposed
Harcourt Merger or other business combination is at least equal to the amount
paid per Share in the Offer. If applicable, Rule 13e-3 requires, among other
things, that certain financial information concerning the fairness of the
proposed transaction and the consideration offered to minority stockholders in
such transaction be filed with the Commission and disclosed to stockholders
prior to the consummation of the transaction.
12. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by the
Purchaser to purchase all outstanding Shares pursuant to the Offer and to pay
fees and expenses related to the Offer and the Proposed Harcourt Merger is
estimated to be approximately $785.0 million. The Purchaser plans to obtain all
funds needed for the Offer and the Proposed Harcourt Merger through a capital
contribution and/or a loan which will be made by Harcourt to the Purchaser.
Harcourt plans to use funds it has available in cash and equivalents and
short-term investments and by borrowing under its existing $400 million
revolving credit facility (the "Revolving Credit Facility"). Harcourt expects
that such borrowings would be repaid from cash flow from the normal operations
of Harcourt's businesses. The Offer is not conditioned on obtaining financing.
The Revolving Credit Facility is provided pursuant to a Credit Agreement
(the "Credit Agreement") dated as of December 16, 1994 among Harcourt, Morgan
Guaranty Trust Company of New York, as documentation agent, The First National
Bank of Boston, as administrative agent, The Bank of Nova Scotia and National
Westminster Bank Plc, as co-agents, and a group of 13 lenders party thereto.
Under the Credit Agreement, Harcourt may request that its lenders make committed
loans which bear interest at a per annum rate determined according to Harcourt's
senior debt rating and one of several pricing options selected by Harcourt.
Under the Credit Agreement, Harcourt may also request that its lenders make
uncommitted loans at competitive rates determined on an auction basis. The
Credit Agreement contains customary conditions to borrowing, representations and
warranties, covenants and events of default and terminates on December 16, 1999.
The foregoing description of the Revolving Credit Facility is qualified in its
entirety by reference to the text of the Credit Agreement, which is filed with
the Commission as Exhibit 11(b) to the Tender Offer Statement on Schedule 14d-1
of the Purchaser in connection with the Offer and is incorporated herein by
reference.
13. DIVIDENDS AND DISTRIBUTIONS. If, on or after March 31, 1997, the
Company (i) splits, combines or otherwise changes the Shares or its
capitalization, (ii) acquires Shares or otherwise causes a reduction in the
number of Shares, (iii) issues or sells additional Shares (other than the
issuance of Shares reserved for
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issuance as of March 31, 1997 pursuant to the exercise of then outstanding
employee stock options or pursuant to conversion of the Convertible Debentures,
in each case in accordance with their terms) or any shares of any other class of
capital stock, other voting securities or any securities convertible into or
exchangeable for, or rights, warrants or options, conditional or otherwise, to
acquire, any of the foregoing or (iv) discloses that it has taken such action,
then, without prejudice to the Purchaser's rights under Section 14, the
Purchaser, in its sole discretion, may make such adjustments in the purchase
price and other terms of the Offer and the Proposed Harcourt Merger as it deems
appropriate to reflect such split, combination or other change or action,
including, without limitation, the Minimum Condition or the number or type of
securities offered to be purchased.
If, on or after March 31, 1997, the Company declares or pays any dividend
on the Shares or any distribution (including, without limitation, the issuance
of additional Shares pursuant to a stock dividend or stock split, the issuance
of other securities or the issuance of rights for the purchase of any
securities) with respect to the Shares that is payable or distributable to
stockholders of record on a date prior to the transfer into the name of the
Purchaser or its nominees or transferees on the Company's stock transfer records
of the Shares purchased pursuant to the Offer, and if Shares are purchased in
the Offer, then, without prejudice to the Purchaser's rights under Section 14,
(i) the purchase price per Share payable by the Purchaser pursuant to the Offer
shall be reduced by the amount of any such cash dividend or cash distribution
and (ii) any such non-cash dividend, distribution, issuance, proceeds or rights
to be received by the tendering stockholders shall (a) be received and held by
the tendering stockholders for the account of the Purchaser and will be required
to be promptly remitted and transferred by each tendering stockholder to the
Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer or (b) at the direction of the Purchaser, be exercised
for the benefit of the Purchaser, in which case the proceeds of such exercise
will promptly be remitted to the Purchaser. Pending such remittance and subject
to applicable law, the Purchaser will be entitled to all rights and privileges
as owner of any such non-cash dividend, distribution, issuance, proceeds or
rights 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.
14. CERTAIN CONDITIONS OF THE OFFER. 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-1(c) under the Exchange Act (relating to the Purchaser's intention 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 (whether or not any Shares have theretofore been purchased
or paid for) if, in the sole judgment of the Purchaser, the Minimum Condition,
the Sylvan Termination Condition, the No Impediments Condition, the Charter
Condition or the Section 203 Condition shall not have been satisfied or if, at
any time on or after March 31, 1997 and prior to the acceptance for payment of
or payment for Shares, any one or more of the events listed below shall have
occurred or shall be determined by Harcourt or the Purchaser to have occurred
(except for any such events occurring between March 31, 1997 and April 15, 1997
which shall have been publicly disclosed prior to April 15, 1997):
(a) there shall have been threatened, instituted or pending any
action, proceeding, claim or application by any government or governmental
regulatory or administrative authority or agency, domestic, foreign or
supranational, or by any other person, domestic or foreign, before any
court or governmental, regulatory or administrative agency, authority or
tribunal, domestic, foreign or supranational, that (i) challenges or seeks
to make illegal, to delay or otherwise directly or indirectly to restrain
or prohibit, or which is likely to impose, in the sole judgment of the
Purchaser, voting, procedural, price or other requirements in addition to
those required by the provisions of the DGCL described in Section 11 and
federal securities law in connection with the acquisition of Shares by the
Purchaser or any of its affiliates, the making of the Offer, the acceptance
for payment of or payment for Shares by the Purchaser or any of its
affiliates or the consummation of the Proposed Harcourt Merger or any other
business combination involving the Company or the performance of any of the
contracts or other arrangements entered into by the Purchaser or any of its
affiliates in connection with the acquisition of the Company,
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seeking to obtain any material damages as a result thereof or otherwise
directly or indirectly relating to the Offer or the Proposed Harcourt
Merger or such other business combination, (ii) seeks to restrain, prohibit
or limit the exercise of full rights of ownership or operation by the
Purchaser or any of its affiliates of all or any portion of the business or
assets of the Company or any of its subsidiaries or the Purchaser or any of
its affiliates or to compel the Purchaser or any of its affiliates to
dispose of or to hold separately all or any portion of the business or
assets of the Company or any of its subsidiaries or the Purchaser or any of
its affiliates, (iii) seeks to impose or confirm limitations on the ability
of the Purchaser or any of its affiliates effectively to acquire or hold or
to exercise full rights of ownership of Shares, including without
limitation the right to vote the 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, or the right to vote any shares of capital
stock of any subsidiary directly or indirectly owned by the Company, (iv)
seeks to require divestiture by Harcourt or the Purchaser or any of its
affiliates of any Shares, (v) might result, in the sole judgment of the
Purchaser, in a diminution of the benefits expected to be derived by the
Purchaser or any of its affiliates as a result of the Offer or the Proposed
Harcourt Merger or any other business combination involving the Company, or
in a diminution of the value of the Shares or the Company or any of its
subsidiaries to the Purchaser or any of its affiliates or (vi) otherwise
directly or indirectly relates to the Offer, the Proposed Harcourt Merger
or any other business combination involving the Company; or
(b) other than the application of the waiting periods under the HSR
Act or the Competition Act and the necessity for the approvals and other
actions by any domestic (federal and state) or foreign or supranational
governmental, administrative or regulatory agency described in Section 15,
there shall have been proposed, sought, promulgated, enacted, entered,
enforced or deemed applicable to the Offer, the Proposed Harcourt Merger or
any other business combination involving the Company, by any government or
governmental, regulatory or administrative agency or authority or by any
court or tribunal, in each case whether domestic, foreign or supranational,
any statute, rule, regulation, judgment, decree, decision, order or
injunction that, in the sole judgment of the Purchaser, might, directly or
indirectly, result in any of the consequences referred to in clauses (i)
through (vi) of paragraph (a) above; or
(c) any change (or any condition, event or development involving a
prospective change) shall have occurred or been threatened in the business,
properties, assets, liabilities, stockholders' equity, financial condition,
capitalization, licenses, franchises, permits, operations, results of
operations or prospects of the Company or any of its subsidiaries or
affiliates (or the Purchaser shall have become aware thereof) or in general
economic or financial market conditions in the United States or abroad
that, in the sole judgment of the Purchaser, is or may be materially
adverse to the Company or any of its subsidiaries or affiliates, or the
Purchaser shall have become aware of any facts that, in the sole judgment
of the Purchaser, have or may have material adverse significance with
respect to either the value of the Company or any of its subsidiaries or
affiliates or the value of the Shares to Harcourt or the Purchaser or any
of its affiliates; or
(d) 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 United States over-the-counter market, (ii) the
declaration of a banking moratorium or any suspension of payments in
respect of banks in the United States, (iii) any material adverse change
(or any existing or threatened condition, event or development involving a
prospective material adverse change) in United States or any other currency
exchange rates or a suspension of, or a limitation on, the markets
therefor, (iv) any other material adverse change in the market price of the
Shares or in the United States securities or financial markets generally,
(v) the commencement of a war, armed hostilities or other international or
national calamity directly or indirectly involving the United States, (vi)
any limitation (whether or not mandatory) by any governmental authority or
any other event that, in the sole judgment of the Purchaser, may have
material adverse significance with respect to the extension of credit by
banks or other lending institutions or the financing of the Offer or the
Proposed Harcourt Merger or any other business combination involving the
Company or (vii) in the case of any of the situations described in clauses
(i) through (vi) above existing at the time of the commencement of the
Offer, a material acceleration or worsening thereof; or
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(e) a tender or exchange offer for some or all of the Shares shall
have been publicly proposed to be made or shall have been made by another
person (including the Company or any of its subsidiaries or affiliates), or
it shall have been publicly disclosed or the Purchaser shall have otherwise
deemed that (i) any person, entity (including the Company or any of its
subsidiaries or affiliates) or "group" (within the meaning of Section
13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire
beneficial ownership of more than 10% of any class or series of capital
stock of the Company (including the Shares) through the acquisition of
stock, the formation of a group or otherwise, or shall have been granted
any option, right or warrant, conditional or otherwise, to acquire
beneficial ownership of more than 10% of any class or series of capital
stock of the Company (including the Shares) other than acquisitions for
bona fide arbitrage purposes only and other than as disclosed in a Schedule
13D or 13G on file with the Commission prior to April 15, 1997, (ii) any
such person, entity or group which, prior to such date, had filed such a
Schedule with the Commission, shall have acquired or proposed to acquire,
through the acquisition of stock, the formation of a group or otherwise,
beneficial ownership of additional shares of any class or series of capital
stock of the Company (including the Shares) constituting 2% or more of any
such class or series, or shall have been granted any option, right or
warrant, conditional or otherwise, to acquire beneficial ownership of
shares of any class or series of capital stock of the Company (including
the Shares) constituting 2% or more of any such class or series, (iii) any
person, entity or group shall have entered into a definitive agreement or
an agreement in principle or made a proposal with respect to a tender or
exchange offer for some or all the Shares or a merger, consolidation or
other business combination with or involving the Company or any of its
subsidiaries or affiliates or (iv) any person, entity or group shall have
filed a Notification and Report Form under the HSR Act or made a public
announcement reflecting an intent to acquire the Company or any of its
subsidiaries or any assets or securities of the Company or any of its
subsidiaries; or
(f) the Company or any of its subsidiaries shall have, directly or
indirectly, (i) split, combined or otherwise changed, or authorized or
proposed the split, combination or other change of, the Shares or its
capitalization, (ii) acquired or otherwise caused a reduction in the number
of, or authorized or proposed the acquisition or other reduction in the
number of, any outstanding Shares or other securities of the Company or any
subsidiary thereof, (iii) issued, distributed or sold, or authorized,
proposed or announced the issuance, distribution or sale of, (A) any
additional Shares, shares of any other class or series of capital stock,
other voting securities, or any securities convertible into or exchangeable
or exercisable for any of the foregoing, or options, rights or warrants,
conditional or otherwise, to acquire any of the foregoing, except for the
issuance of Shares reserved for issuance on April 15, 1997 pursuant to the
exercise of then outstanding employee stock options or the conversion of
the Convertible Debentures, in each case in accordance with their terms on
such date or (B) any other securities or rights in respect of, in lieu of
or in substitution or exchange for any shares of its capital stock, (iv)
permitted the issuance or sale of any shares of any class of capital stock
or other debt or equity securities of any subsidiary of the Company or any
securities convertible into or exchangeable or exercisable for any of the
foregoing, except for the issuance of shares of common stock of
Steck-Vaughn or NETG reserved for issuance on April 15, 1997 pursuant to
the exercise of then outstanding employee stock options in accordance with
their terms on such date, (v) declared, paid or proposed to declare or pay
any dividend or other distribution, whether payable in cash, securities or
other property, on, or in respect of, any Shares or any shares of capital
stock of Steck-Vaughn or NETG, (vi) altered or proposed to alter any
material term of any outstanding security of the Company or any of its
subsidiaries, (vii) issued, distributed or sold, or authorized or proposed
the issuance, distribution or sale of, any debt securities or securities
convertible into or exchangeable or exercisable for debt securities or any
rights, warrants or options entitling the holder thereof to purchase or
otherwise acquire any debt securities, or otherwise incurred, authorized or
proposed the incurrence of, any debt other than in the ordinary course of
business and consistent with past practice or any debt containing
burdensome covenants, (viii) authorized, recommended, proposed, effected or
announced its intention to engage in any merger (other than the Proposed
Harcourt Merger), consolidation, liquidation, dissolution, business
combination, acquisition (including by way of exchange) of assets or
securities, disposition (including by way of exchange) of assets or
securities, joint venture, any release or relinquishment of any material
contract or other rights of the Company or any of its affiliates or
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any comparable event not in the ordinary course of business, (ix)
authorized, recommended, proposed or announced its intent to enter into, or
entered into any agreement or arrangement with any person, entity or group
that in the sole judgment of the Purchaser, has or may have material
adverse significance with respect to the value of the Company or any of its
affiliates, or the value of the Shares to the Purchaser or any of its
affiliates, (x) amended or proposed, adopted or authorized any amendment to
the Charter or the By-laws or similar organizational documents of the
Company or any of its subsidiaries or the Purchaser shall have learned that
the Company or any of its subsidiaries shall have proposed or adopted any
such amendment which shall have been previously disclosed, (xi) transferred
into escrow any amounts required to fund any existing benefit, employment
or severance agreements with any of its employees or entered into or
amended any employment, severance or similar agreement, arrangement or plan
with or for the benefit of any employee of the Company or any of its
subsidiaries (other than in the ordinary course of business and consistent
with past practice) or so as to provide for increased or accelerated
benefits to employees as a result of or in connection with the making of
the Offer, the acceptance for payment of or payment for Shares by the
Purchaser or the consummation by the Purchaser or any of its affiliates of
the Proposed Harcourt Merger or any other business combination involving
the Company, (xii) except as may be required by law, taken any action to
terminate or amend any employee benefit plan (as defined in Section 3(2) of
the Employee Retirement Income Security Act of 1974, as amended) of the
Company or any of its affiliates, or the Purchaser shall have become aware
of any such action which shall not have been previously disclosed, or
(xiii) agreed in writing or otherwise to take any of the foregoing actions;
or
(g) the Purchaser shall become aware (i) that any material contractual
right of the Company or any of its subsidiaries shall be impaired or
otherwise adversely affected or that any material amount of indebtedness of
the Company or any of its subsidiaries (other than indebtedness pursuant to
term or revolving credit agreements provided by banks) shall become
accelerated or otherwise become due or become subject to acceleration prior
to its stated due date, in each case with or without notice or the lapse of
time or both, as a result of or in connection with the Offer or the
consummation by the Purchaser or any of its affiliates of the Proposed
Harcourt Merger or any other business combination involving the Company,
(ii) of any covenant, term or condition in any of the instruments or
agreements of the Company or any of its subsidiaries that, in the sole
judgment of the Purchaser, is or may be (whether considered alone or in the
aggregate with other such covenants, terms or conditions) materially
adverse to either the value of the Company or any of its subsidiaries
(including without limitation any event of default that may occur as a
result of or in connection with the Offer, the consummation by the
Purchaser or any of its affiliates of the Proposed Harcourt Merger or any
other business combination involving the Company) or the value of the
Shares to the Purchaser or any of its affiliates or the consummation by the
Purchaser or any of its affiliates of the Proposed Harcourt Merger or any
other business combination involving the Company, or (iii) that any report,
document, instrument, financial statement or schedule of the Company or any
of its subsidiaries filed with the Commission contained, when filed, an
untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not
misleading; or
(h) (i) the Purchaser or any of its affiliates shall have entered into
a definitive agreement or announced an agreement in principle with respect
to the Proposed Harcourt Merger or any other business combination with the
Company or any of its affiliates or the purchase of any material portion of
the securities or assets of the Company or any of its subsidiaries or (ii)
the Purchaser or any of its affiliates and the Company shall have agreed
that the Purchaser shall amend or terminate the Offer or postpone the
payment for the Shares pursuant thereto; or
(i) any waiting periods under the HSR Act or the Competition Act
applicable to the purchase of the Shares pursuant to the Offer shall not
have expired or been terminated, or any other approval, permit,
authorization, consent or other action of any domestic, foreign or
supranational governmental, administrative or regulatory agency, authority
or tribunal (including those described in Section 15) shall not have been
obtained on terms satisfactory to the Purchaser in its sole discretion;
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which in the sole judgment of the Purchaser with respect to each and every
matter referred to above regardless of the circumstances (including any action
or inaction by the Purchaser or any of its affiliates) giving rise to any such
condition, makes it inadvisable to proceed with the Offer or with such
acceptance for payment of or payment for Shares.
The foregoing conditions are for the sole benefit of the Purchaser and may
be waived by the Purchaser in whole or in part at any time and from time to time
in its sole discretion. Any determination by the Purchaser concerning the events
described above shall be final and binding upon all parties including tendering
stockholders. 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 and each such
right shall be deemed an ongoing right which may be asserted at any time and
from time to time.
A public announcement will be made of a material change in, or waiver of,
such conditions, to the extent required by Rules 14d-4(c) and 14d-6(d) under the
Exchange Act, and the Offer will be extended in connection with any such change
or waiver to the extent required by such rules.
15. CERTAIN LEGAL MATTERS; REQUIRED REGULATORY APPROVALS. Except as set
forth in this Offer to Purchase, based on its review of publicly available
filings by the Company with the Commission and other publicly available
information regarding the Company and its subsidiaries, neither Harcourt nor the
Purchaser is aware of any licenses or regulatory permits that appear to be
material to the business of the Company and its subsidiaries, taken as a whole,
and that might be adversely affected by the Purchaser's acquisition of Shares
(and the indirect acquisition of the stock of the Company's subsidiaries) as
contemplated herein, or any filings, approvals or other actions by or with any
domestic, foreign or supranational governmental authority or administrative or
regulatory agency that would be required for the acquisition or ownership of the
Shares (or the indirect acquisition of the stock of the Company's subsidiaries)
by the Purchaser pursuant to the Offer as contemplated herein. Should any such
approval or other action be required, it is presently contemplated that such
approval or action would be sought except as described below under "State
Takeover Laws." Should any such approval or other action be required, there can
be no assurance that any such approval or action, if needed, would be obtained
without substantial conditions or that adverse consequences might not result to
the Company's or its subsidiaries' businesses, or that certain parts of the
Company's, Harcourt's, the Purchaser's or any of their respective subsidiaries'
businesses might not have to be disposed of or held separate or other
substantial conditions complied with in order to obtain such approval or action
or in the event that such approvals were not obtained or such actions were not
taken. The Purchaser's obligation to purchase and pay for Shares is subject to
certain conditions, including conditions with respect to litigation and
governmental actions. See the Introduction and Section 14 for a description
thereof.
State Takeover Laws. A number of states (including Delaware, where the
Company is incorporated) have adopted takeover laws and regulations which
purport, to varying degrees, to be applicable to attempts to acquire securities
of corporations which are incorporated in such states or which have substantial
assets, stockholders, principal executive offices or principal places of
business therein. To the extent that certain provisions of certain of these
state takeover statutes purport to apply to the Offer or the Proposed Harcourt
Merger, the Purchaser believes that such laws conflict with federal law and
constitute an unconstitutional burden on interstate commerce. In 1982, the
Supreme Court of the United States, in Edgar v. Mite Corp., invalidated on
constitutional grounds the Illinois Business Takeovers Act, which as a matter of
state securities law, made takeovers of corporations meeting certain
requirements more difficult, and the reasoning in such decision is likely to
apply to certain other state takeover statutes. In 1987, however, in CTS Corp.
v. Dynamics Corp. of America, the Supreme Court of the United States held that
the State of Indiana could, as a matter of corporate law and, in particular,
those aspects of corporate law concerning corporate governance, constitutionally
disqualify a potential acquiror from voting on the affairs of a target
corporation without the prior approval of the remaining stockholders, provided
that such laws were applicable only under certain conditions. Subsequently, in
TLX Acquisition Corp. v. Telex Corp., a Federal district court in Oklahoma ruled
that the Oklahoma statutes were unconstitutional insofar as they apply to
corporations incorporated outside Oklahoma in that they would subject such
corporations to inconsistent regulations. Similarly, in Tyson Foods, Inc. v.
McReynolds, a Federal district court in Tennessee ruled that four Tennessee
takeover statutes were unconstitutional as applied to corporations incorporated
outside Tennessee. This decision was affirmed by the
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United States Court of Appeals for the Sixth Circuit. In December 1988, a
Federal district court in Florida held in Grand Metropolitan PLC v. Butterworth
that the provisions of the Florida Affiliated Transactions Act and Florida
Control Share Acquisition Act were unconstitutional as applied to corporations
incorporated outside of Florida.
Except as described herein, the Purchaser has not attempted to comply with
any state takeover statutes in connection with the Offer or the Proposed
Harcourt Merger. The Purchaser reserves the right to challenge the validity or
applicability of any state law allegedly applicable to the Offer or the Proposed
Harcourt Merger and nothing in this Offer to Purchase nor any action taken in
connection herewith is intended as a waiver of that right. In the event that it
is asserted that one or more takeover statutes apply to the Offer or the
Proposed Harcourt Merger, and it is not determined by an appropriate court that
such statute or statutes do not apply or are invalid as applied to the Offer or
the Proposed Harcourt Merger, as applicable, the Purchaser may be required to
file certain documents with, or receive approvals from, the relevant state
authorities, and the Purchaser might be unable to accept for payment or purchase
Shares tendered pursuant to the Offer or be delayed in continuing or
consummating the Offer. In such case, the Purchaser may not be obligated to
accept for purchase, or pay for, any Shares tendered. See Section 14.
Antitrust. Under the HSR Act, and the rules and regulations that have been
promulgated thereunder by the Federal Trade Commission (the "FTC"), certain
acquisition transactions may not be consummated until certain information and
documentary material has been furnished for review by the Antitrust Division of
the Department of Justice (the "Antitrust Division") and the FTC, and certain
waiting period requirements have been satisfied. The acquisition of Shares
pursuant to the Offer and the Proposed Harcourt Merger is subject to such
requirements.
Under the provisions of the HSR Act applicable to the Offer and the
Proposed Harcourt Merger, the purchase of Shares pursuant to the Offer and the
Proposed Harcourt Merger may not be consummated until the expiration of a 15
calendar day waiting period following the filing of certain required information
and documentary material with respect to the Offer with the FTC and the
Antitrust Division, unless such waiting period is earlier terminated by the FTC
and the Antitrust Division. The Purchaser expects to file a Premerger
Notification and Report Form with the Antitrust Division and the FTC in
connection with the purchase of Shares pursuant to the Offer and the Proposed
Harcourt Merger under the HSR Act as soon as practicable following the date
hereof, and, in such event, the required waiting period with respect to the
Offer and the Proposed Harcourt Merger will expire at 11:59 p.m., New York City
time, on the fifteenth calendar day following such filing, unless earlier
terminated by the Antitrust Division or the FTC or the Purchaser receives a
request for additional information or documentary material prior thereto. If,
within such 15 calendar day waiting period, either the FTC or the Antitrust
Division were to request additional information or documentary material from the
Purchaser, the waiting period with respect to the Offer and the Proposed
Harcourt Merger would be extended for an additional period of 10 calendar days
following the date of substantial compliance with such request by the Purchaser.
Only one extension of the waiting period pursuant to a request for additional
information is authorized by the rules promulgated under the HSR Act.
