<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
------------------------
NATIONAL EDUCATION CORPORATION
(Name of Subject Company)
NATIONAL EDUCATION CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
63577110
(CUSIP Number of Class of Securities)
------------------------
PHILIP C. MAYNARD, ESQ.
NATIONAL EDUCATION CORPORATION
2601 MAIN STREET
IRVINE, CALIFORNIA 92614
(714) 474-9400
(Name and address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
with a copy to:
ALVIN G. SEGEL, ESQ.
IRELL & MANELLA LLP
1800 AVENUE OF THE STARS, SUITE 900
LOS ANGELES, CALIFORNIA 90067-4276
(310) 277-1010
================================================================================
<PAGE> 2
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is National Education Corporation, a
Delaware corporation (the "Company"), and the address of the principal executive
offices of the Company is 2601 Main Street, Irvine, California 92614. The title
of the class of equity securities to which this statement relates is the common
stock, par value $.01 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to a tender offer by Harcourt General, Inc., a
Delaware corporation ("Harcourt"), and Nick Acquisition Corporation, a Delaware
corporation and wholly owned subsidiary of Harcourt (the "Purchaser"), disclosed
in a Tender Offer Statement on Schedule 14D-1, dated April 21, 1997 (the
"Schedule 14D-1"), to purchase all outstanding Shares at $19.50 per Share, net
to the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated April 21, 1997 (the "Offer to Purchase"), and the
related Letter of Transmittal (which together constitute the "Offer").
Based on the information in the Schedule 14D-1, the principal executive
offices of each of Harcourt and the Purchaser are located at 27 Boylston Street,
Chestnut Hill, Massachusetts 02167.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding
between the Company or its affiliates and its executive officers, directors or
affiliates is described in the attached Schedule I or set forth below. There are
no material contracts, arrangements or understandings between the Company or its
affiliates and Harcourt, its executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS. For the reasons discussed in
Item 4(b) below, the Board of Directors of the Company (the "Board of
Directors") unanimously recommends that the stockholders of the Company reject
the Offer.
(b) BACKGROUND; REASONS FOR THE RECOMMENDATION. On March 12, 1997, the
Company entered into an Agreement and Plan of Reorganization with Sylvan
Learning Systems, Inc. ("Sylvan") pursuant to which stockholders of the Company
would receive common stock of Sylvan in exchange for the common stock in the
Company based on an exchange ratio of 0.58 shares of Sylvan common stock for
each Share. On April 16, 1997, Harcourt announced that it would commence a cash
tender offer for all of the Company's common stock at $19.50 per Share. Such
price represented a premium of approximately 15.4% over the value of the Sylvan
common stock to be issued in the Sylvan merger based upon the April 15, 1997
closing price of Sylvan's common stock. Subsequently, Harcourt indicated to the
Company that it was prepared to increase its offer to $20.25 per Share in cash
as part of an acquisition proposal. After further discussion and negotiation,
Harcourt indicated its willingness to increase its offer to, but in no event
more than, $21.00 per Share as part of an overall acquisition transaction,
subject to being permitted to conduct confirmatory due diligence. The Board of
Directors has authorized Harcourt to undertake such due diligence over the next
week and Harcourt has entered into a confidentiality agreement. There can be no
assurance that the discussions between the Company and Harcourt will lead to an
acceptable transaction or that such transaction would be approved by the Board
of Directors or the board of directors of Harcourt. Harcourt has indicated that
if the negotiations are not successful, it intends to continue to offer to
purchase all of the Company's Shares at $19.50 per Share. Based on the
foregoing, the Board of Directors unanimously recommends that the stockholders
reject the current Offer.
2
<PAGE> 3
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained BZW, the investment banking division of Barclays
Bank PLC, to act as financial adviser to the Board of Directors for the purpose
of evaluating the fairness, from a financial point of view, of the consideration
to be received by the Company's stockholders pursuant to the Offer. As
compensation for BZW's services as financial adviser, the Company pays BZW a
retainer fee of $30,000 per month and will pay BZW a transaction fee of
$4,000,000 upon the consummation of a sale of all or substantially all of the
Company's stock or assets. The monthly retainer fee will be credited against the
transaction fee. In addition, the Company has agreed to reimburse BZW for all
reasonable travel and other out-of-pocket expenses incurred by BZW in connection
with its activities as financial adviser, regardless of whether any such sale is
consummated. The Company has also agreed to indemnify BZW and certain related
persons against certain liabilities and expenses in connection with its role as
financial adviser.
Except as disclosed herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain or compensate any other persons
to make solicitations or recommendations to security holders on its behalf
concerning the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transaction in the Shares has been effected during the past 60 days
by the Company, or to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, none of the executive officers,
directors or affiliates of the Company presently intends to tender in the Offer
any Shares over which he or she has dispositive power.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in Items 3(b) or 4(b) above, the Company is not
engaged in any negotiation in response to the Offer that relates to or would
result in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale or
transfer of a material amount of assets by the Company or any subsidiary of the
Company; (iii) a tender offer for or other acquisition of securities by or of
the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) Except as set forth in Items 3(b) or 4(b) above, there are no
transactions, Board of Directors resolutions, agreements in principle or signed
contracts in response to the Offer that relate to or would result in one or more
of the events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
None.
3
<PAGE> 4
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- --------------- ------------------------------------------------------------------ ------------
<S> <C> <C>
Exhibit (a)(1) Press Release, dated May 1, 1997, issued by National Education
Corporation.......................................................
Exhibit (a)(2) President's Letter to the Stockholders, dated May 2, 1997.........
Exhibit (c)(1) 1986 Stock Option and Incentive Plan, as amended(1)............... *
Exhibit (c)(2) Amended and Restated 1990 Stock Option and Incentive Plan(2)...... *
Exhibit (c)(3) Amended and Restated 1991 Directors' Stock Option and Award
Plan(3)........................................................... *
Exhibit (c)(4) National Education Corporation Supplemental Executive Retirement
Plan, as amended(4)............................................... *
Exhibit (c)(5) Supplemental Benefit Plan for Non-Employee Directors(5)........... *
Exhibit (c)(6) Executive Employment Agreement between National Education
Corporation and Sam Yau(6)........................................ *
</TABLE>
- ---------------
* Incorporated by reference from a previously filed document.
(1) Incorporated by reference to Exhibit 10.17 filed with National Education
Corporation's Annual Report on Form 10-K for the year ended December 31,
1997, filed April 1, 1991.
(2) Incorporated by reference to Exhibit "B" filed with National Education
Corporation's Proxy Statement furnished in connection with the Annual
Meeting of Stockholders held June 27, 1995, filed May 22, 1995.
(3) Incorporated by reference to Exhibit "A" filed with National Education
Corporation's Proxy Statement furnished in connection with the Annual
Meeting of Stockholders held June 27, 1995, filed May 22, 1995.
(4) Incorporated by reference to Exhibit 10.17 filed with National Education
Corporation's Annual Report on Form 10-K for the year ended December 31,
1991, filed April 1, 1992.
(5) Incorporated by reference to Exhibit 10.18 filed with National Education
Corporation's Annual Report on Form 10-K for the year ended December 31,
1991, filed April 1, 1992.
(6) Incorporated by reference to Exhibit 10.21 filed with National Education
Corporation's Quarterly Report on Form 10-Q for the quarter ended March 31,
1995.
4
<PAGE> 5
SIGNATURE
After reasonable 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.