Thereafter, the waiting period could be extended only by court order or with the
consent of the Purchaser. The additional 10 calendar day waiting period may be
terminated sooner by the FTC or the Antitrust Division. Although the Company is
required to file certain information and documentary material with the Antitrust
Division and the FTC in connection with the Offer, neither the Company's failure
to make such filings nor a request made to the Company from the Antitrust
Division or the FTC for additional information or documentary material will
extend the waiting period with respect to the purchase of Shares pursuant to the
Offer and the Proposed Harcourt Merger.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Shares by the
Purchaser pursuant to the Offer and the Proposed Harcourt Merger. At any time
before or after the Purchaser's purchase of Shares, the Antitrust Division or
the FTC could take such action under the antitrust laws as either deems
necessary or desirable in the public interest, including seeking to enjoin the
purchase of Shares pursuant to the Offer and the Proposed Harcourt Merger, the
divestiture of Shares purchased pursuant to the Offer or the divestiture of
substantial assets of Harcourt, the Purchaser, the Company or any of their
respective subsidiaries or affiliates. Private parties as
31
<PAGE> 35
well as state attorneys general may also bring legal actions under the antitrust
laws under certain circumstances. See Section 14.
Based upon an examination of publicly available information relating to the
businesses in which the Company is engaged, the Purchaser believes that the
acquisition of Shares pursuant to the Offer and the Proposed Harcourt Merger
should not violate the applicable antitrust laws. Nevertheless, there can be no
assurance that a challenge to the Offer and the Proposed Harcourt Merger on
antitrust grounds will not be made, or, if such challenge is made, what the
result will be. See Section 14.
Investment Canada Act. According to publicly available information, the
Company conducts certain operations in Canada. The ICA may require that a notice
of the acquisition of "control" (as defined in the ICA) by a "non-Canadian" (as
defined in the ICA) of any "Canadian business" (as defined in the ICA) be
furnished to Investment Canada, a Canadian governmental agency (the "Agency"),
and that certain of these investments to acquire control of a Canadian business
be reviewed and approved by the Minister of the federal cabinet responsible for
the ICA (the "Minister") as an investment that is "likely to be of net benefit"
to Canada based upon criteria set forth in the ICA. An acquisition of control of
a corporation incorporated outside Canada that controls, directly or indirectly,
an entity in Canada carrying on a Canadian business (an "indirect acquisition")
does not require approval under the ICA before the acquisition is implemented,
although some indirect acquisitions may require approval after implementation.
Direct acquisitions may require the Minister's approval before they can be
implemented. Under the ICA, the acquisition of more than a majority of the
voting shares of a corporation is deemed to be an acquisition of control.
Most indirect acquisitions of control of a Canadian business by an
"American" (as defined in the ICA) are not reviewable under the ICA provided
that the value of the assets of all the acquired entities carrying on a Canadian
business is not more than 50% of the value of the assets of all entities
acquired in the transaction, wherever located. Where the value of the assets of
entities carrying on a Canadian business exceeds that amount, and in the case of
most direct acquisitions of control of a Canadian business by or from an
"American," the transaction is reviewable under the ICA if the value of the
assets of all the acquired entities carrying on a Canadian business is Cdn. $172
million or more (for transactions implemented at any time in 1997). However,
where any of the acquired Canadian businesses is a "cultural business" (as
defined in the ICA), which may include certain businesses of the Company, the
ICA subjects an indirect acquisition to review where the value of the assets of
all acquired entities carrying on a Canadian business exceeds (i) Cdn. $50
million or (ii), if such value also amounts to more than 50% of the value of the
assets of all entities wherever located acquired in the transaction, Cdn. $5
million. A direct acquisition of an entity carrying on such a Canadian business
is subject to review where the value of the assets of all acquired entities
carrying on a Canadian business exceeds Cdn. $5 million. Under the ICA, the
federal cabinet may also require a review if the operations of the acquired
Canadian business include certain cultural activities, without regard to the
value of the assets of the Canadian business.
The Purchaser intends to file within the prescribed time period a notice
with respect to the Offer and the Proposed Harcourt Merger with the Agency and
to seek approval of the Minister, if required. If the Purchaser were to acquire
control of a Canadian business in a transaction reviewable under the ICA and,
within certain specified periods of time provided in the ICA, the Minister
decides that he is not satisfied that the acquisition is "likely to be of net
benefit" to Canada, the Minister could issue a notice the effect of which would
be to prohibit the acquisition of "control" of all or part of the Company's
Canadian businesses by the Purchaser, or, where such acquisition has already
been made, to compel divestiture of control of all or part of the Company's
Canadian businesses. In assessing whether a transaction is likely to be of net
benefit to Canada, the ICA requires that the Minister consider any
representations and undertakings that are submitted by an acquiror. If the Offer
and the Proposed Harcourt Merger are subject to review under the ICA, there can
be no assurance that the Minister would be satisfied that the acquisition is
"likely to be of net benefit to Canada" and, if not, what remedy he might seek
or what the outcome would be.
Competition Act (Canada). Certain provisions of the Competition Act
require pre-merger notification to the Director of Investigation and Research
(the "Canadian Director") of significant transactions, which may include the
acquisition of a large percentage of the stock of a public company which has
Canadian operations, or a merger or amalgamation involving such an entity.
Pre-merger notification is generally required
32
<PAGE> 36
with respect to transactions in which the parties to the transaction and their
affiliates have assets in Canada, or annual gross revenues from sales in, from
or into Canada, in excess of Cdn. $400 million and which involve the direct or
indirect acquisition of an operating business in Canada of which the value of
the Canadian assets, or the annual gross revenues from sales in or from Canada
generated from such assets, exceed Cdn. $35 million (or, in the case of an
amalgamation of two or more corporations one or more of which carries on an
operating business in Canada, the Canadian assets or the annual gross revenues
from sales in or from Canada of the entity resulting from such amalgamation or
the entities controlled by such entity exceed Cdn. $70 million). In the case of
an acquisition of shares of a public company, the transaction must also result
in the acquiror holding voting shares which carry more than 20% of the
outstanding votes (or more than 50% if the acquiror already holds 20% or more)
attached to all the voting shares of the public company. If a transaction is
subject to the pre-merger notification requirements, notice must be given either
7 or 21 days (depending on the information required by the Canadian Director)
prior to the completion of the transaction. The Canadian Director may waive the
waiting period. After the applicable waiting period expires or is waived, the
transaction may be completed.
The Canadian Director may apply to the Competition Tribunal, a specialized
tribunal empowered to deal with certain matters governed by the Competition Act
with respect to a "merger" (as defined in the Competition Act) at any time
before the merger is completed or within three years after the merger is
completed. If the Competition Tribunal finds that the merger prevents or lessens
or is likely to prevent or lessen competition substantially, it may order that
the merger not proceed or, in the event that the merger has been completed,
order its dissolution or the disposition of some or all of the assets or shares
involved. A merger may be subjected to an order of the Competition Tribunal
whether or not it is a notifiable transaction. In some instances, the Canadian
Director may issue an "advance ruling certificate" to the effect that he would
not have sufficient grounds on which to apply to the Competition Tribunal under
the merger provisions of the Competition Act. If the Canadian Director issues an
advance ruling certificate in respect of a proposed transaction, that
transaction is exempt from the pre-merger notification provisions and cannot be
challenged in the future unless the Canadian Director discovers new information.
The Canadian Director may issue a "no-action" advisory opinion following a
notification or voluntary submission indicating that he does not intend to take
any action to prevent the merger but that he reserves his right to do so in the
future.
The Purchaser intends to file any required notice with respect to the Offer
and the Proposed Harcourt Merger with the Canadian Director and, to the extent
necessary, observe any applicable waiting period. There can be no assurance that
a challenge to the Offer and the Proposed Harcourt Merger will not be made
pursuant to the Competition Act, or, if such challenge is made, what the outcome
will be.
Other Foreign Approvals. According to publicly available information, the
Company also owns property and conducts business in a number of other foreign
countries and jurisdictions. In connection with the acquisition of the Shares
pursuant to the Offer or the Proposed Harcourt Merger, the laws of certain of
those foreign countries and jurisdictions may require the filing of information
with, or the obtaining of the approval of, governmental authorities in such
countries and jurisdictions. The governments in such countries and jurisdictions
might attempt to impose additional conditions on the Company's operations
conducted in such countries and jurisdictions as a result of the acquisition of
the Shares pursuant to the Offer or the Proposed Harcourt Merger. There can be
no assurance that the Purchaser will be able to cause the Company or its
subsidiaries to satisfy or comply with such laws or that compliance or
noncompliance will not have adverse consequences for the Company or any
subsidiary after purchase of the Shares pursuant to the Offer or the Proposed
Harcourt Merger.
Margin Credit Regulations. Federal Reserve Board Regulations G, T, U and X
(the "Margin Credit Regulations") restrict the extension or maintenance of
credit for the purpose of buying or carrying margin stock, including the Shares,
if the credit is secured directly or indirectly thereby. Such secured credit may
not be extended or maintained in an amount that exceeds the maximum loan value
of the margin stock. Under the Margin Credit Regulations, the Shares are
presently margin stock and the maximum loan value thereof is generally 50% of
their current market value. The definition of "indirectly secured" contained in
the Margin Credit Regulations provides that the term does not include an
arrangement with a customer if the lender in good faith has not relied upon
margin stock as collateral in extending or maintaining the particular credit.
33
<PAGE> 37
16. CERTAIN FEES AND EXPENSES. Goldman, Sachs & Co. ("Goldman Sachs") are
acting as Dealer Managers in connection with the Offer and as financial advisor
to Harcourt and the Purchaser in connection with the proposed acquisition of the
Company. Harcourt has paid or is obligated to pay to Goldman Sachs a fee of
$750,000 (the "Minimum Fee") and has agreed to pay Goldman Sachs an additional
fee of 0.60% of the aggregate consideration paid by Harcourt upon consummation
of the Offer or certain other business combination transactions involving the
Company during the term of Harcourt's arrangement with Goldman Sachs (less the
Minimum Fee to the extent already paid). In addition, Harcourt has agreed to
reimburse Goldman Sachs for its reasonable expenses, including reasonable fees
and disbursements of its counsel, incurred in rendering its services under its
engagement agreement with Harcourt and has agreed to indemnify Goldman Sachs
against certain liabilities and expenses in connection with the Offer and the
Proposed Harcourt Merger, including certain liabilities under the federal
securities laws. Goldman Sachs from time to time renders various investment
banking services to Harcourt and its affiliates for which it is paid customary
fees.
MacKenzie Partners, Inc. has been retained by the Purchaser as Information
Agent in connection with the Offer. The Information Agent may contact holders of
Shares by mail, telephone, facsimile transmission, telex, telegraph and personal
interview and may request brokers, dealers and other nominee stockholders to
forward material relating to the Offer to beneficial owners of Shares. The
Purchaser will pay the Information Agent reasonable and customary compensation
for all such services in addition to reimbursing the Information Agent for
reasonable out-of-pocket expenses in connection therewith. The Purchaser has
agreed to indemnify the Information Agent against certain liabilities and
expenses in connection with the Offer, including certain liabilities under the
federal securities laws.
In addition, IBJ Schroder Bank & Trust Company has been retained as the
Depositary. The Purchaser will pay the Depositary reasonable and customary
compensation for its services in connection with the Offer, will reimburse the
Depositary for its reasonable out-of-pocket expenses in connection therewith and
will indemnify the Depositary against certain liabilities and expenses in
connection therewith, including certain liabilities under the federal securities
laws.
Except as set forth above, neither Harcourt nor the Purchaser will pay any
fees or commissions to any broker, dealer or other person (other than the
Information Agent and the Dealer Managers) for soliciting tenders of Shares
pursuant to the Offer. Brokers, dealers, commercial banks and trust companies
and other nominees will, upon request, be reimbursed by Harcourt or the
Purchaser for customary clerical and mailing expenses incurred by them in
forwarding offering materials to their customers.
17. MISCELLANEOUS. The Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Shares residing in any jurisdiction in
which the making of the Offer or the acceptance thereof would not be in
compliance with the securities, blue sky or other laws of such jurisdiction.
However, the Purchaser may, in its discretion, take such action as it may deem
necessary to make the Offer in any jurisdiction and extend the Offer to holders
of Shares in such jurisdiction.
In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer will be deemed to
be made on behalf of the Purchaser by the Dealer Managers or one or more
registered brokers or dealers that are licensed under the laws of such
jurisdiction.
Harcourt and the Purchaser have filed with the Commission a Schedule 14D-1,
together with exhibits, 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 amendments thereto. Such Schedule 14D-1
and any amendments thereto, including exhibits, may be examined and copies may
be obtained from the office of the Commission in the same manner as described in
Section 8 with respect to information concerning the Company, except that they
will not be available at the regional offices of the Commission.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION ON BEHALF OF HARCOURT OR THE PURCHASER NOT CONTAINED IN THIS
OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, ANY
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED.
34
<PAGE> 38
Neither the delivery of the Offer to Purchase nor any purchase pursuant to
the Offer shall, under any circumstances, create any implication that there has
been no change in the affairs of Harcourt, the Purchaser, the Company or any of
their respective subsidiaries since the date as of which information is
furnished or the date of this Offer to Purchase.
Nick Acquisition Corporation
April 21, 1997
35
<PAGE> 39
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF THE PURCHASER AND HARCOURT
1. Directors and Executive Officers of the Purchaser. The name and
position with the Purchaser of each director and executive officer of the
Purchaser are set forth below. The other required information with respect to
each such person is set forth under "Directors and Executive Officers of
Harcourt" below. All directors and executive officers listed below are citizens
of the United States.
<TABLE>
<CAPTION>
NAME POSITION
------------------------------------------------- -----------------------------
<S> <C>
Richard A. Smith................................. Director
Brian J. Knez.................................... Director and President
Robert A. Smith.................................. Director
John R. Cook..................................... Vice President
Paul F. Gibbons.................................. Vice President and Treasurer
Eric P. Geller................................... Vice President and Secretary
</TABLE>
2. Directors and Executive Officers of Harcourt. The name, business
address, present principal occupation or employment and material occupations,
positions, offices or employments during the last five years of each director
and executive officer of Harcourt and certain other information are set forth
below. Unless otherwise indicated, the business address of each such director
and executive officer is 27 Boylston Street, Chestnut Hill, Massachusetts 02167.
Unless otherwise indicated, each occupation set forth opposite an individual's
name refers to employment with Harcourt. All directors and executive officers
listed below are citizens of the United States.
<TABLE>
<CAPTION>
NAME POSITION
- ---------------------------- ---------------------------------------------------------------
<S> <C>
William F. Connell.......... Director since 1992; Chairman and Chief Executive Officer of
Connell Limited Partnership; Director of Boston Edison Company,
Bank of Boston Corporation and its principal subsidiary, The
First National Bank of Boston, LCI International, Inc. and
North American Mortgage Company.
Gary L. Countryman.......... Director since 1996; Chairman and Chief Executive Officer of
Liberty Mutual Insurance Company and Liberty Mutual Fire
Insurance Company; Chairman of Liberty Financial Companies,
Inc.; Director of Liberty Mutual Insurance Company, Liberty
Mutual Fire Insurance Company, Liberty Financial Companies,
Inc., Boston Edison Company, and Bank of Boston Corporation
and its principal subsidiary, The First National Bank of
Boston. Mr. Countryman served as a director of The Neiman
Marcus Group, Inc., a majority-owned subsidiary of Harcourt,
from its creation in 1987 until January 1996.
Jack M. Greenberg........... Director since 1993; Chairman of McDonald's USA since October,
1996; Vice Chairman of McDonald's Corporation; Chief Financial
Officer of McDonald's Corporation from January 1982 to
October 1996; Director of McDonald's Corporation, Stone
Container Corporation and Arthur J. Gallagher & Company.
Brian J. Knez............... Director since 1995; President and Co-Chief Operating Officer
of Harcourt since January 15, 1997; President and Chief
Executive Officer of Harcourt Brace & Company since May 1995;
President of the Scientific, Technical, Medical and
Professional Group of Harcourt Brace from 1993 to May 1995;
Group Vice President of the Scientific, Technical and Medical
Group of Harcourt Brace from 1991 to 1993;
</TABLE>
I-1
<PAGE> 40
<TABLE>
<CAPTION>
NAME POSITION
- ---------------------------- ---------------------------------------------------------------
<S> <C>
<-> Mr. Knez is the son-in-law of Richard A. Smith, Chairman and
Chief Executive Officer of Harcourt, and the brother-in-law
of Robert A. Smith, who is also President and Co-Chief
Operating Officer and a director of Harcourt.
Jeffrey R. Lurie............ Director since 1996; Owner and Chief Executive Officer,
Philadelphia Eagles, Inc., a National Football League
franchise, since May 1994; President and Chief Executive
Officer of Chestnut Hill Productions, a motion picture
production company. Mr. Lurie is the nephew of Richard A.
Smith, Chairman and Chief Executive Officer of Harcourt, and
the cousin of Robert A. Smith, President and Co-Chief
Operating Officer and a director of Harcourt.
Lynn Morley Martin.......... Director since 1993; Davee Chair, J. L. Kellogg School of
Management, Northwestern University, since September 1993;
Advisor, Deloitte & Touche LLP, since June 1993; former
Fellow at the Kennedy School of Government, Harvard
University; United States Secretary of Labor from February
1991 to January 1993; Member of the United States House of
Representatives (Illinois 16th Congressional District) from
1981 to February 1991; Director of Ameritech Corporation,
Ryder System, Inc., Procter & Gamble Co., TRW Inc. and
various Dreyfus mutual funds.
Maurice Segall.............. Director since 1986; Senior Lecturer, Massachusetts Institute
of Technology; Former Chairman and Chief Executive Officer of
Zayre Corp.; Director of AMR Corporation.
Richard A. Smith............ Director since 1950; Chairman of Harcourt and of The Neiman
Marcus Group, Inc.; Chief Executive Officer of Harcourt and of
The Neiman Marcus Group, Inc. since January 15, 1997 and
prior to December 1991; Chairman, President (until November
1, 1995) and Chief Executive Officer of GC Companies, Inc.
since December 1993; Director of The Neiman Marcus Group,
Inc., GC Companies, Inc., Liberty Mutual Insurance Company,
Liberty Mutual Fire Insurance Company, Liberty Financial
Companies, Inc., and Bank of Boston Corporation and its
principal subsidiary, The First National Bank of Boston. Mr.
Smith is the father of Robert A. Smith and the father-in-law
of Brian J. Knez, who are Presidents and Co-Chief Operating
Officers and directors of Harcourt. Mr. Smith is the uncle of
Jeffrey R. Lurie, a director of Harcourt.
Robert A. Smith............. Director since 1989; President and Co-Chief Operating Officer
of Harcourt and President and Chief Operating Officer of The
Neiman Marcus Group, Inc. since January 15, 1997; Group Vice
President of Harcourt and of The Neiman Marcus Group, Inc.
prior thereto; President and Chief Operating Officer of GC
Companies, Inc. since November 1995. Mr. Smith is the son of
Richard A. Smith, Chairman and Chief Executive Officer of
Harcourt, the brother-in-law of Brian J. Knez, who is also
President and Co-Chief Operating Officer and a director of
Harcourt, and the cousin of Jeffrey R. Lurie, a director of
Harcourt.
Paula Stern................. Director since 1993; President of The Stern Group, Inc., an
economic analysis and trade advisory firm; Former Chairwoman of
the U.S.
</TABLE>
I-2
<PAGE> 41
<TABLE>
<CAPTION>
NAME POSITION
- ---------------------------- ---------------------------------------------------------------
<S> <C>
<-> International Trade Commission; Alkire Chairholder in
International Business at Hamline University; Director of
Westinghouse Electric Corporation and Wal-Mart Stores, Inc.
Hugo Uyterhoeven............ Director since 1980; Timken Professor of Business
Administration, Graduate School of Business Administration,
Harvard University; Director of Bombardier, Inc., The Stanley
Works and Ecolab, Inc.
Clifton R. Wharton, Jr. .... Director since 1994; Retired Chairman and Chief Executive
Officer of Teachers Insurance and Annuity Association-College
Retirement Equities Fund (TIAA-CREF); Deputy Secretary of
State, U.S. Department of State, from January 1993 to
November 1993; former Chancellor, State University of New
York System; Director of Ford Motor Company, Tenneco, Inc.,
New York Stock Exchange, Inc. and TIAA-CREF Board of
Overseers.
John R. Cook................ Senior Vice President and Chief Financial Officer of Harcourt
and of The Neiman Marcus Group, Inc. since September 1992;
Senior Vice President -- Finance and Administration and Chief
Financial Officer of NACCO Industries prior to September
1992.
Eric P. Geller.............. Senior Vice President and General Counsel of Harcourt and of
The Neiman Marcus Group, Inc. since May 1992; Vice President
and Associate General Counsel of Harcourt and of The Neiman
Marcus Group, Inc. prior to May 1992; Secretary of Harcourt
and of The Neiman Marcus Group, Inc.
Peter Farwell............... Vice President -- Corporate Relations of Harcourt and of The
Neiman Marcus Group, Inc.
Paul F. Gibbons............. Vice President and Treasurer of Harcourt and of The Neiman
Marcus Group, Inc. since August 1992; Vice
President -- Taxation of Harcourt and of The Neiman Marcus
Group, Inc. prior thereto.
Gerald T. Hughes............ Vice President -- Human Resources of Harcourt and of The Neiman
Marcus Group, Inc. since June 1994; Associate General Counsel
of Harcourt and of The Neiman Marcus Group, Inc. with
responsibility for labor and employment matters from August
1992 to June 1994; Labor Counsel of Harcourt and The Neiman
Marcus Group, Inc. prior thereto.
Michael F. Panutich......... Vice President -- General Auditor of Harcourt and of The Neiman
Marcus Group, Inc. since June 1993; Vice
President -- Accounting of Harcourt and of The Neiman Marcus
Group, Inc. prior thereto.
Stephen C. Richards......... Vice President and Controller of Harcourt and of The Neiman
Marcus Group, Inc. since June 1993; Partner, Deloitte & Touche
LLP, prior thereto.
</TABLE>
3. Ownership of Shares by Directors and Executive Officers. To the best
knowledge of the Purchaser and Harcourt, none of the persons listed on this
Schedule I beneficially owns or has a right to acquire directly or indirectly
any Shares, and none of the persons listed on this Schedule I has effected any
transactions in the Shares during the past 60 days.
I-3
<PAGE> 42
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 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 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>
Questions and 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 this 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
BY
NICK ACQUISITION CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
HARCOURT GENERAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON MAY 16, 1997, UNLESS THE OFFER IS 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.
This 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.
<PAGE> 2
- --------------------------------------------------------------------------------
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..............................................
- --------------------------------------------------------------------------------
</TABLE>
* 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.
- --------------------------------------------------------------------------------
[ ] 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
-------------------------------------------------------
2
<PAGE> 3
[ ] 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 $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 (the
"Offer to Purchase") and in this Letter of Transmittal (which together
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 be, subject to
applicable law, entitled to all rights and privileges as owner of any such
Distribution and may withhold the
4
<PAGE> 5
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 Offer to Purchase) 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)
SIGN SIGN
HERE ------------------------------------------------------------- HERE
-------------------------------------------------------------
(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
----------------------------------------
<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 Section 1 of the Offer
to Purchase). 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.
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<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, 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--
SUBSTITUTE Enter taxpayer identification number in the
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 Social Security Number or
number to give the payer. Employer Identification Number
----------------------------------------------------------------------------
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 all 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
PAYER'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 you received another notification from the IRS that you are no longer
NUMBER ("TIN") 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)
April 21, 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 Section 1 of the Offer to Purchase) 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") 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
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
NATIONAL EDUCATION CORPORATION
AT
$19.50 NET PER SHARE
BY
NICK ACQUISITION CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
HARCOURT GENERAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, MAY 16, 1997, UNLESS THE OFFER IS EXTENDED.
<TABLE>
<S> <C>
To Brokers, Dealers, Commercial Banks, April 21, 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 $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 (the "Offer to Purchase") 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, (1) 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, (2) the Agreement and Plan of
Reorganization, dated as of March 12, 1997 (the "Sylvan Merger Agreement"),
between the Company and Sylvan Learning Systems, Inc. ("Sylvan") having been
terminated without any payments by or penalties to the Company (other than any
applicable payments pursuant to Section 6.3 of the Sylvan Merger Agreement), (3)
the Company not having entered into or effectuated any new or amended agreements
with Sylvan or any other person or entity or otherwise having taken any action,
including, without limitation, the declaration or payment of any dividend or
distribution on the Shares, having the effect of impairing the ability of the
Purchaser to acquire the Company or otherwise diminishing the expected economic
value to the Purchaser of the acquisition of the Company, (4) the Purchaser
being satisfied, in its sole discretion, that the unaffiliated stockholder vote
specified in the Company's Restated Certificate of Incorporation would not be
required prior to the consummation of the Proposed Harcourt
<PAGE> 2
Merger (as defined in the Offer to Purchase), and (5) the Purchaser being
satisfied, in its sole discretion, that Section 203 of the Delaware General
Corporation Law has been complied with in connection with the Purchaser's
acquisition of the Company or is invalid or otherwise inapplicable to the
Purchaser in connection with the Offer and the Proposed Harcourt Merger. The
Offer is also subject to other terms and conditions. See the Introduction and
Sections 1, 14 and 15 of the Offer to Purchase. The Offer is not conditioned on
obtaining financing.