NATIONAL EDUCATION CORPORATION
By: /s/ PHILIP C. MAYNARD
---------------------------------------
Name: Philip C. Maynard
Title: Vice President, Secretary and
General Counsel
Dated: May 2, 1997
5
<PAGE> 6
SCHEDULE I
In considering the recommendation of the Board of Directors set forth in
Item 4(a) of the Schedule 14D-9 of which this Schedule I is a part, the
Company's stockholders should be aware of material contracts, agreements,
arrangements and understandings between the Company or its affiliates and its
executive officers, directors or affiliates, which are described below
(including, where applicable, a description of agreements and understandings
relating to the proposed Sylvan merger) and which may present such persons with
certain conflicts of interest regarding the Offer.
MERGER NOMINEES.
Pursuant to the Sylvan merger agreement, Sylvan has nominated each of Sam
Yau, Chief Executive Officer and President of the Company, Richard C. Blum,
Chairman of Richard C. Blum and Associates, L.P., a merchant banking firm, and a
director of the Company, and Michael R. Klein, a partner at the law firm of
Wilmer, Cutler & Pickering and a director of the Company, for election to
Sylvan's Board of Directors effective upon consummation of the Sylvan merger. In
addition, upon consummation of such merger, Mr. Yau would serve as Co-Chief
Executive Officer of the Company.
As of the date of this Schedule 14D-9, the Company is not aware of
Harcourt's intentions with respect to the possible retention of any or all of
the Company's directors and executive officers following consummation of the
Offer.
DIRECTORS' AND OFFICERS' INSURANCE; LIMITATION OF LIABILITY OF DIRECTORS AND
OFFICERS.
The Sylvan merger agreement requires the Company and Sylvan (the
"Indemnifying Parties"), after the effective date of the Sylvan merger, to
indemnify, defend and hold harmless, as and to the fullest extent permitted by
law, each present and former director or officer of the Company and its
subsidiaries (each, an "Indemnified Party") against any losses, claims, damages,
liabilities, costs, expenses (including reasonable attorneys' fees and expenses
in advance of the final disposition of any claim, action, suit, proceeding or
investigation of each Indemnified Party to the fullest extent permitted by law
upon receipt of the undertaking from such Indemnified Party to repay such
advanced expenses if it is finally and unappealably determined that such
Indemnified Party was not entitled to such indemnification), judgments, fines
and amounts paid in settlement with approval of the Indemnifying Parties (which
such approval shall not be unreasonably withheld) of or in connection with any
such claim, action, suit, proceeding or investigation based in whole or in part
on or arising in whole or in part out of (i) his or her actions as such a
director or officer or (ii) the Sylvan merger agreement or the transactions
contemplated thereby. In the event of any such threatened or actual claim,
action, suit, proceeding or investigation (whether arising before or after the
effective date of the Sylvan merger), (i) the Indemnifying Parties shall pay all
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received, and (ii) the Indemnifying Parties
will use all reasonable efforts to assist in the defense of any such matter,
provided that no settlement for which the Indemnified Parties would be liable
will be effected without prior written consent (which would not be unreasonably
withheld). The by-laws of the Company also provide for the indemnification of
the Company's directors and officers to the fullest extent permitted by law.
The Sylvan merger agreement requires that Sylvan shall, to the extent such
insurance is available, cause the persons serving as officers and directors of
the Company immediately prior to the effective date of the Sylvan merger to be
covered for a period of five years from such effective date by the directors'
and officers' liability insurance policy maintained by the Company (provided
that Sylvan and the Company may substitute therefor policies of at least the
same coverage and amounts containing terms and conditions which are not less
advantageous to such directors and officers of the Company than the terms and
conditions of such existing policy); provided, however, that the surviving
corporation in the Sylvan merger would not be obligated to make annual premium
payments for such insurance to the extent such annual premiums exceed 125% of
the annual premiums payable in 1996 (on an annualized basis) by the Company for
such insurance. The Sylvan merger agreement also provides that in the event
Sylvan is not the surviving corporation of a merger or
I-1
<PAGE> 7
consolidation with, or transfers all or substantially all of its assets to,
another entity, Sylvan would make proper provisions so that its successors and
assigns assume the foregoing indemnification and insurance obligations.