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.
2. The 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 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 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 FRIDAY, MAY 16, 1997, UNLESS THE OFFER IS
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.
If holders of Shares desire to tender Shares pursuant to the Offer and such
holder's 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
<PAGE> 3
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.
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
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
NATIONAL EDUCATION CORPORATION
AT
$19.50 NET PER SHARE
BY
NICK ACQUISITION CORPORATION
A WHOLLY-OWNED SUBSIDIARY OF
HARCOURT GENERAL, INC.
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, MAY 16, 1997, UNLESS THE OFFER IS EXTENDED.
To Our Clients: April 21, 1997
Enclosed for your consideration is an Offer to Purchase dated April 21,
1997 (the "Offer to Purchase") 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 $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 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.
Your attention is directed to the following:
1. The tender price is $19.50 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, (1) 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,
(2) the Agreement and Plan of Reorganization, dated as of March 12, 1997
(the "Sylvan Merger Agreement"), between the Company and Sylvan Learning
Systems, Inc. ("Sylvan") having been terminated without any payments by or
penalties to the Company (other than any applicable payments pursuant to
Section 6.3 of the Sylvan Merger Agreement), (3) the Company not having
entered into or effectuated any new or amended agreements with Sylvan or
any other person or entity or otherwise having taken any action, including,
without limitation, the declaration or payment of any dividend or
distribution on the Shares, having the effect of impairing the ability of
the Purchaser to
<PAGE> 2
acquire the Company or otherwise diminishing the expected economic value to
the Purchaser of the acquisition of the Company, (4) the Purchaser being
satisfied, in its sole discretion, that the unaffiliated stockholder vote
specified in the Company's Restated Certificate of Incorporation would not
be required prior to the consummation of the Proposed Harcourt Merger (as
defined in the Offer to Purchase), and (5) the Purchaser being satisfied,
in its sole discretion, that Section 203 of the Delaware General
Corporation Law has been complied with in connection with the Purchaser's
acquisition of the Company or is invalid or otherwise inapplicable to the
Purchaser in connection with the Offer and the Proposed Harcourt Merger.
The Offer is also subject to other terms and conditions. See the
Introduction and Sections 1, 14 and 15 of the Offer to Purchase. The Offer
is not conditioned on obtaining financing.
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 Friday, May 16, 1997, unless the Offer is extended.
6. Upon the terms and subject to the conditions of the Offer
(including, if the Offer is 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 Section 1 of the
Offer to Purchase). 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 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.
<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") 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 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)(7)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated April
21, 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.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
National Education Corporation
at
$19.50 Net Per Share
by
Nick Acquisition Corporation
a wholly-owned subsidiary of
Harcourt General, Inc.
Nick Acquisition Corporation, a Delaware corporation (the "Purchaser")
and a wholly-owned subsidiary of Harcourt General, Inc., a Delaware corporation
("Harcourt"), is 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
$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 (the "Offer to Purchase") and in the related Letter of
Transmittal (which together constitute the "Offer").
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON FRIDAY, MAY 16, 1997, UNLESS THE OFFER
IS EXTENDED.
The Offer is conditioned upon, among other things, (1) 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, (2) the Agreement and Plan of
Reorganization, dated as of March 12, 1997 (the "Sylvan Merger Agreement"),
between the Company and Sylvan Learning Systems, Inc. ("Sylvan") having been
terminated without any payments by or penalties to the Company (other than any
applicable payments pursuant to Section 6.3 of the Sylvan Merger Agreement), (3)
the Company not having entered into or effectuated any new or amended agreements
with Sylvan or any other person or entity or otherwise having taken any action,
including, without limitation, the declaration or payment of any dividend or
other distribution on the Shares, having the effect of impairing the ability of
the Purchaser to acquire the Company or otherwise diminishing the expected
economic value to the Purchaser of the acquisition of the Company, (4) the
Purchaser being satisfied, in its sole discretion, that the unaffiliated
stockholder vote specified in the Company's Restated Certificate of
Incorporation would not be required prior to the consummation of the Proposed
Harcourt Merger (as defined below) and (5) the Purchaser being satisfied, in its
sole discretion, that Section 203 of the Delaware General Corporation Law has
been complied with in connection with the Purchaser's acquisition of the Company
or is invalid or otherwise inapplicable to the Purchaser in connection with the
Offer and the Proposed Harcourt Merger. The Offer is also subject to other terms
and conditions. See the Introduction and Sections 1 and 14 of the Offer to
Purchase.
The Offer is not conditioned on obtaining financing.
The purpose of the Offer and the Proposed Harcourt Merger is to acquire
control of, and the entire equity interest in, the Company. The Purchaser
currently intends, as soon as practicable following consummation of the Offer,
to seek to have the Company consummate a merger or similar business combination
with the Purchaser (the "Proposed Harcourt Merger") pursuant to which each then
outstanding Share (other than Shares owned by Harcourt or any of its
wholly-owned subsidiaries, Shares held in the treasury of the Company and Shares
held by stockholders who perfect appraisal rights under the Delaware General
Corporation Law) would be converted into the right to receive cash in the same
amount as received per Share in the Offer, and the Company would become a
wholly-owned subsidiary of Harcourt. The consummation of the Proposed Harcourt
Merger would be subject to a number of factors (including satisfaction of
various conditions) discussed in the Introduction and in Sections 11 and 14 of
the Offer to Purchase. Section 11 of the Offer to Purchase also discusses
certain appraisal rights available to stockholders upon consummation of the
Proposed Harcourt Merger.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares validly tendered and not
withdrawn as, if and when the Purchaser gives oral or written notice to the
Depositary (as defined in the Offer to Purchase) of the Purchaser's acceptance
of such Shares for payment pursuant to the Offer. In all cases, upon the terms
and subject to the conditions of the Offer, payment for Shares purchased
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 payment from the Purchaser and transmitting such payment to
validly tendering stockholders. 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 purchased 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 the
book-entry transfer of such Shares into the Depositary's account at The
Depository Trust Company or Philadelphia Depository Trust Company (collectively,
the "Book-Entry Transfer Facilities") 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.
Subject to the applicable regulations of the Securities and Exchange
Commission, the Purchaser expressly reserves the right, in its sole discretion,
at any time and from time to time, to extend the period during which the Offer
is open for any reason, including the occurrence of any of the events specified
in Section 14 of the Offer to Purchase, by giving oral or 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
Friday, May 16, 1997, unless and until the Purchaser, in its sole discretion,
shall have extended the period of time for which the Offer is open, in which
event the term "Expiration Date" shall mean the time and date at which the
Offer, as so 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 (or such later date as may apply in case the Offer is extended). In
order for a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of the Offer to Purchase. Any such notice
of withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the name of the registered
holder of the Shares as set forth in the Share Certificate, if different from
that of the person who tendered such Shares. If Share Certificates have been
delivered or otherwise identified to the Depositary, then prior to the physical
release of such certificates, the tendering stockholder must submit the serial
numbers shown on the particular certificates evidencing the Shares to be
withdrawn and the signature on the notice of withdrawal must be guaranteed by an
Eligible Institution (as defined in Section 3 of the Offer to Purchase), except
in the case of Shares tendered for the account of an Eligible Institution. If
Shares have been tendered pursuant to the procedure for book-entry transfer as
set forth in Section 3 of the Offer to Purchase, any notice of withdrawal must
specify the name and number of the account at the appropriate 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 form and validity (including time of receipt) of notices of
withdrawal will be determined by the Purchaser, in its sole discretion, whose
determination shall 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 and is incorporated herein by
reference.
Requests are being made to the Company for the use of the Company's
stockholder list and security position listings for the purpose of disseminating
the Offer to holders of Shares. The Offer to Purchase and the related Letter of
Transmittal and other relevant materials will be mailed to record holders of
Shares and 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 by the Purchaser following receipt of such lists or listings
from the Company, or by the Company, if it so elects.
The Offer to Purchase 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
Information Agent or the Dealer Managers at their respective addresses and
telephone numbers listed below. Requests for copies of the Offer to Purchase and
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 Information Agent and the
Dealer Managers) for soliciting tenders of Shares pursuant to the Offer.
The Information Agent for the Offer is:
[MacKenzie Partners, Inc. 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
April 21, 1997
<PAGE> 1
Exhibit 11(a)(8)
H A R C O U R T Harcourt General
G E N E R A L 27 Boylston Street, Chestnut Hill, MA 02167
Tel 617 232 8200
Contact Peter Farwell News Release
Vice President George Sard or Anna Cordasco
Corporate Relations Sard Verbinnen & Company
(617) 232-8200 (212) 687-8080
FOR IMMEDIATE RELEASE
HARCOURT GENERAL TO COMMENCE CASH TENDER OFFER FOR
NATIONAL EDUCATION CORPORATION AT $19.50 PER SHARE
CHESTNUT HILL, MA, April 16, 1997 -- Harcourt General, Inc. (NYSE:H)
announced today that it will commence an all-cash tender offer for all of the
outstanding common shares of National Education Corporation (NYSE:NEC) at a
price of $19.50 per share.
Following the completion of the tender offer, Harcourt General intends
to effect a merger in which all remaining NEC stockholders will also receive the
same cash price paid in the tender offer.
Harcourt General's $19.50 per share offer, which has a total transaction
value of approximately $740 million, represents a 15.4% premium over the value
of the NEC/Sylvan Learning Systems, Inc. stock merger proposal announced last
month, based upon the per share closing price of the Sylvan shares yesterday,
and a 54.5% premium over the closing market price of NEC shares on March 4, five
trading days before the NEC/Sylvan merger proposal was announced.
Richard A. Smith, chairman and chief executive officer of Harcourt
General said "NEC fits very well with and adds significant growth potential to
our existing portfolio of educational businesses. It would add new distribution
channels for our existing products and would also accelerate our entry into
several non-traditional educational high growth markets,
- more -
<PAGE> 2
Harcourt General Plans Cash Tender
April 16, 1997
Page 2
including distance learning, supplemental publishing and computer-based
training."
The tender offer is subject to customary conditions and the termination
of the merger agreement between NEC and Sylvan in accordance with its terms.
The offer will not be subject to any financing contingencies. The complete
terms and conditions of the tender offer will be set forth in the offering
documents to be filed shortly with the Securities and Exchange Commission.
Harcourt General also indicated that it plans, subject to its ability to
effectuate the merger with NEC, to seek to acquire the outstanding shares of
common stock of Steck Vaughn Publishing Corporation not currently owned by NEC
at a price per share of $14.00. Harcourt General has not yet determined the
manner in which it would seek to acquire the Steck Vaughn shares or the timing
of any such acquisition. Harcourt General reserves the right to change its plan
to acquire Steck Vaughn shares and, accordingly, there can be no assurance that
it will acquire the Steck Vaughn shares.
Harcourt General, Inc. is a growth-oriented operating company with core
businesses in publishing and specialty retailing.
###
<PAGE> 1
Exhibit 11(a)(9)
HARCOURT GENERAL COMMENCES CASH TENDER OFFER
FOR NATIONAL EDUCATION CORPORATION AT $19.50 PER SHARE
CHESTNUT HILL, MA, April 21, 1997 -- Harcourt General, Inc.
(NYSE:H) announced that a wholly owned subsidiary of Harcourt General today
commenced its previously announced all-cash tender offer for all of the
outstanding common shares of National Education Corporation (NYSE:NEC) at a
price of $19.50 per share. The tender offer will expire at 12:00 midnight, New
York City time, on Friday, May 16, 1997, unless the offer is extended. Other
terms and conditions of the tender offer are set forth in the definitive tender
offer documents being filed today with the Securities and Exchange Commission.
Following the completion of the tender offer, Harcourt General intends to
effect a merger in which all remaining NEC stockholders will also receive the
same cash price paid in the tender offer.
Goldman, Sachs & Co. is acting as financial advisor and dealer managers to
Harcourt General in connection with the tender offer and MacKenzie Partners,
Inc. is acting as the information agent.
Harcourt General, Inc. is a growth-oriented operating company with core
businesses in publishing and specialty retailing.
# # #
<PAGE> 1
Exhibit 11(b)
[CONFORMED COPY]
$400,000,000
CREDIT AGREEMENT
dated as of
December 16, 1994
among
Harcourt General, Inc.,
The Banks Listed Herein,
Morgan Guaranty Trust Company of New York,
as Documentation Agent,
The First National Bank of Boston,
as Administrative Agent
and
The Bank of Nova Scotia
and
National Westminster Bank Plc,
as Co-Agents
TABLE OF CONTENTS(1)
Page
ARTICLE I
DEFINITIONS
<PAGE> 2
<TABLE>
<S> <C>
SECTION 1.01 Definitions.................................. 1
1.02 Accounting Terms and Determinations.......... 15
1.03 Types of Borrowings.......................... 15
ARTICLE II
THE CREDITS
(1) The Table of Contents is not a part of this Agreement.
SECTION 2.01 Commitments to Lend.......................... 16
2.02 Notice of Committed Borrowing................ 16
2.03 Money Market Borrowings...................... 17
2.04 Notice to Banks; Funding of Loans............ 21
2.05 Notes........................................ 22
2.06 Maturity of Loans............................ 23
2.07 Interest Rates............................... 23
2.08 Facility Fee................................. 26
2.09 Optional Termination or
Reduction of Commitments................... 27
2.10 Scheduled Termination of
Commitments................................ 27
2.11 Optional Prepayments......................... 27
2.12 General Provisions as to Payments............ 28
2.13 Funding Losses............................... 28
2.14 Computation of Interest and Fees............. 29
2.15 Regulation D Compensation.................... 29
2.16 Replacement of Banks......................... 30
ARTICLE III
CONDITIONS
SECTION 3.01 Effectiveness................................ 30
3.02 Borrowings................................... 31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 Corporate Existence and Power................ 32
4.02 Corporate Authorization...................... 32
4.03 Binding Effect............................... 33
4.04 Financial Information........................ 33
4.05 Litigation................................... 33
4.06 Governmental and Other Approvals............. 34
4.07 Full Disclosure.............................. 34
4.08 Compliance with ERISA........................ 34
4.09 Taxes........................................ 34
4.10 Environmental Matters........................ 35
ARTICLE V
COVENANTS
SECTION 5.01 Furnishing of Financial Data
and Certificates........................... 35
5.02 Payment of Taxes............................. 36
5.03 Maintenance of Corporate Existence........... 37
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
5.04 Maintenance of Property and Leases........... 37
5.05 Insurance.................................... 37
5.06 Accounts and Reports......................... 37
5.07 Inspection................................... 37
5.08 Maintenance of Net Worth .................... 38
5.09 Coverage of Consolidated Fixed
Charges.................................... 38
5.10 Leverage Ratio............................... 38
5.11 Restrictions on Liens........................ 38
5.12 Restricted Payments.......................... 40
5.13 Investments.................................. 40
5.14 Restrictions on Sales, Consolidations
and Mergers................................ 43
5.15 Transactions with Affiliates................. 43
5.16 Restriction on Debt of Subsidiaries.......... 43
5.17 Use of Proceeds.............................. 44
ARTICLE VI
DEFAULTS
SECTION 6.01 Events of Default............................ 44
6.02 Notice of Default............................ 47
ARTICLE VII
THE AGENTS AND THE CO-AGENTS
SECTION 7.01 Appointment and Authorization................ 47
7.02 Agents and Affiliates........................ 47
7.03 Action by Agents............................. 48
7.04 Consultation with Experts.................... 48
7.05 Liability of Agents.......................... 48
7.06 Indemnification.............................. 48
7.07 Credit Decision.............................. 49
7.08 Successor Agents............................. 49
7.09 Agents' Fees................................. 49
7.10 Co-Agents.................................... 49
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01 Basis for Determining Interest
Rate Inadequate or Unfair.................. 50
8.02 Illegality................................... 51
8.03 Increased Cost and Reduced Return............ 51
8.04 Taxes........................................ 53
8.05 Base Rate Loans Substituted for
Affected Fixed Rate Loans.................. 55
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Notices...................................... 56
9.02 No Waivers................................... 56
9.03 Expenses; Indemnification.................... 56
9.04 Sharing of Set-Offs.......................... 57
</TABLE>
Page=3
<PAGE> 4
<TABLE>
<S> <C>
9.05 Amendments and Waivers....................... 58
9.06 Successors and Assigns....................... 58
9.07 Collateral................................... 60
9.08 Governing Law; Submission to Jurisdiction.... 60
9.09 Counterparts; Integration.................... 60
9.10 WAIVER OF JURY TRIAL......................... 61
</TABLE>
Pricing Schedule
Exhibit A - Note
Exhibit B - Form of Money Market Quote Request
Exhibit C - Form of Invitation for Money Market Quotes
Exhibit D - Form of Money Market Quote
Exhibit E - Opinion of Counsel for the Borrower
Exhibit F - Opinion of Davis Polk & Wardwell, Special Counsel for the
Agent
Exhibit G - Assignment and Assumption Agreement
CREDIT AGREEMENT
AGREEMENT dated as of December 16, 1994 among HARCOURT GENERAL,
INC., the BANKS listed on the signature pages hereof, MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as Documentation Agent, THE FIRST NATIONAL BANK OF BOSTON,
as Administrative Agent and THE BANK OF NOVA SCOTIA and NATIONAL WESTMINSTER
BANK PLC, as Co-Agents.
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used
herein, have the following meanings:
"Absolute Rate Auction" means a solicitation of Money Market Quotes
setting forth Money Market Absolute Rates pursuant to Section 2.03.
"Adjusted CD Rate" has the meaning set forth in Section 2.07(b).
"Adjusted Consolidated Net Income" means, for any period,
Consolidated Net Income for such period, plus the aggregate of the following
items of the Borrower and its Subsidiaries for such period:
Page=4
<PAGE> 5
(a) taxes based on or measured by income;
(b) minimum rentals, i.e., rentals paid by the Borrower or any
Subsidiary, other than amounts determined by reference to income
generated from the leased property (including amounts accrued for or
based on taxes, other than income taxes, to the extent that any thereof
are payable in addition to rent), under any lease of real property
excluding in any event (i) leases between the Borrower and a Subsidiary
or between a Subsidiary and another Subsidiary, (ii) Capitalized Leases
and (iii) leases of real property entered into for periods not greater
than one year by Drake Beam Morin, Inc. and its Subsidiaries; and
(c) interest on any Debt outstanding during such period.
"Adjusted Net Worth" means, at any date, the consolidated
shareholders equity of the Borrower and its Subsidiaries (reflecting the
Borrower's investment in NMG and its Subsidiaries on the cost method) determined
as of such date, plus an amount equal to the lesser of (A) the aggregate amount
paid by the Borrower subsequent to October 31, 1994 and on or prior to such date
in respect of the repurchase of common stock of the Borrower and (B)
$100,000,000.
"Administrative Agent" means The First National Bank of Boston in
its capacity as administrative agent for the Banks hereunder, and its successors
in such capacity.
"Administrative Questionnaire" means, with respect to each Bank,
an administrative questionnaire in the form prepared by the Agent and submitted
to the Agent (with a copy to the Borrower) duly completed by such Bank.
"Affiliate" means (i) any Person that directly, or indirectly
through one or more intermediaries, controls the Borrower (a "Controlling
Person") or (ii) any Person (other than the Borrower or a Subsidiary) which is
controlled by or is under common control with a Controlling Person. As used
herein, the term "control" means possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by contract or
otherwise. For purposes of this Agreement no individual shall be deemed to be an
Affiliate solely by reason of the fact that such individual is a director or
officer of the Borrower.
"Agent" means the Administrative Agent or the Documentation
Agent, and "Agents" means the Administrative Agent and the Documentation Agent.
"Applicable Lending Office" means, with respect to any Bank, (i)
in the case of its Domestic Loans, its Domestic Lending Office, (ii) in the case
of its Euro-Dollar Loans, its Euro-Dollar Lending Office and (iii) in the case
of its Money Market Loans, its Money Market Lending Office.
"Assessment Rate" has the meaning set forth in Section 2.07(b).
"Assignee" has the meaning set forth in Section 9.06(c).
"Bank" means each bank listed on the signature pages hereof, each
Assignee which becomes a Bank pursuant to Section 9.06(c), and their respective
successors.
Page=5
<PAGE> 6
"Base Rate" means, for any day, a rate per annum equal to the
higher of (i) the Prime Rate for such day and (ii) the sum of 1/2 of 1% plus the
Federal Funds Rate for such day.
"Base Rate Loan" means a Committed Loan to be made by a Bank as a
Base Rate Loan in accordance with the applicable Notice of Committed Borrowing
or pursuant to Article VIII.
"Benefit Arrangement" means at any time an employee benefit plan
within the meaning of Section 3(3) of ERISA which is not a Plan or a
Multiemployer Plan and which is maintained or otherwise contributed to by any
member of the ERISA Group.
"Borrower" means Harcourt General, Inc., a Delaware
corporation, and its successors.
"Borrower's 1993 Form 10-K" means the Borrower's annual report on
Form 10-K for 1993, as filed with the Securities and Exchange Commission
pursuant to the Securities Exchange Act of 1934.
"Borrowing" has the meaning set forth in Section 1.03.
"Capitalized Lease" means a lease under which, in accordance with
generally accepted accounting principles, the liability of the lessee is
required to be capitalized on its balance sheet.
"CD Base Rate" has the meaning set forth in Section 2.07(b).
"CD Loan" means a Committed Loan to be made by a Bank as a CD
Loan in accordance with the applicable Notice of Committed Borrowing.
"CD Margin" has the meaning set forth in Section 2.07(b).
"CD Reference Banks" means The Bank of Nova Scotia, National
Westminster Bank Plc, The First National Bank of Boston and Morgan Guaranty
Trust Company of New York.
"Co-Agent" means each of The Bank of Nova Scotia and National
Westminster Bank Plc, in its capacity as co-agent hereunder.
"Commitment" means, with respect to each Bank, the amount set
forth opposite the name of such Bank on the signature pages hereof, as such
amount may be reduced from time to time pursuant to Section 2.09.
"Committed Loan" means a loan made by a Bank pursuant to
Section 2.01.
"Consolidated Fixed Charges" means for any period, the sum of the
items included in Adjusted Consolidated Net Income pursuant to paragraphs (b)
and (c) of the definition thereof for such period.
"Consolidated Net Income" means for any period, the aggregate of
the net income (less losses) of the Borrower and its Subsidiaries for such
period (after eliminating all intercompany items and after provisions for
minority interests, if any), all determined in accordance with generally
accepted accounting principles; provided, however, Consolidated Net Income shall
not include (a) extraordinary gains or extraordinary losses, (b) the net income
of any corporation or other enterprise accrued prior to the date it becomes a
Subsidiary, (c) the net income arising from any discontinued
Page=6
<PAGE> 7
operation(s) of the Borrower or any Subsidiary as so classified in the
Borrower's consolidated financial statements, (d) any amortization or write-off
of goodwill arising in connection with a merger, consolidation or acquisition of
stock or assets to which the Borrower or a Subsidiary is a party or (e) the net
income (or loss) of NMG and its Subsidiaries, except (in the case of income) to
the extent of dividends received by the Borrower from NMG.
"Consolidated Subsidiary" means at any date any Subsidiary or
other entity the accounts of which would be consolidated with those of the
Borrower in its consolidated financial statements if such statements were
prepared as of such date. NMG and its Subsidiaries are Consolidated
Subsidiaries.
"Debt" of any Person means, at any date, all obligations of such
Person which would, in accordance with generally accepted accounting principles,
be classified as liabilities (excluding deferred tax liabilities) of such
Person, as of such date, but in any event including (i) all obligations of such
Person as lessee under Capitalized Leases and (ii) all Debt of others secured by
a Lien on any asset of such Person, whether or not such Debt is assumed by such
Person and excluding, subject to Section 5.13(t), all Debt of others Guaranteed
by such Person, except to the extent the same would be reflected as a liability
on a balance sheet of such Person prepared in accordance with generally accepted
accounting principles as of such date.
"Default" means any condition or event which constitutes an Event
of Default or which with the giving of notice or lapse of time or both would,
unless cured or waived, become an Event of Default.
"Derivatives Obligations" of any Person means all obligations of
such Person in respect of any rate swap transaction, basis swap, forward rate
transaction, commodity swap, commodity option, equity or equity index swap,
equity or equity index option, bond option, interest rate option, foreign
exchange transaction, cap transaction, floor transaction, collar transaction,
currency swap transaction, cross-currency rate swap transaction, currency option
or any other similar transaction (including any option with respect to any of
the foregoing transactions) or any combination of the foregoing transactions.
"Documentation Agent" means Morgan Guaranty Trust Company of New
York in its capacity as documentation agent for the Banks hereunder, and its
successors in such capacity.
"Domestic Business Day" means any day except a Saturday, Sunday
or other day on which commercial banks in New York City or Boston, Massachusetts
are authorized by law to close.
"Domestic Lending Office" means, as to each Bank, its office
located at its address set forth in its Administrative Questionnaire (or
identified in its Administrative Questionnaire as its Domestic Lending Office)
or such other office as such Bank may hereafter designate as its Domestic
Lending Office by notice to the Borrower and the Administrative Agent; provided
that any Bank may so designate separate Domestic Lending Offices for its Base
Rate Loans, on the one hand, and its CD Loans, on the other hand, in which case
all references herein to the Domestic Lending Office of such Bank shall be
deemed to refer to either or both of such offices, as the context may require.
"Domestic Loans" means CD Loans or Base Rate Loans or both.
Page=7
<PAGE> 8
"Domestic Reserve Percentage" has the meaning set forth in
Section 2.07(b).
"Effective Date" means the date this Agreement becomes effective
in accordance with Section 3.01.
"Environmental Laws" means any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, permits, concessions, grants, franchises, licenses, agreements or other
governmental restrictions relating to the environment or to emissions,
discharges or releases of pollutants, contaminants, petroleum or petroleum
products, chemicals or industrial, toxic or hazardous substances or wastes into
the environment including, without limitation, ambient air, surface water,
ground water, or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, or any successor statute.
"ERISA Group" means the Borrower, any Subsidiary and all members
of a controlled group of corporations and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or any
Subsidiary, are treated as a single employer under Section 414 of the Internal
Revenue Code.
"Euro-Dollar Business Day" means any Domestic Business Day on
which commercial banks are open for international business (including dealings
in dollar deposits) in London.
"Euro-Dollar Lending Office" means, as to each Bank, its office,
branch or affiliate located at its address set forth in its Administrative
Questionnaire (or identified in its Administrative Questionnaire as its
Euro-Dollar Lending Office) or such other office, branch or affiliate of such
Bank as it may hereafter designate as its Euro-Dollar Lending Office by notice
to the Borrower and the Administrative Agent.
"Euro-Dollar Loan" means a Committed Loan to be made by a Bank as
a Euro-Dollar Loan in accordance with the applicable Notice of Committed
Borrowing.
"Euro-Dollar Margin" has the meaning set forth in Section
2.07(c).
"Euro-Dollar Reference Banks" means the principal London offices
of The Bank of Nova Scotia, National Westminster Bank Plc, The First National
Bank of Boston and Morgan Guaranty Trust Company of New York.
"Euro-Dollar Reserve Percentage" means for any day that
percentage (expressed as a decimal) which is in effect on such day, as
prescribed by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement for a member bank of
the Federal Reserve System in New York City with deposits exceeding five billion
dollars in respect of "Eurocurrency liabilities" (or in respect of any other
category of liabilities which includes deposits by reference to which the
interest rate on Euro-Dollar Loans is determined or any category of
Page=8
<PAGE> 9
extensions of credit or other assets which includes loans by a non-United States
office of any Bank to United States residents).
"Event of Default" has the meaning set forth in Section 6.01.
"Existing Credit Agreement" means the Credit Agreement dated as
of December 16, 1993 among the Borrower, the banks listed on the signature pages
thereof, Morgan Guaranty Trust Company of New York, as documentation agent, The
First National Bank of Boston, as administrative agent and The Bank of Nova
Scotia and National Westminster Bank Plc, as co-agents.
"Federal Funds Rate" means, for any day, the rate per annum
(rounded upward, if necessary, to the nearest 1/100th of 1%) equal to the
weighted average of the rates on overnight Federal funds transactions with
members of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Domestic
Business Day next succeeding such day, provided that (i) if such day is not a
Domestic Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Domestic Business Day as so published on
the next succeeding Domestic Business Day, and (ii) if no such rate is so
published on such next succeeding Domestic Business Day, the Federal Funds Rate
for such day shall be the average rate quoted to The First National Bank of
Boston on such day on such transactions as determined by the Administrative
Agent.
"Fixed Rate Loans" means CD Loans or Euro-Dollar Loans or Money
Market Loans (excluding Money Market LIBOR Loans bearing interest at the Base
Rate pursuant to Section 8.01(a)) or any combination of the foregoing.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person; provided that the term Guarantee shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Indemnitee" has the meaning set forth in Section 9.03(b).
"Interest Period" means: (1) with respect to each Euro-Dollar
Borrowing, the period commencing on the date of such Borrowing and ending one,
two, three or six months thereafter, as the Borrower may elect in the applicable
Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
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<PAGE> 10
(2) with respect to each CD Borrowing, the period commencing on the date of such
Borrowing and ending 30, 60, 90 or 180 days thereafter, as the Borrower may
elect in the applicable Notice of Borrowing; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(3) with respect to each Base Rate Borrowing, the period commencing on the date
of such Borrowing and ending 30 days thereafter; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(4) with respect to each Money Market LIBOR Borrowing, the period commencing on
the date of such Borrowing and ending such whole number of months thereafter as
the Borrower may elect in accordance with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day unless such Euro-Dollar Business
Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Euro-Dollar Business Day;
(b) any Interest Period which begins on the last Euro-Dollar
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the calendar month at the end of such
Interest Period) shall, subject to clause (c) below, end on the last
Euro-Dollar Business Day of a calendar month; and
(c) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
(5) with respect to each Money Market Absolute Rate Borrowing, the period
commencing on the date of such Borrowing and ending such number of days
thereafter (but not less than 15 days) as the Borrower may elect in accordance
with Section 2.03; provided that:
(a) any Interest Period which would otherwise end on a day which
is not a Euro-Dollar Business Day shall be extended to the next
succeeding Euro-Dollar Business Day; and
(b) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended, or any successor statute.
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"Investment" means all loans, advances, extensions of credit,
guarantees, purchases of stock (other than stock of the Borrower) or other
securities, contributions to capital or otherwise, whether existing on the date
of this Agreement or hereafter made.
"Leverage Ratio" means, at any date, the percentage equivalent of
a fraction the numerator of which is Total Adjusted Debt at such date and the
denominator of which is Total Capitalization at such date.
"LIBOR Auction" means a solicitation of Money Market Quotes
setting forth Money Market Margins based on the London Interbank Offered Rate
pursuant to Section 2.03.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset. For the purposes of this Agreement, the Borrower or any Subsidiary shall
be deemed to own subject to a Lien any asset which it has acquired or holds
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement relating to such
asset.
"Loan" means a Domestic Loan or a Euro-Dollar Loan or a Money
Market Loan and "Loans" means Domestic Loans or Euro-Dollar Loans or Money
Market Loans or any combination of the foregoing.
"London Interbank Offered Rate" has the meaning set forth in
Section 2.07(c).
"Material Debt" means Debt (other than the Loans) of the Borrower
and/or one or more of its Consolidated Subsidiaries, in an aggregate principal
amount exceeding $10,000,000.
"Material Financial Obligations" means a principal amount of Debt
and/or payment or collateralization obligations in respect of Derivatives
Obligations of the Borrower and/or one or more of its Subsidiaries, exceeding in
the aggregate $10,000,000.
"Material Plan" means at any time a Plan or Plans having
aggregate Unfunded Liabilities in excess of $10,000,000.
"Money Market Absolute Rate" has the meaning set forth in
Section 2.03(d).
"Money Market Absolute Rate Loan" means a loan to be made by a
Bank pursuant to an Absolute Rate Auction.
"Money Market Lending Office" means, as to each Bank, its
Domestic Lending Office or such other office, branch or affiliate of such Bank
as it may hereafter designate as its Money Market Lending Office by notice to
the Borrower and the Agent; provided that any Bank may from time to time by
notice to the Borrower and the Administrative Agent designate separate Money
Market Lending Offices for its Money Market LIBOR Loans, on the one hand, and
its Money Market Absolute Rate Loans, on the other hand, in which case all
references herein to the Money Market Lending Office of such Bank shall be
deemed to refer to either or both of such offices, as the context may require.
"Money Market LIBOR Loan" means a loan to be made by a Bank
pursuant to a LIBOR Auction (including such a loan bearing interest at the Base
Rate pursuant to Section 8.01(a)).
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"Money Market Loan" means a Money Market LIBOR Loan or a Money
Market Absolute Rate Loan.
"Money Market Margin" has the meaning set forth in Section
2.03(d).
"Money Market Quote" means an offer by a Bank to make a Money
Market Loan in accordance with Section 2.03.
"Moody's" has the meaning set forth in the Pricing Schedule.
"Multiemployer Plan" means at any time an employee pension
benefit plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the ERISA
Group during such five year period.
"NMG" means The Neiman-Marcus Group, Inc., a Delaware
corporation.
"Notes" means promissory notes of the Borrower, substantially in
the form of Exhibit A hereto, evidencing the obligation of the Borrower to repay
the Loans, and "Note" means any one of such promissory notes issued hereunder.
"Notice of Borrowing" means a Notice of Committed Borrowing (as
defined in Section 2.02) or a Notice of Money Market Borrowing (as defined in
Section 2.03(f)).
"Parent" means, with respect to any Bank, any Person
controlling such Bank.
"Participant" has the meaning set forth in Section 9.06(b).
"PBGC" means the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Person" means an individual, a corporation, a partnership, an
association, a trust or any other entity or organization, including a government
or political subdivision or an agency or instrumentality thereof.
"Plan" means at any time an employee pension benefit plan (other
than a Multiemployer Plan) which is covered by Title IV of ERISA or subject to
the minimum funding standards under Section 412 of the Internal Revenue Code and
either (i) is maintained, or contributed to, by any member of the ERISA Group
for employees of any member of the ERISA Group or (ii) has at any time within
the preceding five years been maintained, or contributed to, by any Person which
was at such time a member of the ERISA Group for employees of any Person which
was at such time a member of the ERISA Group.
"Pricing Schedule" means the Schedule attached hereto
identified as such.
"Prime Rate" means the rate of interest publicly announced by
Morgan Guaranty Trust Company of New York in New York City from time to time as
its Prime Rate.
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"Reference Banks" means the CD Reference Banks or the Euro-Dollar
Reference Banks, as the context may require, and "Reference Bank" means any one
of such Reference Banks.
"Refunding Borrowing" means a Committed Borrowing which, after
application of the proceeds thereof, results in no net increase in the
outstanding principal amount of Committed Loans made by any Bank.
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Rental Expense" means, for any period, the amount of the item
included in Adjusted Consolidated Net Income pursuant to paragraph (b) of the
definition thereof for such period.
"Required Banks" means at any time Banks having at least 66 2/3%
of the aggregate amount of the Commitments at such time or, if the Commitments
shall have been terminated in their entirety, holding Notes evidencing at least
66 2/3% of the aggregate unpaid principal amount of the Loans.
"Restricted Payment" means (a) the declaration or payment of any
dividend (in cash or property) on or in respect of any shares of any class of
capital stock of the Borrower, except dividends payable in capital stock of the
Borrower, (b) the purchase or other retirement of any shares, and of any option
or warrant or other right to purchase any shares, of any class of capital stock
of the Borrower, directly, or indirectly through a Subsidiary, or otherwise,
except for the purchase by the Borrower subsequent to November 1, 1994 of stock
options held by employees in an amount not to exceed $5,000,000 in the aggregate
and (c) the prepayment, redemption, retirement or purchase of Subordinated Debt
of the Borrower other than (i) at its scheduled maturity or (ii) in exchange for
equity securities (including options or warrants to purchase equity securities)
of the Borrower or other Subordinated Debt of the Borrower.
"Revolving Credit Period" means the period from and including the
Effective Date to but not including the Termination Date.
"S&P" has the meaning set forth in the Pricing Schedule.
"Significant Subsidiary" means at any time any Subsidiary or any
group of Subsidiaries having consolidated assets, individually or in the
aggregate, equal to or greater than 7% of the consolidated assets of the
Borrower and its Subsidiaries at such time.
"Smith Family Group" means the group of persons party to the
Smith-Lurie/Marks Stockholders Agreement dated as of December 29, 1986, as
amended (whether or not such agreement is terminated) and the progeny of each
such person.
"Subordinated Debt" means any unsecured Debt of the Borrower
which is by its terms subordinated in right of payment to the Notes.
"Subsidiary" means any corporation or other entity (i) of which
securities or other ownership interests having ordinary voting power to elect a
majority of the board of directors or other persons performing similar functions
are at the time directly or indirectly owned by the Borrower (or, if such term
is used with reference to any other Person, by such Person) or (ii) a majority
of the equity interest in which shall at the time be owned directly
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or indirectly by the Borrower and which is a Consolidated Subsidiary as of such
time; provided that neither NMG nor any of its Subsidiaries shall be deemed to
be a Subsidiary of the Borrower.
"Termination Date" means December 16, 1999, or, if such day is
not a Euro-Dollar Business Day, the next succeeding Euro-Dollar Business Day
unless such Euro-Dollar Business Day falls in another calendar month, in which
case the Termination Date shall be the next preceding Euro-Dollar Business Day.
"Total Adjusted Debt" means, at any date, an amount equal to (i)
the consolidated Debt of the Borrower and its Subsidiaries (excluding any such
Debt (other than short-term indebtedness for borrowed money or the current
portion of long-term Debt) which is a current liability of the Borrower or a
Subsidiary) at such date plus (ii) an amount equal to 800% of Rental Expense for
the period of four consecutive fiscal quarters most recently ended on or prior
to such date.
"Total Capitalization" means, at any date, the sum of Total
Adjusted Debt plus Adjusted Net Worth, each determined as of such date.
"Unfunded Liabilities" means, with respect to any Plan at any
time, the amount (if any) by which (i) the value of all benefit liabilities
under such Plan, determined on a plan termination basis using the assumptions
prescribed by the PBGC for purposes of Section 4044 of ERISA, exceeds (ii) the
fair market value of all Plan assets allocable to such liabilities under Title
IV of ERISA (excluding any accrued but unpaid contributions), all determined as
of the then most recent valuation date for such Plan, but only to the extent
that such excess represents a potential liability of a member of the ERISA Group
to the PBGC or any other Person under Title IV of ERISA.
"United States" means the United States of America, including the
States and the District of Columbia, but excluding its territories and
possessions.
"Wholly-Owned Subsidiary" means any Subsidiary all of the shares
of capital stock or other ownership interests of which (except directors'
qualifying shares) are at the time directly or indirectly owned by the Borrower.
SECTION 1.02. Accounting Terms and Determinations. Unless
otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with generally accepted accounting principles as in effect from time
to time, applied on a basis consistent (except for changes concurred with by the
Borrower's independent public accountants) with the most recent audited
consolidated financial statements of the Borrower and its Consolidated
Subsidiaries delivered to the Banks; provided that, if the Borrower notifies the
Documentation Agent that the Borrower wishes to amend any covenant in Article V
to eliminate the effect of any change in generally accepted accounting
principles on the operation of such covenant (or if the Documentation Agent
notifies the Borrower that the Required Banks wish to amend Article V for such
purpose), then the Borrower's compliance with such covenant shall be determined
on the basis of generally accepted accounting principles in effect immediately
before the relevant change in generally accepted accounting principles became
effective, until either such notice is withdrawn or such covenant is amended in
a manner satisfactory to the Borrower and the Required Banks.
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SECTION 1.03. Types of Borrowings. The term "Borrowing" denotes
the aggregation of Loans of one or more Banks to be made to the Borrower
pursuant to Article II on a single date and for a single Interest Period.
Borrowings are classified for purposes of this Agreement either by reference to
the pricing of Loans comprising such Borrowing (e.g., a "Euro-Dollar Borrowing"
is a Borrowing comprised of Euro-Dollar Loans) or by reference to the provisions
of Article II under which participation therein is determined (i.e., a
"Committed Borrowing" is a Borrowing under Section 2.01 in which all Banks
participate in proportion to their Commitments, while a "Money Market Borrowing"
is a Borrowing under Section 2.03 in which the Bank participants are determined
on the basis of their bids in accordance therewith).
ARTICLE II
THE CREDITS
SECTION 2.01. Commitments to Lend. During the Revolving Credit
Period each Bank severally agrees, on the terms and conditions set forth in this
Agreement, to make loans to the Borrower pursuant to this Section from time to
time in amounts such that the aggregate principal amount of Committed Loans by
such Bank at any one time outstanding shall not exceed the amount of its
Commitment. Each Borrowing under this Section shall be in an aggregate principal
amount of $5,000,000 or any larger multiple of $1,000,000 (except that any such
Borrowing may be in the aggregate amount available in accordance with Section
3.02(b)) and shall be made from the several Banks ratably in proportion to their
respective Commitments. Within the foregoing limits, the Borrower may borrow
under this Section , repay, or to the extent permitted by Section 2.11, prepay
Loans and reborrow at any time during the Revolving Credit Period under this
Section.
SECTION 2.02. Notice of Committed Borrowings. The Borrower shall
give the Administrative Agent notice (a "Notice of Committed Borrowing") not
later than 11:00 A.M. (Boston, Massachusetts time) on (x) the date of each Base
Rate Borrowing, (y) the second Domestic Business Day before each CD Borrowing
and (z) the third Euro-Dollar Business Day before each Euro-Dollar Borrowing,
specifying:
(a) the date of such Borrowing, which shall be a Domestic
Business Day in the case of a Domestic Borrowing or a Euro-Dollar
Business Day in the case of a Euro-Dollar Borrowing,
(b) the aggregate amount of such Borrowing,
(c) whether the Loans comprising such Borrowing are to be CD
Loans, Base Rate Loans or Euro-Dollar Loans, and
(d) in the case of a Fixed Rate Borrowing, the duration of the
Interest Period applicable thereto, subject to the provisions of the
definition of Interest Period.
SECTION 2.03. Money Market Borrowings.
(a) The Money Market Option. In addition to Committed Borrowings
pursuant to Section 2.01, the Borrower may, as set forth in this Section ,
request the Banks during the Revolving Credit Period to make offers to make
Money Market Loans to the Borrower. The Banks may, but shall have no
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obligation to, make such offers and the Borrower may, but shall have no
obligation to, accept any such offers in the manner set forth in this Section.
(b) Money Market Quote Request. When the Borrower wishes to
request offers to make Money Market Loans under this Section , it shall transmit
to the Administrative Agent by telex or facsimile transmission a Money Market
Quote Request substantially in the form of Exhibit B hereto so as to be received
no later than 11:00 A.M. (Boston, Massachusetts time) on (x) the fourth
Euro-Dollar Business Day prior to the date of Borrowing proposed therein, in the
case of a LIBOR Auction or (y) the Domestic Business Day next preceding the date
of Borrowing proposed therein, in the case of an Absolute Rate Auction (or, in
either case, such other time or date as the Borrower and the Administrative
Agent shall have mutually agreed and shall have notified to the Banks not later
than the date of the Money Market Quote Request for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be effective) specifying:
(i) the proposed date of Borrowing, which shall be a Euro-Dollar
Business Day in the case of a LIBOR Auction or a Domestic Business Day
in the case of an Absolute Rate Auction,
(ii) the aggregate amount of such Borrowing, which shall be
$5,000,000 or a larger multiple of $1,000,000,
(iii) the duration of the Interest Period applicable thereto,
subject to the provisions of the definition of Interest Period, and
(iv) whether the Money Market Quotes requested are to set forth a
Money Market Margin or a Money Market Absolute Rate.
The Borrower may request offers to make Money Market Loans for more than one
Interest Period in a single Money Market Quote Request. No Money Market Quote
Request shall be given within five Euro-Dollar Business Days (or such other
number of days as the Borrower and the Administrative Agent may agree) of any
other Money Market Quote Request.
(c) Invitation for Money Market Quotes. Promptly upon receipt of
a Money Market Quote Request, the Administrative Agent shall send to the Banks
by telex or facsimile transmission an Invitation for Money Market Quotes
substantially in the form of Exhibit C hereto, which shall constitute an
invitation by the Borrower to each Bank to submit Money Market Quotes offering
to make the Money Market Loans to which such Money Market Quote Request relates
in accordance with this Section.
(d) Submission and Contents of Money Market Quotes. (i) Each Bank
may submit a Money Market Quote containing an offer or offers to make Money
Market Loans in response to any Invitation for Money Market Quotes. Each Money
Market Quote must comply with the requirements of this subsection (d) and must
be submitted to the Administrative Agent by telex or facsimile transmission at
its offices referred to in Section 9.01 not later than (x) 4:00 P.M. (Boston,
Massachusetts time) on the fourth Euro-Dollar Business Day prior to the proposed
date of Borrowing, in the case of a LIBOR Auction or (y) 9:15 A.M. (Boston,
Massachusetts time) on the proposed date of Borrowing, in the case of an
Absolute Rate Auction (or, in either case, such other time or date as the
Borrower and the Administrative Agent shall have mutually agreed and shall have
notified to the Banks not later than the date of the Money Market Quote Request
for the first LIBOR Auction or Absolute Rate Auction for which such change is to
be effective); provided that Money Market Quotes submitted by the Administrative
Agent (or any affiliate of the Administrative
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Agent) in the capacity of a Bank may be submitted, and may only be submitted, if
the Administrative Agent or such affiliate notifies the Borrower of the terms of
the offer or offers contained therein not later than (x) 3:00 P.M. (Boston,
Massachusetts time), in the case of a LIBOR Auction or (y) 9:00 A.M. (Boston,
Massachusetts time), in the case of an Absolute Rate Auction. Subject to
Articles III and VI, any Money Market Quote so made shall be irrevocable except
with the written consent of the Administrative Agent given on the instructions
of the Borrower.
(ii) Each Money Market Quote shall be in substantially the form of
Exhibit D hereto and shall in any case specify:
(A) the proposed date of Borrowing,
(B) the principal amount of the Money Market Loan for which each
such offer is being made, which principal amount (w) may be greater
than or less than the Commitment of the quoting Bank, (x) must be
$5,000,000 or a larger multiple of $1,000,000, (y) may not exceed the
principal amount of Money Market Loans for which offers were requested
and (z) may be subject to an aggregate limitation as to the principal
amount of Money Market Loans for which offers being made by such
quoting Bank may be accepted,
(C) in the case of a LIBOR Auction, the margin above or below the
applicable London Interbank Offered Rate (the "Money Market Margin")
offered for each such Money Market Loan, expressed as a percentage
(specified to the nearest 1/10,000th of 1%) to be added to or
subtracted from such base rate,
(D) in the case of an Absolute Rate Auction, the rate of interest
per annum (specified to the nearest 1/10,000th of 1%) (the "Money
Market Absolute Rate") offered for each such Money Market Loan, and
(E) the identity of the quoting Bank.
A Money Market Quote may set forth up to five separate offers by the quoting
Bank with respect to each Interest Period specified in the related Invitation
for Money Market Quotes.
(iii) Any Money Market Quote shall be disregarded if it:
(A) is not substantially in conformity with Exhibit D hereto or
does not specify all of the information required by subsection (d)(ii);
(B) contains qualifying, conditional or similar language;
(C) proposes terms other than or in addition to those set forth
in the applicable Invitation for Money Market Quotes; or
(D) arrives after the time set forth in subsection (d)(i).
(e) Notice to Borrower. The Administrative Agent shall promptly
notify the Borrower of the terms (x) of any Money Market Quote submitted by a
Bank that is in accordance with subsection (d) and (y) of any Money Market Quote
that amends, modifies or is otherwise inconsistent with a previous Money Market
Quote submitted by such Bank with respect to the same Money Market Quote
Request. Any such subsequent Money Market Quote shall be
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disregarded by the Administrative Agent unless such subsequent Money Market
Quote is submitted solely to correct a manifest error in such former Money
Market Quote. The Administrative Agent's notice to the Borrower shall specify
(A) the aggregate principal amount of Money Market Loans for which offers have
been received for each Interest Period specified in the related Money Market
Quote Request, (B) the respective principal amounts and Money Market Margins or
Money Market Absolute Rates, as the case may be, so offered and (C) if
applicable, limitations on the aggregate principal amount of Money Market Loans
for which offers in any single Money Market Quote may be accepted.
(f) Acceptance and Notice by Borrower. Not later than 10:00 A.M.