EMPLOYMENT ARRANGEMENTS.
1. WITH MR. SAM YAU
As of March 1, 1995, the Company entered into an Executive Employment
Agreement with Mr. Sam Yau (the "Yau Agreement"), naming him President, Chief
Executive Officer and a Director of the Company. The Yau Agreement provides for
a term of three years at a base salary not less than $350,000 per year. (Mr.
Yau's 1997 base salary is $367,000). Mr. Yau will be entitled to earn an annual
bonus based upon achievement of financial goals established annually by the
Compensation Committee of the Board of Directors. Mr. Yau's targeted bonus is
75% of his annual salary; however, Mr. Yau's bonus may be less or more than the
targeted amount based on achievement of the established goals. Mr. Yau is also
entitled to receive all Company benefits that historically have been made
available to the Company's Chief Executive Officer. The Yau Agreement may be
terminated at any time by the Company with or without cause; however, if the
Company terminates the Yau Agreement without cause, or Mr. Yau is terminated
following a change in control of the Company, Mr. Yau will be entitled to two
years' continuation of base salary, bonus and benefits.
As a condition to the Sylvan merger, Mr. Yau must enter into an employment
agreement with Sylvan replacing the Yau Agreement. Mr. Yau's replacement
employment agreement would provide for employment for a three-year period at an
initial annual salary of $375,000, with customary non-compete and non-
solicitation provisions extending for a certain period after termination of Mr.
Yau's employment with Sylvan.
2. WITH OTHER COMPANY EXECUTIVES
The employment of Messrs. Keith Ogata, the Company's Vice President and
Chief Financial Officer, and Philip C. Maynard, the Company's Vice President,
Secretary and General Counsel, would terminate following a reasonable and
mutually agreeable transition period after consummation of the Sylvan merger.
Messrs. Ogata and Maynard have agreed to enter into agreements with Sylvan with
respect to their provision of services during such transition period and
continuation of certain of their benefits after the Sylvan merger.
3. WITH PRESIDENTS OF COMPANY SUBSIDIARIES
As a condition to the Sylvan merger, the respective presidents of ICS
Learning Systems, Inc. ("ICS"), National Education Training Group, Inc. ("NETG")
and Steck-Vaughn Publishing Corp. ("SVPC" and collectively with ICS and NETG,
the "Company Subsidiaries"), must enter into employment agreements with Sylvan
replacing their current employment arrangements with the Company. Messrs. Gary
Keisling and Chuck Moran and Ms. Anita Kopec, the respective presidents of the
Company Subsidiaries, have agreed to enter into employment agreements with
Sylvan on terms satisfactory to such individuals and to Sylvan, including
customary non-compete and non-solicitation provisions.
STOCK OPTION PLANS AND STOCK OPTIONS.
1. COMPANY PLANS.
Each of the four executive officers of the Company (Mr. David C. Jones, the
Company's Chairman of the Board, and Messrs. Yau, Ogata and Maynard) hold
certain options (the "Company Options") to purchase shares of common stock of
the Company, par value $.01 per share (the "Company Common Stock"). Upon the
consummation of the Sylvan merger, the Company stock option plans and the
Company Options granted thereunder would be deemed to have been adopted by
Sylvan and would continue as separate plans and options of Sylvan. Holders of
the Company Options would be entitled to exercise such Company Options for a
number of shares of common stock of Sylvan, par value $.01 per share (the
"Sylvan Common Stock") equal to the product of (A) the number of shares of
Company Common Stock underlying each such Company Option and (B) the applicable
exchange ratio in the Sylvan merger. The per share exercise price of the options
for Sylvan Common Stock would be equal in value to the exercise price set forth
in the agreement pursuant to which the corresponding Company Option was granted
divided by the applicable exchange ratio in the Sylvan
I-2
<PAGE> 8
merger. After the effective time of the Sylvan merger, no further grants would
be made under any of the Company stock option plans.