(Boston, Massachusetts time) on (x) the third Euro-Dollar Business Day prior to
the proposed date of Borrowing, in the case of a LIBOR Auction or (y) the
proposed date of Borrowing, in the case of an Absolute Rate Auction (or, in
either case, such other time or date as the Borrower and the Administrative
Agent shall have mutually agreed and shall have notified to the Banks not later
than the date of the Money Market Quote Request for the first LIBOR Auction or
Absolute Rate Auction for which such change is to be effective), the Borrower
shall notify the Administrative Agent of its acceptance or non-acceptance of the
offers so notified to it pursuant to subsection (e). In the case of acceptance,
such notice (a "Notice of Money Market Borrowing") shall specify the aggregate
principal amount of offers for each Interest Period that are accepted. The
Borrower may accept any Money Market Quote in whole or in part; provided that:
(i) the aggregate principal amount of each Money Market Borrowing
may not exceed the applicable amount set forth in the related Money
Market Quote Request,
(ii) the principal amount of each Money Market Borrowing must
be $5,000,000 or a larger multiple of $1,000,000,
(iii) acceptance of offers may only be made on the basis of
ascending Money Market Margins or Money Market Absolute Rates, as the
case may be, and
(iv) the Borrower may not accept any offer that is described in
subsection (d)(iii) or that otherwise fails to comply with the
requirements of this Agreement.
(g) Allocation by Administrative Agent. If offers are made by two
or more Banks with the same Money Market Margins or Money Market Absolute Rates,
as the case may be, for a greater aggregate principal amount than the amount in
respect of which such offers are accepted for the related Interest Period, the
principal amount of Money Market Loans in respect of which such offers are
accepted shall be allocated by the Administrative Agent among such Banks as
nearly as possible (in multiples of $1,000,000, as the Administrative Agent may
deem appropriate) in proportion to the aggregate principal amounts of such
offers. Determinations by the Administrative Agent of the amounts of Money
Market Loans shall be conclusive in the absence of manifest error.
SECTION 2.04. Notice to Banks; Funding of Loans.
(a) Upon receipt of a Notice of Borrowing, the Administrative
Agent shall promptly notify each Bank of the contents thereof and of such Bank's
share (if any) of such Borrowing and such Notice of Borrowing shall not
thereafter be revocable by the Borrower.
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(b) Not later than 12:00 Noon (Boston, Massachusetts time) on the
date of each Borrowing, each Bank participating therein shall (except as
provided in subsection (c) of this Section ) make available its share of such
Borrowing, in Federal or other funds immediately available in Boston,
Massachusetts to the Administrative Agent at its address referred to in Section
9.01. Unless the Administrative Agent determines that any applicable condition
specified in Article III has not been satisfied, the Administrative Agent will
make the funds so received from the Banks available to the Borrower at the
Administrative Agent's aforesaid address.
(c) If any Bank makes a new Loan hereunder on a day on which the
Borrower is to repay all or any part of an outstanding Loan from such Bank, such
Bank shall apply the proceeds of its new Loan to make such repayment and only an
amount equal to the difference (if any) between the amount being borrowed and
the amount being repaid shall be made available by such Bank to the
Administrative Agent as provided in subsection (b), or remitted by the Borrower
to the Administrative Agent as provided in Section 2.12, as the case may be.
(d) Unless the Administrative Agent shall have received notice
from a Bank prior to the date of any Borrowing that such Bank will not make
available to the Administrative Agent such Bank's share of such Borrowing, the
Administrative Agent may assume that such Bank has made such share available to
the Administrative Agent on the date of such Borrowing in accordance with
subsections (b) and (c) of this Section 2.04 and the Administrative Agent may,
in reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Bank shall not have so made
such share available to the Administrative Agent, such Bank and, if such Bank
shall have failed to do so within four Domestic Business Days of demand by the
Administrative Agent therefor (a copy of which shall be simultaneously given to
the Borrower), the Borrower severally agree to repay to the Administrative Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the Borrower until
the date such amount is repaid to the Administrative Agent, at the Federal Funds
Rate. If such Bank shall repay to the Administrative Agent such corresponding
amount, such amount so repaid shall constitute such Bank's Loan included in such
Borrowing for purposes of this Agreement.
SECTION 2.05. Notes. (a) The Loans of each Bank shall be
evidenced by a single Note payable to the order of such Bank for the account of
its Applicable Lending Office in an amount equal to the aggregate unpaid
principal amount of such Bank's Loans.
(b) Each Bank may, by notice to the Borrower and the
Documentation Agent, request that its Loans of a particular type be evidenced by
a separate Note in an amount equal to the aggregate unpaid principal amount of
such Loans. Each such Note shall be in substantially the form of Exhibit A
hereto with appropriate modifications to reflect the fact that it evidences
solely Loans of the relevant type. Each reference in this Agreement to the
"Note" of such Bank shall be deemed to refer to and include any or all of such
Notes, as the context may require.
(c) Upon receipt of each Bank's Note pursuant to Section 3.01(b),
the Documentation Agent shall forward such Note to such Bank. Each Bank shall
record the date, amount, type and maturity of each Loan made by it and the date
and amount of each payment of principal made by the Borrower with respect
thereto, and may, if such Bank so elects in connection with any transfer or
enforcement of its Note, endorse on the schedule forming a part
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thereof appropriate notations to evidence the foregoing information with respect
to each such Loan then outstanding; provided that the failure of any Bank to
make any such recordation or endorsement shall not affect the obligations of the
Borrower hereunder or under the Notes. Each Bank is hereby irrevocably
authorized by the Borrower so to endorse its Note and to attach to and make a
part of its Note a continuation of any such schedule as and when required.
SECTION 2.06. Maturity of Loans. Each Loan included in any
Borrowing shall mature, and the principal amount thereof shall be due and
payable, on the last day of the Interest Period applicable to such Borrowing.
SECTION 2.07. Interest Rates. (a) Each Base Rate Loan shall bear
interest on the outstanding principal amount thereof, for each day from the date
such Loan is made until it becomes due, at a rate per annum equal to the Base
Rate for such day. Such interest shall be payable for each Interest Period on
the last day thereof. Any overdue principal of or interest on any Base Rate Loan
shall bear interest, payable on demand, for each day until paid at a rate per
annum equal to the sum of 2% plus the rate otherwise applicable to Base Rate
Loans for such day.
(b) Each CD Loan shall bear interest on the outstanding principal
amount thereof, for each day during the Interest Period applicable thereto, at a
rate per annum equal to the sum of the CD Margin for such day plus the
applicable Adjusted CD Rate for such Interest Period; provided that if any CD
Loan shall, as a result of clause (2)(b) of the definition of Interest Period,
have an Interest Period of less than 30 days, such CD Loan shall bear interest
during such Interest Period at the rate applicable to Base Rate Loans during
such period. Such interest shall be payable for each Interest Period on the last
day thereof and, if such Interest Period is longer than 90 days, at intervals of
90 days after the first day thereof. Any overdue principal of or interest on any
CD Loan shall bear interest, payable on demand, for each day until paid at a
rate per annum equal to the sum of 2% plus the higher of (i) the sum of the CD
Margin for such day plus the Adjusted CD Rate applicable to such Loan and (ii)
the rate applicable to Base Rate Loans for such day.
"CD Margin" means a rate per annum determined in accordance with
the Pricing Schedule.
The "Adjusted CD Rate" applicable to any Interest Period means a
rate per annum determined pursuant to the following formula:
[ CDBR ]*
ACDR = [ ---------- ] + AR
[ 1.00 - DRP ]
ACDR = Adjusted CD Rate
CDBR = CD Base Rate
DRP = Domestic Reserve Percentage
AR = Assessment Rate
-------------
* The amount in brackets being rounded upward, if necessary, to the
next higher 1/100 of 1%
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The "CD Base Rate" applicable to any Interest Period is the rate
of interest determined by the Administrative Agent to be the average (rounded
upward, if necessary, to the next higher 1/100 of 1%) of the prevailing rates
per annum bid at 10:00 A.M. (Boston, Massachusetts time) (or as soon thereafter
as practicable) on the first day of such Interest Period by two or more New York
certificate of deposit dealers of recognized standing for the purchase at face
value from each CD Reference Bank of its certificates of deposit in an amount
comparable to the principal amount of the CD Loan of such CD Reference Bank to
which such Interest Period applies and having a maturity comparable to such
Interest Period.
"Domestic Reserve Percentage" means for any day that percentage
(expressed as a decimal) which is in effect on such day, as prescribed by the
Board of Governors of the Federal Reserve System (or any successor) for
determining the maximum reserve requirement (including without limitation any
basic, supplemental or emergency reserves) for a member bank of the Federal
Reserve System in Boston, Massachusetts with deposits exceeding five billion
dollars in respect of new non-personal time deposits in dollars in Boston,
Massachusetts having a maturity comparable to the related Interest Period and in
an amount of $100,000 or more. The Adjusted CD Rate shall be adjusted
automatically on and as of the effective date of any change in the Domestic
Reserve Percentage.
"Assessment Rate" means for any day the annual assessment rate in
effect on such day which is payable by a member of the Bank Insurance Fund
classified as adequately capitalized and within supervisory subgroup "A" (or a
comparable successor assessment risk classification) within the meaning of 12
C.F.R. Section 327.3(e) (or any successor provision) to the Federal Deposit
Insurance Corporation (or any successor) for such Corporation's (or such
successor's) insuring time deposits at offices of such institution in the United
States. The Adjusted CD Rate shall be adjusted automatically on and as of the
effective date of any change in the Assessment Rate.
(c) Each Euro-Dollar Loan shall bear interest on the outstanding
principal amount thereof, for each day during the Interest Period applicable
thereto, at a rate per annum equal to the sum of the Euro-Dollar Margin for such
day plus the applicable London Interbank Offered Rate for such Interest Period.
Such interest shall be payable for each Interest Period on the last day thereof
and, if such Interest Period is longer than three months, at intervals of three
months after the first day thereof.
"Euro-Dollar Margin" means a rate per annum determined in
accordance with the Pricing Schedule.
The "London Interbank Offered Rate" applicable to any Interest
Period means the average (rounded upward, if necessary, to the next higher 1/16
of 1%) of the respective rates per annum at which deposits in dollars are
offered to each of the Euro-Dollar Reference Banks in the London inter- bank
market at approximately 11:00 A.M. (London time) two Euro-Dollar Business Days
before the first day of such Interest Period in an amount approximately equal to
the principal amount of the Euro-Dollar Loan of such Euro-Dollar Reference Bank
to which such Interest Period is to apply and for a period of time comparable to
such Interest Period.
(d) Any overdue principal of or interest on any Euro-Dollar Loan
shall bear interest, payable on demand, for each day from and including the date
payment thereof was due to but excluding the date of actual payment, at a rate
per annum equal to the sum of 2% plus the higher of (i) the sum of the
Euro-Dollar Margin for such day plus the London Interbank Offered Rate
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<PAGE> 22
applicable to such Loan and (ii) the rate applicable to Base Rate Loans for such
day.
(e) Subject to Section 8.01(a), each Money Market LIBOR Loan
shall bear interest on the outstanding principal amount thereof, for the
Interest Period applicable thereto, at a rate per annum equal to the sum of the
London Interbank Offered Rate for such Interest Period (determined in accordance
with Section 2.07(c) as if the related Money Market LIBOR Borrowing were a
Committed Euro-Dollar Borrowing) plus (or minus) the Money Market Margin quoted
by the Bank making such Loan in accordance with Section 2.03. Each Money Market
Absolute Rate Loan shall bear interest on the outstanding principal amount
thereof, for the Interest Period applicable thereto, at a rate per annum equal
to the Money Market Absolute Rate quoted by the Bank making such Loan in
accordance with Section 2.03. Such interest shall be payable for each Interest
Period on the last day thereof and, if such Interest Period is longer than three
months, at intervals of three months after the first day thereof. Any overdue
principal of or interest on any Money Market Loan shall bear interest, payable
on demand, for each day until paid at a rate per annum equal to the sum of 2%
plus the Base Rate for such day.
(f) The Administrative Agent shall determine each interest rate
applicable to the Loans hereunder. The Administrative Agent shall give prompt
notice to the Borrower and the participating Banks of each rate of interest so
determined, and its determination thereof shall be conclusive in the absence of
manifest error.
(g) Each Reference Bank agrees to use its best efforts to furnish
quotations to the Administrative Agent as contemplated by this Section . If any
Reference Bank does not furnish a timely quotation, the Administrative Agent
shall determine the relevant interest rate on the basis of the quotation or
quotations furnished by the remaining Reference Bank or Banks or, if none of
such quotations is available on a timely basis, the provisions of Section 8.01
shall apply.
SECTION 2.08. Facility Fee. The Borrower shall pay to the
Administrative Agent for the account of the Banks ratably in proportion to their
respective Commitments a facility fee at a rate per annum equal to the Facility
Fee Rate (determined daily in accordance with the Pricing Schedule). Such
facility fee shall accrue (i) from and including the Effective Date to but
excluding the Termination Date (or earlier date of termination of the
Commitments in their entirety), on the daily aggregate amount of the Commitments
(whether used or unused) and (ii) from and including the Termination Date (or
earlier date of termination of the Commitments in their entirety) to but
excluding the date the Loans shall be repaid in their entirety, on the daily
average aggregate outstanding principal amount of the Loans. Accrued fees under
this Section shall be payable quarterly on each March 1, June 1, September 1 and
December 1 prior to the Termination Date and upon the date of termination of the
Commitments in their entirety (and, if later, the date the Loans shall be repaid
in their entirety).
SECTION 2.09. Optional Termination or Reduction of Commitments.
During the Revolving Credit Period, the Borrower may, upon at least three
Domestic Business Days' notice to the Administrative Agent, (i) terminate the
Commitments at any time, if no Loans are outstanding at such time or (ii)
ratably reduce from time to time by an aggregate amount of $25,000,000 or any
larger multiple thereof, the aggregate amount of the Commitments in excess of
the aggregate outstanding principal amount of the Loans.
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<PAGE> 23
SECTION 2.10. Scheduled Termination of Commitments. The
Commitments shall terminate on the Termination Date, and any Loans then
outstanding (together with accrued interest thereon) shall be due and payable on
such date.
SECTION 2.11. Optional Prepayments. (a) The Borrower may (i) upon
at least one Domestic Business Day's notice to the Administrative Agent, prepay
any Domestic Borrowing (or any Money Market Borrowing bearing interest at the
Base Rate pursuant to Section 8.01(a)) or (ii) subject to Section 2.13, upon at
least three Euro-Business Days' notice to the Administrative Agent, prepay any
Euro-Dollar Borrowing, in whole at any time, or from time to time in part in
amounts aggregating $5,000,000 or any larger multiple of $1,000,000, by paying
the principal amount to be prepaid together with accrued interest thereon to the
date of prepayment. Each such optional prepayment shall be applied to prepay
ratably the Loans of the several Banks included in such Borrowing.
(b) Except as provided in clause (i) of Section 2.11(a), the
Borrower may not prepay all or any portion of the principal amount of any Money
Market Loan prior to the maturity thereof.
(c) Upon receipt of a notice of prepayment pursuant to this
Section , the Administrative Agent shall promptly notify each Bank of the
contents thereof and of such Bank's ratable share (if any) of such prepayment
and such notice shall not thereafter be revocable by the Borrower.
SECTION 2.12. General Provisions as to Payments. (a) The Borrower
shall make each payment of principal of, and interest on, the Loans and of fees
hereunder, not later than 12:00 Noon (Boston, Massachusetts time) on the date
when due, in Federal or other funds immediately available in Boston,
Massachusetts, to the Administrative Agent at its address referred to in Section
9.01. The Administrative Agent will promptly distribute to each Bank its ratable
share of each such payment received by the Administrative Agent for the account
of the Banks. Whenever any payment of principal of, or interest on, the Domestic
Loans or of fees shall be due on a day which is not a Domestic Business Day, the
date for payment thereof shall be extended to the next succeeding Domestic
Business Day. Whenever any payment of principal of, or interest on, the
Euro-Dollar Loans shall be due on a day which is not a Euro-Dollar Business Day,
the date for payment thereof shall be extended to the next succeeding
Euro-Dollar Business Day unless such Euro-Dollar Business Day falls in another
calendar month, in which case the date for payment thereof shall be the next
preceding Euro-Dollar Business Day. Whenever any payment of principal of, or
interest on, the Money Market Loans shall be due on a day which is not a
Euro-Dollar Business Day, the date for payment thereof shall be extended to the
next succeeding Euro-Dollar Business Day. If the date for any payment of
principal is extended by operation of law or otherwise, interest thereon shall
be payable for such extended time.
(b) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the Banks
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Bank on such due
date an amount equal to the amount then due such Bank. If and to the extent that
the Borrower shall not have so made such payment, each Bank shall repay to the
Administrative Agent forthwith on demand such amount distributed to such Bank
together with interest thereon, for each day from the date such
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<PAGE> 24
amount is distributed to such Bank until the date such Bank repays such amount
to the Administrative Agent, at the Federal Funds Rate.
SECTION 2.13. Funding Losses. If the Borrower makes any payment
of principal with respect to any Fixed Rate Loan (pursuant to Article II or VI
or otherwise, but not including Article VIII) on any day other than the last day
of the Interest Period applicable thereto, or if the Borrower fails to borrow or
prepay any Fixed Rate Loans after notice has been given to any Bank in
accordance with Section 2.04(a) or 2.11(c), the Borrower shall reimburse each
Bank within 15 days after demand for any resulting loss or expense incurred by
it (or by an existing or prospective Participant in the related Loan), including
(without limitation) any loss incurred in obtaining, liquidating or employing
deposits from third parties, but excluding loss of margin for the period after
any such payment or failure to borrow or prepay, provided that such Bank shall
have delivered to the Borrower a certificate as to the amount of such loss or
expense, which certificate shall be conclusive in the absence of clearly
demonstrable error. Each such certificate shall be accompanied by such
information as the Borrower may reasonably request as to the computation set
forth therein.
SECTION 2.14. Computation of Interest and Fees. Interest based on
the Prime Rate hereunder shall be computed on the basis of a year of 365 days
(or 366 days in a leap year) and paid for the actual number of days elapsed
(including the first day but excluding the last day). All other interest and
fees shall be computed on the basis of a year of 360 days and paid for the
actual number of days elapsed (including the first day but excluding the last
day).
SECTION 2.15. Regulation D Compensation. For so long as any Bank
maintains reserves against "Eurocurrency liabilities" (or any other category of
liabilities which includes deposits by reference to which the interest rate on
Euro-Dollar Loans is determined or any category of extensions of credit or other
assets which includes loans by a non-United States office of such Bank to United
States residents), and as a result the cost to such Bank (or its Euro-Dollar
Lending Office) of making or maintaining its Euro-Dollar Loans is increased,
then such Bank may require the Borrower to pay, contemporaneously with each
payment of interest on the Euro-Dollar Loans, additional interest on the related
Euro-Dollar Loan of such Bank at a rate per annum up to but not exceeding the
excess of (i) (A) the applicable London Interbank Offered Rate divided by (B)
one minus the Euro-Dollar Reserve Percentage over (ii) the rate specified in
clause (i)(A). Any Bank wishing to require payment of such additional interest
(x) shall so notify the Borrower and the Administrative Agent, in which case
such additional interest on the Euro-Dollar Loans of such Bank shall be payable
to such Bank at the place indicated in such notice with respect to each Interest
Period commencing at least three Euro-Dollar Business Days after the giving of
such notice and (y) shall furnish to the Borrower at least three Euro-Dollar
Business Days prior to each date on which interest is payable on the Euro-Dollar
Loans an officer's certificate setting forth the amount to which such Bank is
then entitled under this Section (which shall be consistent with such Bank's
good faith estimate of the level at which the related reserves are maintained by
it). Each such certificate shall be accompanied by such information as the
Borrower may reasonably request as to the computation set forth therein.
SECTION 2.16. Replacement of Banks. The Borrower shall have the
right, from time to time, with the assistance of the Documentation Agent or the
Administrative Agent, to substitute a bank or banks (which may be one or more of
the Banks) for any Bank whose participation hereunder the Borrower shall have
determined (in its discretion) to terminate.
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<PAGE> 25
ARTICLE III
CONDITIONS
SECTION 3.01. Effectiveness. This Agreement shall become
effective on the date that each of the following conditions shall have been
satisfied (or waived in accordance with Section 9.05):
(a) receipt by the Documentation Agent of counterparts hereof
signed by each of the parties hereto (or, in the case of any party as
to which an executed counterpart shall not have been received, receipt
by the Documentation Agent in form satisfactory to it of telegraphic,
telex or other written confirmation from such party of execution of a
counterpart hereof by such party);
(b) receipt by the Documentation Agent for the account of each
Bank of a duly executed Note dated on or before the Effective Date
complying with the provisions of Section 2.05;
(c) receipt by the Documentation Agent of an opinion of the
General Counsel of the Borrower, given upon the express instruction of
the Borrower, substantially in the form of Exhibit E hereto and
covering such additional matters relating to the transactions
contemplated hereby as the Required Banks may reasonably request;
(d) receipt by the Documentation Agent of an opinion of Davis
Polk & Wardwell, special counsel for the Agents, substantially in the
form of Exhibit F hereto and covering such additional matters relating
to the transactions contemplated hereby as the Required Banks may
reasonably request;
(e) receipt by the Documentation Agent of all documents it may
reasonably request relating to the existence of the Borrower, the
corporate authority for and the validity of this Agreement and the
Notes, and any other matters relevant hereto, all in form and substance
satisfactory to the Documentation Agent; and
(f) receipt by the Documentation Agent of evidence satisfactory
to it of the payment of all principal of and interest on any loans
outstanding under, and of all other amounts payable under, the Existing
Credit Agreement;
provided that this Agreement shall not become effective or be binding on any
party hereto unless all of the foregoing conditions are satisfied not later than
December 30, 1994. The Documentation Agent shall promptly notify the Borrower
and the Banks of the Effective Date, and such notice shall be conclusive and
binding on all parties hereto. The Banks that are parties to the Existing Credit
Agreement, comprising the "Required Banks" as defined therein, and the Borrower
agree that the commitments under the Existing Credit Agreement shall terminate
in their entirety simultaneously with and subject to the effectiveness of this
Agreement and that the Borrower shall be obligated to pay the accrued commitment
and facility fees thereunder to but excluding the date of such effectiveness.
SECTION 3.02. Borrowings. The obligation of any Bank to make
a Loan on the occasion of any Borrowing is subject to the satisfaction of the
following conditions:
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(a) receipt by the Administrative Agent of a Notice of
Borrowing as required by Section 2.02 or 2.03, as the case may be;
(b) the fact that, immediately after such Borrowing, the
aggregate outstanding principal amount of the Loans will not exceed the
aggregate amount of the Commitments;
(c) the fact that, immediately after such Borrowing, no
Default shall have occurred and be continuing; and
(d) the fact that the representations and warranties of the
Borrower contained in this Agreement (other than, in the case of a
Refunding Borrowing, the representations and warranties set forth in
Sections 4.04(c) and 4.05, which need not be true if the matter which
would make them untrue has theretofore been disclosed in writing by the
Borrower to the Banks) shall be true in all material respects on and as
of the date of such Borrowing.
Each Borrowing hereunder shall be deemed to be a representation and warranty by
the Borrower on the date of such Borrowing as to the facts specified in clauses
(b), (c) and (d) of this Section .
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
SECTION 4.01. Corporate Existence and Power. The Borrower and
each Significant Subsidiary is a corporation duly organized, validly existing
and in good standing under the laws of the state of its incorporation, has all
power and authority to carry on its business as now being conducted and to own
its properties, and is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which the failure to qualify would
materially and adversely affect the conduct of its business or the
enforceability of its contractual rights.
SECTION 4.02. Corporate Authorization. The execution, delivery
and performance by the Borrower of this Agreement and the Notes are within the
Borrower's corporate power, have been duly authorized by all necessary corporate
action and will not contravene, or constitute a default under, any provision of
applicable law or regulation or of the Restated Certificate of Incorporation or
By-Laws of the Borrower, or of any judgment, order, decree, agreement or
instrument binding on the Borrower or result in the creation of any Lien upon
any of its property or assets.
SECTION 4.03. Binding Effect. This Agreement constitutes, and the
Notes when duly executed on behalf of the Borrower and delivered in accordance
with this Agreement will constitute, the valid and binding obligations of the
Borrower, enforceable in accordance with their respective terms.
SECTION 4.04. Financial Information.
(a) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as of October 31, 1993 and the related consolidated
statements of income and cash flows for the fiscal year then ended, reported
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on by Deloitte & Touche and set forth in the Borrower's 1993 Form 10-K, a copy
of which has been delivered to each of the Banks, fairly present, in conformity
with generally accepted accounting principles, the consolidated financial
position of the Borrower and its Consolidated Subsidiaries as of such date and
their consolidated results of operations and cash flows for such fiscal year.
(b) The unaudited consolidated balance sheet of the Borrower and
its Consolidated Subsidiaries as of July 31, 1994 and the related unaudited
consolidated statements of income and cash flows for the nine months then ended,
set forth in the Borrower's quarterly report for the fiscal quarter ended July
31, 1994 as filed with the Securities and Exchange Commission on Form 10-Q, a
copy of which has been delivered to each of the Banks, fairly present, in
conformity with generally accepted accounting principles applied on a basis
consistent with the financial statements referred to in subsection (a) of this
Section , the consolidated financial position of the Borrower and its
Consolidated Subsidiaries as of such date and their consolidated results of
operations and cash flows for such nine-month period (subject to normal year-end
adjustments).