2. NETG PLANS.
The stock option plans of NETG provide that upon a change of control of NEC
all options granted pursuant to such plans shall immediately terminate. Sylvan
has agreed that, from and after the effective time of the Sylvan merger, the
then-outstanding options to purchase shares of NETG common stock and the related
NETG stock option plans would continue and remain in full force and effect.
3. SVPC PLANS.
From and after the effective time of the Sylvan merger, the
then-outstanding options to purchase shares of SVPC common stock and the related
SVPC stock option plans would continue and remain in full force and effect.
4. OPTIONS GRANTED IN CONNECTION WITH EMPLOYMENT.
a. Grants to Mr. Yau.
On March 17, 1995, Mr. Yau was granted options (the "Initial Options") to
purchase 500,000 shares of Company Common Stock at the March 17, 1995 closing
price of $3.00 per share. The Initial Options vest in 36 equal monthly
installments commencing on June 1, 1995. In addition, for a period of 30 days
commencing on May 8, 1995, Mr. Yau was granted an opportunity to purchase up to
240,000 shares of Company Common Stock at the March 17, 1995 closing price with
a concomitant grant of options to Mr. Yau (the "Additional Options") to purchase
two and one-half shares of Company Common Stock at the same $3.00 per share
price for every share of Company Common Stock purchased during the 30-day
period. Mr. Yau purchased all of the 240,000 shares of Company Common Stock
offered to him and was granted Additional Options to purchase 600,000 shares of
Company Common Stock at $3.00 per share. The Additional Options have all vested
and remain exercisable through May 1, 2005.
Upon the consummation of the Sylvan merger, the unvested portion of the
Initial Options would vest. Accordingly, Mr. Yau would be entitled to exercise
Initial Options for approximately 153,000 shares, which would not otherwise be
exercisable until July 1, 1997, and monthly thereafter until May 1, 1998, all
such options having an exercise price of $3.00 per share. Exercise of the
Initial and Additional Options would be settled by delivery of Sylvan Common
Stock in the same manner as the settlement of Company Options described above.
As of the effective time of the Sylvan merger, Initial and Additional Options
would have an estimated aggregate value of $15,751,000 (exclusive of the
exercise price) assuming the agreed initial exchange ratio is applicable and
assuming the per share value of Sylvan Common Stock at such time is $29.86. In
addition, although still under discussion, in connection with Mr. Yau's
employment by Sylvan after the Sylvan merger, Mr. Yau would be granted a
long-term incentive compensation package, including stock options and the
opportunity to be considered for further option awards and participation in
other equity programs when and as other Sylvan executives are considered for and
granted such option awards and other equity participation opportunities.
b. Grants to Messrs. Ogata and Maynard.
On July 25, 1995, Messrs. Ogata and Maynard purchased 30,000 and 20,000
shares, respectively, of Company Common Stock at the July 25, 1995 closing price
of $5.25 per share, with a concomitant grant of options to each of them to
purchase two shares of Company Common Stock for every one purchased share, at
the price per share of $5.2875 (the average closing price of the Company Common
Stock for the ten immediately preceding trading days). Such stock options have
all vested and remain exercisable through July 26, 2005.
The Company has granted other options to each of Messrs. Ogata and Maynard
to purchase shares of Company Common Stock, as discussed in paragraph 4(c)
below.
I-3
<PAGE> 9
c. Other Grants to Officers, Key Employees and Inside Directors.