(c) Since July 31, 1994, there has been no material adverse
change in the business, financial position or results of operations of the
Borrower and its Consolidated Subsidiaries, considered as a whole.
SECTION 4.05. Litigation. There are no actions, suits or
proceedings pending against or, to the knowledge of the Borrower, threatened
against or affecting, the Borrower or any Significant Subsidiary in any court or
before or by any governmental department, agency or instrumentality, in which
there is a reasonable possibility of an adverse decision which would materially
and adversely affect the financial condition or business of the Borrower and its
Subsidiaries, taken as a whole.
SECTION 4.06. Governmental and Other Approvals. No approval,
consent or authorization of or filing or registration with any governmental
authority or body is necessary for the execution, delivery or performance by the
Borrower of this Agreement or the Notes or for the performance by the Borrower
of any of the terms or conditions hereof or thereof.
SECTION 4.07. Full Disclosure. All financial statements and other
documents furnished by the Borrower to the Banks in connection with this
Agreement do not and will not contain any untrue statement of material fact or
omit to state a material fact necessary in order to make the statements
contained therein not misleading. The Borrower has disclosed to the Banks in
writing any and all facts which materially and adversely affect the business,
operations or condition, financial or otherwise, of the Borrower and its
Subsidiaries or the Borrower's ability to perform its obligations under this
Agreement.
SECTION 4.08. Compliance with ERISA. Each member of the ERISA
Group has fulfilled its obligations under the minimum funding standards of ERISA
and the Internal Revenue Code with respect to each Plan and is in compliance in
all material respects with the presently applicable provisions of ERISA and the
Internal Revenue Code with respect to each Plan. No member of the ERISA Group
has (i) sought a waiver of the minimum funding standard under Section 412 of the
Internal Revenue Code in respect of any Plan, (ii) failed to make any
contribution or payment to any Plan or Multiemployer Plan or in respect of any
Benefit Arrangement, or made any amendment to any Plan or Benefit Arrangement,
which has resulted or could result in the imposition of a Lien or the posting of
a bond or other security under ERISA or the Internal
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<PAGE> 28
Revenue Code or (iii) incurred any liability under Title IV of ERISA other than
a liability to the PBGC for premiums under Section 4007 of ERISA.
SECTION 4.09. Taxes. United States Federal income tax returns of
the Borrower and its Subsidiaries have been examined and closed through the
fiscal year ended October 31, 1988. The Borrower and its Subsidiaries have filed
all United States Federal income tax returns, and the Borrower and its
Significant Subsidiaries have filed all other material tax returns, which are
required to be filed by them and have paid all taxes due pursuant to such
returns or pursuant to any assessment received by the Borrower or any
Significant Subsidiary except where the payment of any such taxes is being
contested in good faith by appropriate proceedings. The charges, accruals and
reserves on the books of the Borrower and its Consolidated Subsidiaries in
respect of taxes or other governmental charges are, in the opinion of the
Borrower, adequate.
SECTION 4.10. Environmental Matters. The Borrower has reasonably
concluded that the costs of compliance with Environmental Laws are unlikely to
have a material adverse effect on the business, financial condition, results of
operations or prospects of the Borrower and its Consolidated Subsidiaries,
considered as a whole.
ARTICLE V
COVENANTS
The Borrower agrees that, so long as any Bank has any Commitment
hereunder or any amount payable under any Note remains unpaid:
SECTION 5.01. Furnishing of Financial Data and Certificates.
The Borrower will deliver to each of the Banks:
(a) As soon as practicable, and in any event within 75 days after
the close of each of the first three quarters of each fiscal year of the
Borrower, (i) the consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at the end of such quarter, (ii) the consolidated
statement of income and retained earnings of the Borrower and its Consolidated
Subsidiaries for such quarter and for the portion of such fiscal year to and
including such quarter and (iii) the consolidated statement of cash flows of the
Borrower and its Consolidated Subsidiaries for the portion of such fiscal year
to and including such quarter, each of the foregoing to set forth in comparative
form the corresponding figures of the previous year and to be in reasonable
detail and certified by the principal accounting officer of the Borrower,
subject to year-end audit adjustments; delivery by the Borrower of its Quarterly
Reports on Form 10-Q shall be deemed compliance with this provision;
(b) As soon as practicable, and in any event within 120 days
after the close of each fiscal year of the Borrower, (i) the consolidated
balance sheet of the Borrower and its Consolidated Subsidiaries as at the end of
such fiscal year, (ii) the consolidated statement of income and retained
earnings of the Borrower and its Consolidated Subsidiaries for such fiscal year
and (iii) the consolidated statement of cash flows of the Borrower and its
Consolidated Subsidiaries for such fiscal year, each of the foregoing to set
forth in comparative form the corresponding figures of the previous year and to
be in reasonable detail and audited and certified by Deloitte & Touche or other
certified public accountants of nationally recognized standing reasonably
satisfactory to the Banks; delivery by the Borrower of its Annual
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Reports on Form 10-K (together with its annual report to shareholders, if
incorporated by reference therein) shall be deemed compliance with this
provision;
(c) Promptly after sending or filing, copies of all financial
statements, reports, notices and proxy statements as it shall send to its
shareholders, and of all periodic reports filed by the Borrower with any
securities exchange or with the Securities and Exchange Commission or any
governmental authority succeeding to any of its functions; and
(d) Such other information (which is readily obtainable by the
Borrower without incurring any undue expense) regarding the financial condition
of the Borrower as any Bank may reasonably request.
Together with each delivery of financial statements required by
clauses (a) and (b) above, the Borrower will deliver to the Banks a certificate
of its principal accounting officer stating that to the best of his knowledge
there exists no Default or, if any Default exists, specifying the nature
thereof, the period of existence thereof and what action the Borrower proposes
to take with respect thereto. The certificate delivered in conjunction with each
delivery of annual and quarterly financial statements shall in addition
demonstrate in reasonable detail compliance during the preceding fiscal period
with Sections 5.08, 5.09, 5.10, 5.11(j), 5.12 and 5.13(u).
Each certificate of independent certified public accountants
delivered with the financial statements required by clause (b) above shall be
accompanied by a written statement of such accountants that, in conducting the
examination necessary to the giving of such certificate, they have obtained no
knowledge of the existence during the fiscal period under examination of any
condition, event or act which constitutes a Default (insofar as such a
condition, event or act relates to accounting matters), or if in the opinion of
such accountants there shall exist any Default, such statement shall specify the
nature thereof.
SECTION 5.02. Payment of Taxes. The Borrower will, and will cause
each Subsidiary to, promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes, assessments and governmental
charges or levies imposed upon the income, profits, property or business of the
Borrower or any Subsidiary, provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith and if the Borrower or a Subsidiary shall have set aside
on its books adequate reserves with respect thereto in accordance with generally
accepted accounting principles.
SECTION 5.03. Maintenance of Corporate Existence. The Borrower
will preserve and maintain its corporate existence and will, and will cause each
Subsidiary to, conduct its affairs and carry on its business and operations in
such manner as to comply with any and all applicable laws not being contested in
good faith.
SECTION 5.04. Maintenance of Property and Leases. The Borrower
will, and will cause each Subsidiary to, keep its properties, whether owned or
leased, in satisfactory repair, working order and condition.
SECTION 5.05. Insurance. The Borrower will, and will cause each
Subsidiary to, maintain with financially sound and reputable insurers insurance
against liability to persons and damage to property to the extent and in the
manner customary for companies of like size in similar businesses,
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it being understood that the Borrower may self-insure against exposures which,
in the judgment of its management, are reasonable in relation to its financial
position. The Borrower will deliver to the Banks from time to time upon request
of any Bank through the Administrative Agent full information as to the
insurance so carried.
SECTION 5.06. Accounts and Reports. The Borrower will, and will
cause each Subsidiary to, keep true records and books of account in which full,
true and correct entries will be made of all dealings or transactions in
relation to its businesses and affairs, in accordance with generally accepted
accounting principles consistently applied.
SECTION 5.07. Inspection. Each Bank or its designee shall have
the right, at its expense, on reasonable notice (given to a senior financial
officer of the Borrower) and at reasonable times to visit and inspect the
properties of the Borrower and its Subsidiaries and to discuss the financial
affairs of the Borrower and its Subsidiaries with the Borrower's senior officers
and will be furnished from the books of the Borrower and its Subsidiaries such
financial information as it may reasonably request and upon such reasonable
conditions relating to confidentiality of the material and information so
supplied as the Borrower might impose. Each Bank shall respect the confidential
nature of the material and information so supplied and shall take reasonable
measures to preserve such confidentiality. It is understood that a Bank may be
required to disclose such confidential material and information or portions
thereof (1) at the request of a bank regulatory agency or in connection with an
examination of the Bank by bank examiners, (2) pursuant to subpoena or other
court process, (3) at the express direction of any other authorized government
agency, (4) to its independent auditors or (5) otherwise as required by law.
SECTION 5.08. Maintenance of Net Worth. Adjusted Net Worth will
at all times be equal to or greater than the Compliance Level. For this purpose,
the "Compliance Level" is an amount initially equal to $800,000,000; the
Compliance Level shall be increased effective at the end of each fiscal year of
the Borrower commencing after October 31, 1994 by an amount equal to 50% of
Consolidated Net Income for such year, but as to any particular year only if
Consolidated Net Income for such year is a positive amount. The Compliance Level
shall at no time decrease on account of a negative amount of Consolidated Net
Income for any year.
SECTION 5.09. Coverage of Consolidated Fixed Charges. The ratio
of (i) Adjusted Consolidated Net Income for each period of four consecutive
fiscal quarters, commencing with the four quarters ending January 31, 1995, to
(ii) Consolidated Fixed Charges for such period will be equal to or greater than
1.60 to 1.
SECTION 5.10. Leverage Ratio. The Leverage Ratio will at no time
exceed 60%.
SECTION 5.11. Restrictions on Liens. The Borrower will not, nor
will it permit any Subsidiary to, create, incur, assume or suffer to exist any
Lien upon any of its property or assets now owned or hereafter acquired, except:
(a) Liens existing on the date hereof securing Debt outstanding
on the date hereof;
(b) Liens incidental to the conduct of its business or the
ownership of its properties and assets which were not incurred in
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connection with the borrowing of money or the obtaining of advances or
credit or the incurrence of Derivatives Obligations and which do not
materially detract from the value of its property or assets or
materially impair the use thereof in the operation of its business;
(c) any Lien on any asset securing Debt incurred or assumed for
the purpose of financing all or any part of the cost of acquiring such
asset, provided that such Lien attaches to such asset concurrently with
or within 90 days after the acquisition thereof;
(d) Liens incurred in connection with the making of the type of
Investment described in Section 5.13(t) and Liens incurred in
connection with the acquisition of, or improvements to, real estate;
provided, however, that no such Lien shall extend to or cover any
property other than the property so acquired or improved;
(e) any Lien existing on any assets of any corporation or other
entity at the time it becomes a Subsidiary and not created in
contemplation of such corporation becoming a Subsidiary, or existing on
any assets acquired by the Borrower or any Subsidiary through purchase,
merger, consolidation, or otherwise and not created in contemplation of
such purchase, merger, consolidation or other transaction;
(f) any Lien resulting from any order of attachment, distraint or
other legal process arising out of judicial proceedings so long as the
execution or other enforcement thereof is effectively stayed;
(g) Liens on shares of capital stock or property of a Subsidiary
securing obligations owing by such Subsidiary to the Borrower or to
another Subsidiary;
(h) Liens arising out of the refinancing, extension, renewal or
refunding of any Debt secured by any Lien permitted by this Section
5.11, provided that such Debt is not increased and is not secured by
any additional assets;
(i) Liens to banks or other institutions arising in connection
with the issuance of letters of credit or bankers' acceptances in
connection with the shipment or storage of goods in the ordinary course
of business;
(j) Liens not otherwise permitted by any of the foregoing clauses
of this Section 5.11 securing Debt in an aggregate principal amount at
any time outstanding not to exceed 10% of Adjusted Net Worth; and
(k) Liens on cash and cash equivalents securing Derivatives
Obligations, provided that the aggregate amount of cash and cash
equivalents subject to such Liens may at no time exceed $50,000,000.
SECTION 5.12. Restricted Payments. The Borrower will not make any
Restricted Payment unless, after giving effect to such action, the sum of (a)
$250,000,000, (b) 75% of Consolidated Net Income for the period from November 1,
1994 to the end of the quarter prior to such Restricted Payment, and (c) the
cash proceeds from the sale of equity securities of the Borrower (including
options and warrants to purchase such equity securities) and Subordinated Debt
subsequent to October 31, 1994 exceeds the sum of all Restricted Payments
subsequent to October 31, 1994.
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SECTION 5.13. Investments. Neither the Borrower nor any
Subsidiary will make, purchase, own or have outstanding any Investments or
Guarantee any Debt or other obligations, stock or dividends of any other Person,
except:
(a) Loans and advances by the Borrower to any Subsidiary or loans
and advances between Subsidiaries or by any Subsidiary to the Borrower;
(b) Investments existing as of October 31, 1994, including
without limitation Investments in the capital stock of NMG;
(c) Loans and advances by the Borrower to NMG and Guarantees by
the Borrower of Debt of NMG; provided, however, that the aggregate
amount of all such loans, advances and guarantees shall not exceed
$250,000,000 at any time outstanding;
(d) Investments in direct obligations of or obligations
guaranteed by the United States of America or any agency or
instrumentality thereof;
(e) Investments in municipal obligations, municipal auction
preferred stock and asset backed securities, provided, however, that
any such instrument shall be rated, at the time of investment, a
minimum rating of AAA by S&P and/or AAA by Moody's, or the equivalent
short-term municipal ratings of SP1+ by S&P or MIGI by Moody's;
(f) Investments in certificates of deposit; time deposits; money
market funds; and bankers' acceptances issued by any United States
commercial bank (or branch thereof) or issued by any foreign bank (or
branch thereof) or a bank holding company having at the time of
investment capital and surplus of at least $100,000,000, provided,
however, that any such banking instruments shall be rated, at the time
of investment, a Thomson BankWatch rating of B/C or better;
(g) Investments in commercial paper issued by any corporation and
rated at the time of investment a minimum rating of A1 or better by S&P
or P1 or better by Moody's and, in either case, maturing within 270
days after the date of the acquisition thereof;
(h) Investments in auction rate preferred stock and fixed rate or
adjustable rate bonds or notes, provided, however, that any such
instrument shall be rated, at the time of investment, a minimum rating
of A- by S&P and/or A3 by Moody's;
(i) Repurchase agreements provided that such investments (i) are
made through primary U.S. Government dealers who, at the time of
investment, have a minimum commercial paper rating of A1 by S&P or P1
by Moody's, (ii) are collateralized on a daily basis at a minimum level
of 102% by direct obligations of the United States of America or any
agency or instrumentality thereof and (iii) mature within one year from
the time of investment;
(j) Subject to the provisions of Section 5.12, purchases,
redemptions, or other retirements of any of the Borrower's securities
through the issuance of stock or the sale of treasury stock in exchange
for such securities, or with the proceeds of any issuance of stock or
sale of treasury stock within 180 days after the receipt of such
proceeds;
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(k) Loans to key executive personnel for the purpose of
purchasing common stock of the Borrower under the terms of the
Borrower's Key Executive Stock Purchase Plan, provided that the
aggregate amount of such loans at any time outstanding shall not exceed
$5,000,000;
(l) Advances to employees of the Borrower or its Subsidiaries for
moving and travel expenses, drawing accounts and similar expenditures
in the ordinary course of their employment;
(m) The extension of credit, reflected, in accordance with
generally accepted accounting principles, as accounts receivable
(including notes, drafts, credit card transactions, trade acceptances
and letters of credit) arising from transactions in the ordinary course
of business in connection with the sale of goods or the performance of
services;
(n) Advances, deposits, down payments and prepayments made in the
ordinary course of business;
(o) Purchases or acquisitions of stock or other securities of any
corporation or enterprise which is, or will thereupon become, a
Subsidiary;
(p) Purchases or acquisitions of stock or other securities of any
corporation if, after giving effect to previous purchases of stock or
securities of such corporation, if any, the Borrower will account for
such purchases of stock or other securities under the equity method of
accounting or whose financial statements are consolidated with those of
the Borrower;
(q) Endorsements of negotiable instruments for deposit or
collection or similar transactions in the ordinary course of business;
(r) Investments in a Subsidiary or any other corporation which
would be a Subsidiary assuming conversion by the Borrower or a
Subsidiary of preferred stock or debt securities of said corporation
and Guarantees of any Debt or other obligation of the Borrower or any
Subsidiary;
(s) Guarantees of (i) lease obligations of GC Companies, Inc. and
its Subsidiaries outstanding on the date hereof, including renewals of
such obligations, or (ii) lease obligations of lessees in which the
Borrower or a Subsidiary has at least a 50% stock interest;
(t) Guarantees of bonds, notes or other similar obligations of a
state, city, town or other governmental agency or entity which
obligations are issued in order to finance property used or to be used
by the Borrower or any Subsidiary, provided that the obligations so
Guaranteed shall be treated as Debt; and
(u) Additional Investments, not otherwise permitted by paragraphs
(a) through (t) above, if, after giving effect to any such additional
Investment subsequent to October 31, 1994, the aggregate cost of all
such additional Investments made by the Borrower and its Subsidiaries
(less the amount of cash actually received by the Borrower and its
Subsidiaries in respect of repayments, sales or other liquidations of
such Investments) will not exceed 40% of Adjusted Net Worth.
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For the purposes of this Section 5.13, in determining the amount
of an Investment made through the transfer of real property, such property shall
be valued at the book or fair value thereof at the time of transfer, whichever
is greater.
SECTION 5.14. Restrictions on Sales, Consolidations and Mergers.
Neither the Borrower nor any Subsidiary will sell, lease or in any way dispose
of all, or substantially all, of the property or assets of the Borrower and its
Subsidiaries, taken as a whole, nor will the Borrower consolidate or merge with
or into any other Person, provided that this Section 5.14 shall not prevent any
merger involving the Borrower in which the Borrower is the surviving corporation
if, at the time of, and after giving effect to any such merger, no Default shall
have occurred and be continuing.
SECTION 5.15. Transactions with Affiliates. The Borrower will
not, and will not permit any Subsidiary to, directly or indirectly, pay any
funds to or for the account of, make any Investment in, lease, sell, transfer or
otherwise dispose of any assets, tangible or intangible, to, or participate in,
or effect any transaction in connection with any joint enterprise or other joint
arrangement with, any Affiliate; provided, however, that the foregoing
provisions of this Section shall not prohibit (a) the Borrower from declaring or
paying any lawful dividend so long as, after giving effect thereto, no Default
shall have occurred and be continuing or (b) the Borrower or any Subsidiary from
engaging in any commercial transaction with an Affiliate so long as such
transaction is on terms and conditions at least as favorable to the Borrower or
such Subsidiary as the terms and conditions which would apply in a similar
transaction with a Person not an Affiliate.
SECTION 5.16. Restriction on Debt of Subsidiaries. The Borrower
will not permit any of its Subsidiaries to incur or at any time be liable with
respect to any Debt except (a) Debt owing to the Borrower or any Wholly-Owned
Subsidiary, (b) Debt which is secured by a Lien permitted by Sections 5.11 (a)
through 5.11 (i), inclusive, (c) Debt of any corporation at the time such
corporation becomes a Subsidiary and not created in contemplation of such event,
(d) Debt of Subsidiaries not otherwise permitted by any of the foregoing clauses
in an aggregate principal amount at any time outstanding not to exceed
$25,000,000 and (e) Debt of Subsidiaries outstanding on the date of this
Agreement.
SECTION 5.17. Use of Proceeds. The proceeds of the Loans made
under this Agreement will be used by the Borrower for general corporate purposes
and to provide liquidity support for domestic commercial paper. None of such
proceeds will be used, directly or indirectly, for the purpose, whether
immediate, incidental or ultimate, of buying or carrying any "margin stock"
within the meaning of Regulation U.
ARTICLE VI
DEFAULTS
SECTION 6.01. Events of Default. If one or more of the following
events ("Events of Default") shall have occurred and be continuing:
(a) the Borrower shall fail to pay when due any principal of any
Loan, or shall fail to pay within three days of the due date thereof
any interest or fees payable hereunder;
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(b) the Borrower shall fail to observe or perform any covenant
contained in Sections 5.08 to 5.17, inclusive;
(c) the Borrower shall fail to observe or perform any covenant or
agreement contained in this Agreement (other than those covered by
clause (a) or (b) above) for 30 days after notice thereof has been
given to the Borrower by the Administrative Agent at the request of any
Bank;
(d) any material representation, warranty, certification or
statement made by the Borrower in this Agreement or in any certificate,
financial statement or other document delivered pursuant to this
Agreement shall prove to have been incorrect in any material respect
when made (or deemed made), and if the same shall be susceptible of
cure, such incorrectness shall not have been cured to the reasonable
satisfaction of the Required Banks within 30 days after notice thereof
has been given to the Borrower by the Administrative Agent at the
request of any Bank;
(e) the Borrower or any Subsidiary shall fail to make any payment
in respect of any Material Financial Obligation when due or within any
applicable grace period;
(f) any event or condition shall occur which results in the
acceleration of the maturity of any Material Debt or enables (or, with
the giving of notice or lapse of time or both, would enable) the holder
of such Debt or any Person acting on such holder's behalf to accelerate
the maturity thereof;
(g) the Borrower or any Significant Subsidiary or any one or more
Consolidated Subsidiaries having combined assets exceeding 5% of the
consolidated assets of the Borrower and its Consolidated Subsidiaries
shall commence a voluntary case or other proceeding seeking
liquidation, reorganization or other relief with respect to itself or
its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief
or to the appointment of or taking possession by any such official in
an involuntary case or other proceeding commenced against it, or shall
make a general assignment for the benefit of creditors, or shall fail
generally to pay its debts as they become due, or shall take any
corporate action to authorize any of the foregoing;
(h) an involuntary case or other proceeding shall be commenced
against the Borrower or any Significant Subsidiary or any one or more
Consolidated Subsidiaries having combined assets exceeding 5% of the
consolidated assets of the Borrower and its Consolidated Subsidiaries
seeking liquidation, reorganization or other relief with respect to it
or its debts under any bankruptcy, insolvency or other similar law now
or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other
proceeding shall remain undismissed and unstayed for a period of 60
days; or an order for relief shall be entered against the Borrower or
any Significant Subsidiary or any one or more Consolidated Subsidiaries
having combined assets exceeding 5% of the consolidated assets of the
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Borrower and its Consolidated Subsidiaries under the federal bankruptcy
laws as now or hereafter in effect;
(i) any member of the ERISA Group shall fail to pay when due an
amount or amounts (other than amounts being contested in good faith
through appropriate proceedings) aggregating in excess of $10,000,000
which it shall have become liable to pay under Title IV of ERISA; or
notice of intent to terminate a Material Plan in a distress termination
under Section 4041(c) of ERISA shall be filed under Title IV of ERISA
by any member of the ERISA Group, any plan administrator or any
combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than
for premiums under Section 4007 of ERISA) in respect of, or to cause a
trustee to be appointed to administer any Material Plan; or a condition
shall exist by reason of which the PBGC would be entitled to obtain a
decree adjudicating that any Material Plan must be terminated; or there
shall occur a complete or partial withdrawal from, or a default, within
the meaning of Section 4219(c)(5) of ERISA, with respect to, one or
more Multiemployer Plans which could cause one or more members of the
ERISA Group to incur a current payment obligation in excess of
$10,000,000;
(j) a judgment or order for the payment of money in excess of
$10,000,000 shall be rendered against the Borrower or any Significant
Subsidiary or any one or more Consolidated Subsidiaries having combined
assets exceeding 5% of the consolidated assets of the Borrower and its
Consolidated Subsidiaries and such judgment or order shall continue
unsatisfied and unstayed for a period of 30 days; or
(k) any person or group of persons (within the meaning of Section
13 or 14 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")) other than a member of the Smith Family Group shall
have acquired beneficial ownership (within the meaning of Rule 13d-3 of
the Exchange Act) of more voting stock or total equity capital of the
Borrower than that beneficially owned by the Smith Family Group, if
such person or group of persons is also the beneficial owner (within
the meaning of Rule 13d-3 of the Exchange Act) of at least 15% of
either the voting stock or total equity capital of the Borrower;
then, and in every such event, the Administrative Agent shall (i) if requested
by the Required Banks, by notice to the Borrower terminate the Commitments and
they shall thereupon terminate, and (ii) if requested by Banks holding Notes
evidencing more than 66 2/3% in aggregate principal amount of the Loans, by
notice to the Borrower declare the Notes (together with accrued interest
thereon) to be, and the Notes shall thereupon become, immediately due and
payable without presentment, demand, protest or other notice of any kind, all of
which are hereby waived by the Borrower; provided that in the case of any of the
Events of Default specified in clause (g) or (h) above with respect to the
Borrower, without any notice to the Borrower or any other act by the
Administrative Agent or the Banks, the Commitments shall thereupon terminate and
the Notes (together with accrued interest thereon) shall become immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which are hereby waived by the Borrower.
SECTION 6.02. Notice of Default. The Administrative Agent shall
give notice to the Borrower under Section 6.01(c) or (d) promptly upon being
requested to do so by any Bank and shall thereupon notify all the Banks thereof.
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ARTICLE VII
THE AGENTS AND THE CO-AGENTS
SECTION 7.01. Appointment and Authorization. Each Bank
irrevocably appoints and authorizes each Agent to take such action as agent on
its behalf and to exercise such powers under this Agreement and the Notes as are
delegated to such Agent by the terms hereof or thereof, together with all such
powers as are reasonably incidental thereto.
SECTION 7.02. Agents and Affiliates. Morgan Guaranty Trust
Company of New York and The First National Bank of Boston and their respective
successors shall have the same rights and powers under this Agreement as any
other Bank, subject to the provisions of Section 2.03(d), and may exercise or
refrain from exercising the same as though it were not an Agent, and Morgan
Guaranty Trust Company of New York and The First National Bank of Boston and
their respective successors and affiliates may accept deposits from, lend money
to, and generally engage in any kind of business with the Borrower or any
Subsidiary or Affiliate of the Borrower as if it were not an Agent hereunder.
SECTION 7.03. Action by Agents. The obligations of the Agents
hereunder are only those expressly set forth herein. Without limiting the
generality of the foregoing, the Agents shall not be required to take any action
with respect to any Default, except as expressly provided in Article VI.
SECTION 7.04. Consultation with Experts. Each Agent may consult
with legal counsel (who may be counsel for the Borrower), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken by it in good faith in accordance with the
advice of such counsel, accountants or experts.
SECTION 7.05. Liability of Agents. Neither Agent nor any of their
respective affiliates nor any of the directors, officers, agents or employees of
any of the foregoing shall be liable for any action taken or not taken by it in
connection herewith (i) with the consent or at the request of the Required Banks
or (ii) in the absence of its own gross negligence or willful misconduct.
Neither Agent nor any of their respective affiliates nor any of the directors,
officers, agents or employees of any of the foregoing shall be responsible for
or have any duty to ascertain, inquire into or verify (i) any statement,
warranty or representation made in connection with this Agreement or any
borrowing hereunder; (ii) the performance or observance of any of the covenants
or agreements of the Borrower; (iii) the satisfaction of any condition specified
in Article III, except receipt of items required to be delivered to such Agent;
or (iv) the validity, effectiveness (other than its own due execution and
delivery) or genuineness of this Agreement, the Notes or any other instrument or
writing furnished in connection herewith. Neither Agent shall incur any
liability by acting in reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank wire, telex, facsimile
transmission or similar writing) believed by it to be genuine or to be signed by
the proper party or parties.
SECTION 7.06. Indemnification. Each Bank shall, ratably in
accordance with its Commitment, indemnify each Agent, its affiliates and their
respective directors, officers, agents and employees (to the extent not
reimbursed by the Borrower) against any cost, expense (including counsel fees
and disbursements), claim, demand, action, loss or liability (except such as
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result from such indemnitees' gross negligence or willful misconduct) that such
indemnitees may suffer or incur in connection with this Agreement or any action
taken or omitted by such indemnitees hereunder.
SECTION 7.07. Credit Decision. Each Bank acknowledges that it
has, independently and without reliance upon either Agent, either Co-Agent or
any other Bank, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon either Agent, either Co-Agent or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking any action under this
Agreement.
SECTION 7.08. Successor Agents. Either Agent may resign at any
time by giving notice thereof to the Banks and the Borrower. Upon any such
resignation, the Borrower shall have the right to appoint a successor Agent,
which shall be reasonably satisfactory to the Required Banks. If no successor
Agent shall have been so appointed by the Borrower, and shall have accepted such
appointment, within 30 days after the retiring Agent gives notice of
resignation, then the retiring Agent may, on behalf of the Banks, appoint a
successor Agent, which shall be a commercial bank organized or licensed under
the laws of the United States of America or of any State thereof and having a
combined capital and surplus of at least $50,000,000. Upon the acceptance of its
appointment as Agent hereunder by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all the rights and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder. After any retiring Agent's resignation hereunder as
Agent, the provisions of this Article shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was Agent.
SECTION 7.09. Agents' Fees. The Borrower shall pay to each Agent
for its own account fees in the amounts and at the times previously agreed upon
between the Borrower and such Agent.
SECTION 7.10. Co-Agents. Nothing in this Agreement shall impose
upon either Co-Agent, in such capacity, any duty or obligation whatsoever.
ARTICLE VIII
CHANGE IN CIRCUMSTANCES
SECTION 8.01. Basis for Determining Interest Rate Inadequate or
Unfair. If on or prior to the first day of any Interest Period for any Fixed
Rate Borrowing:
(a) the Administrative Agent is advised by the Reference Banks
that deposits in dollars (in the applicable amounts) are not being
offered to the Reference Banks in the relevant market for such Interest
Period, or
(b) in the case of a Committed Borrowing, the Required Banks
advise the Administrative Agent that the Adjusted CD Rate or the
Adjusted London Interbank Offered Rate, as the case may be, as
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determined by the Administrative Agent will not adequately and fairly
reflect the cost to such Banks of funding their CD Loans or Euro-Dollar
Loans, as the case may be, for such Interest Period,
the Administrative Agent shall forthwith give notice thereof to the Borrower and
the Banks, whereupon until the Administrative Agent notifies the Borrower that
the circumstances giving rise to such suspension no longer exist, the
obligations of the Banks to make CD Loans or Euro-Dollar Loans, as the case may
be, shall be suspended. Unless the Borrower notifies the Administrative Agent at
least one Domestic Business Day before the date of any Fixed Rate Borrowing for
which a Notice of Borrowing has previously been given that it elects not to
borrow on such date, (i) if such Fixed Rate Borrowing is a Committed Borrowing,
such Borrowing shall instead be made as a Base Rate Borrowing and (ii) if such
Fixed Rate Borrowing is a Money Market LIBOR Borrowing, the Money Market LIBOR
Loans comprising such Borrowing shall bear interest for each day from and
including the first day to but excluding the last day of the Interest Period
applicable thereto at the Base Rate for such day.
SECTION 8.02. Illegality. If, on or after the date of this
Agreement, the adoption of any applicable law, rule or regulation, or any change
in any applicable law, rule or regulation, or any change in the interpretation
or administration thereof by any governmental authority, central bank or
comparable agency charged with the interpretation or administration thereof, or
compliance by any Bank (or its Euro-Dollar Lending Office) with any request or
directive (whether or not having the force of law) of any such authority,
central bank or comparable agency shall make it unlawful or impossible for any
Bank (or its Euro-Dollar Lending Office) to make, maintain or fund its
Euro-Dollar Loans and such Bank shall so notify the Agent, the Administrative
Agent shall forthwith give notice thereof to the other Banks and the Borrower,
whereupon until such Bank notifies the Borrower and the Administrative Agent
that the circumstances giving rise to such suspension no longer exist, the
obligation of such Bank to make Euro-Dollar Loans shall be suspended. Before
giving any notice to the Administrative Agent pursuant to this Section, such
Bank shall designate a different Euro-Dollar Lending Office if such designation
will avoid the need for giving such notice and will not, in the judgment of such
Bank, be otherwise disadvantageous to such Bank or contrary to its policies.
Outstanding Euro-Dollar Loans shall be maintained to maturity unless such Bank
shall determine that it may not lawfully continue to maintain and fund any of
its outstanding Euro-Dollar Loans to maturity and shall so specify in such
notice, in which event the Borrower shall immediately prepay in full the then
outstanding principal amount of each such Euro-Dollar Loan, together with
accrued interest thereon. Concurrently with prepaying each such Euro-Dollar
Loan, the Borrower shall borrow a Base Rate Loan in an equal principal amount
from such Bank (on which interest and principal shall be payable
contemporaneously with the related Euro-Dollar Loans of the other Banks), and
such Bank shall make such a Base Rate Loan.
SECTION 8.03. Increased Cost and Reduced Return. (a) If on or
after (x) the date hereof, in the case of any Committed Loan or any obligation
to make Committed Loans or (y) the date of the related Money Market Quote, in
the case of any Money Market Loan, the adoption of any applicable law, rule or
regulation, or any change in any applicable law, rule or regulation, or any
change in the interpretation or administration thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or
administration thereof, or compliance by any Bank (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such authority, central bank or comparable agency shall impose,
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modify or deem applicable any reserve (including, without limitation, any such
requirement imposed by the Board of Governors of the Federal Reserve System, but
excluding (i) with respect to any CD Loan any such requirement included in an
applicable Domestic Reserve Percentage and (ii) with respect to any Euro-Dollar
Loan any such requirement for which such Bank is entitled to compensation under
Section 2.15 for the relevant Interest Period), special deposit, insurance
assessment (excluding, with respect to any CD Loan, any such requirement
reflected in an applicable Assessment Rate) or similar requirement against
assets of, deposits with or for the account of, or credit extended by, any Bank
(or its Applicable Lending Office) or shall impose on any Bank (or its
Applicable Lending Office) or on the United States market for certificates of
deposit or the London interbank market any other condition affecting its Fixed
Rate Loans, its Note or its obligation to make Fixed Rate Loans and the result
of any of the foregoing is to increase the cost to such Bank (or its Applicable
Lending Office) of making or maintaining any Fixed Rate Loan, or to reduce the
amount of any sum received or receivable by such Bank (or its Applicable Lending
Office) under this Agreement or under its Note with respect thereto, by an
amount deemed by such Bank to be material, then, within 15 days after demand by
such Bank, the Borrower shall pay to such Bank such additional amount or amounts
as will compensate such Bank for such increased cost or reduction.
(b) If any Bank shall have determined that, after the date
hereof, the adoption of any applicable law, rule or regulation regarding capital
adequacy, or any change in any such law, rule or regulation, or any change in
the interpretation or administration thereof by any governmental authority,
central bank or comparable agency charged with the interpretation or
administration thereof, or any request or directive regarding capital adequacy
(whether or not having the force of law) of any such authority, central bank or
comparable agency, has or would have the effect of reducing the rate of return
on capital of such Bank (or its Parent) as a consequence of such Bank's
Commitment hereunder (to the extent undrawn) to a level below that which such
Bank (or its Parent) could have achieved but for such adoption, change, request
or directive (taking into consideration its policies with respect to capital
adequacy) by an amount deemed by such Bank to be material, then from time to
time, within 15 days after demand by such Bank, the Borrower shall pay to such
Bank such additional amount or amounts as will compensate such Bank (or its
Parent) for such reduction.
(c) Each Bank will promptly notify the Borrower of any event of
which it has knowledge, occurring after the date hereof, which will entitle such
Bank to compensation pursuant to this Section and will designate a different
Applicable Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Bank, be
otherwise disadvantageous to such Bank or contrary to its policies. A
certificate of any Bank claiming compensation under this Section and setting
forth the additional amount or amounts to be paid to it hereunder shall be
conclusive in the absence of clearly demonstrable error. In determining such
amount, such Bank may use any reasonable averaging and attribution methods. Each
such certificate shall be accompanied by such information as the Borrower may
reasonably request as to the computation set forth therein. No payment made to
any Bank under this Section shall duplicate any other payments made to such Bank
under any other provision of this Agreement.
SECTION 8.04. Taxes. (a) Any and all payments by the Borrower to
or for the account of any Bank or the Administrative Agent hereunder or under
any Note shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies, imposts, deductions, charges
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or withholdings, and all liabilities with respect thereto, excluding, in the
case of each Bank and the Administrative Agent, taxes imposed on its income, and
franchise taxes imposed on it, by the jurisdiction under the laws of which such
Bank or the Administrative Agent (as the case may be) is organized or any
political subdivision of such jurisdiction or any jurisdiction of which such
jurisdiction is a political subdivision and, in the case of each Bank, taxes
imposed on its income, and franchise or similar taxes imposed on it, by the
jurisdiction of such Bank's Applicable Lending Office or any political
subdivision of such jurisdiction or any jurisdiction of which such jurisdiction
is a political subdivision (all such non-excluded taxes, duties, levies,
imposts, deductions, charges, withholdings and liabilities being hereinafter
referred to as "Taxes"). If the Borrower shall be required by law to deduct any
Taxes from or in respect of any sum payable hereunder or under any Note to any
Bank or the Administrative Agent, (i) the sum payable shall be increased as
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 8.04) such Bank or the
Administrative Agent (as the case may be) receives an amount equal to the sum it
would have received had no such deductions been made, (ii) the Borrower shall
make such deductions, (iii) the Borrower shall pay the full amount deducted to
the relevant taxation authority or other authority in accordance with applicable
law and (iv) the Borrower shall furnish to the Administrative Agent, at its
address referred to in Section 9.01, the original or a certified copy of a
receipt evidencing payment thereof.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes and any other excise or property taxes, or charges or
similar levies which arise from any payment made hereunder or under any Note or
from the execution or delivery of, or otherwise with respect to, this Agreement
or any Note (hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Bank and the
Administrative Agent for the full amount of Taxes or Other Taxes (including,
without limitation, any Taxes or Other Taxes imposed or asserted by any
jurisdiction on amounts payable under this Section 8.04) paid by such Bank or
the Administrative Agent (as the case may be) and any liability (including
penalties, interest and expenses) arising therefrom or with respect thereto,
except where such liability arises from such Bank's gross negligence or willful
misconduct. This indemnification shall be made within 15 days from the date such
Bank or the Administrative Agent (as the case may be) makes demand therefor.
(d) Each Bank organized under the laws of a jurisdiction outside
the United States, on or prior to the date of its execution and delivery of this
Agreement in the case of each Bank listed on the signature pages hereof and on
or prior to the date on which it becomes a Bank in the case of each other Bank,
and from time to time thereafter if requested in writing by the Borrower (but
only so long as such Bank remains lawfully able to do so), shall provide the
Borrower with Internal Revenue Service form 1001 or 4224, as appropriate, or any
successor form prescribed by the Internal Revenue Service, certifying that such
Bank is entitled to benefits under an income tax treaty to which the United
States is a party which reduces the rate of withholding tax on payments of
interest or certifying that the income receivable pursuant to this Agreement is
effectively connected with the conduct of a trade or business in the United
States. If the form provided by a Bank at the time such Bank first becomes a
party to this Agreement indicates a United States interest withholding tax rate
in excess of zero, withholding tax at such rate shall be considered excluded
from "Taxes" as defined in Section 8.04(a).
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<PAGE> 42
(e) For any period with respect to which a Bank has failed to
provide the Borrower with the appropriate form pursuant to Section 8.04(d)
(unless such failure is due to a change in treaty, law or regulation occurring
subsequent to the date on which a form originally was required to be provided),
such Bank shall not be entitled to indemnification under Section 8.04(a) with
respect to Taxes imposed by the United States; provided, however, that should a
Bank, which is otherwise exempt from or subject to a reduced rate of withholding
tax, become subject to Taxes because of its failure to deliver a form required
hereunder, the Borrower shall take such steps as such Bank shall reasonably
request to assist such Bank to recover such Taxes.
(f) If the Borrower is required to pay additional amounts to or
for the account of any Bank pursuant to this Section 8.04, then such Bank will
change the jurisdiction of its Applicable Lending Office so as to eliminate or
reduce any such additional payment which may thereafter accrue if such change,
in the judgment of such Bank, is not otherwise disadvantageous to such Bank or
contrary to its policies.
(g) In the event any Bank obtains the benefit of any tax credit
or allowance which may be available to it on account of any Taxes for which it
has been indemnified by the Borrower under this Section 8.04, it will pay to the
Borrower an amount equal to the net benefit so received by such Bank, as
determined in good faith by it. Should it later develop because of loss
carrybacks, tax credit carrybacks or otherwise that such Bank in fact did not
receive the net benefit so paid over to the Borrower, the Borrower will promptly
reimburse such Bank the amount by which the payment theretofore made to the
Borrower exceeds the net benefits actually so received by such Bank, as
determined in good faith by it.
SECTION 8.05. Base Rate Loans Substituted for Affected Fixed Rate
Loans. If (i) the obligation of any Bank to make Euro-Dollar Loans has been
suspended pursuant to Section 8.02 or (ii) any Bank has demanded compensation
under Section 8.03 or 8.04 with respect to its CD Loans or Euro-Dollar Loans and
the Borrower shall, by at least five Euro-Dollar Business Days' prior notice to
such Bank through the Administrative Agent, have elected that the provisions of
this Section shall apply to such Bank, then, unless and until such Bank notifies
the Borrower that the circumstances giving rise to such suspension or demand for
compensation no longer exist:
(a) all Loans which would otherwise be made by such Bank as CD
Loans or Euro-Dollar Loans, as the case may be, shall be made instead
as Base Rate Loans (on which interest and principal shall be payable
contemporaneously with the related Fixed Rate Loans of the other
Banks), and
(b) after each of its CD Loans or Euro-Dollar Loans, as the case
may be, has been repaid, all payments of principal which would
otherwise be applied to repay such Fixed Rate Loans shall be applied to
repay its Base Rate Loans instead.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including bank wire,
telex, facsimile transmission or similar writing) and shall be given to
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<PAGE> 43
such party: (x) in the case of the Borrower or either Agent, at its address or
telex number set forth on the signature pages hereof, (y) in the case of any
Bank, at its address or telex number set forth in its Administrative
Questionnaire or (z) in the case of any party, such other address or telex
number as such party may hereafter specify for the purpose by notice to the
Agents and the Borrower. Each such notice, request or other communication shall
be effective (i) if given by telex, when such telex is transmitted to the telex
number specified in this Section and the appropriate answerback is received,
(ii) if given by mail or by any other means (including, without limitation,
facsimile transmission), when received at the address specified in this Section.
SECTION 9.02. No Waivers. No failure or delay by either Agent or
any Bank in exercising any right, power or privilege hereunder or under any Note
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The rights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
SECTION 9.03. Expenses; Indemnification. (a) The Borrower shall
pay (i) all reasonable out-of-pocket expenses of the Agents, including
reasonable fees and disbursements of special counsel for the Agents, in
connection with the preparation and administration of this Agreement, any waiver
or consent hereunder or any amendment hereof or any Default or alleged Default
hereunder and (ii) if an Event of Default occurs, all reasonable out-of-pocket
expenses incurred by each Agent and Bank, including reasonable fees and
disbursements of counsel (including the allocated cost of in-house counsel), in
connection with such Event of Default and collection, bankruptcy, insolvency and
other enforcement proceedings resulting therefrom.
(b) The Borrower agrees to indemnify each Agent and each Bank,
their respective affiliates and the respective directors, officers, agents and
employees of the foregoing (each an "Indemnitee") and hold each Indemnitee
harmless from and against any and all liabilities, losses, damages, costs and
expenses of any kind, including, without limitation, the reasonable fees and
disbursements of counsel, which may be incurred by such Indemnitee in connection
with any investigative, administrative or judicial proceeding (whether or not
such Indemnitee shall be designated a party thereto) brought or threatened
relating to or arising out of this Agreement or any actual or proposed use of
proceeds of Loans hereunder; provided that no Indemnitee shall have the right to
be indemnified hereunder for such Indemnitee's own gross negligence or willful
misconduct as determined by a court of competent jurisdiction; and provided
further that the Banks and the Agents shall use reasonable efforts to avoid
inappropriate duplication of expense in connection with any matter for which
they are indemnified by the Borrower under this subsection (b).
SECTION 9.04. Sharing of Set-Offs. Each Bank agrees that if it
shall, by exercising any right of set-off or counterclaim or otherwise, receive
payment of a proportion of the aggregate amount of principal and interest due
with respect to any Note held by it which is greater than the proportion
received by any other Bank in respect of the aggregate amount of principal and
interest due with respect to any Note held by such other Bank, the Bank
receiving such proportionately greater payment shall purchase such
participations in the Notes held by the other Banks, and such other adjustments
shall be made, as may be required so that all such payments of principal and
interest with respect to the Notes held by the Banks shall be shared by the
Banks pro rata; provided that nothing in this Section shall
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<PAGE> 44
impair the right of any Bank to exercise any right of set-off or counterclaim it
may have and to apply the amount subject to such exercise to the payment of
indebtedness of the Borrower other than its indebtedness under the Notes. The
Borrower agrees, to the fullest extent it may effectively do so under applicable
law, that any holder of a participation in a Note acquired pursuant to the
foregoing arrangements may exercise rights of set-off or counterclaim and other
rights with respect to such participation as fully as if such holder of a
participation were a direct creditor of the Borrower in the amount of such
participation.
SECTION 9.05. Amendments and Waivers. Any provision of this
Agreement or the Notes may be amended or waived if, but only if, such amendment
or waiver is in writing and is signed by the Borrower and the Required Banks
(and, if the rights or duties of either Agent are affected thereby, by such
Agent); provided that no such amendment or waiver shall, unless signed by all
the Banks, (i) increase or decrease the Commitment of any Bank (except for a
ratable decrease in the Commitments of all Banks) or subject any Bank to any
additional obligation, (ii) reduce the principal of or rate of interest on any
Loan or any fees hereunder, (iii) postpone the date fixed for any payment of
principal of or interest on any Loan or any fees hereunder or for or termination
of any Commitment or (iv) change the percentage of the Commitments or of the
aggregate unpaid principal amount of the Notes, or the number of Banks, which
shall be required for the Banks or any of them to take any action under this
Section or any other provision of this Agreement.
SECTION 9.06. Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, except that the Borrower may not
assign or otherwise transfer any of its rights under this Agreement without the
prior written consent of all Banks, it being agreed that no merger permitted by
Section 5.14 shall be deemed to be an assignment or transfer for purposes of
this Section 9.06.
(b) Any Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Loans. In the event of any such grant by a Bank of a
participating interest to a Participant, whether or not upon notice to the
Borrower and the Administrative Agent, such Bank shall remain responsible for
the performance of its obligations hereunder, and the Borrower and the Agent
shall continue to deal solely and directly with such Bank in connection with
such Bank's rights and obligations under this Agreement. Any agreement pursuant
to which any Bank may grant such a participating interest shall provide that
such Bank shall retain the sole right and responsibility to enforce the
obligations of the Borrower hereunder including, without limitation, the right
to approve any amendment, modification or waiver of any provision of this
Agreement; provided that such participation agreement may provide that such Bank
will not agree to any modification, amendment or waiver of this Agreement
described in clause (i), (ii) or (iii) of Section 9.05 without the consent of
the Participant. The Borrower agrees that each Participant shall, to the extent
provided in its participation agreement, be entitled to the benefits of Section
2.15 and Article VIII with respect to its participating interest. An assignment
or other transfer which is not permitted by subsection (c) or (d) below shall be
given effect for purposes of this Agreement only to the extent of a
participating interest granted in accordance with this subsection (b).
(c) Any Bank may at any time assign to one or more banks or other
institutions (each an "Assignee") all, or a proportionate part of all, of its
rights and obligations under this Agreement and the Notes, and such
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<PAGE> 45
Assignee shall assume such rights and obligations, pursuant to an Assignment and
Assumption Agreement in substantially the form of Exhibit G hereto executed by
such Assignee and such transferor Bank, with (and subject to) notice to the
Administrative Agent and the consent of the Borrower (such consent not to be
unreasonably delayed or withheld); provided that (i) if an Assignee is an
affiliate of such transferor Bank, such notice shall be given to the
Administrative Agent and the Borrower but no such consent shall be required,
(ii) such assignment may, but need not, include rights of the transferor Bank in
respect of outstanding Money Market Loans, (iii) unless the assignment covers
all rights and obligations of such assignor Bank, the assignment shall cover the
equivalent of a Commitment of not less than $5,000,000 and (iv) the remaining
Commitment (if any) of the assignor Bank after any such assignment is at least
$5,000,000. Upon execution and delivery of such instrument and payment by such
Assignee to such transferor Bank of an amount equal to the purchase price agreed
between such transferor Bank and such Assignee, such Assignee shall be a Bank
party to this Agreement and shall have all the rights and obligations of a Bank
with a Commitment as set forth in such instrument of assumption, and the
transferor Bank shall be released from its obligations hereunder to a
corresponding extent, and no further consent or action by any party shall be
required. Upon the consummation of any assignment pursuant to this subsection
(c), the transferor Bank, the Agents and the Borrower shall make appropriate
arrangements so that, if required, a new Note is issued to the Assignee. In
connection with any such assignment, the transferor Bank shall pay to the
Administrative Agent an administrative fee for processing such assignment in the
amount of $2,500. If the Assignee is not incorporated under the laws of the
United States of America or a state thereof, it shall, prior to the first date
on which interest or fees are payable hereunder for its account, deliver to the
Borrower and the Administrative Agent certification as to exemption from
deduction or withholding of any United States federal income taxes in accordance
with Section 8.04.