Executives and key employees, including employee-directors, of the Company
are eligible to receive stock options and shares of restricted stock pursuant to
the Company's Amended and Restated 1990 Stock Option and Incentive Plan. If the
Company stockholders approve the Sylvan merger, upon such approval, all such
outstanding awards would become immediately vested or otherwise free from
restrictions in their entirety. Accordingly, immediately after stockholder
approval of the Sylvan merger, plan participants would be entitled to exercise
options to purchase approximately 965,390 shares of Company Common Stock (which
would become options to purchase Sylvan Common Stock as described above) at a
weighted average exercise price per share of $8.47. Absent accelerated vesting
of such options, options to purchase 142,022, 339,755, 192,188, 174,015 and
57,410 shares of Company Common Stock would otherwise have become exercisable
during calendar year 1997, 1998, 1999, 2000 and 2001, respectively. In the event
the Sylvan merger is consummated, such options would be settled by delivery of
Sylvan Common Stock in the same manner as described above regarding the Company
Options.
d. Grants to Outside Directors.
Options to purchase an aggregate of 142,000 shares of Company Common Stock,
at a weighted average exercise price per share of $7.76, have been granted to
the Company's non-employee directors pursuant to the Company's Amended and
Restated 1991 Directors' Stock Option and Award Plan. If the Company
stockholders approve the Sylvan merger, upon such approval, all outstanding but
unvested options granted under such plan (specifically, options to purchase
22,500 shares of Company Common Stock, having a weighted average exercise price
per share of $14.16) would become immediately exercisable. In the event the
Sylvan merger is consummated, such options would be settled by delivery of
Sylvan Common Stock in the same manner as described above regarding the Company
Options.
SEVERANCE BENEFITS.
Pursuant to Company policy, in the event the employment of any of Messrs.
Ogata, Maynard, Keisling and Moran and Ms. Kopec is terminated without cause or
after a change of control of the Company, such executive officer is entitled to
continuation of his or her salary and fringe benefits for one year or, at such
executive officer's option, a lump sum payment equal to one year's salary.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN.
The Company has in effect an unfunded Supplemental Executive Retirement
Plan (the "SERP"), which provides for supplemental retirement income benefits as
early as age 60 for certain of its current and former executive officers and
Company Subsidiary presidents who have completed at least six years of credited
service. Each of Messrs. Yau, Ogata and Maynard is a SERP participant. Each SERP
participant is entitled to receive maximum lifetime retirement income benefits
in the amount of 60% of average earnings (reduced by the amount of a
participant's primary social security benefits), multiplied by the participant's
credited service percentage under the SERP. The credited service percentage
vests at a rate of 10% per year beginning with the sixth year of credited
service and becomes fully vested after 15 years of credited service. As of
February 28, 1997, the estimated years of credited service and credited service
percentage for the current participating executive officers are as follows: Mr.
Yau -- 1 year (0%), Mr. Ogata -- 11 years (60%) and Mr. Maynard -- 3 years (0%).
In addition, the SERP provides for a death benefit of between two and three
times the average earnings of a participant, and a surviving spouse and minor
children also receive certain benefits under the SERP. The SERP also provides
for disability benefits of up to 60% of a participant's average earnings.
The SERP further provides that, if a participant's employment is terminated
voluntarily or involuntarily within two years of a change of control of the
Company ("Timely Termination"), such participant is entitled to accelerated
vesting and payout of SERP benefits in a single lump sum. Such lump sum
settlement shall be equal to the actuarial present value of full retirement
benefits, assuming that (i) such participant's employment had continued to age
65, (ii) such participant's earnings had remained unchanged to age 65 and (iii)
such participant was 65 for purposes of calculating social security benefits.
For these purposes, earnings
I-4
<PAGE> 10
are determined by using such participant's highest annual earnings during the
three-year period prior to the change of control. Sylvan has agreed that, in the
event of and upon consummation of the Sylvan merger, SERP participants would be
entitled to accelerated vesting and payout of SERP benefits without Timely
Termination, provided that (i) participants who remain employees after the
Sylvan merger would be entitled to payment of SERP benefits, with interest from
the effective date of the Sylvan merger, only upon termination of such
participant's employment and (ii) no additional SERP benefits would accrue from
and after the Sylvan merger. Estimated lump sum payments to which Messrs. Yau,
Ogata and Maynard would be expected to be entitled are approximately $2,171,000,
$805,000 and $586,000, respectively, and to which all SERP participants as a
group would be expected to be entitled are $5,323,000.
DIRECTORS' FEES AND BENEFITS.
In addition to certain immaterial fees, the Company pays each of its
non-employee directors an annual fee of $15,000, payable in the form of Company
Common Stock, valued at the fair market thereof. The Company also periodically
grants to each eligible non-employee director option(s) to purchase shares of
Company Common Stock pursuant to the Company's Amended and Restated 1991
Directors' Stock Option and Award Plan, as described above. Furthermore, subject
to certain exceptions, the Company accrues a retirement benefit for each
eligible non-employee director of the Company, pursuant to the Supplemental
Benefit Plan for Non-Employee Directors, equal to the director's fees received
for the given calendar year, subject to a maximum annual accrual of $25,000 for
each year on and after 1991, and a maximum accrual of $15,000 for 1990 and prior
years.
EFFECT OF CONSUMMATION OF THE OFFER.
The consummation of the Offer would constitute a change in control for
purposes of all of the employment agreements and benefit plans described above.
I-5
<PAGE> 1
Exhibit (a)(1)
PRESS RELEASE
NATIONAL EDUCATION RESPONDS TO HARCOURT GENERAL PROPOSED TENDER OFFER
IRVINE, Calif., May 1/PRNewswire/ -- National Education Corporation (NYSE:
NEC) announced today that its board of directors had rejected Harcourt General,
Inc.'s (NYSE:H) $19.50 per share cash tender offer for all National Education's
outstanding common stock in view of Harcourt's indication that as part of an
overall acquisition transaction, Harcourt would increase its offer to $21.00 per
share, subject to due diligence. National Education said that it would permit
Harcourt to conduct due diligence during the next week. The company said that
there was no assurance that the discussion with Harcourt would lead to an
acceptable transaction or that such transaction would be approved by the board
of directors at National Education or Harcourt.
Harcourt commenced an all-cash tender offer for all of the outstanding
common shares of National Education on April 21, 1997.
National Education Corporation's operations include ICS Learning Systems,
the world's largest and most established provider of distance education in
vocational, academic and professional studies; National Education Training Group
(NETG), the global leader in Information Technology interactive media-based
learning products; and an 83 percent ownership in Steck-Vaughn Publishing
Corporation (Nasdaq: STEK), one of the country's largest publishers of
supplemental education materials which addresses instructional needs from
childhood through adulthood.
SOURCE National Education Corporation
05/01/97
/CONTACT: Connie McCluskey, Director of Investor Relations, 714-474-9483/ (NEC)
<PAGE> 1
EXHIBIT (a)(2)
PRESIDENT'S LETTER TO THE STOCKHOLDERS
[NATIONAL EDUCATION CORPORATION LETTERHEAD]
May 2, 1997
Dear Stockholder:
On April 21, 1997, Harcourt General, Inc. and Nick Acquisition Corporation,
a wholly-owned subsidiary of Harcourt, commenced a cash tender offer to purchase
all of the outstanding shares of the Company's common stock for $19.50 per
share, net to the seller in cash. Subsequently, Harcourt has indicated to the
Company its willingness to increase its offer to, but in no event more than,
$21.00 per share as part of an overall acquisition transaction, subject to
confirmatory due diligence to be conducted over the next week. Accordingly, your
Board of Directors unanimously recommends that all holders reject Harcourt's
current $19.50 per share offer. At this point, however, there is no assurance
that the negotiations with Harcourt will lead to a definitive agreement or that
such agreement will be approved by the Company's Board of Directors or by
Harcourt's board of directors.
We will keep you apprised of material developments in connection with the
Sylvan merger agreement and the negotiations with Harcourt.
Sincerely,
/s/ SAM YAU
Sam Yau
President and Chief Executive Officer
Putnam Investments 33777 597
Boston EquiServe 1550-SL-97