(d) Any Bank may at any time assign all or any portion of its
rights under this Agreement and its Note to a Federal Reserve Bank. No such
assignment shall release the transferor Bank from its obligations hereunder.
(e) No Assignee, Participant or other transferee of any Bank's
rights shall be entitled to receive any greater payment under Section 8.03 or
Section 8.04 than such Bank would have been entitled to receive with respect to
the rights transferred, unless such transfer is made with the Borrower's prior
written consent or by reason of the provisions of Section 8.02, 8.03 or 8.04
requiring such Bank to designate a different Applicable Lending Office under
certain circumstances or at a time when the circumstances giving rise to such
greater payment did not exist.
SECTION 9.07. Collateral. Each of the Banks represents to the
Agents and each of the other Banks that it in good faith is not relying upon any
"margin stock" (as defined in Regulation U) as collateral in the extension or
maintenance of the credit provided for in this Agreement.
SECTION 9.08. Governing Law; Submission to Jurisdiction. This
Agreement and each Note shall be governed by and construed in accordance with
the laws of the State of New York. The Borrower hereby submits to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York State court sitting in New York City
for purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Borrower irrevocably
waives, to the fullest extent permitted by law, any objection which it may now
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<PAGE> 46
or hereafter have to the laying of the venue of any such proceeding brought in
such a court and any claim that any such proceeding brought in such a court has
been brought in an inconvenient forum.
SECTION 9.09. Counterparts; Integration. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement constitutes the entire agreement and understanding
among the parties hereto and supersedes any and all prior agreements and
understandings, oral or written, relating to the subject matter hereof.
SECTION 9.10. WAIVER OF JURY TRIAL. EACH OF THE BORROWER, THE
AGENTS AND THE BANKS HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY
JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day and
year first above written.
HARCOURT GENERAL, INC.
By /s/ Paul F. Gibbons
Title: V.P. and Treasurer
27 Boylston Street
Chestnut Hill, MA 02167
Attention: Paul Gibbons
Kenneth Fogarty
Telephone No.: (617) 232-8200
Telecopier number: (617) 278-5397
<TABLE>
<CAPTION>
COMMITMENTS
<S> <C>
$43,750,000 MORGAN GUARANTY TRUST COMPANY OF
NEW YORK
By /s/ Michael Y. Leder
Title: Vice President
$43,750,000 THE FIRST NATIONAL BANK OF BOSTON
By /s/ Mary M. Barcus
Title: Vice President
$43,750,000 THE BANK OF NOVA SCOTIA
</TABLE>
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<PAGE> 47
<TABLE>
<S> <C>
By /s/ Michael R. Bradley
Title: Authorized Signatory
$43,750,000 NATIONAL WESTMINSTER BANK PLC
By /s/ David Apps
Title: Vice President
$25,000,000 BANK OF AMERICA ILLINOIS
By /s/ John Pocalyko
Title: Vice President
$25,000,000 THE CHASE MANHATTAN BANK, N.A.
By /s/ Bruce E. Lagenkamp
Title: Vice President
$25,000,000 CREDIT LYONNAIS NEW YORK BRANCH
By /s/ Robert Ivosevich
Title: Senior Vice President
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By /s/ Robert Ivosevich
Title: Authorized Signature
$25,000,000 THE FIRST NATIONAL BANK OF CHICAGO
By /s/ Marguerite C. Canestraro
Title: Vice President
$25,000,000 THE FUJI BANK LIMITED
</TABLE>
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<PAGE> 48
<TABLE>
<S> <C>
By /s/ Gina M. Kearns
Title: Vice President and Mgr.
$25,000,000 NATIONSBANK OF NORTH CAROLINA, N.A.
By /s/ William Casperson
Title: Vice President
$25,000,000 THE SANWA BANK LIMITED
By /s/ Yutaka Higashino
Title: Sr. Vice President
$25,000,000 SWISS BANK CORPORATION
By /s/ Jane A. Majeski
Title: Director Merchant Banking
By /s/ Phyllis J. Karno
Title: Director Restructuring
$25,000,000 TORONTO DOMINION (NEW YORK), INC.
By /s/ Jorge Garcia
Title: Vice President
- -----------------
TOTAL COMMITMENTS
$400,000,000
=================
</TABLE>
MORGAN GUARANTY TRUST COMPANY OF
NEW YORK, as Documentation Agent
By /s/ Michael Y. Leder
Title: Vice President
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<PAGE> 49
60 Wall Street
New York, New York 10260-0060
Attention: Syndication
Telex No.: 177615
Fax No.: 212-648-5016
THE FIRST NATIONAL BANK OF BOSTON,
as Administrative Agent
By /s/ Mary M. Barcus
Title: Vice President
100 Federal Street
Boston, MA 02110
Attention: Media & Communications
Telecopier No.: (617) 434-3401
THE BANK OF NOVA SCOTIA, as
Co-Agent
By /s/ Michael R. Bradley
Title: Authorized Signatory
NATIONAL WESTMINSTER BANK PLC, as
Co-Agent
By /s/ David Apps
Title: Vice President
PRICING SCHEDULE
The "Euro-Dollar Margin", "CD Margin" and "Facility Fee Rate" for
any day are the respective percentages set forth below in the applicable row
under the column corresponding to the Status that exists on such day:
<TABLE>
<CAPTION>
Level Level Level Level Level Level
Status I II III IV V VI
<S> <C> <C> <C> <C> <C> <C>
Euro-Dollar
Margin 0.16 0.225 0.25 0.275 0.40 0.50
CD Margin 0.285 0.35 0.375 0.40 0.525 0.625
Facility Fee
Rate 0.09 0.10 0.125 0.15 0.20 0.25
</TABLE>
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<PAGE> 50
For purposes of this Schedule, the following terms have the
following meanings:
"Level I Status" exists at any date if, at such date, the
Borrower's long-term debt is rated A or higher by S&P and A2 or higher by
Moody's.
"Level II Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated A- or higher by S&P and A3 or higher by
Moody's and (ii) Level I Status does not exist.
"Level III Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB+ or higher by S&P and Baa1 or higher by
Moody's and (ii) neither Level I Status nor Level II Status exists.
"Level IV Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB or higher by S&P and Baa2 or higher by
Moody's and (ii) none of Level I Status, Level II Status and Level III Status
exists.
"Level V Status" exists at any date if, at such date, (i) the
Borrower's long-term debt is rated BBB- or higher by S&P and Baa3 or higher by
Moody's and (ii) none of Level I Status, Level II Status, Level III Status and
Level IV Status exists.
"Level VI Status" exists at any date if, at such date, no other
Status exists.
"Moody's" means Moody's Investors Service, Inc.
"S&P" means Standard & Poor's Corporation.
"Status" refers to the determination of which of Level I Status,
Level II Status, Level III Status, Level IV Status, Level V Status or Level VI
Status exists at any date.
The credit ratings to be utilized for purposes of determining a
Status are those assigned to the senior unsecured long-term debt of the Borrower
without third-party credit enhancement, and any rating assigned to any other
debt of the Borrower shall be disregarded; provided that if the Borrower's
senior unsecured long-term debt is not rated by S&P and Moody's but the
Borrower's subordinated unsecured long-term debt, without third party credit
enhancement, is so rated, then Status shall be determined upon the basis of the
ratings for such subordinated debt and the rating threshold for each Status
shall be adjusted downward by one whole rating category (i.e., Level I Status
shall exist if such subordinated debt is rated A- or higher by S&P and A3 or
higher by Moody's). The rating in effect at any date is that in effect at the
close of business on such date.
EXHIBIT A
NOTE
New York, New York
____________, 1994
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<PAGE> 51
For value received, Harcourt General, Inc., a Delaware
corporation (the "Borrower"), promises to pay to the order of
(the "Bank"), for the account of its Applicable Lending Office, the unpaid
principal amount of each Loan made by the Bank to the Borrower pursuant to the
Credit Agreement referred to below on the last day of the Interest Period
relating to such Loan. The Borrower promises to pay interest on the unpaid
principal amount of each such Loan on the dates and at the rate or rates
provided for in the Credit Agreement. All such payments of principal and
interest shall be made in lawful money of the United States in Federal or other
immediately available funds at the office of The First National Bank of Boston,
100 Federal Street, Boston, Massachusetts 02110.
All Loans made by the Bank, the respective types and maturities
thereof and all repayments of the principal thereof shall be recorded by the
Bank and, if the Bank so elects in connection with any transfer or enforcement
hereof, appropriate notations to evidence the foregoing information with respect
to each such Loan then outstanding may be endorsed by the Bank on the schedule
attached hereto, or on a continuation of such schedule attached to and made a
part hereof; provided that the failure of the Bank to make any such recordation
or endorsement shall not affect the obligations of the Borrower hereunder or
under the Credit Agreement.
This note is one of the Notes referred to in the Credit Agreement
dated as of December 16, 1994 among the Borrower, the banks listed on the
signature pages thereof, and Morgan Guaranty Trust Company of New York, as
Documentation Agent, The First National Bank of Boston, as Administrative Agent
and The Bank of Nova Scotia and National Westminster Bank Plc, as Co-Agents (as
the same may be amended from time to time, the "Credit Agreement"). Terms
defined in the Credit Agreement are used herein with the same meanings.
Reference is made to the Credit Agreement for provisions for the prepayment
hereof and the acceleration of the maturity hereof. This Note shall be governed
by and construed in accordance with the laws of the State of New York.
HARCOURT GENERAL, INC.
By _________________________
Title:
Note (cont'd)
LOANS AND PAYMENTS OF PRINCIPAL
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Amount of
Amount of Type of Principal Maturity Notation
Date Loan Loan Repaid Date Made By
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EXHIBIT B
Form of Money Market Quote Request
______________, 19__
To: The First National Bank of Boston
(the "Administrative Agent")
From: Harcourt General, Inc.
Re: Credit Agreement (the "Credit Agreement") dated as of December
16, 1994 among the Borrower, the Banks listed on the signature
pages thereof, Morgan Guaranty Trust Company of New York, as
Documentation Agent, the Administrative Agent and The Bank of
Nova Scotia and National Westminster Bank Plc, as Co-Agents
We hereby give notice pursuant to Section 2.03 of the Credit
Agreement that we request Money Market Quotes for the following proposed Money
Market Borrowing(s):
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Date of Borrowing: _______________
Principal Amount(*) Interest Period(**)
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
Terms used herein have the meanings assigned to them in the
Credit Agreement.
(*)Amount must be $5,000,000 or a larger multiple of $1,000,000.
(**)Not less than one month (LIBOR Auction) or not less than 15 days (Absolute
Rate Auction), subject to the provisions of the definition of Interest Period.
HARCOURT GENERAL, INC.
By______________________
Title:
EXHIBIT C
Form of Invitation for Money Market Quotes
To: [Name of Bank]
Re: Invitation for Money Market Quotes
to Harcourt General, Inc. (the "Borrower")
Pursuant to Section 2.03 of the Credit Agreement dated as of
December 16, 1994 among the Borrower, the Banks parties thereto, Morgan Guaranty
Trust Company of New York, as Documentation Agent, the undersigned, as
Administrative Agent, and The Bank of Nova Scotia and National Westminster Bank
Plc, as Co-Agents, we are pleased on behalf of the Borrower to invite you to
submit Money Market Quotes to the Borrower for the following proposed Money
Market Borrowing(s):
Date of Borrowing: ________________
Principal Amount Interest Period
$
Such Money Market Quotes should offer a Money Market [Margin]
[Absolute Rate]. [The applicable base rate is the London Interbank Offered
Rate.]
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Please respond to this invitation by no later than [4:00 P.M.]
[9:15 A.M.] (Boston, Massachusetts time) on [date].
THE FIRST NATIONAL BANK
OF BOSTON
By________________________
Authorized Officer
EXHIBIT D
Form of Money Market Quote
To: The First National Bank of Boston
(the "Administrative Agent")
Attention:
Re: Money Market Quote to
Harcourt General, Inc. (the "Borrower")
In response to your invitation on behalf of the Borrower dated
____________, 19__, we hereby make the following Money Market Quote on the
following terms:
1. Quoting Bank:_____________________
2. Person to contact at Quoting Bank:
3. Date of Borrowing:______________(*)
4. We hereby offer to make Money Market Loan(s) in the following
principal amounts, for the following Interest Periods and at the following
rates:
Principal Interest Money Market
Amount(**) Period(***) [Margin(****)] [Absolute Rate(*****)]
$
$
[Provided, that the aggregate principal amount of Money Market Loans
for which the above offers may be accepted shall not exceed
$________________.]**
We understand and agree that the offer(s) set forth above,
subject to the satisfaction of the applicable conditions set forth in the Credit
Agreement dated as of December 16, 1994 among the Borrower, the Banks listed on
the signature pages thereof, Morgan Guaranty Trust Company of New York, as
Documentation Agent, yourselves, as Administrative Agent, and The
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Bank of Nova Scotia and National Westminster Bank Plc, as Co-Agents irrevocably
obligates us to make the Money Market Loan(s) for which any offer(s) are
accepted, in whole or in part.
Very truly yours,
[NAME OF BANK]
Dated:__________________ By:_____________________
Authorized Officer
(*)As specified in the related Invitation.
(**)Principal amount bid for each Interest Period may not exceed principal
amount requested. Specify aggregate limitation if the sum of the individual
offers exceeds the amount the Bank is willing to lend. Bids must be made for
$5,000,000 or a larger multiple of $1,000,000.
(***)Not less than one month or not less than 15 days, as specified in the
related Invitation. No more than five bids are permitted for each Interest
Period.
(****)Margin over or under the London Interbank Offered Rate determined for the
applicable Interest Period. Specify percentage (to the nearest 1/10,000 of 1%)
and specify whether "PLUS" or "MINUS".
(*****)Specify rate of interest per annum (to the nearest 1/10,000th of 1%).
EXHIBIT E
OPINION OF
COUNSEL FOR THE BORROWER
------------------------
[Effective Date]
To the Banks and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Documentation Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
In my capacity as Senior Vice President and General Counsel of
Harcourt General, Inc. (the "Borrower"), I, together with
___________________________, have acted as counsel to the Borrower in connection
with the preparation, execution and delivery of the Credit
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Agreement dated as of December 16, 1994 among the Borrower, the Banks listed on
the signature pages thereof, Morgan Guaranty Trust Company of New York, as
Documentation Agent, The First National Bank of Boston, as Administrative Agent
and The Bank of Nova Scotia and National Westminster Bank Plc, as Co-Agents (the
"Agreement"). Capitalized terms used in this opinion which are not defined
herein shall have the same meaning as in the Agreement.
I have examined the originals, or copies certified to my
satisfaction, of the Agreement, the Notes, the charter documents and the By-Laws
of the Borrower and the Significant Subsidiaries, records of the Borrower's
corporate proceedings, all Debt instruments and other material agreements and
instruments to which the Borrower or a Significant Subsidiary is a party and of
which I have knowledge, certificates of public officials and such other
documents,agreements, certificates and records as I have deemed necessary to
examine as a basis for the opinions hereinafter expressed.
I am an attorney admitted to practice in the Commonwealth of
Massachusetts. I am not, and do not purport to be, an expert in or qualified to
express opinions concerning the laws of any jurisdiction other than
Massachusetts, the United States of America and the corporate laws of the State
of Delaware to the extent necessary to express the opinions hereinafter set
forth. For the purposes of this opinion, I have assumed without investigation
that the laws of the State of New York are the same as those of the Commonwealth
of Massachusetts.
Based upon the foregoing, and having regard for such legal
considerations as I have deemed relevant, I am of the opinion that:
1. The Borrower and each Significant Subsidiary (i) is a
corporation duly organized, validly existing and in good standing under the laws
of its respective state of incorporation, (ii) has all requisite corporate power
and all material governmental licenses, authorizations, consents and approvals
required to carry on its business as now conducted and as presently contemplated
and (iii) is in good standing as a foreign corporation and is duly qualified to
conduct business in each jurisdiction in which its property or business as
presently conducted or contemplated makes such qualification necessary, except
in those jurisdictions in which the failure to be so qualified would not have a
material adverse effect upon the business or financial condition of the Borrower
or such Significant Subsidiary and would not (after qualification) preclude the
Borrower or such Significant Subsidiary from enforcing claims against any party
in the courts of such jurisdictions.
2. The execution, delivery and performance by the Borrower of the
Agreement and the Notes are within the Borrower's corporate powers, have been
duly authorized by all necessary corporate action, require no action by or in
respect of, or filing with, any governmental body, agency or official except for
the filing of the Agreement with the Securities and Exchange Commission pursuant
to the Securities Exchange Act of 1934, as amended, and the Agreement and the
Notes do not contravene, or constitute a default under, any provision of
applicable law or of the Restated Certificate of Incorporation or By-Laws of the
Borrower or of any agreement, judgment, injunction, order, decree or other
instrument binding upon the Borrower or any Significant Subsidiary.
3. The Agreement and the Notes have been duly and validly
executed and delivered by authorized officers of the Borrower, and the Agreement
and the Notes constitute legal, valid, binding and enforceable
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obligations of the Borrower, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting generally the enforcement of creditors' rights and
except to the extent that the availability of the remedy of specific enforcement
or injunctive relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
4. Various suits and claims arising in the ordinary course of
business, some of which involve substantial amounts, are pending against the
Borrower and its Subsidiaries. While the ultimate effect of such litigation
cannot be ascertained at this time, in my opinion, there are no actions, suits,
proceedings or investigations pending, or to my knowledge threatened, against
the Borrower or any Subsidiary in which there is a reasonable possibility of an
adverse decision which would materially adversely affect the business, assets or
financial condition of the Borrower and its Subsidiaries, taken as a whole.
Very truly yours,
EXHIBIT F
OPINION OF
DAVIS POLK & WARDWELL, SPECIAL COUNSEL
FOR THE AGENT
--------------------------------------
[Effective Date]
To the Banks and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Documentation Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
We have participated in the preparation of the Credit Agreement
(the "Credit Agreement") dated as of December 16, 1994 among Harcourt General,
Inc., a Delaware corporation (the "Borrower"), the banks listed on the signature
pages thereof (the "Banks"), Morgan Guaranty Trust Company of New York, as
Documentation Agent, The First National Bank of Boston, as Administrative Agent
and The Bank of Nova Scotia and National Westminster Bank Plc, as Co-Agents and
have acted as special counsel for the Agents for the purpose of rendering this
opinion pursuant to Section 3.01(d) of the Credit Agreement. Terms defined in
the Credit Agreement are used herein as therein defined.
We have examined originals or copies, certified or otherwise
identified to our satisfaction, of such documents, corporate records,
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certificates of public officials and other instruments and have conducted such
other investigations of fact and law as we have deemed necessary or advisable
for purposes of this opinion.
Upon the basis of the foregoing, we are of the opinion that:
1. The execution, delivery and performance by the Borrower of the
Credit Agreement and the Notes are within the Borrower's corporate powers and
have been duly authorized by all necessary corporate action.
2. The Credit Agreement constitutes a valid and binding agreement
of the Borrower and each Note constitutes a valid and binding obligation of the
Borrower, in each case enforceable in accordance with its terms, except as the
same may be limited by bankruptcy, insolvency or similar laws affecting
creditors' rights generally and by general principles of equity.
We are members of the Bar of the State of New York and the
foregoing opinion is limited to the laws of the State of New York, the federal
laws of the United States of America and the General Corporation Law of the
State of Delaware. In giving the foregoing opinion, we express no opinion as to
the effect (if any) of any law of any jurisdiction (except the State of New
York) in which any Bank is located which limits the rate of interest that such
Bank may charge or collect.
This opinion is rendered solely to you in connection with the
above matter. This opinion may not be relied upon by you for any other purpose
or relied upon by any other person without our prior written consent.
Very truly yours,
EXHIBIT G
ASSIGNMENT AND ASSUMPTION AGREEMENT
AGREEMENT dated as of __________, 19__ among [ASSIGNOR] (the
"Assignor"), [ASSIGNEE] (the "Assignee") and HARCOURT GENERAL, INC. (the
"Borrower").
W I T N E S S E T H
WHEREAS, this Assignment and Assumption Agreement (the
"Agreement") relates to the Credit Agreement dated as of December 16, 1994 among
the Borrower, the Assignor and the other Banks party thereto, as Banks, Morgan
Guaranty Trust Company of New York, as Documentation Agent, The First National
Bank of Boston, as Administrative Agent and The Bank of Nova Scotia and National
Westminster Bank Plc, as Co-Agents (the "Credit Agreement");
WHEREAS, as provided under the Credit Agreement, the Assignor has
a Commitment to make Loans to the Borrower in an aggregate principal amount at
any time outstanding not to exceed $_________;
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WHEREAS, Committed Loans made to the Borrower by the Assignor
under the Credit Agreement in the aggregate principal amount of $_______ are
outstanding at the date hereof; and
WHEREAS, the Assignor proposes to assign to the Assignee all of
the rights of the Assignor under the Credit Agreement in respect of a portion of
its Commitment thereunder in an amount equal to $___________ (the "Assigned
Amount"), together with a corresponding portion of its outstanding Committed
Loans, and the Assignee proposes to accept assignment of such rights and assume
the corresponding obligations from the Assignor on such terms;
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, the parties hereto agree as follows:
SECTION 1. Definitions. All capitalized terms not otherwise
defined herein shall have the respective meanings set forth in the Credit
Agreement.
SECTION 2. Assignment. The Assignor hereby assigns and sells to
the Assignee all of the rights of the Assignor under the Credit Agreement to the
extent of the Assigned Amount, and the Assignee hereby accepts such assignment
from the Assignor and assumes all of the obligations of the Assignor under the
Credit Agreement to the extent of the Assigned Amount, including the purchase
from the Assignor of the corresponding portion of the principal amount of the
Committed Loans made by the Assignor outstanding at the date hereof. Upon the
execution and delivery hereof by the Assignor, the Assignee [and the Borrower]
and the payment of the amounts specified in Section 3 required to be paid on the
date hereof (i) the Assignee shall, as of the date hereof, succeed to the rights
and be obligated to perform the obligations of a Bank under the Credit Agreement
with a Commitment in an amount equal to the Assigned Amount, and (ii) the
Commitment of the Assignor shall, as of the date hereof, be reduced by a like
amount and the Assignor released from its obligations under the Credit Agreement
to the extent such obligations have been assumed by the Assignee. The assignment
provided for herein shall be without recourse to the Assignor.
SECTION 3. Payments. As consideration for the assignment and sale
contemplated in Section 2 hereof, the Assignee shall pay to the Assignor on the
date hereof in Federal funds the amount heretofore mutually agreed between
them.(*) It is understood that facility fees in respect of the Assigned Amount
accrued to the date hereof are for the account of the Assignor and such fees
accruing from and including the date hereof are for the account of the Assignee.
Each of the Assignor and the Assignee hereby agrees that if it receives any
amount under the Credit Agreement which is for the account of the other party
hereto, it shall receive the same for the account of such other party to the
extent of such other party's interest therein and shall promptly pay the same to
such other party.
[SECTION 4. Consent of the Borrower. This Agreement is
conditioned upon the consent of the Borrower pursuant to Section 9.06(c) of the
Credit Agreement. The execution of this Agreement by the Borrower and the Agent
is evidence of this consent. Pursuant to Section 9.06(c) the Borrower agrees to
execute and deliver a Note payable to the order of the Assignee to evidence the
assignment and assumption provided for herein.]
SECTION 5. Non-Reliance on Assignor. The Assignor makes no
representation or warranty in connection with, and shall have no responsibility
with respect to, the solvency, financial condition, or statements of the
Borrower, or the validity and enforceability of the
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obligations of the Borrower in respect of the Credit Agreement or any Note. The
Assignee acknowledges that it has, independently and without reliance on the
Assignor, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement and will continue to be responsible for making its own independent
appraisal of the business, affairs and financial condition of the Borrower.
SECTION 6. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York.
SECTION 7. Counterparts. This Agreement may be signed in any
number of counterparts, each of which shall be an original, with the same effect
as if the signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their duly authorized officers as of the date first
above written.
[ASSIGNOR]
By________________________
Title:
[ASSIGNEE]
By________________________
Title:
HARCOURT GENERAL, INC.
By________________________
Title:
(*) Amount should combine principal together with accrued interest and breakage
compensation, if any, to be paid by the Assignee, net of any portion of any
upfront fee to be paid by the Assignor to the Assignee. It may be preferable in
an appropriate case to specify these amounts generically or by formula rather
than as a fixed sum.
